MNIil

raraiiiv

UC-NRLF

B ^ SIE 337

•TMSrMimi75!J!tJ!l;:

LYONS' BOOKKEEPI

Complete

LYONS' BOOKKEEPING

EDITION OF 1913

PARTS I AND II

J. A. LYONS

AND

WALTER L. READ

LYONS y CARNAHAN

CHICAGO NEW YORK

H1^5{o35

i1 fj

Copyrighted 1909 by
J. A. Lyons & Company

Copyrighted 1910 by
J. A. Lyons & Company

EDUCATION PfcH,

Copyrighted 1913 by
Lyons & Carnahan

au^

PREFACE

The plan of teaching bookkeeping with business papers is a very popular one and
must continue to be the favorite plan for those who wish the course to give the student,
in addition to a knowledge of the principles of accounting, a familiarity with the ma-
terials and the methods of a modern business office.

There are in general two schemes for teaching bookkeeping by the individual "busi-
ness practice" plan. The one scheme involves the use of business papers solely to accom-
pany and illustrate the transactions set forth in the text. The other uses the business
papers as the basis of the student's entries in his books.

There is a vast difference between these two plans. The former plan makes the business
papers a subordinate and auxiliary feature of the work that can be and often is slighted
if not absolutely ignored. The latter plan makes the business papers the foundation of
the course. The papers come to the student just as they come to him in business; from
the data upon them he constructs his bookkeeping entries; and they are then systemati-
cally filed and become a part of the records. Thus business papers, a knowledge of which
is in itself of value, constitute the central feature of the course, and the student, through
receiving them, making his entries, and disposing of them, is taught business procedure,
accounting, and office methods.

The plan of using business papers as the basis of the presentation of the transactions
is the one which is followed in the business practice sections of Lyons' Bookkeeping
and these business practice sections constitute the greater part of the course. The trans-
actions are not merely illustrated by business papers, but they are based upon business
papers.

Preceding each of the principal sets using the business papers, a shorter section of the
book, in which papers are not used, is devoted to a treatment of the accounting principles
which will be involved in the work which is to follow. Thus, the student attempts no
work whatever in "business practice" until he has mastered a short chapter without
business papers in which he studies accounts and journalizing, and learns how to post
and take a trial balance. Again, before taking up the work of the second principal set,
he studies in a separate chapter, no business papers being used, the new accounting features
which he will use in the second practice set. This plan of teaching accounting principles
in separate chapters preceding the business practice sections dnd without the business
papers, presents two distinct advantages: first, the student is enabled to concentrate
upon the study of the accounting principles without any distraction, until he gets a thor-
ough intellectual knowledge of the principles studied; second, the accounting principles
being intellectually acquired when the student takes up the "business practice," the
work of familiarizing the student with forms and driUing him in the bookkeeping operations
can proceed without interruption.

The student will find every step explained in detail both as to the principle involved
and the procedure followed. Every difficulty is anticipated. There are no pitfalls —
no ambiguities. We have avoided the introduction of puzzles and conundrums. The
pupil has the right to know what every proposition is, and this right is respected through-
out — he is not left to guess the intent of the authors. Nor is it presumed that he knows
any of these things which he cannot know without schooling or business experience. The
book was written for beginners and it is felfc that it meets fully the requirements of such
a text book.

54rJ42

PREFACE TO EDITION OF 1913

Bookkeeping has been called "applied arithmetic," and for years there has been a
growing tendency to teach bookkeeping from its arithmetical side. The Edition of 1913
recognizes the truth that an account is nothing more nor less than a formal statement
of a proposition in arithmetic, and that the simple and only proper method of account
study is that which approaches the account from its arithmetical side. The account is,
therefore, approached in this way in the Edition of 1913.

It has not been considered sufficient to call attention, through footnotes and in other
ways, to the analogies between bookkeeping and arithmetic. The first 70 pages of Lyons'
Bookkeeping have been entirely remade in order to work out the arithmetical approaches
to the different accounts and statements in practical detail. Preceding the study of each
account and each statement the student is given a list of problems in arithmetic which
lead him into an understanding of the theory of that account or statement before
he undertakes the study of it as bookkeeping. Thus the pedagogical principle of going
from the known to the unknown is made fully available, and the problems themselves
are made an integral part of the course, and not supplementary. Students will not secure
the benefits of this carefully devised unfolding of the subject of bookkeeping, however,
unless teachers fully grasp the pedagogical idea underlying it. Treated as supplementary
work merely, these problems will fail of their purpose.

Up to page 179, the Edition of 1913 differs in no respect from the original edition,
except for the inclusion of the groups of problems found on pages 6, 10, 14, 16, 19, 22, 25,
27, 31, 33, 64 and 66. These problems have added eight pages to the length of the book,
but they have been put in where they belong without the change of a word or figure else-
where.

The last set in the book (the Drj^ Goods set) has been changed so as to require the
use of the separate merchandise accounts instead of one general account only. These are
the Mdse. Sales, Mdse. Purchases, and Mdse. (Trading) Accounts. The Sales Book and
the Purchase Book are both used in this set, thus making a complete classification of original
entries affecting the merchandise account. It has seemed desirable to observe the same
classification in the ledger accounts.

A clear statement of the extent of this revision has been thought necessary for the
information of teachers who are using the original edition, who are assured that no con-
fusion can result from the use of the two editions in the same class aside from the minor
detail of the difference in paging.

LYONS' BOOKKEEPII^G

CHAPTER I
ACCOUNTS

Bookkeeping is the science of making a systematic record of business transactions
in books.

A Set of Books includes all the books necessary to contain the records of the trans-
actions of a particular business. This includes books of entry, books of memorandum,
and books of account.

The Purpose of bookkeeping is to enable those interested to ascertain at any time
the condition and progress of the business.

The Condition of the business is its net worth. This is shown by accounts. The
condition of a business in its different parts is shown by separate accounts. These
accounts, taken together, show the condition of the business as a whole.

The Progress of the business is its net gain or loss. This also is shown by accounts.
The separate losses and gains are shown by separate accounts. These separate losses and
gains, taken together, exhibit the total loss or gain of the business. The total loss or gain
for a given period of time can also be found by comparing the condition, or worth of the
business at the end of that period with the worth at the beginning of the period.

An Account is a list of items of a certain kind, grouped together under one head in
order to show a result of some one part of the business.

The Cash account shows all receipts and payments of cash.

The Notes Receivable account shows all notes of other persons received and disposed of.

The Notes Payable account shows all our notes issued and redeemed.

A Personal account shows all transactions with a given person on account.

The Real Estate account shows all real estate bought and sold.

The Merchandise account shows all merchandise bought and sold.

The Expense account shows all costs of expense items (and returns, if any).

The Interest account shows all losses and gains from interest.

The Proprietor's account shows all investments and withdrawals by the proprietor.

The Loss and Gain account shows the separate losses and gains.

And so on.

Some accounts exhibit, by their results, the condition or worth of the different parts of
the business.

The result of the Cash account shows the amount of cash on hand.

The result of the Notes Receivable account shows the amount of notes and acceptances on hand.
The result of the Notes Payable account shows the notes payable outstanding against the business.
The result of a Personal account shows how much the person owes the business or how much the
business owes him.

The result of the Proprietor's account shows how much the business owes to the proprietor.
And so on.

' y.. '.,'''.■ --<' ACCOUNTS

Some accounts show, by their results, the progress of the business as to loss or gain.
The result of the Real Estate account shows how much the business has lost or gained on real estate.
The result of the Merchandise account shows how much the business has lost or gained on mer-
chandise.

The result of the Expense account shows the amcmnt of loss for expense items.
The result of the Interest account shows the loss or gain from interest.
And so on.

The Ledger is the book of accounts. The items belonging to each account are clas-
sified in the ledger, each under its proper heading.

Beginning with the Cash Account, on page 7, are given descriptions of ten of the
principal accounts usually found in a ledger.

CASH PROBLEMS

1. During January, 1913, D. M. Libby took in $1,247.50 in cash and paid out $923.78 cash. How
much cash did he have left on January 31?

2. During February, 1913, L. E. Stone received in cash the following amounts: $24.65; $52.73;
$102.50; $73.49; $10.75; $82.56. He paid out cash during February as follows: $10.50, $72.69; $83.47;
$53.26; $84.75; $42.01. How much cash did he have left on February 28?

3. J. H. Smith's cash transactions during March, 1913, were as follows: Mar. 1, received $15.26;
Mar. 2, paid out $5.72; Mar. 4, received $10.00; Mar. 8. paid out $4.73; Mar. 10, received $5.83; Mar.
14, received $4.50; Mar. 17, received $8.73; Mar. 21, paid out $11.54; Mar. 23, received $25.32; Mar.
30, paid out $3.75. How much cash did he have left on Mar. 31?

4. State in writing, in your own words, how you find the amount of cash a person has on hand if
you know what his receipts and payments of cash have been.

. 5. D. R. Green began business with $21.50 in cash on April 1, 1913. During the month he took
in $276.83 in cash, and paid out cash $157.86. How much cash did he have on April 30?

6. On May 1, 1913, C. W. Barnes began business with $53.47 in cash. His cash receipts during
the month were as follows: $5.25, $16.72, $32.54, $31.24, $35.94, $13.21, $14.72, $17.50. His cash pay-
ments during the month were: $4.25, $47.36, $3.73, $14.52, $21.14. How much did he have on hand at
the end of the month?

7. Ralph M. Gray began business on June 1, 1913, with $46.72 in cash. He received and paid out
during the month in cash as follows: June 2, received $10.25; June 3, paid out $28.75; June 7, received
$32.00; June 16, paid out $34.50; June 22, received $24.35; June 29. received $1.23. How much did
he have on hand June 30?

8. A. L. Black began business on July 1, 1913, with $50.00 in cash. During the month of July
his cash receipts and payments were as follows: July 3, received $5.67; July 5, received $8.92; July 8,
paid out $5.00; July 9, received $10.25; July 12, paid out $5.50; July 12, received $6.25; July 15, received
$7.50; July 18, paid out $4.25; July 19, paid out $5.27; July 20, received $22.50; July 21, paid out $3.85.
How much cash did he have on hand on July 31?

9. State in writing how you would find the amount of cash a person has on hand if it is known (a)
How much cash he had at the time of beginning business; (b) What his receipts of cash have been since
then; (c) What his payments of cash have been since then.

10. A. L. Black had on hand Aug. 1, 1913, the same amount of cash as he had on July 31, as deter-
mined in problem 8. During August he received cash totaling $342.63, and paid out cash totaling
$223.47. How much did he have on hand on August 31?

11. On September 1, 1913, A. L. Black had on hand the same amount of cash as he had on Aug. 31.
His receipts and payments of cash during the month were as follows: Sept. 2, received $10.25; Sept. 3,
paid out $2.24; Sept. 6, received $17.68; Sept. 8, paid out $4.50; Sept. 10, received $23.75; Sept. 15,
received $1.72; Sept. 16, paid out $4.83; Sept. 18, paid out $4.50; Sept. 21, received $43.25; Sept. 22,
paid out $2.50; Sept. 23, paid out $2.50; Sept. 24, paid out $2.50; Sept. 25, paid out $2.50; Sept. 26,
received $2.50; Sept. 27, paid out $2.50. How much cash did he have on Sept. 30?

12. A. L. Black had the same amount of cash on Oct. 1, 1913, as he had on Sept. 30, but during
October he took in $252.70 in cash from sales of merchandise, received $150.00 in cash from persons

THE CASH ACCOUNT /

who owed him, found a $10.00 gold piece, paid $100.00 in cash to people whom he owed, paid $220.25
for expenses, and through his cashier's mistake in making change lost $2.00 cash. How much cash did
he have on Oct. 31?

13. State in writing how to find the amount of cash a person has on hand if you know : (a) How much
he had on hand at the beginning of the month (or other period); (b) How much cash he has received
during the month (or other period); (c) How much cash he has paid out, lost or otherwise disposed of
during the month (or other period).

,,_- — V THE CASH ACCOUNT

Purpose: To show the receipts and payments of cash.
Method: Debit the account when cash is received. Credit the account when cash
is paid out.

Result: The difference between the two sides is the amount of cash on hand.

Illustrative Exercise:

19—

Sept.

1. ^Received cash from H. M. Strong, the proprietor, $2,000.00.

2. Paid cash for merchandise, $750.00.

3. Paid rent for September in cash, $50.00.

4. —Received cash from sales of merchandise, $60.00.

5. Paid cash for our note due to-day, $220.00.

6. Received cash- from John Doe on account, $23.50.

8. Paid janitor's wages in cash, $7.50.

9. Received cash for house and lot, $4,000.00.

10. Paid cash to Richard Roe on account, $100.00.

11. Received cash for interest on a note, $10.50.

Illustration

( '^^L.d^^Z^

/ f~

yf-

J>at»

■ fi^lmt**tt«i%

^STu

WmpuA

ZOO

^OOO

J>att

■ 2-

J-
<r

FxpUnatitn,

r^if

W>n*unt

yso
so

220

/ oo

/J<:^.<^i^.y>'l^^^

Aj £Z,.'€^€Z^^?'7^'Oe^

^ad^

do'f^

Off

^7 '^ "
6 oai^

<P <L

(5W

^f^c

Slf

8 ACCOUNTS

Note that the account is divided into two parts, the left-hand side and the right-hand
side. By universal custom, these two sides are called the debit and credit sides (abbrevi-
ated Dr. and Cr.). The left-hand side is called the debit side. The right-hand side is
called the credit side. All receipts of cash are entered on the debit side, and are called
debits; when such entries are made, the cash account is said to be debited or "charged."
All payments of cash are entered on the credit side, and are called credits; when such
entries are made, the cash account is said to be credited.

Each side contains columns for date, explanation, folio, and amount, as shown in the
illustration. The explanation column and the folio column, in the illustration, are left
blank; the purposes of these columns will be explained later.

Trace the transactions from the Illustrative Exercise to the Illustration.

The heading "Cash" is written on the line above the horizontal ruling at the top.
It is written in a plain, bold hand, somewhat larger than the writing used in the body
of the account.

It may assist the student at first to write the abbreviation "Dr." above the year date on the left
hand side and "Cr." above the year date on the right-hand side, writing in a small, neat hand. This is
not a customary practice, however, and should be discontinued as soon as the student becomes familiar
with the use of the debit and credit sides.

Explanation :

Sept. 1, 19 — . Cash is received. The date is entered in the date column on the debit
side, the year date being placed just above the horizontal ruling at the top of the account.
The amount is written in the money column. The cent spaces are left blank when the
amount is in even dollars.

Sept. 2, 19 — . The date and amount of the cash paid out are entered on the credit
side in the proper columns. The year date is placed just above the month and day, as
before.

Trace through the rest of the transactions.

How much cash has been received?

How much cash has been paid out?

How much cash remains on hand?

Is it ever possible for the credit side of the cash account to be the larger? Why?

To Balance the Account

The account is now to be "balanced"; i.e., ruled up with a balance so that the amount
of cash on hand may be seen at a glance.

1st. Ascertain the amount of the balance by subtracting the smaller from the larger
side.

2d. Write this balance on the smaller side in red ink, dating it. Assume, for the pres-
ent, that the date of balancing is Sept. 30. Write the explanation "Balance" in the expla-
nation column, and place a check mark in the folio column.

3d. Rule a single red line underneath the lowest item on the account. This line is
ruled across the money column only. Rule a single red line across the money column of
the other side, on the same line.

THE CASH ACCOUNT 9

4th. Foot both money columns, writing the footings in black ink on the next line
below the single red line.

5th. Rule a double red line below the footings. This line should extend across the
entire page, except that it is not ruled across the explanatory columns.

6th. Bring the balance down in black ink below the double red ruling, on the side
opposite that on which the red ink balancing entry is placed. Date this Oct. 1. Use
the explanation "Balance" and place a check mark in the folio column.

Work out the following exercises on the first page of your ledger (Blanks I, Book 2).
Write the heading "Cash" for the first exercise, on the blue line above the horizontal red
rulings at the top of the page. Write the first entry on the line immediately below the
horizontal red rulings. Do not forget the year dates. Write on all lines on both sides,
leaving no blank lines except when one side is unfilled at the time of balancing, as shown
in the illustration. After completing Exercise I, leave four blank lines and write the
heading "Cash" again. On the next line below the word "Cash," rule a double red line
clear across the page and work Exercise II.

EXERCISE I
19—

Jan. 1. The proprietor, W. H. Armsby, invested cash, $2,500.00. ^

2. Paid cash for merchandise, $200.00.

3. Sold for ca^h, merchandise amounting to $45.00.

4. Paid the clerk's salary in cash, $10.00.

6. Paid the rent in cash, $65.00.

7. John Doe paid us cash on account,* $34.50.

8. Richard Roe redeemed his note in our favor by paying us cash, $320.60.

9. Paid the First Nat'l Bank cash for interest on money borrowed, $8.64.

10. Sold a bill of goods for $24.30 cash.

11. Loaned John Doe cash on account, $5.00.

12. Bought merchandise for cash, $250.00.

14. Sold for cash, merchandise amounting to $17.28.

How much cash was received?
How much cash was paid out?
How much cash remains on hand?

Balance the account, dating the balancing entry Jan. 31. Do not forget to "bring the
balance down" below the double ruled line.

EXERCISE II

19—

Feb. 1. J. B. Owen, the proprietor, has invested cash, $1,500.00.

2. Paid cash for rent for March, $50.00.

3. Paid cash for merchandise bought, $565.20.

*"0n Account" means that the cash was paid us for something not delivered to Mr. Doe at the
time. Probably it was in payment for something he had bought at some previous time, which he
had had charged to his account. The payment was made "on account."

ACCOUNTS

19—

Feb. 5. Received cash from John Doe on account, $44.60.

6. Paid cash for sundry petty expenses, $1.67.

Sundry means various. Petty means small. "Sundry petty expenses," therefore, means various
small expenses.

How much cash was received?

How much cash was paid out?

How much remains on hand?

Balance the account, dating the balancing entry Feb. 28. Bring the balance down.

PROMISSORY NOTES

A Promissory Note, usually called a note, is a written promise to pay a certain sum of
money at a specified time or on demand, to a certain person.

Form of Note

(In the above note, Geo. R.
(In the above note,

The parties to a note are the maker and the payee.

The maker is the person who signs it, promising to pay.
Davis.)

The payee is the person to whom the note is made payable.
Samuel Stewart.)

Notes may be transferred by the payee to another holder. This transfer is evidenced
by the endorsement of the payee. This consists of his signature written across the back of
the paper, with or without words indicating to whom the paper is sold. The person selling
the paper is the endorser. The person to whom it is sold is the endorsee.

NOTES RECEIVABLE PROBLEMS

1. During March, 1913, I received the promissory notes of others in the following amounts: $128.75,
$236.50, $58.75, $72.83, $84.92, $150.00. The following were paid off during the month and I gave them
back to the signers: $236.50, $72.83, $150.00, and $84.92. What was the total of other persons' notes
in my hands on March 31, if there were no other notes received or disposed of by me during the month?

2. On Feb. 1, 1913, I received J. C. Clark's note for $150.00. On Feb. 3, 1 received O. F. Winter's
note for $125.00. On Feb. 7, I received T. H. Jasper's note for $78.50. On Feb. 11, J. C. Clark paid

THE NOTES RECEIVABLE ACCOUNT 11

his note for $150.00 and I gave it back to him. On Feb. 22, T. H. Jasper p^id his note for $125.00 and
I gave it back to him. No other notes having been received or disposed of by me during the month,
what was the total of notes held by me against others on Feb. 28?

3. State in writing how to find the amount of notes on hand if it be known: (a) What notes are
received and the amount of each; (b) What notes are paid by the signers and given back to them?

4. On April 1, 1913, H. T. Adams had on hand promissory notes signed by others in his favor as
follows: M. R. Jackson's note for $100.00; H. K. Johnson's note for $50.00; Jno. R. Robertson's note
for $32.50; and C. E. Holmgren's note for $90.00. During April the following notes were paid off and
he gave them back to the signers: H. K. Johnson's note for $50.00; and M. R. Jackson's note for $100.00.
What was the total of promissory notes held by him on April 30?

5. On May 1, 1913, I had on hand promissory notes amounting to $375.00. During May, I received
notes signed by other persons as follows: $45.00, $120.50, and $37.75; and the following notes, being
paid as they became due, were handed back by me to the signers: $120.50, $52.00, $70.50. What was
the total amount of the notes I had on hand on May 31?

6. On June 1, 1913, you had on hand Henry W. George's note in your favor for $100.00. On June
2, you received a note from E. B. Alden in your favor for $125.00. You also received a note from I. N.
Johns for $75.00, on June 10. Henry W. George's note fell due on June 13; he paid the amount he owed
and you gave him back his note. E. B. Alden paid his note on April 17, and you gave it back to him.
On June 20, I. N. Johns paid $25.00 on his note. At the end of the month how much was due you on
other person's notes, no other notes having been received or disposed of?

7. On July 1, 1913, I had on hand other persons' notes amounting to $650.50. During the month
I received notes amounting to $450.25, notes were redeemed by the signers and given back to them
amounting to $125.00, and notes amounting to $175.60 were disposed of to my banker for cash.
What was the total of notes held by me on July 31?

8. Other persons' notes held by you on Aug. 1, 1913, amounted to $127.65. On Aug. 3, you received
A's note for $75.00. On Aug. 5, you received B's note for $50.00. C's note in your favor for $40.00
was received by you on the 10th of the month. On Aug. 15, A paid his note of Aug. 3, and you gave it
back to him. On Aug. 20, you received D's note for $67.50. On Aug. 20, C paid you $40.00 and you
gave him back his note. No other transactions involving notes took place during August. What was
the total of other persons' notes held by you on Aug. 31?

9. On Sept. 1, 1913, the notes held by you were the same as on Aug. 31. During the month you
received notes amounting to $250.75, and disposed of notes amounting to $132.50. What was the total
of notes in your hands on Sept. 30?

10. The notes held by you on Oct. 1, 1913, were the same as on Sept. 30. Transactions involving
notes were as follows during October: Oct. 1, you received E's note, $100.00. Oct. 2, D paid his note,
$67.50. Oct. 5, you received F's note, $27.50. Oct. 9, you bought G's note from F, $42.25. Oct. 12,
you sold E's note for $100.00 to G. What was the amount of other persons' notes on hand on Oct. 31?

11. State in writing how to find the amount of notes on hand at the end of a given period if there
be known: (a) The notes on hand at the beginning of the period and the amount of each; (b) The notes
received during the period and the amount of each; (c) The notes disposed of during the period and the
amount of each,

THE NOTES RECEI VABLE ACCOUNT

Purpose: To contain a record of all notes the amounts named in which are to be
received by us. This includes notes which we hold as original payee and notes endorsed
over to us by the original payee.

Method: Debit the Notes Receivable account when a note signed by another is
received. Credit the account when such paper is disposed of. •

Result: The difference between the two sides will show at any time the amount of
notes receivable on hand.

Which side of this account will be larger, if the two sides are not the same?

ACCOUNTS

The following illustration shows an account begun below the top of the page.
Illustrative Exercise.

19—

Sept. 1. The proprietor has invested a note which he holds against A. R. Scott.
Face of note, $105.60.

2. Sold to W. G. Humphrey a bill of goods worth $34.60, and received his

note in payment.

3. Loaned W. J. Burnham $50.00 in cash, taking his 60-day note in return.

5. Sold the note which we hold against W. G. Humphrey to J. A. Lippincott

for cash, $34.60.

6. Received H. M. Owen's note for $65.00 on account.

7. A. R. Scott has paid his note in cash, $105.60.

8. Paid Jones & Co.'s account against us for $50.00 by endorsing to them

W. J. Burnham's note.

*f'

Illustration

//o^'^i (y\x^ c-^e^-^r^L-t^-z^

J2U/iJ:

/9.a^

/ OJ 6o 5^^

\J0

A.I1S.2J1.

^jr

Aj a.^C^t'O't.^c^-^

S^^f^i^

Explanation: In working the above exercise it was only necessary to apply the
method — debit the account when a note is received; credit the account when a note is
disposed of. The account is balanced the same as the cash account.

Trace each transaction from the Illustrative Exercise to the Illustration.

19—

Mar. 1.
2.
3.

EXERCISE III

Received on account C. W. Penney's 60-day note for $126.50.

Holmes & Stoddard have signed a note in our favor for $250.00 on account.

C. W. Penney made a payment of $26.50 on his note of Mar. 1. (Credit
Notes Receivable, as you would if he had paid the note in full and it had
been canceled and returned to him. The amount credited is $26.50.)

Received the Chicago Grocery's note for $247.50 for Mdse. sold them to-day.

Holmes & Stoddard have paid cash for their note of Mar. 2, $250.00.

THE NOTES RECEIVABLE ACCOUNT 13

19—

Mar. 7. Received H. W. Capron's note for $46.57 in full of account. (This means
that the note was for the entire amount he owed us.)

8. H. E. Casteel has given us a note for $59.54 payable in ten days, in return

for money loaned him.

9. Disposed of the note against H. W. Capron, selling it to the First National

Bank for cash, $46.57.

What was the total of notes receivable received?

Wfiat was the total of notes receivable disposed of?

What is the amount of notes receivable still on hand?

Balance the account, dating the entry Mar. 31. The balancing entry is written on the
first blank line on the credit side. There will be one blank line on the credit side when the
account is balanced. Bring the balance down.

EXERCISE IV

Open a Notes Receivable account with the balance on hand shown by Exercise III.
This is done by making the following entry on the debit side: "April 1, 19 — , Balance,
***•**" Enter the following items:

19—

April 1. Bought from Green & Co. for $650.00 in cash a note signed by the Illinois
Construction Co.

2. Received of Lloyde Adams on account his note for $250.00.

3. M. J. Mattison has mailed us his note for $285.64 to apply on account.

4. Received from John Morrison, on account, a note signed by Oscar Wilson,

for $275.80.

6. Paid the Laclede Gas Co. in full of account, by giving them the note signed

by Lloyde Adams, $250.00.

7. Felix McAvoy paid his account by giving us his note for the amount in full,

$225.75.

8. Sold Felix McAvoy's note to the Harris Trust & Savings Bank for its face

value in cash.

9. Received Frank Elliott's 30-day note for $240.55 for Union Bank stock

sold him to-day.

10. Endorsed Oscar Wilson's note for $275.80 to Jacob Williamson on account.

What was the total of notes receivable received, including the balance on hand April
1? Disposed of? What is the amount remaining on hand? Which side of this account
should always be the larger, if the sides are not equal?

Balance the account, dating the entry the last day of the month. Bring the balance
down, dating it the first of the next month.

Compare the two sides and make a list of the notes on hand. See that the total of
this list, plus the balance on hand April 1, equals the difference between the two sides.

14 ACCOUNTS

NOTES PAYABLE PROBLEMS

1. During February, 1913, you issued notes totaling $473.50, and of these you redeemed during the
month notes totaling $232.25-. How much did you still owe on notes outstanding Feb. 28?

2. During March, 1913, 1 issued notes in favor of others as follows: Mar. 1, my note in favor of Chas.
E. French, $45.75; Mar. 2, my note in favor of the First National Bank, $250.00; Mar. 5, my note in
favor of E. N. Banks, $100.00; and on Mar. 15, my note in favor of Gill & Co. for $82.57. On Mar.
21, I paid my note in favor of Chas. E. French, $45.75. On Mar. 25, I paid my note in favor of E. N.
Banks, $100.00. How much did I still owe others on notes outstanding Mar. 31?

3. During April, 1913, you issued notes in the following amounts: $100.50, $67.25, $75.20, $52.34,
$87.50, $93.46, $45.60; and you redeemed notes as follows: $52.34, $45.60, $93.46, $87.50, $100.50,
$67.25, $75.20. How much did you owe on notes outstanding against you on April 30?

4. State in writing how to determine the amount of notes outstanding against a person if the fol-
lowing facts be known: (a) What notes have been issued, and the amount of each; (b) What notes have
been redeemed and the amount of each.

5. Notes outstanding against you on May 1 amounted to $750.26. During the month you issued
new notes amounting to $523.45 and paid off old notes amounting to $620.34. How much did you owe
on notes outstanding May 31?

6. Notes outstanding against D. B. Williams on July 1, 1913, amounted to $420.20. On July 5,
he issued his note in favor of L. H. Hawkinson for $225.25. On July 7, he redeemed a note held against
him by the First National Bank, $250.75. On July 10, he issued a note in favor of M. B. Conway, $21.76.
On July 15, he gave M. M. Goodkind his note for $75.00. On July 25, he redeemed his note in favor of
L. H. Hawkinson, $225.25. On July 27, he redeemed a note held against him by H. E. BuUerman,
$42.75. What was the total of notes outstanding against Williams on July 31, no other notes having
been issued or redeemed by him?

7. Notes outstanding against D. B. Williams on Aug. 1, 1913, were the same as on July 31, as deter-
mined in the preceding problem. On Aug. 2, he issued his note in favor of Geo. N. Harmon, $150.67.
On Aug. 5, he issued a note in favor of Fairbanks and Co., $42.07. On Aug. 10, he gave S. B. Morse a
note for $45.76. On Aug. 15, he redeemed his note in favor of Fairbanks and Co. by paying them
$42.07. During the rest of the month the new notes issued by him were as follows: $50.00, $62.50,
$123.48. No other notes having been redeemed by him, what did he owe on notes outstanding Aug. 31?

8. State in writing how to find the amount of notes outstanding at the end of a given period if the
following facts be known: (a) What notes were outstanding at the beginning of the period and the
amount of each; (b) What notes have been issued during the period and the amount of each; (c)
What notes have been redeemed during the period and the amount of each.

THE NOTES PAYABLE ACCOUNT

Purpose: To contain a record of all notes the amounts of which are to be paid by us.
This includes notes signed by us, whether held by the person named in them or not.

Method : Credit the Notes Payable account when we issue a note. Debit the account
when we redeem the note (and receive it back, canceled).

Result: The difference between the two sides will show at any time the amount of
such paper outstanding against us.

If the two sides of this account are not equal, which side will be the larger?

Illustrative Exercise:

19—

Sept. 1. Issued a note in favor of Jas. Hammond for $75.00 in payment for a bill
of merchandise.

2. Bought of Wilton & Hoyne goods worth $120.60, and gave them our 60-day

note in payment.

3. Gave Longworth & Co. our note for $250.00 on account.

THE NOTES PAYABLE ACCOUNT

19—

Sept. 6.

Redeemed our note favor of James Hammond in cash, $75.00.

Made a part payment on our note in favofof Longworth & Co., $100.00.

Received of S. R. George on account, our note in favor of Wilton & Hoyne
for $120.60. (Wilton & Hoyne had evidently endorsed our note over
to S. R. George. As Mr. George was in debt to us, he made us a part
payment by returning our own note.)

Illustration

^^^

x2L/a.

AJ al^■c^€l.^9^.<,^^

/2.0

MMA'h.

eL/a-

OrJ-.

/o a.^^^iy'-yi^'C.'d^

/zo

2^0

^iA3 6o

/j~o

What was the total of notes payable issued?
What was the total of notes payable redeemed?
What is the balance on notes payable outstanding?

19—

May

EXERCISE V

Issued our note for $456.78 to C. D. Johns & Co. on account.
Bought merchandise of H. O. Wright on our note at 15 days, $75.64.
Remitted C. D. Johns & Co. $156.78 cash in part payment of our note in
their favor.

Bought on our note a bill of goods amounting to $125.60.

Redeemed our note in favor in favor of H. O.Wright in cash, $75.64.

Redeemed our note of May 1 by giving CD. Johns & Co. a new note for
the amount still due on it, $300.00. (Two entries.)

Bought Mdse. amounting to $345.64 from the Ludlow Mercantile Co., and
signed a 60-day note in their favor to cover the amount of the bill.

Paid cash for our note of May 4, $125.60.

Bought on our note a bill of goods amounting to $245.60.
What was the total of notes payable issued?
W^hat was the total redeemed?
What amount is still due on notes payable?

4.
17.
23.

24.

25.
26.

16 ACCOUNTS

Balance the account and bring the balance down dated June 1. Continue the entries
for June on the same account below the rulings.

EXERCISE VI
19—

June 1. Gave H. W. Austin on account our note for $376.89.

2. Issued our 30-day note for $250.65 in favor of Geo. S. Kamp in full of

account.

3. We owed H. F. Crane $120.00 and settled our account by giving him a 10-

day note.

4. Paid the note in favor of H. W. Austin in cash, $376.89.

5. Borrowed of the Continental Bank $250.00 and gave them our 30-day note

for the amount.

12. Paid our note for $250.65 in favor of Geo. S. Kamp in cash.

13. Bdlight Mdse. of Hoffman Bros, on our 15-day note, $123.45.

13. Paid T. E. Holmes $120.00 in cash and received in return our canceled note.
15. Bought of E. N. Herbstreet, on our note at 30 days, an invoice of Mdse.

amounting to $253.85.
28. Remitted Hoffman Bros, our check for $123.45 inpayment of our note of

the 13th inst.
30. Bought at the Post Office for cash a money order for $253.85 and sent it to

E. N. Herbstreet in payment of our note in his favor.

What was the total of the notes payable issued, including the balance outstanding
June 1?

What was the total of notes payable redeemed?

What is the total of notes payable still outstanding?

Compare the two sides of the account, placing a check mark opposite the amounts of
all notes issued during May and June that have since been redeemed. What are the dates
and the amounts of the notes still unpaid? Does their total agree with the balance of
the account?

PERSONAL ACCOUNT PROBLEMS

1. During January, 1913, we sold to E. R. Sabin goods for which he did not pay at time of purchase
amounting to $423.64 and during the same month'his payments to us amounted to $273.27. How much
did he owe us on Jan. 31?

2. H. M. Baldwin bought from us during February, 1913, the following bills of goods for which he
made no payment at the time of purchase: $23.41, $52.76, $31.64, $12.83, $22.42, $34.58, $27.64, $32.29.
During the month he made payments as follows: $12.50, $15.00, $10.25, $23.41, $12.83. How much
did he owe us on Feb. 28?

3. During March, 1913, H. R. McLain bought from us merchandise for which he did not make
payment at the time, and made us payments, as follows: Mar. 1, he bought merchandise, $52.65; Mar.
3, he bought merchandise, $23.17; Mar. 6, he bought merchandise, $42.75; Mar. 8, he paid $23.17;
Mar. 12, he bought, $25.19; Mar. 15, he paid $30.00; Mar. 18, he paid $22.65; Mar. 21, he bought, $37.92;
Mar. 22, he bought, $10.50; Mar. 22, he paid $25.19; Mar. 23, he bought, $12.75; Mar.25, he paid $37.92;
Mar. 28, he bought, $26.05. How much did he owe us on Mar. 31?

4. State in writing how to find the amount due from a customer if you know what his purchases
have been and what his payments have been.

5. On March 1, 1913, H. K. James owed us $27.50. During the month our sales to him for which
he did not make payment at the time were: $4.34, $5.28, $10.26, $8.92, $12.20, $8.96, $12.58, $7.26.
His payments during the mouth were: $5.00, $20.00, $10.00. How much did he owe us on Mar. 317

PERSONAL ACCOUNTS 17

6. On April 1, 1913, H. K. James owed us the amount determined in the last problem as due on
Mar. 31. Sales to him during the month, for which he made no payment at the time, and payments
made at various times during the month by him, were as follows: April 2, sale, $12.20; April 5, sale,
$4.32; April 6, payment, $5.00; April 10, sale, $8.75; April 12, sale, $2.36; April 15, payment, $8.50;
April 18, sale, $5.20; April 20, sale, $6.50; April 21, payment, $10.00; April 23, sale, $12.70; April 24,
payment, $7.50. How much did he owe us on April 30?

7. On May 1, 1913, H. K. James owed us the amount determined in the last problem as due on
April 30. During the month our sales to him were $24.36, $17.19, $15.42 and $6.30 and his payments
to us were $10.50, $15.25, $23.38, $1.42, and $4.29. How much did he owe us on May 31?

8. State in writing how to find the balance due from a customer at the end of a certain period if
the following facts be known: (a) How much he owed us at the beginning of the period; (b) What sales
have been made to him during the period; (c) What payments have been made hyhim during the period .

9. My purchases from Jno. H. Beeler during July, 1913, for which I did net make payment at the
time, amounted to $256.72; but during the month I made three payments of $75.00 each. How much
did I owe him on July 31?

10. State in writing how to find the amount due to one from whom we buy, if the total amount
purchased from the person and the total amount paid to the person be known.

11. On Aug. 1, 1913, I owed R. L. Stevenson $29.50. My purchases from him during the month
for which I did not make payment at the time were: $25.40, $32.24, $24.36, $10.75, $21.72, $29.80.
My payments during the month were: $32.24, $10.75, $24.36, $25.40, and $29.80. How much did
I owe him on Aug. 31?

12. On Sept. 1, 1913, I owed to R. L. Stevenson the amount determined in the last problem as due
him on Aug. 31. My purchases from him for which I did not make payment at the time of purchase,
and my payments to him, during the month of September, were as follows: Sept. 2, purchase, $40.50;
Sept. 4, purchase, $29.65; Sept. 7, payment, $32.46; Sept. 8, purchase, $27.50; Sept. 12, payment, $40.50;
Sept. 14, payment, $29.65; Sept. 17, purchase, $43.84; Sept. 18, payment, $27.50. How much did
I owe him on Sept. 30?

13. On Oct. 1, 1913, I owed to R. L. Stevenson the amount determined in the last problem as due
on Sept. 30. During the month my purchases from him amounted to $185.73, and my payments to
him amounted to $152.75. He allowed claims made by me for shortages and damaged goods amount-
ing to $6.75. How much did I owe him on Oct. 31?

14. State in writing how to find the amount due a person from whom we buy if the following facts
be known: (a) The amount due him at some previous date; (b) The amounts purchased since that date;
(c) The payments made to him and allowances made by him since that date.

PERSONAL ACCOUNTS

Purpose: To contain a record of all transactions with persons, firms, and corpora-
tions not settled at the time of their occurrence.

Method: Debit persons when they cost us something; credit persons when they
return us something.

Result: The difference between the two sides will be the amount due us or due the
person. If the debit side be the larger, the person has cost us more than he has returned
us, and he owes us. If the credit side be the larger, the person has returned or produced
to us more than he has cost us, and we owe him.

Illustrative Exercise:

19—

Sept. 1. Sold W. B. Dewey, Galesburg, 111., on account, Mdse. amounting to $50.65.

2. W. B. Dewey gave us his note on account for $25.00.

3. W. B. Dewey returned Mdse. to the amount of $5.15 as not being what he

had ordered.

ACCOUNTS

19—

Sept. 4. Sold W. B. Dewey on account, Mdse. amounting to $10.25.

5. Collected from W. B. Dewey cash, $20.00.

6. Allowed W. B. Dewey $1.05 for one sack of flour which was spoiled.

Illustration

/a-

/0,c

^^_ ^f^z<^a^^^,J^^i4^

.JU^.

jd^!e.^v^.

^jTO

<^J

'Z-

J-/J-

t o

Z.0

S 1

o^s

Note : Leave personal accounts open except when they are paid or settled in full, at which time
they are to be ruled and footed. The debit and credit columns are footed and each footing is placed close
beneath the last item in the column to which it applies, as shown in the illustration, in small lead pencil
figures.

Explanation: W. B. Dewey "cost" us the merchandise which we delivered to him on
account on Sept. 1 and Sept. 4. The "returns" on W. B. Dewey's account consisted of:
Sept. 2, a note; Sept. 3, goods returned; Sept. 5, cash; and on Sept. 6, a claim for dam-
aged goods.

What is the total W. B. Dewey has cost us?

How much has he returned or produced to us?

Does he owe us or do we owe him, and how much?

The foregoing is called an account receivable, because the amount of its balance is to
be received by us. When the balance is to be paid by us, the amount is an account pay-
able. The balance is not shown by a red ink entry, as in other accounts, but by a small
lead pencil figure at the left of the footing on the larger side.

19—

July

EXERCISE VII

Bought of S. Y. Gillan & Co., an invoice of Mdse. amounting to $240.60.
Gave them our note on account, $100.00.
Returned to them Mdse. as damaged, $10.00.
Bought of them a bill of goods amounting to $129.50.
We claimed a shortage on yesterday's order of goods amounting to $9.50,
and they allowed the claim.
8. Paid them cash on account, $37.50.

Explanation: S. Y. Gillan & Co. have "produced" to us the things we have bought
of them. They have cost us the cash, notes, and Mdse. we have delivered to them.
Treat the claim allowed on July 7 as though the goods had come and had been returned
by us.

THE REAL ESTATE ACCOUNT 19

How much have we bought of them?
What is the total with which we have debited them?
Do we owe them or do they owe us, and how much?
Continue Exercise VIII on the same account.

EXERCISE VIII
19—

Aug. 1. Bought of S. Y. Gillan & Co. Mdse. amounting to $145.60.

2. Paid them cash, $50.00. ^

3. Gave them our note for $50.00.

4. Bought of them an invoice of goods worth $135.00.

5. Endorsed over to them a note which we held against C. O. Boston, $110.50.

6. Returned to them damaged goods, $12.25.

What is the total of the credit side, including the lead pencil footing for July?
What is the total with which we have debited them, including the July footing?
Do we owe them or do they owe us, and how much?

REAL ESTATE PROBLEMS

1. Swift bought five houses and lots paying the following prices: $4275.00, $4390.00, $5200.00,
$6250.50, $5460.75. He sold them for $5000.00, $5150.60, $5750.00, $7500.00, and $6000.00 respec-
tively. Did he gain or lose on real estate, and how much?

2. State in writing how to find the amount of gain or loss on real estate when all is sold if it be
known what was paid for and what was realized on each piece of property.

3. D. G. Perrin bought two 25-foot lots on Union Ave. at $75.00 a front foot. He built on these lots
two 2-flat buildings which cost him $3450.00 each. He then sold one building and lot for $6500.00.
How much did he gain, the unsold building and lot being valued at what they cost him?

4. State in writing how to find the gain or loss on real estate if it be known: (a) What the real
estate cost; (b) What was realized on the real estate sold; (c) The value of the real estate remaining on
hand unsold.

6. On Jan. 1, 1913, W. F. Dean owned real estate valued at $12540.50. On Jan. 10 he bought a
house and lot for $5250.00. On Jan. 15 he sold a house and lot for $6500.00. He made no other sales
or purchases during January. On Jan. 31 he valued his real estate at $13500.00. Did he gain or lose
on real estate, and how much?

6. D. G. Perrin had on hand on May 1, 1913, one building and lot on Union Ave. which he valued
at $5325.00. During May he acquired other properties at the following prices: $5500.00, $4925.00,
$4650.50, $2950.50, $3875.63, and disposed of four houses and lots at $6000.00, $6500.00. $4850.00,
and $3000.00, respectively. He valued his real estate on May 31 at $11225.75. What was the amount
of his profit or loss on real estate during May?

7. State in writing how to find the gain or loss on real estate for a certain period if the following
be known: (a) The value of real estate on hand at the beginning of the period; (b) The amounts paid
for real estate purchased during the period; (c) The amounts received from sales of real estate during
the period; (d) The value of real estate remaining on hand at the end of the period.

THE REAL ESTATE ACCOUNT

Purpose : To contain a record of the separate purchases and sales of houses and lands.
Method : Debit the account for costs of real estate. Credit it for returns from sales
of real estate. (Costs for repairs, maintenance, etc., are not costs of real estate.)

ACCOUNTS

Result: The difference between the two sides, after all real estate has been sold, is a
gain or loss. If all real estate has not been sold, the value of the unsold (which is called
the inventory) must be entered on the credit side before the gain can be shown.

Illustrative Exercise :

19—

Sept. 1. Bought house and lot, No. 485 Madison Ave., for cash, $6,000.00.

2. Bought a farm in Henry County for $10,000.00, and issued a series of notes

in payment.

3. Sold half my farm for $5,500.00, receiving in payment cash, $3,500.00,

and H. C. Green's note for $2,000.00.

4. Bought house and lot in Augusta, 111., for cash, $3,500.00.

5. Sold to J. E. Smith house and lot, No. .485 Madison Ave., for cash, $3,100.00,

and 6-month note, $3,000.00.

Inventory: The remaining half of the Henry County farm is valued at cost, $5,000.00.
House and lot in Augusta, 111., at cost.

Illustration

-»^i5Z,^-'?-i^

t^^z^^'i^e-^^-^^-^

6ooo

"^0000
3J~00

ZO/00

J'J'OO

'^U-^2A\

■3

^!=Jr?iyi^-A-'7'i>t<H^

6/00

^o/o o

Closing the Account: An account showing loss or gain closes with a loss or a gain,
not with a balance. The inventory is entered on the credit side in red ink and added to
the returns. In this case the returns, after the inventory is included, exceed the cost.
The account therefore shows a gain, which is entered on the smaller side.

What is Done with the Red Ink Entries: The inventory is brought down in black
ink below the closing rulings, on the side opposite that on which the red ink entry
appears. The gain is brought down in black ink, hut not on the same account. It is taken
to the loss and gain account (which will be described later), where it is entered in black
on the side opposite that on which the red ink entry appears in this account.

THE REAL ESTATE ACCOUNT 21

Study carefully the items in the illustration. From what two sides has the gain of
$600.00 arisen? What was the gain on each sale? Does their total agree with the result
of the account?

EXERCISE IX
19—

Sept. 1. Bought of D. F. Godfrey, store and lot, No. 184 Main St., for $7,200.00.
Paid him cash, $3,000.00, and my note for $3,000.00. The balance,
$1,200.00, I credited to his account.

2. Bought a farm near the city limits from W. M Carter for $15,000.00.

Gave him in payment cash, $5,000.00, and two notes (No. 1 and No. 2)
for $5,000.00 each.

3. Sold store and lot. No. 184 Main St., for $7,500.00. Received cash,

$5,000.00; note signed by L. Johnson, $2,500.00.

4. Bought house and lot in Elgin, 111., for $4,000.00. Gave in payment L.

Johnson's note, $2,500.00; cash, $1,500.00.

5. Settled my account with D. F. Godfrey, $1,200.00, and my note in his favor,

$3,000.00, by deeding to him my house and lot in Elgin.

Inventory: Farm valued at cost, $15,000.00.

Enter the inventory Sept. 30 and close the account with a gain. From what two sales
did gains arise? What was the gain in each case? Does the sum of the two gains equal
the result of the account? Bring the inventory dowTi dated Oct. 1, and continue Exercise
X on the same account.

EXERCISE X
19—

Oct. 1. Divided my farm into twenty city lots. Sold five of the lots for cash,
$1,000.00 each.

2. Sold five city lots to H. M. Ashleby at $1,000.00 each. In payment he

returned to me, canceled, my note No. 1 of Sept. 2 for $5,000.00 in favor
of W. M. Carter, which Carter had endorsed to him on Sept. 17.

3. Exchanged five city lots for a house and lot in Aurora, 111., valued at $4,500.00.

(Two entries.)

6. Redeemed my note No. 2 in favor of W. M. Carter for $5,000.00 by deeding

to him the house and lot in Aurora at $4,200.00 and one city lot at $800.00.

7. Sold one city lot for cash, $800.00.

8. Sold one city lot to G. L. Kane on account, $850.00.

9. Sold one city lot to C. W. Barnes on his note, $750.00.

Inventory: One city lot valued at $750.00.

Close the account.

What was the gain on real estate for October?

What would have been the gain had we inventoried the remaining lot at $500.00?

What would have been the gain had we valued the lot at $1,000.00?

22 ' ACCOUNTS

What effect has the valuation of the inventory upon the gain?

What do you think is the proper valuation to place upon property inventoried?

Estimate the profit made on the farm by adding the gains arising from each sale of
city lots. Deduct $300.00 lost on the sale of the house and lot in Aurora, and see if the
result agrees with the gain shown by the account.

MERCHANDISE PROBLEMS

1. On Feb. 1, 1913, Walter Dey bought merchandise which cost him $346.75. During the month
he sold it all, making the following sales: $52.37, $48.26, $72.89, $63.47, $42.25, $57.24, $34.26, $45.19,
$16.27. Did he gain or lose on his sales of merchandise, and how much?

2. During March, 1913, you made the following purchases and sales of merchandise: Mar. 4, pur-
chase, $58.50; Mar. 5, sale, $27.20; Mar. 5, purchase, $63.24; Mar. 7, purchase, $225.94; Mar. 8, sale,
$10.26; Mar. 12, sale, $42.50; Mar. 16, sale, $62.57; Mar. 18, sale, $23.55; Mar. 21, sale, $74.23; Mar.
24, sale, $62.50; Mar. 28, sale, $43.72; Mar. 30, sale of all goods remaining on hand, $52.18. What
was the cost of the goods sold? Did you gain or lose on merchandise during March, and how much?

3. State in writing how to find the gain on merchandise, when all is sold, if the amounts paid for
it and the amounts of the sales made, be known.

4. During April, 1913, your purchases of merchandise amounted to $750.65. At the end of the
month you found that you had still on hand, unsold, merchandise which amounted to $249.73 at cost
price. What was the cost of the goods sold during April?

5. State in writing how to find the cost of goods sold if the cost of all goods purchased, be known,
and the value (at cost price) of the goods remaining on hand, be known.

6. During May, 1913, Howard's purchases of merchandise amounted to $849.36. His sales for the
month amounted to $723.49. Goods on hand at the end of the month, at cost price, were valued at
$329.63. What was the cost of the goods sold during May? What was the amount of his profit or
loss on merchandise for May?

7. State in writing how to find the gain or loss on merchandise if the following facts be known:
(a) Total purchases; (b) Total sales; (c) value, at cost price, of goods remaining on hand.

8. Howard's merchandise inventory on June 1, 1913, was $329.63. His purchases for June were
$824.36. His sales for June were $729.35. His inventory June 30 was $350.60. What was the cost
of goods sold by him during June? What was the amount of his merchandise profit or loss for June?

9. Howard's merchandise inventory on July 1, 1913, was $350.60. His purchases during July were
as follows: $100.45, $72.63, $125.49, $83.43. His sales during July were: $62.56, $49.50, $38.42, $29.63,
$58.75, $12.43, $82.21, $94.15, $63.36, $45.63, $25.41. On .July 31 his inventory, at cost price, was
$529.64. What was the cost price of goods sold during July? What was the amount of Howard's
profit or loss on merchandise during July?

10. Howard's merchandise inventory on Aug. 1, 1913, was $529.64. His purchases and sales of mer-
chandise during the month were as follows: Aug. 2, purchase, $129.62; Aug. 3, purchase, $132.33; Aug. 6,
sale, $52.79; Aug. 8, sale, $65.83; Aug. 9, sale, $74.86; Aug. 12, purchase, $45.94; Aug. 15, sale, $33.35;
Aug. 18, sale, $34.92; Aug. 21, purchase, $98.75; Aug. 22, sale, $35.60; Aug. 23, sale, $52.72; Aug. 25,
sale, $48.36; Aug. 28, purchase, $64.29; Aug. 29, sale, $29.83; Aug. 30, sale, $30.60. His inventory on
Aug. 31 was $723.93. What was the cost of goods sold during August? What was Howard's profit
or loss during August?

11. My merchandise inventory on Sept. 1, 1913, was $500.00. My purchases during September
amounted to $650.60, and my sales to $725.43. My inventory on Sept. 30 was $350.50. What was the
cost of goods sold during September? What was the amount of my gain or loss for September?

12. State in writing how to find the gain or loss on merchandise for a given period if the following
facts be known: (a) The value, at cost price, of goods on hand at the beginning of the period; (b) The cost
of merchandise purchased during the period; (c) The amounts of sales of merchandise made during the
period; (d) The value, at cost price, of merchandise on hand at the end of the period.

13. My merchandise inventory on Oct. 1, 1913, was $350.50. My purchases during the month
amounted to $725.83, and my sales to $1025.96. My inventory on Oct. 31 was $343.50. What was the
cost of goods sold during October? What was the profit for October? What was the per cent of profit,

THE MERCHANDISE ACCOUNT

based on the cost of the goods sold, or at what per cent above cost pfrice shall I mark goods bought by
me in future in order to get the same rate of profit as during October?

14. State in writing how to find the per cent of profit on merchandise if the following facts be known :
(a) The cost of the goods sold; (b) The total amount received from sales.

MERCHANDISE

"Merchandise" includes those commodities which are bought and sold in a given
business for profit.

Purpose: To show cost of merchandise and the returns from sales.

Method: Debit Mdse. for its costs. Credit it for its sales.

Result: The difference between the two sides after all Mdse. has been sold, will be a
loss or a gain.

Illustrative Exercise:

19—

Sept.

1.
2.
3.

Bought of H. O. Critchell, on account, Mdse. invoicing at $1,460.50.
Sold to W. A. Oliver, on account, a bill of goods worth $75.00.
Received an invoice of Mdse. from C. D. Miller amounting to $680.40.
Gave him my note for the amount.

4. Sold Mdse. for cash, $47.50.

5. Sold to C. J. Barber, Mdse. on his note, $62.50.

7. Received cash for Mdse., $25.60.

8. Gave our note to M. J. Whitney for Mdse. bought of him, $240.60.
Inventory: Mdse. on hand valued at cost, $2,228.50.

Illustration

z^-

/
J
r

OcJ:

'*S^-ii-'i^^yt^

^:a'^-n,'Z/~e^^^Lyt(yi^

/A^^OS'C? -sJ^t^'r

to^

2-¥0

Z^3^ /O

zzzrj'o

^:r:rW-zfi2-o^-^^-^-^

s<?

2J^O

T-T-Z^ SO

^M3^/C?

Explanation of Closing: It is desired to know the gain on Mdse. sold during Sep-
tember. This cannot be found until we know the cost of goods sold during September.
That cost is ascertained in the following way:

24 ACCOUNTS

The total cost of goods purchased, as shown by the debit side of the account, was
$2,381.50. The cost of the unsold, as ascertained by an actual inventory of goods now
in stock, is $2,228.50. The difference between these two amounts is $153.00, the cost
of the goods sold.

The total sales were $210.60. The gain is the difference between the total sales,
$210.60, and the cost of the goods sold, $153.00, or $57.60 gain.

Process of Closing: It is not proper to show a subtraction in bookkeeping, however,
so instead of subtracting the Mdse. inventory from the debit side of the merchandise
account, it is added to the credit side. This accomplishes the same result. The gain
is $57.60, as shown above.

Bring down the inventory on the opposite side of the same account. The gain is
carried to the loss and gain account on the side opposite that in which it shows on the
merchandise account.

This process of closing has been previously illustrated in the real estate account, and
is the same for all loss or gain accounts.

EXERCISE XI
19—

Nov. 1. Bought of Weir & Co. on account, Mdse. amounting to $576.50.

2. Sold to P. K. Marriott on account, a bill of goods worth $53.40.

3. Sold Mdse. for cash, $30.35.

4. Bought for cash Mdse. invoicing at $9.75.

5. Bought Mdse. from Soule & Co. on account, $225.67.

7. Paid cash for Mdse., $8.75.

8. Sold Mdse. to John Doe on credit, $15.30.

10. Bought of Revillon Freres* a bill of goods invoicing at $383.50. Gave

our note for the amount.

11. Sold H. C. linger on his note a bill of goods amounting to $35.60.

Inventory: Stock on hand valued at $1,160.00.
What was the total cost of Mdse.?
What was the total returns on Mdse.?

What was the cost of goods sold during November? The profit?
Enter the inventory, close the account with a loss or gain, bring down the inventory,
and continue Exercise XII on the same account.

EXERCISE XII
19—

Dec. 1. Bought on our note Mdse. invoicing at $97.50.

2. Paid cash for Mdse., $16.14.

3. Sold Harry Helmer on account Mdse. amounting to $25.60.

4. Bought goods for cash, $12.25.

6. Sold L. M. Hawkinson Mdse. on account, $8.75.

7. Paid cash for Mdse., $16.25.

*Revillon Brothers — French.

THE EXPENSE ACCOUNT 26

19—

Dec. 8. The proprietor took from stock for his private use goods worth $10.50.
(The goods were sold to the proprietor.)

10. Sold to S. D. Marshall on account, goods worth $14.55.

11. Sold W. J. Frame on his note, Mdse. billed to him at $27.50.
Inventory: Goods on hand amount to $1,250.00, valued at cost.

What was the total cost of Mdse. for December, including inventory on hand Dec. 1?
What was the total of Mdse. sales for December?
What was the cost of the goods sold?

What was the percentage of profit, based on the cost of goods sold?
Close the account, and in bringing down the inventory Jan. 1, do not fail to write
the new year date above the "Jan. 1."

EXPENSE PROBLEMS

1. My expenses during January, 1913, were as follows: Rent, $75.00; salaries of office helpers, $236.62;
hire of scrub woman, $3.50; office stationery, $4.50; postage, $12.73; extra stenographic labor, $12.75;
electric Ught bill, $3.42; ink, 25ji; typewriter ribbon, 75ff. What was the total of expense for January?

2. My expenses for February, 1913, were: Rent, $75.00; salaries of office helpers, $236.62; oJBBce
stationery,. $5.70; postage, $14.64; blank books and forms for bookkeeper, $15.26; coal bill, $35.40; elec-
tric Ught bill, $3.62. At the end of the month there was on hand coal worth $27.50. What was the
amount of my February expenses?

3. Coal on hand March 1, 1913, $27.50, was considered as a March expense. Other expenses dur-
ing March amounted to $365.40. Coal on hand March 31 was worth $12.30. What was the amount of
ray March e.xpense?

4. If there is left on hand at the end of a given period something which has been paid for during
that period but will rfot be used until the next period, which period should it be charged to? State in
writing what steps you will take to prevent such an item from being a charge against the wrong period
and how you will provide for having the item charged against the right period.

5. During April, 1913, I paid out for expenses as follows: $75.00, $37.50, $43.72, $12.65, $1.23,
$30.60, $4.50, $6.25, $24.65, $3.21. This is all that I paid out during the month, but I found at the
end of the month that I owed my clerks for four days' work, $25.00, which I considered should be treated
as a part of the April expense though not yet paid. What was my expense for April?

6. My expenses for May, 1913, were as follows: Rent, $75.00; clerk hire, $292.22; extra janitor
help, $3.25; office stationery, $4.63; postage, $13.20; electric light bill, $3.67; pens and penholders, 25jf;
typewriter ribbon, Ibi. Bearing in mind that $25.00 of the amount paid to my clerks though paid
this month had already been included in last month's expenses, state what was the total of my May
expense.

7. If work is done half in one month and half in the following month but all of it paid for during
the second month, how are you going to plan to charge each month with its proper amount?

THE EXPENSE ACCOUNT

Purpose : To contain a record of the cost of items commonly classed as expense,*
such as rent, fuel, light, advertising, repairs, etc.

Method: Debit the expense account for costs. Credit it for returns, if any.

Result: The difference between the two sides will be a loss.

*Expenditures are of two kinds: Those which do not occasion a loss, and those which do occasion
a loss. When Mdse., real estate, etc., cost us, we receive the property, having merely exchanged one
asset for another. When rent, fuel, light, etc., cost us, however, a loss has been incurred, called
Expense. Expenses, therefore, are expenditures for the carrying on of the business.

ACCOUNTS

Illustrative Exercise:

19—

Sept. 1.
2.
3.
3.

. 9.

10.

11.

13.

Inventories, Sept. 30: Salaries due clerks,
coal on hand, $2.70; safe valued at $275.00.

Illustration

Paid cash for one month's rent, $50.00.

Paid the janitor cash for service, $7.50.

Bought office stationery from the City Book Store, on account, $12.35.

Gave the Marvin Safe Co. our 30-day note for a safe for the office, billed to

us at $275.00.
Paid the gas bill in cash, $8.60.
Paid the salaries of the office clerks in cash, $26.00.
Bought 1,000 2-cent stamps for cash.
Sold 100 2-cent stamps to G. N. Holt for cash.
Secured a rebate of $0.86 in cash from the Gas Co.
Bought from the Lehigh Coal Co., on account, one ton of coal for office

use, $3.75.
Paid $26.00 in cash for office salaries.

.00; postage stamps on hand, $16.00;

Jii

JSZ^e-A^.

2.
J
J

//
/J

zy^

<f6o

2.0

2.6

jAfyz

24^

37^

1^3 yo

f
/o

trr^^-'Z^sg'^^-^^^-i-^

/^/

2
/(70

^ATy 2

/ j-r

THE EXPENSE ACCOUNT 27

How much was paid out for expenses?

What was the total cost of expense for September, including the inventory?

What was the amount of returns on the expense account?

What was the amount of returns, including the inventory?

What was the net cost of expense for September?

Explanation: The rebate on the gas bill and the $2.00 received from the sale of
stamps are properly treated as reductions of cost by being entered on the credit side. Note
that there are inventories on both sides of the expense account. The unpaid salaries are
added to the cost of running the business for the month and the value of the stamps, coal,
and safe on hand are deducted by being placed on the credit side. Debit and credit
inventories are brought down separately. The loss is carried to the loss and gain account.

Note. — Separate accounts may be kept with Rent, Salaries, Furniture and Fixtures,
Insurance, Postage, Advertising, or any other class of expense of which a separate record
is desired. In such cases these items would not be included in the expense account, but
would be recorded in the special accounts kept for the purpose. The expense account
might in such a case be more properly headed General Expense, or Unclassified Expense,
since it only receives items not entered in some special account. The special accounts
would be handled in precisely the same way as the expense account is handled, as described
in the foregoing. The loss shown by each one of these accounts might be closed into the
expense account instead of into the loss and gain account. The process of closing accounts
into the loss and gain account will be described later.

EXERCISE XIII
19—

Jan. 1. Paid cash for rent, S60.00.

2. Gave the iEtna Fire Insurance Co. our check for $75.00 for one year's insur-

ance.

3. Paid the drayman for services, $4.50 in cash.

4. Paid the janitor in cash, $7.50.

8. Paid cash for sundry expenses, $6.94.

9. Paid the clerks' salaries in cash, $25.00.

10. Gave our 10-day note to the "Tribune" for advertising, $15.00.

11. Sub-let desk room in our office to John Adams and charged him, on account,

$10.00. (A return to the expense account.)

12. Paid cash for postage and stationery, $5.75.
16. Paid the salaries of clerks in cash, $15.00.
20. Paid the plumber's bill for $16.75 in cash.

Inventories, Jan. 31: Salaries of clerks unpaid, $30.00; eleven months' insurance
unused, $68.75; stamps unused, $4.00. Note that one of these inventories increases the
expense for the month; two of them decrease it.

INTEREST ACCOUNT PROBLEMS

1. H. R. Smith's gains from interest during January, 1913, were $12.75, $8.63, $13.72, $25.50,-
$4.73, and $18.26. His losses for interest during the same month were $30.46, $22.75, $16.16, and $22.93.
Did he gain or lose during the month, and how much?

2. D. B. Green's gains from interest during February, 1913, and his losses for interest during the
same period were as follows: Feb. 1, gain, $21.62; Feb. 3, gain, $1.26; Feb. 7, paid for interest, $25.50;

28 ACCOUNTS

Feb. 9, received as interest, $6.25; Feb. 12, paid for interest, $12.40; Feb. 18, gain, $2.62; Feb. 27, the
bank charged him for interest, $27.56. Did he lose or gain on interest during February, and how much?

3. State in writing how to determine the amount of the gain or loss on interest during a certain
period, if the amounts of the separate gains and losses be known.

4. F. R. Farrar's gains from and losses for interest during March, 1913, were as follows: Mar. 1,
gain, $12.63; Mar. 4, gain, $13.46; Mar. 6, loss, $17.50; Mar. 10, gain, $4.23; Mar. 12, loss, $22.70; Mar,
15, loss, $29.75; Mar. 24, gain, $13.75. On Mar. 31 he had in his hands notes against others on which
interest amounting to $5.67 had accrued, though not yet paid. What was his gain or loss on interest
during March?

5. F. R. Farrar's total receipts for interest during April, 1913, amounted to $52.67, this including the
$5.67 which he had figured as part of his gain for last month. His losses for interest during March
amounted to $72.50. There was no interest accrued either in his favor or against him at the end
of ths month. What was his gain or loss for interest for the month?

6. State in writing: (a) How to find the gain or loss on interest for a given period if the following
facts 4)6 known: The separate gains; the separate losses; the interest accrued in your favor but not yet
received, (b) If interest accrued but not yet received is figured as part of the gain for a given period,

. how do you avoid figuring it again as a part of the gain for the period during which it is actually received?

7. S. W. Nichols' gains from and losses for interest during May, 1913, were as follows: May 7, gain,
$2.73; May 9, gain, $4.52; May 11, loss, $12.50; May 16, gain, $1.23; May 21, loss, $23.50. On May 31
he found that interest had accrued, though not yet payable, on notes outstanding against him, amount-
ing to $8.75. What was his gain or loss on interest during the month?

8. S. W. Nichols' gain from interest during June amounted to $72.65. He paid out for interest
$93.72, this figure including the $8.75 that he had figured as a part of his May losses. What was his loss
for interest during June?

9. State in writing: (a) How to find the gain or loss on interest for a given period if the following
facts be known: The separate gains; the separate losses; the interest accrued against you but not yet
paid, (b) If interest accrued but not yet paid be figured as part of the loss for a given period, how
do you avoid figuring it again as part of the loss during the period during which it is actually paid out?

THE INTEREST ACCOUNT

Definition : Interest is the use of money for which compensation is paid. When we
hold another's money, we are receiving the use of the money, called interest. When we pay
for this use, it is a cost to us. When others pay for the use of our monej'-, it is a return to us.

The expression "paid interest" is not, strictly speaking, a correct one. We do not "pay interest,"
but we pay /or interest. Similarly, we do not "pay rent," but we pay /or the rent or use of the property.
Interest is the use of money, just as rent is the use of property.

Purpose : The Interest account should contain a record of the costs to us for the use
of other people's money, and of the returns to us from others for their use of our money.

Method: Debit Interest for its cost; credit it for its returns.

Result: The difference between the two sides is the amount lost or gained on account
of interest.

Illustrative Exercise :

19—

Sept. 1. Received $5.00 in cash from J. H. Stebbins for the use of money we loaned
him.
2. J. H. Osborne has returned to us $100.00, which we loaned him, with $3.60
additional for interest. (Enter in the interest account the amount
of the interest only.)

THE INTEREST ACCOUNT

19—

Sept.

3.
4.

15.

16.

Paid $5.60 cash for interest on money borrowed of the First National Bank.
G. H. Burton's account is overdue. We have charged him $15.60 for

interest, which he pays by note.
Paid our note due the First National Bank in cash. Face of the note,

$800.00; interest accrued, $2.40; total cash paid, $802.40. (The

amount of the interest only, is entered in the interest account.)
Received cash of G. H. Burton in full of his account and accrued interest.

Amount due on account, $650.00; interest, $1.47.

Inventories, Sept. 30: Interest due from J. H. Stebbins, $2.50.

Illustration

^Jht^ttA^^i^J^

'f-

J2U^v^,

(h^

->S^r?Ut^'i'Zy

\zJlnyi^€^^yi.tkH^

</0

.ZJL

2U'^i^

2 fO

^:r:^^»^^Z^^'*-i^^-4^

3 6o

2.f

What was the total cost of interest?

What were the total returns from interest?

Why was the inventory added to the credit side?

What effect had the inventory upon the amount of the gain?

Closing: The inventory is brought down on the opposite side of the same account.
The gain is carried to the opposite side of the loss and gain account.

19—

Feb.

EXERCISE XIV

1. Paid cash for interest on our note in favor of the Second National Bank,

$15.00.

2. Received cash from Shelby & Co., $409.60, for their note in our favor,

$400.00, with $9.60 for interest. (Enter the interest only.)

3. Paid in cash our note in favor of CuUom & Co. Face of note, $200.00;

interest, 30 days at 6%, $1 .00 ; total, $201 .00. (Enter the interest only.)

4. The Gary Building & Loan Association sent us a notice that $13.50 has

been credited to our account on their books, for interest.

30 ACCOUNTS

19—

Feb. 5. Gave C. D. Jackson our check for $5.00 for the semi-annual interest on a
note which he held against us.

6. Paid J. Bowen $101.50 in cash for our note in his favor, $100.00, plus

interest, $1.50.
6. Redeemed in cash our note in favor of the National Biscuit Co. for $150.00

with interest amounting to $2.60.

8. Collected $100.75 in cash from E. G. Wells for his note in our favor for

$100.00 and 75 cents interest.

9. Our note in favor of W. G. Evans for $200.00, with $2.15 accrued for inter-

est, fell due. Gave him a new note for the full amount.
10. Thompson & Clark charged us $1.75 for interest on our account, which we
paid in cash.

Inventories, Feb. 28: Interest accrued on our note in favor of the Second National
Bank, $25.00; on our loan to the Gary Building & Loan Association, $2.25; on our note
in favor of C. D. Jackson, $0.70. (Two of these inventories increase the cost of interest.
The other increases the returns.)

What was the total cost of interest paid for during February?

What was the total loss, including inventories of interest owed by us?

What was the total of returns on interest during February?

What was the total of gains, including inventory of interest due us?

Was the net result of the interest account a loss or gain, and how much?

Bring the inventories down and continue Exercise XV on the same account.

EXERCISE XV
19—

Mar. 1. Paid for interest on note in cash, $5.25.

2. Paid cash for interest on a bill past due, $2.16.

3. Received cash for interest on government bonds, $25.00.

4. H. N. Walker paid us cash, $102.00, for his note, $100.00, and interest, $2.00.

6. Paid our note in favor of A. N. Palmer in cash. Face of note, $50.00;

interest, $1.50; total cash paid, $51.50.

7. Gave S. W. Jackson our note for $10.64 for interest on money due him.

11. Received a note for $30.00 for interest on a mortgage.

12. Received Sam'l Jones' check for $4.50 for interest on money loaned him.
14. Paid cash to the Second National Bank for our note, $1,000.00, and interest

$33.00.

16. Withdrew from the Gary Building & Loan Association in cash the amount

loaned them, $250.00, and accrued interest, $3.27.

17. Sold C. D. Jackson Mdse. amounting to $250.00, receiving in exchange our

note for $200.00, with interest accrued amounting to $2.70, and cash for
balance.

Inventory, Mar. 31: Due the Citizens' Bank, $45.00 for interest on money borrowed.

THE LOSS AND GAIN ACCOUNT 31

LOSS AND GAIN ACCOUNT PROBLEMS

1. During January, 1913, A gained $375.60 on his merchandise sales, but his expenses amounted
to $265.65, and interest on money borrowed cost him $16.40. What was his net gain for January?

2. On Feb. 28, 1913, B's ledger showed gain on merchandise, $450.50; gain on interest, $4.72; loss
on furniture and fixtures, $15.00; expenses, $320.65; loss on real estate, $22.50. What was his net gain
for February?

3. C's ledger exhibited the following results for the month of March, 1913: Gain on merchandise,
$387.50; loss on real estate, $12.50; loss on furniture and fixtures, $6.60; gain on interest, $6.78; total
expense, $250.50. What was the amount of his gain or loss for March?

4. State in writing how to find the net gain or loss for a certain period if the separate gains and
losses of the business be known.

6. On April 30, 1913, D's Loss and Gain account showed a loss of $25.00 under date of April 10 and
a gain of $12.00 under date of April 16. Other gains and losses of the business for the month, as shown
in the various accounts on April 30 were: Gain on merchandise, $270.70; loss on interest, $8.50; expenses,
$190.95. What was the amount of the net gain or loss for the month?

6. E's ledger and inventories on May 31, 1913, exhibited the following facts: Cost of merchandise,
including inventory at the beginning of the month, $227.46; sales for the month, $392.80; inventory
of merchandise on hand May 31, $125.60. Expense for the month, $260.65. Interest losses, $10.25;
interest gains, $6.20. Cost of furniture and fixtures, $750.00; present valuation, $740.00. What was
E's net loss or net gain for May?

THE LOSS AND GAIN ACCOUNT

Purpose : To contain a record of the separate losses and gains as shown in the various
accounts closing with a loss or gain; and to contain any items of loss or gain not classified
in any special account.

Method : Debit Loss and Gain with the separate losses of the business as shown by
accounts closing with a loss, and for any losses not entered in any special account. Credit
Loss and Gain with the separate gains of the business as shown by accounts closing with a
gain, and for any unclassified gains.

Result: The difference between the two sides will be the net loss or gain of the
business for the period of time since the account was last closed.

Illustrative Exercises:

19—

Sept. 10. Found in our cash register tonight $10.00 too much. Entered this in the
loss and gain account.

20. Burglars broke in the store last night and took $24.00 worth of Mdse.

21. T. F. Smith failed to-day. He owed us $90.00, and as he was able to pay

in cash only 60 cents on the dollar, we lost $36.00.

30. The real estate account for this month shows a gain of $600.00. (See
Illustration of Real Estate.) This is entered in the loss and gain
account. As it is a gain, it is placed on the credit side. Note that the
black ink entry in the loss and gain account and the red ink entry in
the real estate account are on opposite sides. This is always the case.

30. The merchandise account for this month shows a gain of $57.60. (See
Illustration of Merchandise Account.) This amount is entered in the
loss and gain account.

ACCOUNTS

19—

Sept. 30. The expense account for this month shows a loss of $190.64. (See Illus-
tration of Expense Account.) This amount is closed to the loss and
gain account.
30. The interest account for this month shows a gain of $20.17. (See Illus-
tration of Interest Account.) This amount is closed to the loss and
gain account.

Illustration

'^-

a^^LJ

a.^'C^^^^z^

JZU^^iJr

tip
2-/
30

/fO

U2_7J_

■Zu/zy^

^4^

Id.

/O
30
JO
JO

/ O

Coo

7''

C<ty

o
77

Explanation: This account contains a summary of all losses and gains for the month.
The difference between its two sides is a net gain or loss, which is placed on the smaller
side in red ink at the line of closing. This net gain or net loss is entered in the proprietor's
account in black ink on the side opposite that in which it is shown in the loss and gain
account in red ink.

EXERCISE XVI
19—

April 16. Found the cash in the cash register to-night to be $5.00 short.

17. W. H. Conklin owed us $85.00, which we were afraid we could not collect.
We offered to take $50.00 in full settlement of his account and he paid
us $50.00 in cash.

30. The merchandise account for this month shows a gain of $185.51. (Write
the word Mdse. in the explanation column.)

30. The expense account for this month shows a loss of $60.75.

30. The interest account shows a gain of $10.63.

30. Our advertising account shows a loss of $22.50.

Close the account, using the explanation Proprietor in the closing entry,
to what account the net gain is carried.

This shows

THE proprietor's ACCOUNT 33

PROPRIETOR'S ACCOUNT PROBLEMS

1. The proprietor of a certain business began business with an investment of $10,000.00 and debts
totaling $750.60. During the first month his net gain was $225.00, which he allowed to remain in the
business. What was the business worth at the end of the month, no further investments or withdrawals
having been made?

2. W. H. WyUe invested $12,000.00 in the grocery business on February 1, 1913. His debts at the
time of beginning business, which were assumed by the business, amounted to $4250.00. On Feb. 13
he increased his investment $1000.00. On Feb. 21 he withdrew $50.00 for his own use. His net gain
for February, which he allowed to remain in the business, was $240.40. What was the amount of his
investment on Feb. 28?

3. W. H. Wylie's investment in business on March 1, 1913, was the amount determined in the
last problem as the amount of his investment on Feb. 28. His gains and losses for the next four months
were as follows: March, gain, $222.65; April, gain, $350.68; May, loss, $57.63; June, gain, $129.64.
On March 3, he withdrew from the business $150.00 for his own use. On May 16, he increased his
investment $550.00. No other withdrawals from or additions to his investment having been made,
and all gains having been allowed to remain in the business, what was W. H. Wyhe's investment on
June 30?

4. H. N. Nolan, E. J. Doolin, and E. C. McGuire began business as partners on July 1, 1913. Mr.
Nolan invested $10,000.00. Mr. Doolin invested $8000.00 but had debts of $1250.00 which the busi-
ness assumed. Mr. McGuire invested $7500.00. During the month Mr. Nolan increased his invest-
ment $1000.00 at one time and $500.00 at another. Mr. Doohn withdrew $75.00, $54.50, and $44.25,
at different times, for his own use. Mr. McGuire made no withdrawals or investments during the
month. On July 31 it was found that the net gain of the business for July had been $933.21, and this
was allowed to remain in the business, equally divided among the partners. What was the investment
of each partner on July 31?

5. State in writing how to find the amount of the proprietor's present investment if the following
facts be known: (a) His investment at some previous date; (b) his additional investments and with-
drawals since that date; (c) his gain since that date if allowed to remain in the business, or his loss since
that date.

THE PROPRIETOR'S ACCOUNT

Purpose: To contain a record of the amounts invested by the proprietor and with-
drawn by him.

Method: Credit the proprietor for his investments; debit him for his withdrawals.

Result: The difference between the two sides will be the amount of the proprietor's
interest in the business.

Note. — The Proprietor's account is like any personal account as far as the book-
keeping features are concerned. The proprietor is debited for what he costs the business
(in withdrawals) and credited for what he produces (by investment).

Illustrative Exercise:

19—

Sept. 1. H. M, Strong, the proprietor, invested cash, $2,000.00.

10. H. M. Strong withdrew for personal use Mdse. valued at $7.90.

15. H. M. Strong withdrew cash, $50.00, with which to pay his house rent.

20. H. M. Strong made another cash investment, $1,000.00.

30. The gain of the business for September, as shown by the loss and gain
account (see Illustration), was $437.13. Instead of withdrawing this
gain, Mr. Strong allowed it to remain in the business, the amount being
carried to his account as an addition to his investment.

ACCOUNTS

Illustration

r:A( /V^J^JuA^^

/J'

Aj a,J^<^^^yl^c.c^

y^c

dJj;^

S2&^

cXo~d-J Y'-'^^a^ty^vy

A^!^ti^^C^Ci^^^'ZyC.£^

200C
/ OOC

40;

/3
3^3^ /3
A 33jfZ3

Explanation: The amount of the gain for the month, taken from the loss and gain
account, is entered on the proprietor's account in black ink at the end of the month, the
name of the loss and gain account being used as an explanation. The account is then
balanced. The amount of the balance shows what the business owes Mr. Strong. If the
debit side of Mr. Strong's account had been the larger, he would have owed the business,
and would be said to have been "insolvent." The balance is brought down below the
rulings on the opposite side, in black ink. The term "present worth," or "investment''
or "net capital" or any similar expression, can be used instead of the word "balance."

19—

May 1.
1.

EZEBCISE XVn

T. L. Foster began business to-day with a cash investment of $3,500.00.
On starting business Mr. Foster owes G. W. Champion $465.00, on account,
which debt is assumed by the business. (Debit T. L. Foster.)
10. Mr. Foster made a further investment of property worth $2,000.00.
12. Mr. Foster withdrew cash, $20.00-
15. Mr. Foster received $1,364.50 in cash from the maturing of an endowment

policy, and invested it in the business.
20. Mr. Foster paid his personal grocery bill, $25.60, from the cash register.
31. Mr. Foster's salary of $200.00 is carried to the credit of his account.
31. Mr. Foster's house rent, $35.00, is paid out of the cash register.
31. The gain of the business for the month, $124.67, is carried to the credit of
the proprietor.
Balance his account. Do not forget to bring the balance down.

CLASSIFICATION OF BOOKS

The books used in any set of books are:

1. Books of Original Entry. 2. Books of Final Entry. 3. Auxiliary Books.

Books of Original Entry are the books in which transactions are first recorded, at the
time of their occurrence. Entries appear in these books in the order in which the trans-
actions occurred. The book of original entry which you will first study is the journal.

Books of Final Entry. The principal book of final entry is the ledger. Transactions

THE JOURNAL 35

are transferred from the books of original entry to the ledger, where they are arranged in
classified order, in accounts.

Auxiliary Books. These are books in which are recorded certain additional facts or
memorandums which are of interest or importance.

THE JOURNAL

A BOOK OF ORIGINAL ENTRY

A Business Transaction is an even exchange of commodities, services, or other things of
Value, The values of the things exchanged are assumed, by the parties trading, to be equal.

Double Entry Bookkeeping is a system by which a record is made of both sides of every
exchange. Equal debits and credits are recorded for every transaction.

Rule foe Debiting and Crediting Accounts: Debit that which is received or which
costs value. Credit that which is disposed of or which produces returns.

That which is received is exactly the same as that which costs in every case. This is not always clear
to beginners, however. In some cases it is easier for the beginner to answer the question, "What has
been received?" In other cases it is easier to answer the question, "What has cost us something?"
Whenever either of these questions is answered, the answer is the name of the account to be debited.
Similarly, that which has been disposed of is the same as that which produces returns, and is the thing which
is to be credited.

Since that which is received or which costs us, and that which is disposed of or which
produces returns are of equal value, the amount or amounts debited will be equal to the
amount or amounts credited.

The Journal. This is a book of original entry in which are recorded the equal debits
and credits arising from transactions. Transactions are recorded in the journal at the
time of their occurrence, and hence in the order of their occurrence.

Journalizing is the process of determining, by the rule for debiting and crediting
accounts, what account is to be debited and what account is to be credited, in each trans-
action. The items of debit and credit are arranged in the journal in a form convenient
for transferring to the ledger.

Illustrative Exercise:

19—

Sept. 1. Bought of John Brown for cash, 10 brl. apples at $2.50, $25.00.

2. Sold Amos Smith on his note, 6 brl. apples at $3.10, $18.60.

3. Bought of James Ransom for cash, 10 brl. flour at $6.00, $60.00.

4. Bought of J. Thurman, a house and lot, No. 271 Park Ave., for $2,500.00.

Gave him my note in exchange.

5. Sold to Wm. Allen, 361 Church St., on account, 10 brl. apples at $2.75,

$27.50; 5 brl. flour at $6.60, $33.00. Total, $60.50.
7. Bought of W. Parsons for cash, a farm in Henry County for $4,000.00.

accounts
Illustration

y./^-

£-

,;l^U^.

&^dX

^z^

ji/ (I^iC*t^-£>X^-e^

/(T

zsoo

^c?

j-o

^000

ZJ-

/d'^o

ZSoo

^000

s-0

Explanation: Applying the rule for debiting and crediting accounts to the first trans-
action, we find that the merchandise account is to be debited $25.00 and the cash account
is to be credited $25.00. This debit and credit is indicated in the journal entry hy position.
The debit item is written on the first line, the name of the account being written at the ex-
treme left of the wide space, and the amount being written in the left hand column. The
credit item is written on the line below, the name of the account being indented to about
one and a half inches from the left margin, and the amount being written in the right-hand
money column. Sometimes a light line is ruled down the page to show where to write the
name of the account credited. (If the wide column is ruled squarely down the middle, do
not use this ruling as a guide line, as you need more space for the credit entry.) In any
case this margin should be precise. This relative position should never be even slightly
varied, as debit and credit are indicated in the journal by position alone.

THE JOURNAL

The date of the transaction is written above the entry in each case, as shown in the
illustration. Leave blank the narrow columns at the left — their purposes will be explained
later. The first date on each page is written out in full, including the month and year.
Other dates on the page may be shown by figures only.

When there are more than one debit or more than one credit, they should be shown
as in the following illustration.

Illustrative Exercise:

19—

Sept.

1. Sold J. H. Perkins, 680 La Salle St., house and lot, No. 226 Monroe St., for
$3,000.00. Received in payment cash, $1,000.00, and his note due in
two years for $1,000.00. Charged him $1,000.00 on account.

4. Bought of Henry Turner, 723 Polk St , 20 brl. flour at $8.00, $160.00. Paid
him cash, $60.00; balance on account, $100.00.

9. Sold R. Snyder 3 shares Illinois Central Railroad stock at $125.00, $375.00,
and 1 share Union Bank stock, $200.00. Received in p.ayment his note
at 30 days for $200.00, and cash for balance. (Accounts are kept with
Union Bank Stock and /. C. R. R. Stock.) •

Illustration

....-'t^L.J.'-P^

/^il,<£-6^.

9? ^£^(2^.

/ooo
/ooo

/io

3y^

Joao

/ 0(?

3-/^
zoo

ACCOUNTS

When recording the first transaction with any person, write the person's address in
the journal, just opposite or just beneath the name, in a small, neat hand.

Transactions to be Journalized
19—

Jan. 1. Richard A. Strong has this day commenced business with a cash capital of
$2,000.00.

2. Bought of Caldwell & Perkins, 723 S. Clark St., for cash, 150 lb. Elgin

creamery butter at 33^^, $50.00; 75 lb. maple sugar at 15^, $11.25;
25 lb. Royal Ceylon tea at 40^, $10.00; 25 lb. Santos coffee at 18^,
$4.50; 125 doz. eggs at 30^, $37.50. Total, $113.25.

3. Bought of H. C. Harriman, Winona, Minn., on my note at ten days,

50 brl. Ceresota flour at $5.50, $275.00; 75 brl. Ben Davis apples at
$1.75, $131.25; 150 bu. Burbank potatoes at 80^, $120.00. Total
$526.25.

4. Sold to J. D. Williamson, 3186 Westminster Ave., for cash, 50 lb. Elgin

butter at 35^, $17.50; 25 brl. Ceresota flour at $5.75, $143.75; 20 brl.
Ben Davis apples at $2.00, $40.00. Total, $201.25.
6. Bought of W. N. Furbeck, San Francisco, Cal., for cash, 200 boxes Cali-
fornia grapes at 25^, $50.00; 50 boxes California navel oranges at $1.60,
$80.00. Total, $130.00.

8. Sold to James Duncan, Hammond, Ind., on account, 80 lb. Elgin butter at

40^, $32.00; 100 doz. eggs at 32^, $32.00; 100 bu. Burbank potatoes
at 75^, $75.00; 25 brl. apples at $2.10, $52.50. Total, $191.50.

9. Received from James Duncan on account, cash, $100.00.

10. Bought of E. E. Beaver, 425 S. Water St., 100 boxes California grapes at
40^, $40.00; 50 boxes oranges at $2.00, $100.00; 250 lb. maple sugar at
20^, $50.00; 25 lb. Royal Ceylon tea at 50^, $12.50. Total, $202.50.
Gave in payment cash, $50.00; my note at 30 days for balance, $152.50.

13. Paid H. C. Harriman for my note of the 3d inst. Face of note, $526.25.
Gave in payment 50 boxes oranges at $2.25, $112.50; 100 boxes Cali-
fornia grapes at 50^, $50.00. Total, $162.50. Cash for balance, $363.75-

15. Paid cash for rent of store for the current month, $50.00. (Debit Expense.)

16. Bought of Washburn-Crosby Co., Minneapolis, Minn., on account, 50 brl.

Gold Medal flour at $5.60, $280.00. Paid cash for freight on the ship-
ment, $11.40. (Two entries. The freight is considered a cost to Mdse.)

18. Bought of Diebold Safe & Lock Co., 194 Fifth Ave., on account, a burglar-
proof safe for my office, $100.00. (Debit Furniture & Fixtures.)

20. Received of James Duncan cash, $75.00, to apply on account. Sold to
Thompson & Smith, 443 W. Randolph St., on account, 25 brl. Gold
Medal flour at $6.00, $150.00; 25 doz. eggs at 44^, $11.00; 50 bu. Bur-
bank potatoes at 75^, $37.50. Total, $198.50.

POSTING TO THE LEDGER OR BOOK OF FINAL ENTRY

You have learned that all the original entries in the journal are made in the order of
their occurrence and that they are later transferred to the ledger or book of final entry,

EXERCISE IN JOURNALIZING 39

where they are classified in proper accounts. The process of transferring these items is
called posting.

The process of posting from the journal to the ledger may be better illustrated than
defined. You will therefore journalize the transactions for February and follow closely
the instructions for posting.

Transactions

19—

Feb. 1. (Student) commenced business this day with a cash capital of $3,500.00.

2. Bought from Bronson & Baker, 1625 Dearborn Ave., 50 doz. men's linen

shirts at $10.00, $500.00; 100 doz. lac^ies' linen handkerchiefs at$2.50,
$250.00; 2 cases paper cambric, 4,000 yd., at 10^, $400.00; 200 yd.
bleached cotton at 10^, $20.00. Total, $1,170.00. Gave in payment
my note at 9 days for $600.00; cash for balance, $570.00.

3. Bought from J. V. Farwell & Co., 148 Market St., on account, 50 yd. Irish

linen at 40^, $20.00; 100 yd. sheeting at 11^, $11.00. Total, $31.00.

4. Sold to W. O. Thomas, First National Bank Building, on account, 10 doz.

men's linen shirts at $12.00, $120.00; 5 yd. Irish linen at 50^, $2.50.
Total, $122.50.

5. Sold to D. Nugent & Co., St. Louis, on their note at 30 days, 1 case paper

cambric, 2,000 yd., at 11^, $220.00; 10 doz. ladies' linen handkerchiefs

at $3.00, $30.00. Total, $250.00.
7. Bought from Wanamaker & Sons, New York, on my note at 30 days, 1,000

yd. gingham at 10^, $100.00; 55 yd. black silk at $2.75, $151.25; 100 yd.

broadcloth at $3.75, $375.00. Total, $626.25.
9. Sold to G. B. Fairchild, Omaha, on account, 30 yd. black silk at $3.00, $90.00;

15 yd. Irish linen at 55^, $8.25. Total, $98.25.

11. Paid Bronson & Baker cash for my note of the 2d inst., $600.00.

12. Sold to Henry Russell, Milwaukee, Wis., on account, 50 yd. sheeting at 12^,

$6.00; 200 yd. gingham at 12^, $24.00; 10 doz. men's linen shirts at
$12.00, $120.00. Total, $150.00.

15. Sold to Chas. W. Harms, 2329 Michigan Ave., for cash, 14 yd. broadcloth at

$4.00, $56.00; 1 case paper cambric, 2,000 yd. at 12^, $240.00. Total,
$296.00. Bought of J. B. Clark, 5711 Wabash Ave., store and lot, No. 185
Lake Street, for $4,000.00. Gave in payment cash, $2,000.00; my note
at 60 days for $2,000.00. Total, $4,000.00.

16. Received cash from W. O. Thomas, on account, $75.00; also $50.00 from

Henry Russell on account. (Separate entries.)

18. Sold to G. B. Fairchild, Omaha, Neb., on account, 100 yd. bleached cotton

at 12^, $12.00; 20 doz. men's linen shirts at $12.50, $250.00. Total,
$262.00.

19. Received from Henry Russell, Milwaukee, his note at 30 days to cover his

account, $100.00.

20. Sold to F. E. Arnold, 1801 Michigan Ave., 20 yd. Irish linen at 50^, $10.00;

800 yd. gingham at 12^, $96.00; 16 yd. broadcloth at $4.00, $64.00.
Total, $170.00.

ACCOUNTS

Feb. 22. Received of G. B. Fairchild, on account, cash, $125.00; his note at 31 days
for $200.00. Total, $325.00.

23. Paid taxes on store and lot No. 1317 State St., for current year, in cash,

$18.30. (Debit Expense.)

24. Received cash of W. O. Thomas, on account, $45.00.

25. Sold to Henry Russell, on account, 50 yd. sheeting at 13^, $6.50; 50 doz.

ladies' linen handkerchiefs at $3.00, $150.00. Total, $156.50.

26. Received cash of F. E. Arnold, on his account, $100.00. Paid Wanamaker

& Sons cash on my note of the 7th inst., $450.00.

27. Sold to W. O. Thomas, on account, 10 doz. men's linen shirts at $12.00,

$120.00.

28. Paid cash to L. H. Carter for 2 tons of coal for use in the store, at $6.50 per

ton, $13.00. Received of D. Nugent & Co., cash on their note of the
5th inst., $150.00. Received cash of the following persons on account:
G. B. Fairchild, $20.00; F. E. Arnold, $40.00; W. 0. Thomas, $50.00.
Paid cash for the following expenses: Clerks' wages to date, $60.00;
gas bill for the month, $10.80; advertising in the "Times," $12.00.
Total, $82.80.

Open accounts in the ledger as follows, allowing for each account one line for the head-
ing, one line for the ruling, and for the entries the number of hues indicated below:

Page 1. Student (your name), 5 lines; Merchandise, 13 lines; Real Estate, 5 lines;
Expense, 5 lines. Page 2. Cash, 14 lines; Notes Receivable, 5 lines; W. 0. Thomas,
5 lines; G. B. Fairchild 5 lines. Page 3. Henry Russell, 5 lines; F. E. Arnold, 5 iines;
Notes Payable, 5 lines; J. V. Farwell & Co., 5 lines.

In opening accounts with persons, write the address on the double-ruled line just below
the name. Write in a small, neat hand, far enough toward the right side to leave room
for the year date of the credit side.

The first transaction in the journal is:

February 1, 19 —

Page 1

Folio

Debit Account
Cash

Credit Account

Student

Debit Amo
3500

unt
00

Credit Amo

unt

3500100

Note that the Folio column is left blank at the time of making the entry.

Posting

The first item in the first transaction is Cash Dr. $3,500.00. Enter this amount in the
cash account on page 2, on the debit side. Write the date in the date column and the
amount in the money column, as instructed in working the cash account on pa^e 6.

In the explanation column in the ledger write the name of the account credited in the
same transaction. (In this case, the student's account. The explanation would, there-
fore, be the student's name.)

POSTING

In the folio column in the ledger write the journal page from which the entry was trans-
ferred (1).

In the folio column of the journal write the ledger page to which the entry was trans-
ferred (2).

Post the credit side of the same transaction. Enter the credit in the student's account,
writing the date in the date column, the word "Cash" (the name of the account debited)
in the explanatory column, the journal page (1) in the folio column, and the amount in the
money column, all on the credit side, of course. Then enter the ledger page on which the
student's account appears (1) in the folio column of the journal.

When the first transaction has been posted, the cash account and student's account
in the ledger will look like these:

CASH

19—

Page 2

The folio column in the journal will contain the figure 2 opposite the word "Cash,"
and the figure 1 opposite the word "Student."

Post the second transaction in the same way. Debit the merchandise account $1,170.00,
writing in the explanation column the words "Cash & Notes Pay." (the names of the credit
items). Write the journal page in the folio column of the ledger, and the ledger page in the
folio column of the journal. Post the $600.00 to the credit side of the notes payable
account and the $570.00 to the credit side of the cash account, using the explanation
"Mdse." in each case. Always write the journal page in the ledger and the ledger page in
the journal in the folio column, opposite the item, at the exact time of posting.

The explanation used in the ledger when posting from the journal, consists of the name or names of
the account or accounts affected on the side of the transaction. If there are too many of such names to
write in the small space allotted, use the word " Sundries," which means " Several."

Do not fail to put the page numbers in the folio columns at the precise time of posting. These page
numbers not only serve as references from one book to the other, to be used in tracing items from the
journal to the ledger or vice versa, but they have another purpose which is quite as important: The
entering of the page shows that the transaction has been posted, and great caution should be taken to
enter it at the precise moment the posting is done, in order to prevent error. For if the bookkeeper should
put down his page mark in the journal in advance, intending to make his entry later, he might forget, and
the posting would be omitted. On the other hand, if the bookkeeper should post all his entries, intending
to put his page marks in later, he would never know what had been posted and what had not been, and
might either omit an item or get one posted twice. Leave nothing to memory. Enter the pages in both
journal and ledger at the precise moment the posting is done. Do not ignore this instruction. Neglect
of this causes bookkeepers and bookkeeping students more trouble than any one thing pertaining to the .
detail of bookkeeping.

Post the rest of the transactions.

ACCOUNTS
THE TRIAL BALANCE

In every transaction there has been an even exchange. There have been equal debits
find credits in the journal for every transaction. The debits posted to the ledger have,
therefore, exactly equalled the credits posted to the ledger. It follows that the total debits
must equal the total credits, if no mistake has been made.

The trial balance is a list of the ledger accounts and the total debits and credits of each,
prepared for the purpose of ascertaining whether the total of the debits actually equale
the total of the credits. If it does, the ledger is said to be "in balance."

^.J^^l^t^^Z^ /C> <^:l^C^^^ zf:

Z^-

???

n ?
?? ?

r??
???

F? ?

ff???

/6zsis

? f ? ?
? ? ?
? / /

? ? ?
? ? ?

? ? ? /
u.

??/? /

? >

The above trial balance is taken from the ledger footings after the transactions for
February have been posted and before any accounts are closed. The amounts are to be
ascertained by you.

Add the debit side and the credit side of each account in the ledger. Place the footings
in the money columns, in small, neat lead-pencil figures close to the last figure in the column
in each case. Then make a list of the accounts, under the heading "Trial Balance, Feb. 28,
19 — ," writing the total debits and total credits opposite each account in the list. In the
Folio column, place the ledger pages on which the accounts appear. Rule a single red
line under the last item in the trial balance, and foot the columns. The footings of the
two sides should be equal. Rule a double red line. under the footings.

THE TRIAL BALANCE 43

If the debit and credit totals in the trial balance are not equal, some mistake has been
made. The mistake may be in addition; it may be in posting. You must find it.

To find your error, proceed as follows:

Add the trial balance again. If you find your addition to be correct, compare the
amounts in the trial balance with the lead-pencil footings in your ledger. As you find each
amount to have been correctly entered in the trial balance, and on the proper side, place
a neat check mark ( i^ ) opposite the amount in the trial balance and another opposite the
footing in the ledger. The mistake still remaining undiscovered, add your ledger columns
again carefully, adding downward if you added upward the first time. Then check all
debit items in the ledger against debit items in the journal, placing check marks opposite
each entry in the ledger and in the journal as you find them to agree. Then check all
credit items in the ledger against corresponding credit items in the journal. This checking
should be done backward, from the ledger to the journal, not from the journal to the ledger.
Last, inspect all transactions in the journal, to be sure the debits and credits in each trans-
action are equal. Inspect the ledger, journal, and trial balance to be sure that everything
is checked and nothing checked twice.

The advantage of this plan of checking is that you have gone over every step of your
work in posting and addition in an order reverse from that in which the work was done.
If the checking has been carefully done, you have discovered the mistake.

When you have secured a trial balance, hand in your work. Do not attempt to close
any accounts at this time.

Teachers' Note. — Additional practice in journalizing is provided for in the exercises on accounts.
If it seems desirable, require the students to journalize the transactions in these exercises, using loose
sheets of journal paper for the purpose. The additional practice thus secured will be of great value to
them, as they cannot be too well grounded in journalizing. Even if their work in journalizing has been
well done thus far, they have probably had to sUidy it very carefully and work slowly. They ought to
be able, before proceeding further, to journalize rapidly unthoiU error. When journalizing transactions
has become almost second nature to them, their minds can be free to grasp the meaning and use of the
business papers which will be introduced in'Chapter II, and free to grapple with the more difficult prob-
lems in accounting which they will encounter.

Review Qttestions. 1. What is bookkeeping? 2. What is its purpose? 3. What is meant by
the "condition" of the business, and how is it shown? 4. The "progress" of the business? 5. Name
6 accounts which exhibit condition. 6. Name 4 which exhibit progress. 7. What is the ledger? 8.
What is the purpose of the cash account? 9. The method of debiting and crediting it? 10. The result
shown? 11. How is the account closed? 12. TVTiat is a promissory note? 13. Name the parties to
a note and give definitions. 14. What is an endorsement? 15. What is the purpose of an endorsement
of a note? 16. Name the parties to an endorsement and give definitions. 17. When is a promissory note
a "note receivable?" 18. When is it a "note payable?" 19. Answer questions 8, 9, 10, and 11 as applied
to the notes receivable account. 20. Answer questions 8, 9, 10, and 11 as applied to the notes payable
account. 21. Answer questions 8, 9, 10, and 11 as applied to personal accounts. 22. What is an inven-
tory? 23. Answer questions 8, 9, 10, and 11 as applied to the real estate account. 24. WTiat is done
with the two red ink entries of an account closing with an inventory and a loss or gain? 25. What is
merchandise? 26. Answer questions 8, 9, 10, and 11 as applied to the Mdse account. 27. "VVTiat are
expenses? 28. Answer questions 8, 9, 10, and 11 as applied to the expense account. 29. What is
interest? 30. Answer questions 8, 9, 10, and 11 as applied to the interest account, 31. When is an
inventory placed upon the debit side of an account? Wien upon the credit side? 32. Answer ques-
tions 8, 9, 10, and 11 as applied to the Loss & Gain account. 33. Answer questions 8, 9, 10, and 11 as
applied to the proprietor's account. 34. WTiat are books of original entry? 35. What are books of
final entry? 36. WTiat are aiixiliary books? 37. What is meant by "a business transaction"? 38.
What is double entry bookkeeping? 39. Give the general rule for debiting and crediting accounts. 40.
What is the journal? 41. What is journalizing? 42. How are debits and credits indicated in the journal?
43. When should an address be written in the journal? 44. Why are entries transferred from the journal
to the ledger? 45. What is the process of transferring entries from the journal to the ledger called?
Describe it. 46. What is the trial balance? 47. How do you proceed to find errors in posting?

CHAPTER II

PRACTICAL OFFICE WORK AND BOOKKEEPING

THE STUDENT AS BOOKKEEPER

BUSINESS FOR JANUARY, 19—

January 1, 19 — . D. B. Stewart has today engaged in the flour and feed business at
377 Adams St., Chicago, III. You have been installed as bookkeeper and cashier at a salary
of $20.00 per week.

You are bojkkeeper and cashier because you are to have charge not only of the books,
but of the cash as it is received and paid out. You are to look to Mr. Stewart, however,
for authority to pay out cash; and Mr. Stewart will sign all checks.

Transaction No. i

Mr. Stewart hands you $10,100.00 in cash, which he wishes to invest in the business-
The cash will be found in the envelope marked "Currency," which accompanies your outfit.
Take from it one $100.00 bill and a slip marked, "This slip represents $10,000.00 in cash."

Bookkeeping. Journalize the transaction and make your first journal entry, following
it by a complete explanation, as shown in the illustration.

Journal Entry with Explanation

/f.

/o/oo

.-^.yT^Z^

<2^cl.^lJi^ JO/00

37 7 C/i^^'Ctyyn^ -'SzU:; C.^'A^c^C-tz-^^ , ^J^-v^., a^yv-e/ ■^■^^v-m-J

Note. In the preliminary chapter on accounts and journalizing nothing was said about the expla-
nation. This explanation should follow every journal entry and should always be full and complete.
No fault of bookkeepers causes greater confusion and more misunderstandings than that of making
journal explanations which are not complete or are not clear. Leave nothing to the memory or the
imagination.

Explanations should be worded in every case so as to show our side of the transaction. When we
buy Mdse. of Smith, the explanation should read "Bought." When Jones pays us, the explanation should
be "Received." And so on.

Erasures in the journal are positively forbidden. In the absence of instructions, apply
to your teacher in case of an error. Strive not to make errors. Be neat and orderly in

DEPOSITING

everything pertaining to your work and you will thus greatly diminish the chances of
error. Be sure that you know what is to be debited and what is to be credited before
you make an entry. If in doubt, write your entry out on a separate slip of paper and
show it to your teacher for approval before writing it in your journal.

Filing. Accompanying your outfit you will find a filing device consisting of a number
of sections, each marked to show what it should contain. One of these sections is marked
"Cash Register." Place in it the $10,100.00.

Legal point. The journal is the only book of original entry used this month. It is the book in
which entry is made in the first place — at the time of the transaction in each case. It is therefore the
only book which will be received in evidence in a suit at law, because the law refuses to accept books
in which entries were made subsequent to the transactions, or books to which transactions have been
transferred, if a book of original entry can be secured. This, it will be seen, furnishes one good reason
why erasures in the journal are forbidden — an entry which has been erased and patched up would, of
course, not be acceptable as evidence.

The Day Book. The old-fashioned way was to make memorandums of all transactions in a "Day
Book" in the order of their occurrence, afterwards making the required entries in the journal and other
books, from which posting could be made to the ledger. This necessitated an additional step in the
bookkeeping. The explanatory journal combines the old-fashioned day book and journal and saves
time. Some bookkeepers still cling to the day book.

Transaction No. 2

Deposited with the

Merchants Exchange Bank

at Account of

January 1. Mr. Stewart has made arrangements to open a checking account with the
Merchants Exchange Bank. He instructs you to deposit $10,000.00.

Business point. It is not prudent to keep a large sum of money in your cash register. The bank

is the proper place to keep all funds beyond what
cash is necessary for making change. Nearly all
business firms deposit every day. The bank becomes
responsible for the funds in its possession and will
pay them out as you order by your checks.

Procedure. Fill out a deposit slip like the
one here shown, a pad of which has been
secured at the bank. Present the slip and the
$10,000.00 to the receiving teller at the bank.

The Bank is glad to furnish deposit slips, check-
books and pass-books to its customers free of charge.
You will find all these things among the supplies fur-
nished you with this set.

Filing. The deposit slip and the $10,000.00
are to be placed in the outgoing papers sec-
tion of the file. Thia corresponds to leaving
them at the bank.

Teacher's Note. If your school has no bank, ap-
point some student as banker. Instructions given
in the text will show him how to receive the deposits,
and make the pass-book entries. Some teachers prefer to authorize each student to act as his own
banker, but this is confusing to the pupil, if not positively dangerous. No teacher should do this with-
out being extremely careful to impress upon the student the fact that he is not acting for himself, but
£or another, in doing the work.

CurrtiKj,.
dill,

Chttis, .

/ O

000

PRACTICAL OFFICE WORK AND BOOKKEEPING

Many business houses make it a rule to keep duplicates of all deposit slips, as these would contain
records of detail which the bare entry in the pass book would not show. If a depositor forgets his
pass book, he may secure a duplicate deposit slip and hold it until the deposit can be entered in the
pass book.

Bookkeeping. No entry is required in the books for this transaction. Cash in the bank
is considered as on hand just the same as if it were in the cash register. In order to know
the amount of cash on hand at any time it is necessary to add the amount in the bank to
the amount in the cash drawer. Just now, $10,000.00 is in the bank, and $100.00 is in the
cash drawer, making a total of $10,100.00, as shown by the cash account. Whenever cash
is paid out of the cash drawer, or drawn out of the bank by check, cash is credited.

Legal and Business Points. Banks are glad to receive deposits. The money so deposited is used
by the bank in its business, and as an important part of its business is that of making loans at interest,
it is amply repaid for its trouble in receiving deposits, caring for the money and paying the checks,
by the interest it is able to earn on the balances remaining in the bank. Large depositors can
demand and obtain interest on deposits left in the bank for a considerable time, though most banks will
not pay interest on accounts against which checks are drawn from time to time. Mr. Stewart is not
to receive interest, as he plans to check against his account.

Some banks in large cities do not wish to be bothered with small accounts and will not accept them-

THE PASS-BOOK

The cover of the bank pass-book reads:

^ierchants Exchange Bank

In account with

In the first blank line write the name of
the city, — Chicago. In the second blank
line write the name D. B. Stewart. In the
lower left-hand corner of the cover write your
name and write the name of your school imme-
diately below it.

When the receiving teller of the bank has
entered your deposit in the pass-book, it will
appear as shown in the illustration below.

Merchants Exchange Bank

In Acc't With D. a 5toar/

19—

Jan. 1

Deposit

10000

Note. The entry in the pass-book constitutes the bank's receipt for the money. The purpose of
the pass-book is to contain a list of these receipts as deposits are made.

When Mr. Stewart made his arrangements with the bank he was required to leave his
signature at the bank. No other signature will be honored on a check. You are to make
out the checks and take them to Mr. Stewart (represented by your teacher) for his sig
nature.

At the option of the teacher, the student may be allowed to sign the checks himself, thus: "D. B.
Stewart, by (student's name)." This will save time, but is not as good a practice. Most banks would
require a written authorization, called Power of Attorney, before honoring checks so signed. The Power
of Attorney gives the employee power, as attorney for the employer, to do the thing or things specified in it.

ISSUING A NOTE 47

THE CHECK-BOOK STUB

You are to keep a record of transactions with the bank on the check-book stub.
Your first entry on the check-book stub will be, "Deposit, Jan. 1, 19 — , $10,000.00/'
as shown in the illustration on page 42.

Transaction No. 3

January 1. A cash register has been delivered to-day by the National Cash Registey
Company.

Mr. Stewart has examined the cash register and found it to be in perfect condition,
and the invoice correct as to amount and terms. He has therefore placed his "O. K."
upon the invoice in the lower left-hand corner, thus: "0. K. — D. B. S." He hands you
the invoice.

The invoice will be found in the pad of incoming papers. It is the first paper that has
been received and will be the top paper in the pad (Incoming Paper No. 1). Detach the
invoice from the pad.

Observe that the terms on which the cash register was sold are "Note 30 days." You
will, therefore, detach a note from the pad of blank notes, after filling it out properly,
and present it for signature to Mr. Stewart. Turn to page 9 for instructions as to filling
out a note. This one does not bear interest. Make it payable at "my office." Mr. Stewart
will sign the note. [Your teacher will sign Mr. Stewart's name or authorize you to sign
"D. B. Stewart, by (your initials)."]

Before detaching the note from its stub, fill out on the stub a record showing the number
of the note, to whom and for what it was issued, its date, the length of time it is to run,
the due date, and the amount.

Bookkeeping. Make the journal entry, charging the amount to "Furniture and Fix-
tures." When you open your ledger, an account will be opened under this title, which will
be debited with the cost of all furniture and fixtures.

Your explanation in the journal should be, "Bought of the National Cash Register Co.
on our 30-day note, one cash register No. 350-C. Their invoice No. 235." This last refers
to the invoice number which the National Cash Register Co. has placed upon the bill in the
upper left-hand corner.

Filing. Pin or otherwise attach the note to the invoice, and mail the two by placing
them in the outgoing papers section. If you use a pin, be sure that its point is hidden
between the two papers, so that it will not prick the fingers of one opening the envelope.

^^ Business Note. It is customary for business houses to number serially their invoices of goods sold.

' This is a means of quickly identifying a bill and furnishes a convenient reference. In correspondence

a bill is referred to as "Invoice No. — ." This fully describes the bill without a long enumeration of

date, items, etc. Mr. Stewart expects you to employ a similar system of numbering invoices when

goods are sold.

Note. The bookkeeping entry should always be made before the papers used in the transaction are

filed, as the papers not only contain the information necessary for the entry, but serve as a reminder

that the entry has not been made. Always make the journal entry at once, if possible.

\ Business Point. Do not underestimate the importance of filing all papers promptly and systemat-

\ically. The difference between a good bookkeeper and an incompetent one often lies in the ability of

tfie former to find quickly any document he wants.

48 PRACTICAL OFFICE WORK AND BOOKKEEPING

Transaction No. 4

January 1, Mr. Stewart hands you an invoice of furniture and fixtures which he has
to-day received and O. K.'d (Incoming Paper No. 2 in the pad of incoming papers).

Observe that the terms of this bill are "On account." You will, therefore, make a
journal entry crediting The Macey Co., 82 Wabash Ave., Chicago, III, and file the invoice
in the section marked, "Invoices Payable." In your journal entry refer to the invoice
as "Their No. 2457."

Transaction No. 5

January 1. Mr. Stewart asks you to make out a check for $125.00, for the rent of the
store for January. The check is payable to J. B. Olmstead, the owner of the building.

Make out the check, all except the signature, as shown in the illustration, and hand it to
D. B. Stewart (represented by your teacher) for his signature. (Your teacher will give
instructions as to how this signature is to be secured.)

Form of Check

rof ^'JA Aj( yi-<U^.^i7^Z<fy^ '

'^'ll^22..£.y:^:^L^i.^tL^^3^^

A.lsi::i

^/t^aX-a^^'^-^.^^^^^^A-^

Explanation. The above check is No. 1. Succeeding checks will be numbered in the
order in which they are drawn. The next will be No. 2, etc.

The amount is written both in figures and words, as a safeguard against mistakes. Note
that the three words in "One Hundred Twenty-five" are each capitalized. "Twenty-five"
is a compound word. Note that the "&" is placed between the dollars and the cents. It
must always be placed there. "No/100" means "no cents." "Twenty cents" would be
written '"20/100."

Be careful to begin the written amount at the extreme left of the blank line, and to fill
up all unused spaces after the amount in writing, the amount in figures, and the name.
This may be done with ruled lines, or with wavy lines with the pen, as in the illustration.
Thus you may prevent tampering with the check.

Legal Point. In case there is a difference between the amount written in words and the amount
expressed in figures, the written amount will be considered correct.

THE LEASE

Deposit, Jan. /, ig-

No.-

Date-

Jan.

In favor of

J . B. OlmsUad

.19—

On what account
Rent for Jan.

12^.00

No.

Date-

Jan. /

-19—

In favor of
Pillsbury Washburn Co.

On what account
Invoice # 2346

1127.50

The Check-book Stub. The balance of Mr. Stewart's account with the bank should
always be exhibited on the check-book stub. This is done by adding the amount of each

deposit to the previous balance, and subtract-
ing the amount of each check. The balance
before Check No. 1 was drawn was $10,-
000.00. From this the amount of Check
No. 1 is subtracted. Write in the proper
blank spaces on the stub the number and
date of the check, the name of the person
to whom it was issued, the purpose for
which it was issued, and the amount. Carry
the amount out into the main column and
subtract it from the balance. This should
be done before the check is torn out of the
book. The illustration shows the stub for
the first two checks.

The balance at the bottom of the first
stub should be written at the top of the next
stub, the balance at the bottom of the second
stub carried to the top of the third, and
so on.

To tear off check No. 1, hold a sharp rule
firmly against the paper at the line show-
ing where to tear, and tear quickly with an
upward motion. Learn to do this neatly
before attempting to tear the check off.

The Lease. The agreement between Mr.

Stewart, the renter, and Mr. Olmstead, the

landlord, was put in written form. This

written agreement is called a lease. Mr.

125

9S75

S747

Stewart hands you the lease, and asks you to file it. He requests you to read it carefully
before you file it, so that you will know what the agreement is, and to "brief" it.

You will find the lease among the miscellaneous papers accompanying your outfit.

Questions on the Lease: ^

Who is the party of the first part?
Who is the party of the second part?
What is the length of the lease?
When and in what amounts is the rent to be paid?

If Mr. Stewart should vacate the premises at the end of the sixth month, would he be required to
pay rent for the remaining six months?

If Mr. Olmstead should in the above case rent the property to another party after it had been vacant
thirty days, for how much could he hold Mr. Stewart?

May Mr. Stewart rent office room to another party?

Mr. Stewart allowed heavy trucks to be dragged across the floor and damaged it. Who is re-
sponsible according to the terms of the lease?

PRACTICAL OFFICE WORK AND BOOKKEEPING

At the end of the year the wall paper is soiled and the painting worn off of the wood work in
spots. Can Mr. Stewart be compelled to repaper and repaint the interior?

rvE> A.SE>

From.

J. B. Olmstead
To

D. B. Stewart

January i

-19-

To-

December J T

-19-

"Briefing" the Lease. By this is
meant writing on the back of the paper
in a concise, brief form, the nature of its
contents. On the back of the lease you
will find a printed form which is to be
filled in with this information. When
you have filled it in, it will read as shown
in the illustration.

Fold the lease so that the briefing on
the back will be on the outside when it
is folded. File the lease in the section
marked "Miscellaneous Incoming Papers."

Business Point. It is usual and best to
have the lease drawn up in proper form before
the building is occupied. But in this case Mr.
Stewart took possession first, and the lease
followed as a matter of form. A verbal agreement without the formality of a written lease would be
binding in most states for any length of time less than one year. It is better in any case, however, to
have a written lease, thus avoiding misunderstandings and disputes.

Bookkeeping. In journalizing the entry, be sure that your explanation shows that
the payment was for the January rent. A sufficient explanation would be, "Paid rent
for Jan., 19—, by Ck. No. 1."

Filing. Deliver the check to Mr. Olmstead by filing it in the section marked
"Outgoing Papers." Mr. Olmstead gives you a receipt (Paper No. 3 in the pad of in-
coming papers). Examine the receipt to see that it is properly made out and file it in
the section marked "Receipts."

The National Cash Register Co. has returned the invoice paid today, receipted. That
is, with the words, "Paid by note Jan. 1, 19 — , National Cash Register Co., by A. B."
written on the bottom of the bill. You may take this paper from the outgoing papers
file, have the notation made on the bottom (by your teacher or someone authorized by
him to act for the National Cash Register Co.), and file it in the section marked "Receipts."
Leave the note in the outgoing papers section.

Transaction No. 6

January 1. Mr. Stewart hands you an invoice for goods received today from the
Pillsbury- Washburn Flour Mills Co., 135 Adams St., City. (This is Paper No. 4 in the pad
of incoming papers.) Mr. Stewart has O.K.'d the invoice. He instructs you to look for
this O. K. on every bill before making any payment or any entry on your books. Verify
the multiplications and addition of the bill.

MAKING OUT AN INVOICE

The terms of the invoice are "Net Cash." This means you are to pay the bill at once
in cash without deduction. Write out a check for the amount, and hand it to Mr. Stewart
(your teacher) for his signature, or sign it yourself, as your teacher may direct.

Bookkeeping. You need not itemize the bill in the journal explanation, because
the invoice itself contains a detailed list of the items purchased. Pillsbury- Washburn
Co.'s number (No. 2346) will be found in the upper right-hand corner of the bill, and
your journal explanation should refer to their number and date, thus: "Their No. 2346,
dated Jan. 1." A sufficient explanation of this transaction would be: "Bought of Pills-
bury-Washburn Flour Mills Co., 135 Adams St., City, their invoice No. 2346, dated
Jan. 1, 19 — . Paid net cash by our check No. 2."

Filing. Pin or otherwise attach the check to the invoice and mail the two to the
Pillsbury- Washburn Co., by placing them with the outgoing papers.

Business Point. The Pillsbury-Washbum Co.'s mills are located at Minneapolis, Minn., but Mr.
Stewart transacts all his business with them through their local office. It is customary for large houses
to have local offices in all important cities. These offices usually have on hand a stock of merchandise.
The local office is in a better position to get the business than the main office, can fill orders with less
delay, and can make collections more readily.

Transaction No. 7

January 2. A sale is made to the Boston Bakery Co., 1220 S. Clark St., on account,
of 10 brl. Best Baker's Patent Flour, at $5.75.

Billing. Detach one invoice from the pad of blank invoices, and fill it out as shown
in the following illustration:

An bUlt du« In lltw Tork or CIiic<<o Bxckaat*. 0«im> for Shorttg* oa thii bin mutt b« madt on receipt of ioo<li.

No — /^ CHICAGO,

f!f.,f ^y, 7-.

.19_ZZL

TO D. B. STEWART, ^^

DEALER IN

FLOUR and FEED

377 ADAMS STREET

/ n

-^^ /^.^/^J^^^^Cj^7j^^:^i^^y .-f^r .ry

^S7j\

52 PRACTICAL OFFICE WORK AND BOOKKEEPING

Business Point. The bill is to accompany the merchandise. A bill or invoice, containing an item-
ized list of goods t;old, should always be made out for goods sold on account, and handed or mailed to
the customer at the time of the sale. Some houses even make out bills for cash sales, especially when
the goods are to be delivered.

Note that the model invoice is numbered "1." The next invoice you make out will be
No. 2, and so on.

Bookkeeping. In the explanation for the journal entry, itemize the goods sold. Write
the address of The Boston Bakery Co. in the journal explanation. This address must
appear in the ledger when you open the account later.

Filing. Mail the bill by placing it in the outgoing papers section.

The Pillsbury- Washburn Co. has returned the invoice which we paid on January 1,
marked "Received payment, Jan. 1, 19 — . Pillsbury- Washburn Flour Mills Co., per A.
B." Take it out of the outgoing papers section, have it receipted, as above, for the Pills-
bury-Washburn Co., and file it in the section marked "Receipts."

Transaction No. 8

January 3. We sell to H. E. Brown, for cash, 5 brl. Pillsbury's Best flour at $6.80.

The cash will be found in the "Currency" envelope. No bill will be made out, because
the sale was made for cash to a person who has no account on our books.

Bookkeeping. In the journal entry, make note of the quantity and price of the
goods sold.

Filing. Place the cash in the "Cash Register."

Transaction No. g

January 3. Mr. Stewart has bought 1,000 bushels of oats from the American Milling
Co., 179 La Salle St. He now hands you the invoice, which he has O.K.'d, asking you to
pay it by check. (Incoming pfiper No. 5).

The check will be your Check No. 3.

Bookkeeping. As this is the first entry on page 2 of the journal, write the date out
in full at the top of the page. Number the pages of the journal, writing the numbers on
the line opposite the date and near the outside edge of the page.

Filing. Mail bill and clieck by placing them in the outgoing papers section of the file.

Legal and Business Points. Checks are orders on the bank to pay a given sum of money to the
person or firm named therein. The persori drawing the check must, of course, have funds on deposit
at the bank. The bank will pay the check and charge the amount against the account of the person
drawing.

The person signing the check is called the "drawer" (in this case, D. B. Stewart). The person or
firm in whose favor the check is drawn (in this case, the American Milling Co.) is the "payee." The
bank is called the "drawee."

Transaction No. lo

January 3. A sale is made to the Austin Livery Co., Austin, 111., on account, of 100
bu. Standard oats at 65 cents.

TRANSACTIONS CONTINUED 63

Make out an invoice (our No. 2). As a matter of your own convenience, you may now
number your blank invoices up to No. 23. Then you will not have to look up the number
of the last invoice whenever you wish to number a new one.

Bookkeeping. Be sure to write the address of the Austin Livery Co. in the journal
entry. (See form on page 29.)

Filing. File the invoice in the outgoing papers section.

Transaction No. ii * *

January 3. This being Saturday night, Mr. Stewart pays you your salary for three days
in cash, $10.00. Make a journal entry. Take the cash out of the cash register. Place
it in the outgoing papers section.

Transaction No. 12

January 5. We are presented by A. C. McClurg & Co. with a bill for office books and
stationery bought of them by Mr. Stewart and delivered to-day.
Pay this bill in cash, taking the cash from the "Cash Register."

McClurg «fe Co.'s bill will be found in the pad of incoming papers (No. 6). It is marked "Paid Jan.
6, 19— A. C. McClurg & Co., by W. L. R."

Bookkeeping. Debit the expense account.

Filing. File the bill with the receipts. Place the outgoing cash in the outgoing pa-
pers section of the file.

The American Milling Co. has receipted and returned the invoice for which we sent
a check Saturday. Take the invoice out of the outgoing papers section, have the receipt
written at the bottom for the American Milling Co., and file the paper in the section marked
"Receipts."

Transaction No. 13

January 7. We have sold to-day for cash to D. R. Francis, 3940 Lake St., 25 brl.
Lincoln flour at $5.25. Mr. Francis asks for a receipted bill.

Make out a bill, terms, "Net cash." Write a receipt at the bottom of the bill, dating it.

The cash received is in the form of a check, which you will find in the pad of incoming
papers (No. 7). Examine it carefully to see that it is made out to D. B. Stewart, that the
date and amount are correct, and that it is properly signed.

Filing. File the check in the "Cash Register."

Note. Checks received are always regarded as cash, because they are orders on a bank for money
which can be obtained at once.

Transaction No. 14

January 7. Mr. Stewart instructs you to deposit the check just received and $100.00
in cash. See transaction No 2 for the proper procedure in making a deposit. List the
amount of currency and the amount of the check separately. Rule a line at the bottom
of the deposit slip and write the total. On the horizontal line opposite the word "checks,"
place the initials of the drawer of the check, "D. R. F."

Business and Legal Point. Checks should be deposited, if possible, within twenty-four hours of
the time they are received. If checks are not presented for payment (or deposited, which amounts to

PRACTICAL OFFICE WORK AND BOOKKEEPING

tho same thing) within a reasonable time after they are received, the holder loses in case of the failure
of the bank — and the courts have held that a "reasonable time" in which the payee must act is twenty-
four hours, except in unusual cases. When the bank drawn upon is at a distance, reasonable time must
be allowed for the check to be forwarded.

Furthermore, failure to present a check will cause the holder great inconvenience in case the maker
should draw out his funds from the bank while the check was being held by the payee. The bank would
return the check marked "No funds" or "Insufficient funds." The holder would then be compelled
to look to the maker of the check to redeem it.

Deposit checks promptly and be on the safe side.

* Endorsement. Before depositing, the check should be endorsed. That is, D. B. Stew-
art's name should be signed on the back of the check, as shown in the illustration. This
transfers the ownership of the check from Mr. Stewart to the bank, and also constitutes
Mr. Stewart's receipt for the money. In case the check should prove to be "no good" the
bank could require Mr. Stewart to take it back. Checks should always be endorsed when
transferred, whether to a bank or a person or firm. This check reads "Pay to the order
of D. B. Stewart." Mr. Stewart's endorsement is his "order" for the payment of the
check.

^^e4^.^^zz.

'^.'^^^^-^^^''7^^^ ,^'? ^le^^yt<i/

TJ^^^.^^^^^

All commercial papers should be endorsed when transferred from one party to another. Following
are several forms of endorsement:

Endorsement in Blank. This consists merely of the name of the party transferring the paper, as
shown in the illustration.

Its effect is to order the paper to be paid to bearer. The endorser becomes responsible for it to the
party to whom he transfers it; that is, he agrees to redeem it if the maker does not.

Note. It is permissible for one receiving a check endorsed in blank, to fill in above the endorsement
the words " Pay to the order of (endorsee's name)" so that it becomes an endorsement in full. This is
a wise precaution if one expects to hold the check for some time, or if there is danger of losing it, as
the paper is then not payable to bearer.

ENDORSEMENT ' 55

Endorsement in Full. This consists of the name of the endorser and instructions as to whom to
pay, thus:

Pay to the order of the Merchants' Exchange Bank.

D. B. Stewart.
Its effect is to order that the paper be paid to the Merchant's Exchange Bank or some one the bank
may specify by a second endorsement. Mr. Stewart agrees to pay it if the maker does not.

Restrictive Endorsement. This consists of the name of the endorser, preceded by instructions
as to whom to pay, and the word "only" or "for collection" or "for deposit" or "for my use" or
similar words, thus:

Pay to E. D. Smith only.

D. B. Stewart.
This does not transfer the paper to E. D. Smith, but indicates that Smith is acting as Stewart's
agent. Smith has no power to transfer the paper further, but merely to collect it for Stewart. Stewart
agrees to redeem the paper if the maker does not.

Restrictive endorsements of checks are not encouraged by banks.

Conditional Endorsement. This is an endorsement coupled with a condition, thus:

Pay to E. D. Smith on January 1, provided he be engaged in the practice of

law at that time.

D. B. Stewart.

The validity of such an endorsement depends upon the fulfillment of the condition. This is an
unusual form.

Endorsement "Without Recourse." This endorsement reads:
Pay to E. D. Smith without recourse to me.

D. B. Stewart.

It effects the transfer of the paper from Stewart to Smith, but repudiates Stewart's obligation to
pay if the maker does not. It is unsafe to accept paper endorsed "without recourse."

Business Point. If the name of the payee be misspelled in the body of a check, he should spell his
name in the same way in his endorsement, but should also sign his name again underneath that, spelling
it correctly.

Business Point. In case there are a number of checks deposited, it is customary to list them in the
column underneath the word "Checks," placing the total only in the main column opposite the word
"Checks."

Endorse in blank the check just received, and make the deposit. The bank clerk will
enter the date and amount of the deposit immediately below the last entry in the pass-
book. Do not forget to add the deposit in your check book stub.

Mr. Stewart requests that in future you attend to the depositing. Deposit all checks
promptly, and do not keep on hand more than a small amount of cash. Make it a rule
never to keep a sum in excess of $100.00 in the cash register over night.

Transaction No. 15

January 9. We receive from the Eckhart & Swan Milling Co., 377 Carroll Ave., an
invoice of merchandise bought on account. (Incoming Paper No. 8).

Filing. File the invoice in the section marked "Invoices Payable."

Transaction No. 16

January 10. We sell to the Austin Livery Co., on account, 100 bu. ear corn at 57^0.
Follow the instructions given in Transaction No. 7.

56 PRACTICAL OFFICE WORK AND BOOKKEEPING

Transaction No. 17

January 10. We sell to The Boston Bakery Co., on account, 20 brl. Best Baker's Patent
flour at $6.20; 50 bu. Standard oats at 76^; and 500 bu. ear corn at 68^.
Follow instructions given for Transaction No. 7.

Transaction No. 18

January 10. Your salary is paid in cash, $20.00.
Follow the instructions given on Jan. 3.

POSTING

Mr. Stewart now suggests that you post the transactions from the journal to the ledger.
The transactions appear in the journal in the order of their occurrence, but they must be
arranged in the ledger in the proper accounts. It is not desirable that the posting be
deferred. The longer you delay the work of posting, the further behind you will get.
Besides, if someone should desire to settle his account, or for any other reason it should
be necessary to find the balance of any account, it would be inconvenient to have to trace
through the journal hunting up items. There are many reasons why the posting should be
kept up to date.

Opening the Ledger. You will now open accounts in the ledger, opening them in the
order in which they are given in the list which follows. Write your ledger headings in a
plain, bold hand. Do not abbreviate except for initials, for the word "Co." and for the
sign "&." Addresses must be written for all personal accounts.

Allow for each account one line for the name of the account, one line for the ruling,
and for the entries the number of lines indicated in the following list:

Page 1: D. B. Stewart, 9 lines; Expense, 17. Page 2: Furniture and Fixtures, 9; Merchandise, 24.
Page 3: Interest, 9; Loss and Gain, 10. Page 4: Cash, 27; Notes Receivable, 6. Page 5: The Boston
Bakery Co., 11; Austin Livery Co., 9; H. N. Alkire, 11. Page 6: E. C. Judson, 10; J. T. Hooper, 6;
Notes Payable, 11. Page 7: Eckhart & Swan Milling Co., 10; The Macey Co., 4; Pillsbury-Washburn
Flour Mills Co., 4.

Indexing the Ledger. Number the ledger pages and proceed to list the ledger accounts
alphabetically in the index, which precedes the first page of the D. B, Stewart's ledger.
Write the heading " Index to D. B. Stewart's Ledger," at the top of the page. The
page is divided into twelve sections. These should be headed as follows: First column,
A, B,C & D, E second column, F & G, H, I, J& K; third column, L, M, N & O, P to Z.
First write D. B. Stewart's name in the space under S, thus: Stewart, D. B, Write figure
1 (the ledger page) in the narrow column at the left. Then index Expense under E, writing
the ledger page (1) in the narrow column. Furniture and Fixtures is indexed under F,
and Merchandise under M, but in each case the ledger page 2 is used instead of 1. In this
manner index all accounts each under its proper letter, the ledger page being shown in
each case.

The Boston Bakery Co. is indexed under B. and is written "Boston Bakery Co., The." Notes Pay-
able and Notes Receivable are indexed under N. The Macey Co. is indexed under M. Eckhart &
Swan Milling Co., under E.

students' reports 67

Posting. Post the transactions from the journal to the ledger. Refer to page 33 for
definite instructions for posting. Begin with the first transaction in the journal and post
the transactions in order. In posting each transaction, post first the debit or debits and
then the credit or credits. Use as your explanation for each entry in the ledger the name
of the account or accounts affected on the other side in the same transaction.

Write the number of the journal page in the folio column of the ledger and the number
of the ledger page in the L. F. column of the journal at the instant of posting the entry.
Then there will be no confusion in case you are interrupted before the posting is finished.

Student's Weekly Reports

Student's Report No. i. Accompanying your outfit is a pad of reports, the purpose
of which is to show that your files have been properly kept and to show certain other facts
your teacher should know at this time. These reports are to be made out at the end of
each business week.

Write your name at the top of the report. Fill in the spaces for the Report Number
(1), the date (Jan. 10, 19 — ), and the fact that the report is taken at the end of Transaction
No. 18.

How to Fill Out the Report

Cash. Opposite the words "Cash Dr." write the total of cash received, which you will
ascertain by adding the debit side of the cash account. Place below it the amount of cash
paid out. The difference is the balance on hand.

The Cash Proof. This is the test of the cash balance. Count the cash in the cash reg-
ister and write the amount in the first blank space. Add to this the bank balance, as shown
by the check-book stub. The sum of these two items is the balance on hand, and must
agree with the balance on hand as ascertained from the cash account.

As there is no cash in the cash register at this time, you need not fill out the Cash
Proof on Report No. 1.

You will do nothing with the Bank Proof at this time.

Papers Issued. Under this head include in each report all papers issued since January 1.

The number of checks issued will be shown by the number on the check-book stub.
Write the total of checks issued in the "Amount" column.

The number of notes issued will be found by counting the stubs of the blank-book for
notes. Add the amounts of the notes and write the total in the "Amount" column.

The deposit slips will all be in the outgoing papers section. Count them and record
the number made out. Put their total amount in the "Amount" column. The difference
between this amount and the amount of total checks issued should agree with the bank
balance as shown by the check-book stub.

Invoices issued will all be found in the outgoing papers section. Some of these will be
receipted by us and some will not. Count them all. Compute the amount. This amount
differs from the total sales to date by $34.00, as no invoice was made out for the cash sale
($34.00) made on Jan. 3.

The receipts issued may be determined from the stub of the receipt-book, on which you
have made proper memorandums. No form receipts have been issued as yet.

No drafts have been drawn as yet.

Condition of Files. This part of your report will show whether your files have been
properly kept.

58 PRACTICAL OFFICE WORK AND BOOKKEEPING

Unpaid bills should all be in the file marked "Invoices Payable." Give the number of
them and the amount.

Notes Receivable are all kept in the cash register. None have been received as yet.

Receipts received by us should all be in the section marked "Receipts." They are of
four kinds: (a) Simple receipt forms, filled out and signed by others; (b) Canceled checks,
which are equivalent to receipts from the endorsers; (c) Canceled notes, which are equiva-
lent to receipts; (d) Invoices and bills paid by us, which were marked "Paid" by others
when we paid them.

It is of the utmost importance that you fill out these reports properly. Your teacher
checks your work each week from these reports, and a failure on your part to make them
out properly will result in poor marks for you.

Hand in your report to your teacher.

Business Point. It is customary in business to "prove the cash" (take a cash proof) every day
or oftener. Banks usually prove the cash as often during the day as business will permit. The longer
an error in cash goes undiscovered, the harder it is to find out what the mistake was.

Transaction No. 19

January 12. We sell for cash 5 brl. Pillsbury's Best flour at $6.80.
No bill will be made out for this transaction. The cash may be taken from the out-
going papers section, and placed in the cash register.

Transaction No. 20

January 13. Mr. Stewart hands you an invoice for 500 bu. No. 2 spring wheat, bought
of Kemper Bros. Co., 663 N. Halsted St., on our note payable fifteen days after date, with-
out interest. (The invoice is Incoming Paper No. 9.)

Detach a note from the pad of blank notes and fill it out, all except the signature. Make
it payable at Mr. Stewart's office. Secure the signature in the usual way.

Business Point. The note is payable "fifteen days after date." The time when payable could
have been specified in some other way, as "Twenty days after Jan. 8," "On Jan. 28," etc. But the above
wording is usual.

Note. D. B. Stewart has not in any sense discharged his debt by issuing the note. He has, if any-
thing, bound himself even more positively, for in the note he specifies in writing a place and a date on
which he will pay. He now owes Kemper Bros. Co. "on his note"; if no note had been issued, he
would owe them "on account."

The date on which the note falls due is called the date of "maturity."

Bookkeeping. State in your journal explanation the length of time for which the
note runs.

Filing. Deliver the note by placing it in the outgoing papers section. Kemper Bros.
Co. receipt the invoice. (Have the receipt written for them: "Paid by note 1/13/19 — .
Kemper Bros. Co., by "). File the receipted bill with the receipts.

Transaction No. 21

January 15. We sell to H. N. Alkire, 3760 N. Halsted St., on account, 100 bu. No. 2
spring wheat at $1.15, and 50 brl. Pillsbury's Best flour at $6.90.
Follow the instructions for -Transaction No. 7.

QUESTIONS ON THE REPORT 59

Transaction No. 22

January 15. Pajnuent is made by the Austin Livery Co. for Mdse. bought of us on
Jan. 3. This bill is for $65.00. They pay cash, $15.00; and a 30-day note for $50.00.

A $10.00 bill and a $5.00 bill will be found in the envelope marked "Currency."

The note will be found in the incoming' papers pad (No. 10).

Take the invoice from the outgoing papers section and receipt it thus: "Paid 1/15/19 — .

Cash, $15.00. 30-day note, $50.00. D. B. Stewart, by ." Return the receipted

invoice to the outgoing papers file.

Bookkeeping. The explanation in the journal should show when the note falls due,
and the rate of interest it bears.

Filing. Place the cash and note in the cash register, first examining the note carefully
to see that it is correctly made out.

Transaction Wo. 23

January 17. We sell to The Boston Bakery Co., on account, 5 brl. Lincoln flour at
$5.15.

Transaction No. 24

January 17. Your salary is paid in cash, as on Jan. 10.

Take the cash from the cash register and place it in the outgoing papers section of
the file.

Posting. Mr. Stewart suggests that you now post to the ledger all transactions which
have not yet been posted from the journal.

From the L. F. column in your journal you can determine what transactions have been
posted, as a page number has been entered in this column opposite every posted transaction.
Continue the posting from the point where you left off. In making the entries in the ledger,
leave no blank spaces; write each new debit item immediately below the last. debit item
posted in the account affected, and each new credit item immediately below the last credit
item posted to that account. Do not forget to write the journal page in the ledger and
the ledger page in the journal, as each item is posted.

Student's Report No. 2. Make out a student's report, following the instructions given
on page 50 for Student's Report No. 1. The report on "Papers Issued" will include all
papers issued since Jan. 1. The report on "Condition of Files" will show the condition of
the files as they now stand.

Questions:

Does the cash balance, as shown by your cash proof, equal the balance on hand as shown by your
Cash account?

Does the difference between the amount of deposits and the amount of checks drawn equal the bank
balance as shown by the check-book stub?

Does the difference between the notes issued and the canceled notes, as shown by the report, equal
the balance of the notes payable account as shown by the ledger?

Does the sum of the canceled checks, if any, in the receipt file, and the checks still in your outgoing
papers file, equal the total of checks issued, as shown by your report?

60 * PRACTICAL OFFICE WORK AND BOOKKEEPING

Remember page 62 and refer to the foregoing questions whenever you prepare a Student's
Report. They will greatly assist you in keeping your files properly. Do not pass to the work of
the next week until the report has been approved by your teacher.

The Trial Balance (by Differences). Add the ledger accounts, placing small
lead-pencil footings underneath the columns added. In each account write the difference
between the two footings just to the left of.the larger footing, as illustrated on page 14
for personal accounts. Prepare your trial balance, dating it Jan. 17, 19 — , using differ-
ences only.

Taking a trial balance by differences is in fact nothing but the omission from the trial balance of equal
amounts on both sides of the ledger, the amount omitted in each account being the amount of the smaller
side of that account. Deducting this amount from the smaller side leaves 0. Deducting it from the
larger side leaves the difference between the two sides. In future, all trial balances will be by differences
only, as this is the customary form. (When the adding machine is used, trial balances of full footings
are often taken.)

Note. Before writing the lead pencil figures in the ledger, sharpen your lead pencil to a fine point,
and be sure to make small, neat figures just beneath the last item in the column and close to it so as
not to interfere with the item which will later be written on the next line. It is well to use a medium
or hard lead pencil for this purpose. Be careful in making your rigures. Many mistakes originate in
carelessly made figures, and these are harder to discover than any other mistakes.

Checking. If a mistake has been made, proceed at once to discover it by checking,
as described on page 36. Many bookkeepers check the posting whether the trial balance
comes out all right or not, as there are some mistakes which may exist without throwing
the ledger out of balance, as, for instance, posting to a wrong account, or transposing a
debit and credit. Careful checking will reveal these.

If a bookkeeper purposes to check his posting whether or not his ledger is in balance
(as shown by his trial balance), then it is well that the checking be done before the trial
balance is attempted. In this case the bookkeeper will be spared the annoyance and dis-
couragement of failing to get a balance.

Making Corrections. When an error is discovered, ask your teacher how to correct it.
Later on you will be taught how to correct the different kinds of errors, but for the present
you will consult with your teacher on these matters. Do not make erasures or interline-
ations, or rule out figures, unless your teacher instructs you to do so.

Close no accounts at this time.

Transaction No. 25
January 20. We sell to E. C. Judson, 36 S. Water St., Chicago, on account, 200 bu.
Standard oats at 65 cents.

Transaction No. 26

January 21. We sell for cash to E. C. Judson, 36 S. Water St., 100 bu. No. 2 spring
wheat at $1.12^ and 4 bu. ear corn at 62 i^. Mr. Judson demands a receipt. You will there-
fore make out an invoice and receipt it.

Take a $100.00 bill from the currency envelope and a $20.00 bill from the outgoing
papers section. Return to the outgoing papers section $5.00 change from the cash register.

Bookkeeping. Make two journal entries, one charging E. C. Judson for the goods
purchased, and the other crediting him for the payment.

Business Note. It is customary in business to keep a record in the ledger of all transactions with
persons having accounts with us, whether such transactions are for cash or on account. The purpose
of this is that the ledger may exhibit a complete history of all transactions with those persons. Mr.

TRANSACTIONS CONTINUED 61

Judson is a regular customer of Mr. Stewart's, and Stewart wishes this transaction to show on Judson's
account, even though it was a cash transaction. The above plan provides for this.

Filing. Place the cash received in the cash register. Place the receipted invoice
with the outgoing papers.

Transaction No. 27

January 21. Deposit $100.00 in the bank. (See instructions given for Transaction
No. 2.)

Transaction No. 28

January 22. We sell to H. N. Alkire, on account, 5 bu. Standard oats at 65^, 10 bu.
ear corn at 60 <t, and 5 bu. No. 2 spring wheat at $1.15.

Transaction No. 29

January 24. Mr. Stewart hands you an invoice for merchandise bought of the Eckhart
& Swan Milling Co. on account. (Incoming Paper No, 11).

Transaction No. 30

January 24. Your salary is paid as on Jan. 10. See instruction on that date.

Posting. Mr. Stewart again suggests that all posting should be done up to date. Post
all transactions that have not yet been posted, but do not take a trial balance nor close
any accounts.

Student's Report No. 3 should be made out at this time.

When you have made out your report, turn to the questions on page 52, and answer
them satisfactorily to yourself before handing the report to your teacher.

Mr. Stewart does not expect to prompt you every Saturday night to post your books.
Understand that you are to post your books every Saturday night until differently
instructed. Make out a report at the end of each business week.
y

Transaction No. 31

January 27. Mr. Stewart instructs you to pay the Eckhart & Swan Milling Co.'s bill
of Jan. 9 by giving them our 10-day note for $300.00 bearing 6% interest and our check
for $180.00.

See Transaction No. 3 for instructions as to issuing our note. Make the note payable
here. See Transaction No. 5 for instructions as to drawing a check. Do not forget the
record on the check-book stub.

Bookkeeping. State in your journal explanation that this is in payment of their
bill of Jan. 9.

Filing. Take the invoice from the section for "Invoices Payable," have it receipted
by the Eckhart & Swan Milling Co., and file it with the receipts. DeUver the check and
note by placing them in the outgoing papers section.

Transaction No. 32

January 27. W^e sell to H. N. Alkire, on account, 50 brl. Lincoln fiour at $5.40 and
50 bu. barley screenings at 76^.

62 PRACTICAL OFFICE WORK AND BOOKKEEPING

Transaction No. 33

January 28. Mr. Stewart asks if we do not owe a note which falls due about this time.
Look in the outgoing papers section and take out a note which is due today.
Mr. Stewart instructs you to pay this note at once by check. Write out a check for
the amount, which Mr. Stewart will sign.

Filing. Have Kemper Bros. Co. cancel the note by writing across the face of the

paper, in red ink, "Paid Jan. 28, Kemper Bros. Co., by ■ " File the canceled note

with the receipts. Deliver the check by filing it with the outgoing papers.

Business Point. Canceled notes, receipted invoices, and paid checks are all receipts and should be
kept with the receipts. You will not get back any paid checks until the bank returns them all at the
end of the month with its monthly statement.

Transaction No. 34

January 29. We sell to H. K. Walton, Oak Park, 111,, 50 bu. barley screenings at
72^, receiving in payment his check. (Incoming Paper No. 12).

Make no bill for this transaction, as the sale is for cash to a person who has no account
with us. File the cash.

Transaction No. 35

• January 30. The Boston Bakery Co., has paid $20.00 on account in cash.
Take the cash from the outgoing papers section and file it in the cash register.
Give them a receipt for $20.00 "on account." Make a proper record of this receipt
on the stub of the receipt book. See Incoming Paper No. 3 for form of receipt.

Transaction No. 36

January 30. Deposit the check last received and $20.00 in cash. The check should
be endorsed in blank before depositing.

Transaction No. 37

January 31. Your salary is paid in cash.

Transaction No. 38

January 31. Mr. Stewart's note in favor of the National Cash Register Co. falls due
today. He instructs you to pay it by check and have the note canceled.

Take the note from the outgoing papers section.

Write out a check for the proper amount and secure Mr. Stewart's signature.

Do not forget to make the proper entries on the check-book stub before detaching the
check. Have the note canceled by the National Cash Register Co. Place the canceled
note with the receipts.

Posting

Post the remainder of the transactions for January. The last transaction posted was
No. 30. In posting, leave no blank spaces in the ledger, on either side. Do not skip a
single fine in the ledger just because it has lead-pencil figures above it- If you have followed

STATEMENTS 63

instructions closely these figures are small and written close beneath the last item posted
before Jan. 19, so they will not interfere with the new entries.

Trial Balance

Take a trial balance, dating it January 31. The footings for this trial balance should
include all transactions from the beginning. You may add all entries in the ledger col-
umns, ignoring the lead-pencil footings which you placed in the ledger at the time of
taking the last trial balance, on Jan. 17; or you may simply add up to and including these
footings. In the trial balance appear differences only.

Inventories t."^

At the end of the month Mr. Stewart values the property and Mdse. on hand as fol-
lows:

Furniture and Fixtures, $ 385.00
Mdse., 1,066.63

Teacher's Note. There are two small interest inventories, one a resource and the other a liability,
which Mr. Stewart omits from this Ust, as they practically cancel each other.

STATEMENTS

One month's business has now been transacted and Mr. Stewart desires to know what
the gain or loss has been during the month and how the house stands financially. He asks
you to prepare, from the ledger accounts and the inventories, statements showing these
things.

The progress and condition of the business may be shown by means of statements.
These statements may be prepared at periodical intervals, usually monthly, semi-annu-
ually, or annually.

By the progress of the business is meant its net gain or net loss. The statement
showing the progress, or profitableness, of the business is called the Loss and Gain State-
ment. The items of which this statement consists are taken from the accounts show-
ing loss or gain.

The condition of the business is shown by a list of its assets and liabilities, called the
Financial Statement. The items of which this statement consists are taken from the
financial accounts and from the inventories.

Before you can prepare a Loss and Gain Statement or a Financial Statement, you
must understand the following:

Classification of Accounts

Accounts in the ledger are of two classes, namely; Loss or Gain accounts, and Financial
accounts.

A Loss or Gain account is one which exhibits as a result either a loss or a gain. If the
debit side be the larger, a loss is shown; if the credit side be the larger, a gain is shown.
Of this class of accounts are Mdse., Real Estate, Interest, Expense, Loss and Gain, etc.

A Financial account is one which exhibits as a result either an asset or a liability.
Assets, or resources, are property of any kind. Liabilities are debts. If the debit side

PRACTICAL OFFICE WORK AND BOOKKEEPING

Inventories of property on hand are assets. These inventories are not the results of accounts, how-
ever, but are ascertained by an actual count and valuation of the goods.

of a financial account be larger, it exhibits an asset; if the credit side be the larger, a
liability is shown. Of this class of accounts are Cash, Personal Accounts, Notes Receiv-
able, and Notes Payable.

Refer to the first chapter of this book, in which the accounts are each discussed separately,
pare the result shown in each case with that shown in the following table:

Account
Cash

Notes Receivable
Notes Payable
Personal Accounts
Real Estate
Mdse.
Expense
Interest
Loss & Gain
Proprietor

Result
Asset
Asset
Liability

Asset or Liability
Loss or Gain
Loss or Gain
Loss

Loss or Gain
Loss or Gain
Amount of Investment

Classification
Financial
Financial
Financial
Financial
Loss or Gain
Loss or Gain
Loss or Gain
Loss or Gain
Loss or Gain
Financial

Corn-

Questions :

May the cash account ever show a liability? Why?

Why is it not possible to say whether the result of the real estate account will be a loss or whether
it will be a gain?

Why does the notes receivable account never show a liability?

Why does the notes payable account never exhibit an asset?

When does a personal account show an asset? When a liability?

W^hy does the expense account always show loss?

Which side of the interest account will usually be the larger in case of a business run on borrowed
money?

LOSS AND GAIN STATEMENT PROBLEMS

1. E. W. Cameron's ledger showed total gains for the month of April, 1913, to be $852.67, and
total losses for the same period amounting to $623.59. What was his net gain or loss for April? If
his investment on April 1 was $11,274.65, what was his investment on April 30?

2. H. R. Ward's ledger shows for the month of May, 1913, the following gains and losses: Gains,
merchandise, $293.74, interest, $4.76; losses, furniture and fixtures, $17.50, real estate, $20.00, expenses,
$262.75. What was the amount of his net gain or loss for the month? If his investment on May 1
was $9487.56, what was his investment on May 31?

3. From the following facts, taken from E. N. Miner's ledger and inventories, determine the amount
of his net gain or loss for the month of June, 1913: The inventory of merchandise on June, 1913, was
$7346.92; merchandise purchases during June amounted to $526.79; merchandise sales during June
amounted to $827.33; inventory of merchandise June 30, $7457.82. Fixtures, which were valued at
$729.30 on June 1, were valued at $710.20 on June 30. Expenses for June were $227.36. No othe;
losses or gains are shown. If his investment on June 1 was $10,006.72, what was his investment on
June 30?

4. State in writing how to find the net gain or loss for a given period if the amounts of the separate
gains and losses be known. State how the investment on a given date is determined if the following
facts be known: (a) The investment at some previous date, (b) The gain since that previous date if
allowed to remain in the business, or the loss since that previous date if there was a loss.

THE LOSS AND GAIN STATEMENT
THE LOSS AND GAIN STATEMENT

The Loss and Gain Statement consists of a list of the separate losses and gains. The
difference between the total gains and the total losses will be the net gain of the business
since January 1.

A loss and gain statement ordinarily shows the net amount of gain or loss between the time it was
taken and the last time the ledger was "closed." But in this case it shows the loss or gain since the
beginning, Jan. 1, as the books have never been closed. You will learn later of the process of closing the
ledger. This is usually done every time the loss and gain statement is taken, though not necessarily so.

ci><^cPxLJ y^^(^ayunyJ2L^!^kJ^^e^^

^:?y?z^.

^/; /f '

-^,

1^.u^,

<:z^L-^^^u<^

? P ? ? ? ?

? ? ? ? 7 >

? 7 ? ? 7 ?

? ? ? ?.
? ? ? ?. ? ?

IZL

? ? ?. ? .
? > P.

? ? 7

7 ;

p ?

// » '>S^a^cyn^ £z^ .-^i-eAy <z/ard^ i'^-&g^^

? ?? 7 7

? ? 7

7777?

7 7

? ? ?

7 ? ?

7 ? 7

? 7

? ?

7 7

66 PRACTICAL OFFICE WORK AND BOOKKEEPING

On page 65 is an outline of Mr. Stewart's loss and gain statement. The amounts are
to be ascertained by you from the trial balance and inventories.

Explanation: The gains are to be listed first.

The first loss or gain account listed in the trial balance is the expense account. But as
this account exhibits only debit items it is apparent that it is a loss. We will therefore
pass it for the present.

The second loss or gain account listed in the trial balance is the furniture and fixtures
account. An inspection shows that as the cost of furniture and fixtures is greater than the
inventory, this account exhibits a loss. We will therefore pass it for the present.

The next loss or gain account in the trial balance is Mdse. You cannot readily deter-
mine by inspection whether this account shows a loss or a gain. You will therefore
figure it but before writing it in the statement. The total cost is $***.**, the debit foot-
ing of the account. The value of unsold Mdse. is the inventory. The difference between
these two is $***.**, the cost of the goods sold. The difference between the total sales
(the credit side of the account) and the cost of the goods sold, as just ascertained, is
$***,**, a gain. (Had the cost of the goods sold been in excess of the sales, a loss would
have been shown.)

The Mdse. account is therefore the first and only account showing a gain. Write the
amount of the gain in the left-hand money column, after showing your computations in
the explanatory column. Rule a single line and carry the same amount out into the sec-
ond column as the total gain. Write the number of the ledger page in the folio column.

Leave three blank lines.

Write the heading "Losses," and list the losses. These are exhibited by the expense
account and the furniture and fixtures account.

Subtract the total loss from the total gain. The result will be the net gain. Rule
up the statement.

FINANCIAL STATEMENT PROBLEMS

1. On Jan. 31, 1913, O. E. Miller had cash $560.75, merchandise worth $3246.96, and furniture
and fixtures valued at $750.00. G. V. Bunker owed him $120.00 and he held H. W. Ryerson's note for
$100.00 on which $1.50 interest had accrued. If the foregoing were all of O. E. Miller's assets and he
owed nothing, what was he worth at this time?

2. J. E. McBurney's ledger and inventories showed that his assets and debts on Feb. 28, 1913,
were as follows: Cash on hand, $728.49; real estate owned by him, $6500.00; furniture and fixtures,
$875.00; stock of goods, $7256.42; notes in his favor held by him,'$520.00; and the following amounts
due him from others: $52.60, $73.86, $27.89, $62.50, $23.13. On the same date there was outstanding
against him a note in favor of the Continental National Bank, $5000.00; and he owed others on account
the following amounts: $120.60, $234.61, $50.65, $1247.80. What was he worth on Feb. 28?

3. On Mar. 31, 1913, W. E. Bradner had cash on hand, $623.50; furniture and fixtures, $720.00;
merchandise, $3752.60; J. E. Smith's note for $100.00 with $1.50 interest accrued; and an account
against Wm. Beye, $225.52. He owed the First National Bank on his note, $3500.00 and interest accrued
amounting to $62.50; and he owed other creditors the following amounts: $1250.60, $623.75, $745.83,
$924.60, $847.26, $1324.75. What was the condition of Mr. Bradner's business on Mar. Si? ;

4. J. L. Bowen's ledger showed the following condition on April 30, 1913: Cash Dr. total, $2349.62;
Cash Cr. total, $647.28; Notes Rec. Dr., $1547.60, Cr. $1292.75; balances against customers, $72.46,
$72.59, $83.64, $120.36, and $73.62; Notes Pay. Dr., $780.69, Cr., $925.79; and balances in favor of
creditors, $126.40, $236.87, $52.76, and $83.47. His inventories on April 30 were as follows: Furniture
and fixtures, $723.64; merchandise, $6724.50. If there were no other assets or liabilities, how much wag
J. L. Bowen worth on April 30?

THE FINANCIAL STATEMENT 67

5. E. J. Roberts invested S10,000.00 in business on July 1, 1913. On July 31 he had cash $892.50,
furniture worth $950.00, merchandise valued at $8252.69, and the following amounts due from cus-
tomers: $125.36, $127.89, $139.43, $82.75, $63.72. On the same date he owed a note for $150.00 on
which interest had accrued amounting to $4.62, and his creditors had accounts against him as follows:
$124.50, $67.25, $52.70. If there were no other assets or habilities, what was the amount of E. J. Rob-
erts' investment on July 31? What was his gain for July?

6. E. J. Roberts' gains during July were as follows: Merchandise, $577.26; interest, $2.37. His
losses were: On furniture and fixtures, $12.70; for expenses, $331.66. What was his net gain for July?
If his investment on July 31 was as determined in the preceding problem, what was the amount of his
original investment on July 1?

7. D. H. Evert had $12,562.50 invested in business on Jan. 1, 1913. On December 31, 1913, he
found that his cash, property, and accounts receivable from others amounted to $19,624.72, while his
debts amounted to $4782.31. His expenses and other losses during 1913 had been $3256.95. If his
only source of profit was his merchandise, determine from the known facts, what must have been the
gross amount of his merchandise gain fOT 1913.

8. State in writing how to find the present worth of a business if the amounts of the separate assets
and liabihties be known. How would you find the loss or gain for a given period if the investment at
the beginning of the period and the investment at the end of the period were known?

Determine which of the accounts used in Mr. Stewart's ledger are financial accounts.;
These are to be used in preparing the financial statement. '

The assets are listed first. The items are written in the left-hand column, and their
total placed in the right-hand column. The liabilities are then listed in the same way.
The total liabilities are subtracted from the total assets. The result is the net capital, or
worth of the business at the time the statement is prepared.
The Financial Statement Analyzed

The Financial Statement consists of a list of the assets and liabilities of the business,
prepared for the purpose of showing the net capital, or the worth of the business, at the
time it is taken. It should include all inventories and all financial accounts.

Following is an outline of Mr. Stewart's financial statement. You may now refer to
your trial balance of January 31 and prepare a financial statement, using a sheet of journal
paper. In form your statement will be like the model shown. The amounts must be
supplied by you after reference to your trial balance and inventories.

Explanation: Write the heading, "Financial Statement, January 31, 19 — ."
On the first line below the double red line write the word "Assets," and proceed to list
the assets, writing the separate items in the left-hand money column and placing the total
in the right-hand money column, with the explanation "Total Assets."

The first two assets are inventories. The proper amounts are given at the end of the
transactions for January. You must use the figures there given.

Refer to your trial balance. The first account named is the Proprietor's account.
Pass this account for the present. The second, third, and fourth accounts named in the
trial balance are loss or gain accounts, and these will not be used in taking the financial
statement. Pass them over for the present.

The next account listed in the trial balance is Cash. This account exhibits an asset,
which is the balance of cash on hand, or the difference between the debit and credit sides
of this account. Place the amount of this balance in the left-hand money column, under-
neath the Mdse. inventory. Place the ledger folio (4) in the L. F. column at the left.

PRACTICAL OFFICE WORK AND BOOKKEEPING

The next account listed in the trial balance is the notes receivable account. This is
an asset account. Place the amount of the asset in the left-hand money column. Write
the ledger page in the L. F. column; do this for each account listed.

The next account in the trial balance is the account with The Boston Bakery Co., a
personal account. Personal accounts may be either assets or liabilities. As the debit

OyT^Z^ 3/, Z^—

? ? ? p ? ?

? ?

? ? F. ? ?
? ?

9 ? P

0yt>^A^^iA^ i^^£u

? ? ?.
? ? p

z-uy-cz^TL^

? ^ P.

? ? /
? p ? ;

? ? P ?
? p

p p p

p p
p p p
? ? P

p p p

P P
? p p

p p

? p

p p

p p p p p

p p p

p p ? p p

p p
p ?

The above is one of several forms of statement. Some bookkeepers prefer to list the assets on a left-
hand page and the liabihties on the opposite or right-hand page. . Again, some bookkeepers prefer to
write the capital as the last item among the liabilities, so that the total of liabilities including capital is
shown as exactly equal to the total of assets. The form shown, however, is more widely used.

PROVING THE STATEMENTS 69

side of this account is the larger, it is apparent that the difiference between the two sides
is an asset. Place it in the list of assets.

The Austin Livery Co.'s account, H. N. Alkire's account, and E. C. Judson's account
exhibit assets. List the amounts with other assets.

Complete the examination of the trial balance. Do any of the remaining accounts
exhibit assets?

If not, proceed to list the liabilities. Leave three blank lines and write the heading,
"Liabilities."

Passing the Proprietor's account, the accounts showing loss or gain, and the accounts
already listed as assets, the first account you come to is the notes payable account. This
is a financial account. Its credit side is the larger. It therefore shows a liability, which
is written in the left-hand money column.

The Eckhart & Swan Milling Co.'s account is a personal account. The credit side is
the larger; therefore it is a liability. List it as the second liability item.

The last liability is the amount of the balance due The Macey Co.

Rule a single red line of addition under the list of assets. Add the assets, extend the
total into the right-hand column, and write opposite it the words * 'Total Assets."

Rule a single red line under the list of liabilities. Add the liabilities. Extend the
total into the right-hand column and write opposite it the words, "Total Liabilities."
Rule a line across the second column and subtract the total liabilities from the total assets.

The result shown by this last subtraction is the net capital, or worth of the business, on
Jan. 3L Rule a double red line across both columns.

Proof

The sum of the proprietor's investment, as now exhibited in the trial balance, and the
net gain, as shown by the loss and gain statement, must exactly equal the net capital, as
shown by the financial statement.

The accuracy of the two statements is proved by applying this test. It is called a
"proof" and should be written at the bottom of the loss and gain statement for two reas-
ons : First, it would not be wise to have the proof, which shows the amount of gain, on the
financial statement, which is often seen by persons other than the proprietor and book-
keeper. Second, there is usually more room to write it at the bottom of the loss and gain
statement.

Explanation: Gains are increases of assets or diminutions of liabilities. Losses are
diminutions of assets or increases of liabilities.

Hence the amount of gain for a given period will be exactly the same as the increase
of net assets during that period. The amount of loss will exactly agree with the decrease
of net assets.

Mr. Stewart's gain may be ascertained in either of two ways. It is the difference
between his net capital Jan. 31 and his investment, or net capital Jan. 1. Or it is the
difference between his gains for the month and his losses for the month.

If you find the sum of Mr. Stewart's investment Jan. 1 and his net gain for January to
be exactly equal to his net capital as shown by your financial statement, write the proof
at the bottom of your loss and gain statement and hand in both statements.

Note. It is understood, of course, that the trial balance is merely a list of ledger accounts, and that
statements could be, and often are, taken directly from the ledger.

PRACTICAL OFFICE WORK AND BOOKKEEPING

ADDITIONAL EXERCISES

Exercise I

From the following ledger footings and inventories make W. B. Hayes' financial statement Jan. 31,
19 — . Also make a loss and gain statement and proof. Use loose sheets.

W. B. Hayes' Trial Balance, Jan. 31, 19—.

W. B. Hayes, Proprietor
Furniture and Fixtures .

Merchandise

Interest

Expense

Cash

Notes Receivable. . . .
John M. Smythe & Co. .
C. J. Anderson . . . ,. .
Steinway Bros. . . . . .

L. D.Conway

Notes Payable

490

2,400

275

3,903

1,200

125

8,493 99

00
00
99
00
50
00
00
50

5,460

560
69

520

459

1,425

8,493

00
33

00
00
00

Inventories: Mdse, $2,100.00. Furniture and Fixtures, $475.00.

If the losses exceed the gains, the result is a net loss. In taking the proof, this must be deducted
from the investment in order to find the net capital Jan. 31.

Exercise II

Prepare statements from the facts shown by the following footings, taken from the ledger
of W. B. Owen, Feb. 28, 19 — , and the inventories. Write a proof at the bottom of the loss and gain
statement.

W. B. Owen's Trial Balance, Feb. 28, 19—

W. B. Owen, Proprietor

Merchandise

Real Estate

Expense

Interest

Cash

Notes Receivable. . .

John Doe

Richard Roe

Notes Payable

4,256

10,000

272

2,405

500

245

17,773

20
00
65
50
65
00
40
00

14,253
1,134

10
1,000

125
600
650

17,773

20
00

00
00
00

Inventories:

$14.70.

Merchandise, $3,678.20; Real Estate, $9,950.00; Interest due on our notes payable.

Note that the interest inventory is an inventory of debt. This is called a liability inventory. It is
included among the liabilities in the financial statement. It is added to the debit side of the interest
account when making the loss and gain statement.

CLOSING THE LEDGER

Exercise III
W. F. Barnes' Trial Balance, Mar. 31, 19-

W. F. Barnes . . .
Merchandise ....
Real Estate ....

Expense

Interest

Cash

Notes Receivable. .
Accounts Receivable
Notes Payable . . .
Accounts Payable .

52,000

8,000

1,260

320

34,000

12,060

9,350

3,700

4,520

125,210

00
00
00
00
00
00
00
00
00

10,000
53,000

254

33,000

5,600

3,356

9,700

10,300

125,210

00
00

00
00
00
00
00

Inventories: Mdse., $6,000.00; Store and Lot, $7,500.00; Unexpired Insurance (which had been

charged to Expense), $125.00.

Note. Unexpired insurance is a resource inventory. It represents something of value which we
stiU own, as it has never been used.

CLOSING THE LEDGER

Mr. Stewart has seen and approved your financial statement, loss and gain statement,
and proof. He now instructs you to rule up the accounts of the ledger, so that the ledger
itself will exhibit the condition of the business as sho^vn by the financial statement, and the
results as ascertained in taking the loss and gain statement.

Note. Before attempting to close the ledger, study carefully the following directions for ruling,
and practice the ruling here assigned.

Take a new pen point. Moisten it with your tongue and wipe it carefully, so that the ink will flow
evenly. Do not overload it with ink, and watch it closely to guard against spilling ink. Do not start
to rule a line without enough ink on the pen to finish it.

Lay the ruler down on the desk, beveled edge up, and hold the pen against the edge when ruling.
If you were to lay the edge of the ruler next to the paper the ink would fill in between the ruler and
the paper and blot the line. Hold the pen sidewise, so as not to smear ink on the ruler's edge, and so
that the two nibs of the pen will spread apart and allow the ink to flow. Make light lines by ruling
with the back of the pen. Single lines will be light lines. Double lines will be composed of one light
line and one heavy line. Rule with a fiill arm sweep, not too slowly. Practice making heavy and light
lines.

Now rule a design as follows, on a separate piece of paper: Rule double lines aroimd a 2-inch square.
Mark off the four sides into quarter inches and rule heavy lines making squares } inch on each side.
Rule three light lines between the heavy lines, making small squares 1*5 of an inch on each side. When
you have ruled this design to your satisfaction, hand it in to your teacher.

Do not underestimate the importance of good ruling. Neat ruling goes far toward the production
of good work, which will be an inspiration to you and lessen the liability of mistake.

First: Close with a balance such financial accounts as need to be balanced at this
time. This does not include personal accounts or the proprietor's account. It includes
the cash account and the notes payable account, and would ordinarily include the notes
receivable account, but as the latter contains only one item, it will not be closed at this
time. To close with a balance an account having only one item would be a waste of time.
Close the cash account and the notes receivable account, therefore, as the first step. The

PRACTICAL OFFICE WORK AND BOOKKEEPING

manner of closing these accounts was illustrated in the chapter on accounts at the beginning
of the book.

Note the amounts due from the Austin Livery Co. and E. C. Judson, the balance of the notes payable
account, and amount due from the Eckhart & Swan Milling Co. Each represents one unpaid item. State
which one in each case.

Illustration of Merchandise Account, Closed

1 "^-

zA^i>

/a—

?^k.k.^^

(Page 2)

i/a^yty.

&z..a.

/ / zy

J-o

^la^n^

/CIcTd^tb^zy/jiiAeytyC^,

(3....^^

^ZO

C-T?Z-c^'^C-'

0c^Jvtzyt^t'^U(/TZ^yLy

^J^o

uT^-cJ-^i^f^^K^yO^^-A^yY^--^'

/(ty-t^^ (j&iyy-.

¥SJ

■

(-^<l<d^A^

/3 /

(^c^/^JC^zA^^-^Ui^et^yt^

j-C

OH^C<d^^i^''Z^=^'i<(-'i^~^^^(^

J-yso

c^(^^£J r^U^^nJ'I^'^J

3ff

/o
/z
/J-

3
3
3

Soz
3u

AJOti^irn^Tjay^jA^C^

zj- /J

G.C^A/.^^yCcCd^^^'yLy

(2,^^^

/ /J-

■

^'9?.aM-^^

-J^9?.aM<k^

30<S'

(Z.c.U.

■J-

'zzk^.^-eyyv^^^ ^^^

/ o^C

fcr^«-«^s-*2-2^-2^

303 7

3 03 7

S:^

/ o^C

Next: The loss or gain accounts will be closed. The process of closing these accounts
is as follows:

1. Inventories are entered in red ink.

2. The loss or gain is ascertained and entered in the smaller side in red ink. (See
Illustration of Mdse. account, closed.)

CLOSING THE LEDGER

3. The loss or gain is entered in the loss and gain account in black ink on the opposite
side. (See Illustration of Loss and Gain account, closed.)

The name and page of the loss and gain account are entered in the explanatory and
folio columns of the account closed. The name and page of the account closed are entered
in the explanatory and folio columns of the loss and gain account This furnishes a
"cross reference" between the two accounts.

4. The inventories are brought down in black ink below the rulings on the opposite
side of the accounts in which they were entered. (See the Mdse. account, closed.) A
check mark ( V ) is placed in the folio column opposite the red ink inventory, and another
opposite the inventory brought down.

The loss and gain account now contains all the separate losses and gains shown by
the different loss or gain accounts before closing.

Next: Close the loss and gain account into the Proprietor's account by the same process
as that used for closing the separate loss or gain accounts.

Loss AND Gain Account, Closed

a~cLJ

^;^.^>^'Z^

(Page 3)

'9-

Ua^n^,

■iff

■a.^ru.J/

l^^^u^.

dS^

Enter the amount of the net loss or net gain on the smaller side of the loss and
gain account in red ink. Enter the same amount in the Proprietor's account on the
opposite side in black ink. Rule and foot the loss and gain account. Close the Pro-
prietor's account with a balance, which is brought down below the rulings in black ink.

Proprietor's Account, Closed

^7<l^/Or-^S£-ZS-^.^^^^Z^^^

(Page 1)

JL£^

/f-

<a^^?-i^.

A3^z^.-£a^yi.<.^y(^°:^J

/ozy3

y<:z^ny.

/(?Z73

^^U^

3/ <=>(fxtJ >'-<y'£Z^C'^yi^

/04z-<^«'<?^-<.<£-^

/(P/(ZO

/C?Z^3

PRACTICAL OFFICE WORK AND BOOKKEEPING

Final Condition of the Ledger. All loss or gain accounts are now closed and
several of the financial accounts. Every account is now reduced to its simplest terms.
The balance of each personal account is noted in one of the explanatory columns of the
ledger, expressed in a single figure. The balances of cash, notes receivable, and notes
payable are each represented in a single figure. Each inventory is represented by a single
figure.

Since the balances and inventories all appear in the financial statement, it is clear
that these should check. In other words, the individual items shown by the ledger as
it now stands should correspond in detail with the individual assets and habilities shown
by the financial statement.

Balance of Balances. You will now hand Mr. Stewart a balance of balances. This
is a balance of the ledger as it now stands, all loss or gain accounts and several financial
accounts having been closed. It is taken very readily, and if a balance is secured, it is
not likely that any mistake has been made in closing. Check the balance of balances with
the results shown by the financial statement, including the balance of the proprietor's
account.

THE BANK PROOF

January 31. The bank returns to you the checks which have been paid by them
(Checks Nos. 1, 2, 3, 4, and 5), together with the bank's monthly statement of your account
(Incoming Paper No. 13) showing their total. The checks are each marked paid. Mr.
Stewart asks you to prepare a bank proof.

The checks issued by you were placed in the outgoing papers section of your file. This
was equivalent to a delivery of them to the parties in whose favor they were made out.
These parties are assumed to have endorsed the checks and presented them at the bank for
payment. The bank then cashed the checks and stamped them paid. They were then
held at the bank until the end of the month to be returned to you with the bank's monthly
statement.

Take the five checks from your outgoing papers section to your teacher, who will have
them endorsed in blank by the proper parties and cancelled by the bank. The cancellation
will consist of the word "Paid" or "Canceled," the date (usually the same day or one day
later than the date of issue), and the name of the bank, written across the face of the check
in red ink.

Filing. Place the canceled checks and the statement furnished by the bank in the
section for "Receipts."

Student's Report. Prepare and hand in to your teacher Report No. 4, dated Jan. 31,
19 — . Follow the instructions given on Jan. 10 for the filing of this report. Fill out this
report entirely, including the bank proof.

The Bank Proof. You will see by comparing the balance of the bank statement with
your balance as shown by the check-book stub that there is a difference of $225.00. This
arises from the fact that the bank has not yet paid Check No. 6, which is for $225.00.
When the amount of this check is added to the balance shown by the check-book stub, the
result will be the balance shown by the bank statement.

Do not consider the bank statement a receipt, when you write the number of receipts,
but count each canceled check as one receipt.

THE STOCK RECORD

The Stock Record

To take an inventory of stock by actual count and valuation of goods is a matter of
some difficulty, and in case of a large stock would consume a great deal of time. The
clerks go through the stock systematically, counting, weighing, and measuring. Every
article of stock is thus handled. Goods are inventoried at cost, unless for some reason they
are worth more or less than their cost.

In most mercantile houses it is not customary to take an inventory of stock oftener than
once a year, or twice a year at the oftenest.

A merchant who wishes to know constantly what merchandise is on hand and in what
quantities, should keep a stock record. He will enter in this record the quantities pur-
chased, the purchase price, and the quantities sold. By subtracting the total quantity
of a given article sold from the total quantity purchased he will know how much is on hand
at any time. Multiplying this by the purchase price, he will know the value of the amount
on hand, computed at cost.

Mr. Stewart requests you to prepare a stock record which will show all Mdse. bought
and sold during January.

Rule a sheet of paper as shown in the following illustration:

Illustration of Stock Record

ARTICLES

Bot.

Sold

Left

Price

Amount

Pillsbury's Best flour, bris

Standard oats, bu

1000

100

200

645

335

The following articles are to be listed. Give each the number of lines indicated:

Lines

Pillsbury's Best flour,

Ear corn,

Best Baker's Patent flour,

No. 2 spring wheat,

Lincoln flour

Barley screenings.

Standard oats,

Referring to the five invoices of goods bought (which you will find among the receipts
and among the unpaid invoices), enter the quantities purchased in the first column opposite
the names of the articles. Be sure to return each invoice to the file in which it belongs.

Refer to the explanations in the journal for articles and quantities sold. Your stock
record is ruled to give you one line for each item sold. Write the quantities sold, each in
its proper list.

Subtract the total quantity sold from the quantity purchased of each article, and enter
the quantity remaining in the third column.

Write the cost price in the column headed "Price." This must be ascertained from the
incoming bills.

Multiply the quantity left by the price in each case, and place the result in the last col-
umn as shown.

76 PRACTICAL OFFICE WORK AND BOOKKEEPING

Add the results. The total will be the value of Mdse. on hand, or the inventory. See
if your result agrees with the inventory given at the end of the list of transactions for
January. If it does not, check over your work till you find your mistake.

Journalizing Exercises

(Without explanations.)

January 1, 19 — . F. H. Harms has to-day invested in business cash, $5,000.00.

Jan. 2. Bought merchandise for cash, $1,000.00.

Jan. 3. Sold merchandise for cash, $500.00.

Jan. 4. Bought of the Cook Company, furniture and fixtures invoiced at $550.00, on account.

Jan. 5. Bought store and lot for $6,000, payable as follows: A note due in one year for $2,000.00;
a second note due in two years for $2,000.00; and cash, $2,000.00.

Jan. 6. Sold to Jas. Strong, on account, merchandise billed at $425.00.

Jan. 8. Gave our note to the Cook Company for the furniture and fixtures bought of them on the
4th inst.

Jan. 8. Paid rent in cash, $75.00.

Jan. 9. Received Jas. Strong's note at 30 days in full of account, $425.00.

Jan. 10. Received cash from Hiram Green for his note due to-day. Face of note, $300.00; interest,
60 days at 6%, $3.00; total cash received, $303.00.

Jan. 11. Paid cash for our note due John Brown for $400.00 plus interest for one-half year at 6%.

Jan. 12. A note which we hold against John J. Johnson has fallen due to-day, for $100.00 plus
interest for one year at 5%. He pays for it by giving us a new note for the amount due, the new note
bearing 6% interest.

Jan. 13. Borrowed $100.00 of H. H. Jacobs. Gave him in exchange our non-interest bearing note
for $110.00 due in one year. (In other words we gave him our note for $100.00, with 10% interest for
one year added.

Jan. 14. Rented to Wm. Little, desk room in our office. He paid us $20.00 in cash for the first
month's rent. (This is a return on the expen.se account.)

Jan. 15. Sold Wm. Little, one office desk and chair for $35.00, on account. (This is a return on
the furniture and fixtures account.)

Jan. 16. Bought 500 two-cent postage stamps for cash. Accommodated Mr. Little with 50 two-cent
stamps, which we charged to his account.

Jan. 17. Settled our account with Hamilton Mabie, $600.00, by giving him our note for $400.00,
an order on O. R. Williams for $100.00, and cash, $100.00. (O. R. Williams' account is credited with
the amount of the order.)

Jan. 18. Endorsed over to N. V. Lanthorne, on account, a note in our favor for $150.00, signed by
H. H. Harris, on which interest of $3.50 has accrued.

Jan. 19. Received in full settlement of Robt. Smith's account of $200.00, a note signed by Richard
Coe, $100.00, on which $3.20 interest has accrued; his own note for $50.00, bearing 7% intwest; and
cash to balance.

Review Questions. 1, What is an explanatory journal? 2. Describe the procedure of making
a deposit. 3. What records are made of deposits? 4. Describe the pass book and state what its pur-
pose is. 5. Describe the check-book stub. 6. What is an invoicef 7. What is a check? 8. Who are
the parties to a check? 9. What is a lease? 10. What is meant by "briefing" a document for purposes
of filing? 11. How and when should a check be endorsed? 12. What is an endorsement "in blank?"
What is its effect? 13. What is an endorsement "in full?" What is its effect? 14. How is the cash
balance tested when part of the funds are kept in the bank? 15. Name at least four kinds of receipts.
16. May a mistake be made in posting without throwing the ledger out of balance? Give illustrations.
How may such mistakes be discovered? 17. Why should a record be kept of all transactions with regular
customers? How is this done when the customers pay cash? 18. What is an asset? A liability? 19.
Classify the following accounts to to the result shown by each: Cash, Notes Receivable, Notes Payable,
Personal accounts. Real Estate, Mdse, Expense, Interest, Loss & Gain, the Proprietor's account 20.
What is the purpose of the Financial Statement? Describe it. 21. WTiat is the purpose of the Loss
& Gain Statement? Describe it. 22. How is the accuracy of the two statements proved? 23. How
are financial accounts closed? 24. How are loss or gain accounts closed? 25. Describe the process of

getting a bank proof. 26. How is a periodical inventory of stock taken? 27. How may a stock record
e kept which will show the amoimt on hand at any time?

CHAPTER III

PRACTICAL OFFICE WORK AND BOOKKEEPING— Continued

BUSINESS FOR FEBRUARY
Transaction No. 39

February 2, 19 — . Mr. Stewart desires the rent to be paid promptly. He therefore
requests you to write out a check for the February rent and bring it to him for signature.

Note. By this time you have learned that your teacher will either sign Mr. Stewart's name or
authorize some one else to do so. No further directions will be given in regard to this.

Mr. Olmstead's receipt will be found in the pad of incoming papers (No. 14).

Bookkeeping. As this is the first transaction in February, start a new page in the
journal, writing the name of the month in full at the top. The journal entry for this
transaction should state that the rent was paid for the month of February.

Check-book Stub. Do not forget to deduct the amount of the check from your bank
balance as shown by the check-book stub.

Question. Why does Mr. Stewart receive no lease this month as he did last month?

Transaction No. 40

February 3. Mr. Stewart has bought for cash two new blank books for your use,
advancing the money out of his own pocket. He paid $1.00 each for the books. He asks
you to reimburse him in cash.

You will receive no bill or receipt for this transaction.

Transaction No. 41

February 3. A sale is made to H. N. Alkire, on account, of 5 brl. Best Baker's Patent
flour at $6.25 per barrel. Make out an invoice.

Bookkeeping. This transaction is not to be entered in the journal, but in one of the
new books, the Sales Book.

THE SALES BOOK

The Sales Book, as its name implies, is a book in which are entered all sales of Mdse.
Mr. Stewart has observed that nearly half of the transactions for January were sales. He
would like to have sales kept separate from other transactions, for the future, in a special
book.

Questions. How many sales of Mdse. were made during January? What part were they of the
entire number of transactions for the month?

PRACTICAL OFFICE "WORK AND BOOKKEEPING

Mr. Stewart calls your attention to the fact that every time there is a sale of Mdse.,
whether it be for cash, on account, or on a note, the same account is credited, and also
calls your attention to the fact that during January it was necessary to post all these credits
separately from the journal.

Questions. What account is credited every time Mdse. is sold? If there were ten sales for cash,
five sales on account, and three on a note, how many times would you have to post to the credit of this
account, under the plan followed during January?

Mr. Stewart suggests that if you will list the Mdse. sales all together in the new sales
book, all these credits may be added together, and it will only be necessary to post their
sum to the credit of Mdse.

Questions. If there were eighteen sales of Mdse., how many times would the Mdse. account in the
ledger be posted to from the journal, under the plan used for January? How many times would you
have to post to the credit of Mdse. if you were using a sales book? How many postings would be saved
by the use of the sales book?

Form of Sales Book

^i^^-^^^-'^^^^^^'-^^j^ 3, /c?—

^.~

&^.dJ^

.c^

/./J-

, C.^,!U-^^c^g^,<d''0-7zy

/O ,^i^-t^^. G c^L-^^ (-^i?-^iy-yLy

.oz'A

2-r

^^^Lu^. &y, --^4^-^x-t^W^s^

/ ^ /

trA<o

J"/

2-J

J~o

3 /

/zy

7^ / ^0

/oo

p ? ? ?

/j-

p p

Do not copy the transactions shown in the above form, but study them carefully and
refer to them when you make entries in the sales book.

THE SALES BOOK

Explanation. The sales book (sometimes called the sales journal) is a book of original entry, the
same as the journal. When the sales book is kept, all sales of Mdse., without exception, are entered in
it, and these transactions are not entered in the journal. When the sales book and journal are used as
books of original entry, it is the province of the journal to contain entries for all transactions not disposed
of in the sales book.

There are four sales shown in the model form of sales book. In the journal, the same entries would
have appeared as follows:

February 3, 19 —

H. N. Alkire

Mdse.

The Boston Bakery Co.
Mdse.

127

E. C. Judson

Mdse.

140

Cash

Mdse.

100

When the sales book is used, the four credits of Mdse. are entered in the right-hand money column
so that they may be added, and the total, only, posted to the credit of Mdse. The effect of the use of
the sales book is to condense the entry, as follows:

H. N. Alkire

The Boston Bakery Co.

E. C. Judson

Cash

Mdse.

127

140

100

399

Form. The date is written above the transaction, as in the journal.

The name of the account debited is written on the first line below the date, and at the extreme left
of the wide column.

The left-hand narrow column is not used. In the right-hand narrow column (L. F.) the ledger
folio is written at the time of posting.

At the right-hand side of the wide column, on the first line, and opposite the name of the account
to be debited, are noted the terms of the sale, as "On account," "IS-day note," "cash," etc.

The items of the sale are written in the wide column, indented about one-half of an inch from the
L. F. column. The amounts of the separate items are written in the left-hand money column, a single
line ruled underneath the last amount, and the total written in the right-hand money column, on the
same line with the last item. If there is only one item, the amount is entered at once in the right-hand
money column, the left-hand column being left blank, as in the first sale.

When it is desired to post the footing of the sales book to the credit of the Mdse. account in the
ledger, a single line is ruled underneath the amount of the last sale, and the sales added. The sales book
is then ruled up, as shown in the model.

Posting. The separate amounts are posted to the debits of the separate accounts named, and the
total is posted to the credit of Mdse. As each item is posted, the ledger page is entered in the L. F.
column opposite the name of the account. In making the entry in the ledger, use the initial S (for Sales
Book) as an explanation.

80 PRACTICAL OFFICE WORK AND BOOKKEEPING

Note that in the model the L. F. column is not filled out. It is improper to insert the folios except
at the precise moment the posting is done.

The terms of the sale to E. C. Judson, Feb. 5, were "Cash," and Mr, Judson paid the cash when he
bought the goods. This could have been disposed of by an entry debiting the cash account, without
showing Mr. Judson's name. But Mr. Stewart wishes all transactions with persons having accounts
with us to show in the ledger. He therefore instructs that in a case of this kind you are to charge the
amount of the sale to the customer in the sales book, just as if it were bought on account, and at the
same time give the customer credit in the journal for the amount of cash paid. The effect of this plan,
as you can see, will be that both the purchase and the payment will show in the customer's account in
the ledger, the purchase being posted from the sales book, and the payment being posted from the journal.
As the two entries just cancel each other, the balance of the customer's account stands unchanged after
both are posted.

Transaction No. 42

February 4. Mr. Stewart hands you incoming paper No. 15.
The terms of this bill are "On account."

Transaction No. 43

February 4. We sell to The Boston Bakery Co. on their fifteen-day note at 6% (incom-
ing paper No. 16), 5 brl. Lincoln flour at $5.25, and 145 bu. Standard oats at 70(i.

Filing. Receipt the invoice by writing across its face at the bottom the words, " Paid
by 15-day note Feb. 4, 19 — . D. B. Stewart by (your name)." Deliver the receipted bill
to The Boston Bakery Co. by filing it with the outgoing papers. File the note in the
section marked "Cash Register and Notes Receivable."

Transaction No. 44

February 5. We sell to E. C. Judson 136 bu. ear corn at 650 and 45 bu. No. 2 spring
wheat at $1.15. Mr. Judson gives us his check in payment.
Billing. Make out an invoice and receipt it.

Transaction No. 45

February 5. Deposit the check received to-day.

See instructions for depositing, given on Jan. 1.

Do not forget to endorse the check. Endorse it in blank.

Are you entering all deposits in your check-book stub?

Transaction No. 46

February 6. Receive $45.00 in cash from the Austin Livery Co. on account.

Take $25.00 from the outgoing papers section and ^20.00 from the currency envelope.
Make out a receipt for $45.00 "on account." Record the transaction on the receipt book
stub.

Transaction No. 47

February 6. The Eckhart & Swan Milling Co. presents for payment to-day a note
signed by Mr. Stewart. Mr. Stewart instructs you to compute the interest accrued on the
note, and draw a check for the amount of the note and interest, which check he will sign.

Take the note from the outgoing papers section. Observe that it is dated ten days
ago and bears 6% interest. The interest on $300.00 for 10 days at 6% is 500. Draw a
check for $300.50.

TRANSACTIONS — CONTINUED 81

Eckhart & Swan cancel the note thus: "Paid Feb. 6, with 500 interest. Eckhart &
Swan Milling Co., by F. G." Your teacher will tell you how to secure this cancellation.

Check-book Stub. Do not fail to deduct the amount of the check from the balance
shown on the check-book stub.

Transaction No. 48

February 7. Mr. Stewart has arranged to receive from H. N. Alkire, his note at 30
days, bearing 6% interest, for $783.00, the balance due on his last month's account.
The note is Incoming Paper No. 18.

Filing. When you have examined the note carefully to see that it is correct in every
particular, place it in the section where it belongs.

Search through the outgoing papers section until you find the bill or bills covered by
the payment of $783.00. Receipt it (or them) and replace in the same section of the file.

Transaction No. 49

February 7. Receive cash for 15 brl. Best Baker's Patent flour at $6.25 and 10 bu.
ear corn at 62^0.

The cash may be taken from the currency envelope. No invoice is to be made out.

Transaction No. 50

February 7. Make a deposit of $100.00 in currency.

Mr. Stewart now suggests that you post aU entries in both books, up to date.

Post all sales book entries. First, post all the debits, entering the ledger page in the
L. F. column as each item is posted, and at the same time entering the sales book folio in
the ledger thus: S. 1. Use the abbreviation "Mdse." as an explanation in each case.
Do not post the footing of the sales book at this time.

Post the entries from the journal. Prove the cash.

Fill out Students' Report No. 5, all except the bank proof. Before handing it in, turn
to the questions on page 52, and be able to answer them all satisfactorily. In answering
the third question, remember the unposted total of the sales book.

THE BILL BOOK

On February 3, Mr. Stewart bought a blank bill book. He now hands it to you with the
remark that he would like you to keep in it a record of all notes received by us from others
and issued by us to others, beginning with January 1. Before you can do this intelligently
you will have to examine the book carefully and study the forms shown herewith.

Nature of the Bill Book. The bill book, or register of notes receivable and payable, is an auxiliary
book. From the definition of this term, as given on a preceding page, you know that this means it is
a book of memorandum. It is not a book of original entry; the original entries involving the receiving or
issuing of notes are made in the journal or sales book (usually in the journal). It is not a book of final
record; the book of final record is the ledger, in which are kept accounts with notes receivable and notes
payable. The sole purpose of the bill book is to furnish a memorandum of facts in regard to the various
notes receivable and notes payable, and especially to show when the notes fall due, so that they may be
paid or collected, as the case may be, at the proper time.

Observe that the bill book is divided into two parts, one for notes receivable and one for notes payable.

PRACTICAL OFFICE WORK AND BOOKKEEPING

NOTES

Date
Rec'd

Our

No.

Maker or Acceptor
(Payer)

In favor of
(Payee)

Where Payable

Rec'd for

Date of
Paper

19—

Jan.

Feb.

15
4

1
2
3

Austin Livery Co

The Boston Bakery Co

H. N. Alkire

D. B. Stewart
D. B. Stewart
D. B. Stewart

Maker's Office

Union Trust Co

Maker's Office

On^

On %

Jan. Bal.

19—
Jan.

Feb.

15
4

Notes Receivable

In this book are recorded all notes which we receive from others and all facts pertaining
to them. The record extends across two pages.

Note No. 1. This note was received Jan. 15, and this date is written in the column headed, "Date
received." It is No. 1 because it is the first note received. The next will be No. 2, and so on.

The maker was the Austin Livery Co., and their name is written in the column headed "Maker or
Acceptor." (The word "Acceptor" is a term used in connection with drafts. You do not need to con-
sider it at this time.)

The note was made in favor of D. B. Stewart. (In case it had been issued originally to some other
person, from whom Mr. Stewart had bought it, that person's name would appear in this column.)

It is payable at the maker's office. All notes are payable at the office of the maker unless otherwise
stated on the face of the note. Sometimes it is stipulated that a note is payable at a certain bank, or
some other place where it is convenient for the maker to pay it. The payee must present it for payment
at the place designated by the maker.

The fact that a note is payable at a certain bank merely indicates the phce where it will be paid, and
does not authorize the bank to pay it from the funds of the maker. The bank will not pay out any part
of the balance of a depositor except on his express order.

Under the heading "Received for" is written the explanation of the existence of the note. In this
case it was received on the account of the Austin Livery Co.

Date of paper. The date of Note Receivable No. 1 is Jan. 15, the same as the date when received.
These two dates are not always the same. When we buy an old note, or when a note is dated ahead
or dated back, these dates differ.

Time, 30 days. This time is added to the date of the paper to find the due a ate.

When due. Find the due date of the paper and write the day of the month in the proper square.
Note Receivable No. 1 is due on Feb. 14, 19 — .

The column headed "Face" is the last column filled out at the time the paper is received. The
four right-hand columns will not be filled out until the note is paid.

NOTES

Date
Issued

Our
No.

Maker or Acceptor
(Payer)

In favor of
(Payee)

Where Payable

Given for

Date of
Paper

19—
Jan.

Jan.

1
13

1
2
3

D. B. Stewart
D. B. Stewart
D. B. Stewart

Nat'l Cash Reg. Co.

Kemper Bros. Co.

Eckhart & Swan M.Co.

Our Office
Our Office
Our Office

Cash Reg.
Mdse.
On%

19—
Jan.

Jan.

13
27

THE BILL BOOK

RECEIVABLE

Rate
of
Int.

j When Due

Disposed of

Time

Year

■-9

•-5

iiii

"6
O

Face

When

How Int. Reed.

Amt.Recd.

Days
30

19—

127

6fo

19—

783

Enter Note Receivable No. 1 as above described. Enter Note No. 2. This is the
note received from The Boston Bakery Co. (Transaction No. 43.) Enter Note No. 3.
This is the note received from H. N. Alkire on account on Feb. 7. (Transaction No. 48).

Notes Payable

The memorandums kept for this book are similar to those kept for Notes Receivable.
D. B. Stewart's name always appears as maker, however, in case of Notes Payable, whereas
in case of Notes Receivable his name appears as payee, if it appears at all.

The three notes payable which Mr. Stewart issued during January are listed in this book as No. 1,
No. 2 and No. 3. Observe that No, 1 was given for a cash register, No. 2 was given for Mdse. purchased,
and No. 3 was given on account.

Fill out the data required for these three notes payable, referring to your journal for
the facts. Observe that the four columns at the right, under the general heading, "Re-
deemed," are filled out for the three notes payable.

This brings your bill book up to date.

In future, make these memorandums in your bill book, making each at the time of
making the original entry for the transaction in your journal or sales book.

Transaction No. 51

February 9. Mr. Stewart hands you incoming paper No. 19.
Verify the extensions and footings.

Transaction No. 52

February 10. We are handed a bill for drayage (Incoming Paper No. 20), which Mr.
Stewart instructs you to pay in cash. The bill is already receipted.

PAYABLE

Rate
of
Int.

When Due |

Redeemed

Time

Year

a
>->

0.
<

i-s

3
<

Face

When

How

Int.

Amt. Pd.

30 Days

—

19—

225

Jan.

Ck.No.6

225

15 Days

—

19—

455

Jan.

Ck.No.5

—

455

10 Days

19—

300

Feb.

Ck.No.8

300

84 PRACTICAL OFFICE WORK AND BOOKKEEPING

Take $10.00 from the cash register, and place it in the outgoing papers section, taking
from the outgoing papers section a $2.00 bill, which you will return to the cash register.

Transaction No. 53

February 11. We sell to J. T. Hooper, 5365 S. 63d St., City, on account, 20 brl. Pills-
bury 's Best flour at $6.80, and 25 brl. Lincoln flour, at $5.20 per brl.

Bookkeeping. Make the entry in the sales book. Write Mr. Hooper's address on
the line with his name, writing in a small hand, so that the name, address, and terms
may all be written on the same line.

Transaction No. 54

February 12. Receive cash for 10 brl. "XXXX Best" Patent flour at $6.50 per barrel.
The cash will be found in the envelope marked "Currency" (three $20.00 bills and a
$5.00 bill). No invoice will be made out.

Transaction No. 55

February 14. Receive the Austin Livery Co.'s check for $50.25, in payment of their
note dated Jan. 15, $50.00, with interest for 30 days at 6%, 25 cents.

The note is in the notes receivable section of the file. Cancel it and return it to the
outgoing papers section.

This check is Incoming Paper No. 21. Detach it from the pad and verify the amount
of interest.

COMPUTING INTEREST

"Interest at 6%" means that six per cent of the face of the note must be paid every year by the
maker to the payee for the use of the money which he owes to the payee. In this case, the Austin Livery
Co. owes Mr. Stewart $50.00, and must pay him at the rate of 6% per annum for interest on it.
6% of $50.00 is found by multiplying $50.00 by .06, or six hundredths.

$50.00, face of note
.06, rate of interest

$3 . 00 yearly interest

A year has 365 days (or 366). For purposes of rapid computation, an interest year is usually counted
as 360 days, divided into 12 months of 30 days each.

6% per year is one-half of 1% every month, or 1% every 2 months.

The commonly accepted method of computing 6% interest is as follows:
- Write the amount upon which interest is to be figured. Point off 1% of this amount by moving the
decimal point two places to the left. This is the amount of Interest for 2 months, or 60 days, at 6%.
Using this as a basis, add to it or subtract from it whatever part of it is necessary to give the result for
the required number of days.

In the above case, the interest on $50.00 for 60 days at 6% is found by removing the decimal point
two places to the left — $0.50.

The interest for 30 days would be just half of this, or $0.25.

Bookkeeping. Make the entry in the journal and record in the bill book the date the
note was paid, the manner of payment, the interest, and the full amount received by us.
Cancel the note and return it to the Austin Livery Co.

Transaction No. 56

February 14. Deposit the check just received, and all but $44.00 of the currency on
hand. Endorse the check in blank. Enter the amount of the deposit on the stub of the
check-book.

TRANSACTIONS — CONTINUED 85

Transaction No. 57

February 14. Your salary has not been paid for two weeks. Mr. Stewart pays you
in cash, from the cash register, $40.00.

Post all transactions up to date. First, post unposted sales book items, as described
after Transaction 50. Do not post the footing of the sales book at this time ; Mr. Stewart
wishes this posted at the end of the month only, so that the sum posted will show the
sales for the month in a single amount. Post the entries from the journal. Prove the cash.

Student's Report No. 6 should be made out at this time. Do nothing with the bank
proof. After filling out the report, refer to the questions on page 52, as usual. If you can
answer them all satisfactorily, hand in your report.

Take a trial balance. In order to secure a balance, it will be necessary to include the
total of sales to date as a credit. Add the sales book, placing the total just underneath
the last sale in small lead pencil figures. Include this amount in the trial balance, using
the explanation, "Footing of sales book — not posted."

Transaction No. 58

February 16, E. C. Judson purchases on account, 10 brl. Lincoln flour at $5.50 and
100 bu. No. 2 spring wheat at $1.15.

Transaction No. 59

February 17. The Boston Bakery Co. has sent us a 10-day note to cover last month's
balance. The note bears 6% interest.

This is Incoming Paper No. 22. Detach it from the pad and examine it carefully.

Fill out the bill book record. (This is Note Receivable No. 4.)

Filing. Notes receivable are kept with the cash.

Take from the outgoing papers section the bill or bills covered by this note, write a,
proper receipt upon them, and return them to the same section of the file. Remember
that $20.00 has already been paid on one of these bills.

Transaction No. 60

February 18. H. N. Alkire purchases on account, 40 brl. Bohemian Rye flour at $6.00
per barrel and 60 bu. ear corn at 70^.

Transaction No. 61

February 18. Mr. Stewart suggests that The Eckhart & Swan MilUng Co. should be
paid the balance due them on last month's account.

Ascertain what this amount is and write a check, which Mr. Stewart will sign. Take
from the ''Invoices Payable" section the bill covered by this payment.

Bookkeeping. Do not forget the record which should be made on the check-book stub.

Filing. Attach the check to the invoice and mail by placing them in the outgoing
papers section.

Transaction No. 62

February 19. Receive The Boston Bakery Co.'s check for $128.07 in payment of
their note of Feb. 4, for $127.75 with 6% interest for 15 days.

86 PRACTICAL OFFICE WORK AND BOOKKEEPING

The check is Incoming paper No. 23. Detach it from the pad and ascertain whether
the interest has been correctly computed. If so, cancel the note. In computing interest,
bear in mind that 15 days is | of 60 days.

Bookkeeping. Fill out the last four columns in the bill book. See transaction Np. 55.

The canceled note should be returned to the makers.

Transaction No. 63

February 19. Deposit the check just received. Do not fail to endorse it. Remember
to enter the deposit on the check-book stub.

The Eckhart & Swan Milhng Co. returns, marked "Paid," the invoice for which we sent
our check yesterday. Take the bill from the outgoing papers section, have it canceled thus:
" Paid, Feb. 18, 19—. Eckhart & Swan Milhng Co., by M. N.," and file it with the receipts.

Transaction No. 64

February 20. Mr. Stewart remarks that the bill of The Macey Co. should be paid at
once. It has already remained unpaid too long. Ascertain the amount due them.

Take their bill for furniture sold us on Jan. 1 from the unpaid invoices file.

Mr. Stewart instructs you to pay this bill as follows: Give The Macey Co. an order on
E. C. Judson for $130.00, which amount he owes us; and our check for the remainder.

Refer to the ledger and you will find that E. C. Judson owes Mr. Stewart SI 30.00 for
goods bought Jan. 20. Mr. Stewart has a right to ask Mr. Judson to pay this. He there-
fore instructs you to write Mr. Judson a letter requesting him to pay the SI 30.00 to The
Macey Co.

Make out a check for $36.50, in favor of The Macey Co. Mr. Stewart will sign it.

Bookkeeping. Charge The Macey Co. $166.50; for we have settled with them for
the entire bill. Credit cash paid out, $36.50. Credit E. C. Judson $130.00, just the
same as if he had paid us direct.

Filing. Mail the letter and the check both to The Macey Co. by placing them with
the outgoing papers. The Macey Co.'s bill should be sent along with the remittance, so
that they can receipt and return it.

The letter instructing E. C. Judson to pay The Macey Co. was mailed to The Macey
Co., not to Mr. Judson. The reason for this is obvious. The Macey Co. will take the
letter to Judson when they go to collect the money.

This order if written out in full would be called a draft on E. C. Judson. The student is not expected
to prepare a draft in formal manner at this time. More will be said of drafts later.

Transaction No. 65

February 20. We sell to the Austin Livery Co., on account, 100 bu. Standard oats
at 72^^ and 100 bu. ear corn at Q2<t.

Forwarding the Footing of the Sales Book. This is the last item which can be
written on page 1 of the sales book. Rule a single line of addition, and add the column..

TRANSACTIONS CONTINUED 87

Opposite the footing write the word " Forwarded." Write the amount at the top of page 2,
on the first line, and write opposite this the words "Brought Forward."

Transaction No. 66

February 21. Mr. Stewart instructs you to send our 30-day note for $950.00 at 6%
interest, to the Eckhart & Swan Milhng Co., to cover their bill of Feb. 4.

Detach a note from the pad of blank notes and fill it out as Mr. Stewart has instructed
you. Do not forget to make a proper record on the stub of the book of blanks.

Take the invoice from the "Invoices Payable" section, have Eckhart & Swan's receipt
written upon it, and file with the receipts.

The Macey Co.'s bill for $166.50 has been returned marked "Paid." Take it from the
outgoing papers section and have their receipt written upon it.

Post to date and make out Student's Report No. 7. Can you answer satisfactorily
the questions on page 52? K so, hand in the report.

Transaction No. 67

February 23. We sell to The Boston liakery Co., on account, 100 bu. No. 2 spring
wheat at $1.20 and 20 brl. XXXX Best Patent flour at $6.50.

Transaction No. 68

February 23. J. T. flooper purchases on account, 200 bu. Standard oats at 66§^ and
10 brl. XXXX Best Patent flour at $6.50.

Are you filling out invoices neatly and in your very best handwriting? Remember that a great deal
depends on the care with which you do your work. Neat, careful work is not only more creditable to
you, but lessens the likelihood of error.

Transaction No. 69

February 24. Mr. Stewart instructs you to remit to the Pillsbury- Washburn Flour
Mills Co., in payment of their last bill, as follows: Send them our 60-day note for $500.00,
dated Feb. 9, the date of the bill bought of them, and bearing 6% interest; and our check
for the balance of the bill.

Do not forget to deduct the amount of the check from the balance shown by the check-
book stub. The note issued is Note Payable No. 5.

Filing. The note, the check, and Pillsbury- Washburn's invoice (which you will take
from the "Invoices Payable" section) are to be fastened together and mailed.

Transaction No. 70

February 24. We sell to the Austin Livery Co., on account, 50 bUu No. 2 spring wheat
at $1.15 and 40 bu. ear corn at 650.

88 PRACTICAL OFFICE WORK AND BOOKKEEPING

Transaction No. 71

February 25. J. T. Hooper has sent us his check for $266.00 in payment of his bill
of Feb. 11. The check is Incoming Paper No. 24.

Take the bill from the outgoing papers section, write a receipt at the bottom, and
return it to the same section.

Transaction No. 72

February 25. H. N. Alkire purchases on account, 40 brl. Pillsbury's Best at $6.90.

Transaction No. 73

February 25. Deposit the check you received today. Do not forget to endorse it.
Add the amount to the balance shown on the check-book stub.

Transaction No. 74

February 26. During the past few weeks Mr. Stewart has made a number of small
expenditures, taking the money from his own pocket from time to time. These items
amount to $15.00, and Mr. Stewart requests you to give him a check for this amount,
charging Expense.

When a depositor wishes to yrithdraw cash from his bank account, it is customary to draw a check
In favor of "Currency." He presents this check at the bank and receives cash in exchange for it. A
check so made out is payable to bearer, and no endorsement is necessary to complete the authorization
to the bank to pay it. Yet most banks, though fully empowered to pay such a check to any bearer, will
nevertheless require the person receiving the money to write his name on the back as a matter of informa-
tion, especially if he is not known at the bank.

Sometimes the depositor draws the check in favor of "Self" or "Myself," in which case his endorse-
ment is necessary before the check will be paid. This is a good plan when the drawer expects to carry
the check about with him for some time before presenting it to the bank for payment.

The check you are to make out will read:

N". -'^ Chicago, February 26, 19

MERCHANTS EXCHANGE BANK

Pay to the order of Currency $15.00

Fifteen and ^ Dollars

D. B. Stewart

Bookkeeping. Your journal explanation for this entry should be: "Paid to D. B.
Stewart for sundry petty expenses."

A BANK STATEMENT 89

The Pillsbury- Washburn Flour Mills Co. has returned the Feb. 9 invoice marked, "Feb.
24, 19—. Rec'd note S500.00; cash $610.00. Pillsbury- Washburn Flour Mills Co., by
D. F." (Have this done for them.) File it with the receipts.

Transaction No. 75

February 26. Receive $282.00 in cash from H. N. Alkire, in settlement of his bill
of Feb. 18. (Take $232.00 from the currency envelope and $50.00 from the outgoing
papers section of the file.)

Transaction No. 76

February 26. Deposit $200.00 cash.

Are you remembering to add deposits to the balance of the check-book stub?

Transaction No. 77

February 27. We sell to The Boston Bakery Co., on account, 20 brl. Bohemian Rye
flour at $6.30 and 40 bu. ear corn at 62^^.

Transaction No. 78

February 27. Receive The Boston Bakery Co.'s check for their note of Feb. 17, due
today, $565.25, and interest for 10 days at 6%, 94 cents. Amount of check, $566.19.

Verify the interest.

Transaction No. 79

February 27. Deposit the check last received.

Transaction No. 80

February 28. Your own salary for two weeks is now due. This is paid in cash.
Did you endorse the check deposited yesterday?

THE BANK STATEMENT

February 28. The bank clerk i-etums to you checks No. 6, 7, 8, 9, 10, 11, and 12,
canceled, together with a bank statement (Incoming Paper No. 26).

Take the seven checks from the outgoing papers section of the file and have them
endorsed by the proper parties and canceled by the bank, as on Jan. 31.

Since all the checks have been paid by the bank, the balance shown by the bank state-
ment should exactly agree with the balance shown by your check-book stub. Does it?

Note. This is an unusual condition. There are usually some outstanding checks, so that it is neces-
sary to reconcile the check-book balance and the bank statement by means of a bank proof.

Post the sales book and journal to date. After all sales book items have been posted
separately as debits, rule and add, and post the total to the credit of Mdse. Write opposite
the total in the sales book, "Mdse. Cr. for total," and enter the ledger page in the L. F.
column. As an explanation in the ledger, write "Sales total," and enter the sales book
page in the folio column. Use the date Feb. 28 in both sales book and ledger.

90 PRACTICAL OFFICE WORK AND BOOKKEEPING

Prove your cash.

Make out Student's Report No. 8. Do not fail to fill out the spaces for the bank proof.
Inventories, February 28:

Furniture and Fixtures, $ 380.00

. Merchandise, 1339.50

Interest accrued on H. N. Alkire's note of February 7, in our favor, 21

days at 6%, 2.74

Interest accrued on our note of Feb. 21, in favor of the Eckhart & Swan

Milling Co., 7 days at 6%, 1.11

Interest accrued on our note issued Feb. 24, in favor of the Pillsbury-

Washburn Flour Mills Co., dated Feb. 9, 19 days at 6%, 1.58

The inventory of interest accrued on Alkire's note in our favor is a resource to us.
The amounts of interest accrued on notes which we owe are liabilities to us.

Take a trial balance. Prepare a financial statement and a loss and gain statement.
In computing the gain on interest add the resource inventory to the credits, and add the
liability inventory to the debits. In making the financial statement, remember to include
these inventories.

Close the ledger accounts. First close the financial accounts, except personal accounts
and the proprietor's account. Then close the loss or gain accounts into the loss and gain
account. These will close with the results shown in the loss and gain statement. In
closing the interest account, remember that it has a resource inventory and two liability
inventories. These must be entered in red ink, the resource with the gains (credit
side) and the liabilities with the losses (debit side). After the account is closed with a
gain, these inventories must be brought down separately.

Close the proprietor's account.

When the ledger has been closed as above described, and balances and inventories
have been properly brought down and balances of personal accounts have been noted in
lead pencil in the explanatory columns of the ledger, take a balance of balances. This
balance of balances should correspond with the assets and liabilities shown in the financial
statement.

Prepare a stock record for February. Allow lines for each item as follows:

Lines Lines

Pillsbury's Best flour 2 Ear corn, 6

Best Baker's Patent flour, 2 No. 2 spring wheat, 4

Lincoln flour, 3 XXXX Best Patent flour, 3

Standard oats, 3 Bohemian Rye flour, 2

First: Enter the quantities on hand Feb. 2, at the latest prices paid, as follows:
Pillsbury's Best flour, 15 brl. at $5.70; Best Baker's Patent flour, 20 brl. at $5.20; Lincoln
flour, 20 brl. at $5.40; Standard oats, 645 bu. at 520; ear corn, 386 bu. at 480; No. 2 spring
wheat, 295 bu. at 910.

Second : Enter all quantities purchased in February, as ascertained from the invoices.

Third: Enter all quantities sold, as ascertained from the sales book items.

Last: Subtract the quantities sold from the quantities purchased, and multiply by
the purchase prices. The total of this list should agree with the Mdse. inventory given
in the book.

SUPPLEMENTARY PROBLEMS

Bill Book Proof. Test the accuracy of the bill book records by checking the items in
the bill book with those shown in the ledger. The items of notes receivable should exactly
correspond with the items on the debit side of the notes receivable account, while the items
marked in the notes receivable book as disposed of should all appear on the credit side of
the notes receivable account in the ledger. Similarly, the items shown in the notes payable
book should exactly agree with the credits of the notes payable account in the ledger, and
those items marked in the book as paid should check with the debit side of the notes payable
account.

Hand in your files to your teacher, who will examine their contents and return the
empty files to you to be used for your next month's business.

Supplementary Exercises
By inspection of the following entries, determine what was the transaction in each case:
Jan. 19—

9. Cash

John Smith

10. Mdse.
Notes Pay.

11. Notes Rec.
John Smith

Mdse.

12. Cash
Notes Rec.
Interest

14. Proprietor

Cash
16. Notes Pay.
Interest

Cash

1. Cash

Proprietor

2. Mdse.

Cash

3. John Smith

Mdse.

4. Cash

Mdse.

5. Notes Rec.

John Smith

7. Cash

Notes Rec.

8. Notes Rec.

Mdse.

17. Real Estate

Notes Pay.

Cash

Geo. Brown

18. Mdse.

Notes Rec.
Notes Pay.
Ed. Gray

19. Geo. Brown

Cash

20. Ed. Gray

Mdse.

Proprietary Investments

Mr. Stewart's investment January 1 consisted of $10,100.00 in cash. You debited cash and credited
D. B. Stewart for the amount. Had the investment consisted of several items, several accounts would
have been debited and Mr. Stewart credited for the total, thus:

Cash

Mdse. .'

Real Estate ....
D. B. Stewart

10,000
5,000
6,000

20,000

A proprietor often brings into the business liabilities as well as assets. In this case, the separate
liabilities should be credited to the proper accounts and the proprietor debited for the total. Thus,
if Mr. Stewart had owed $5,000.00 on a note and had owed John Jones $5,000.00 at the time of starting
business, and the business had assumed these liabilities, the following entry would have been made:

D. B. Stewart . . .
Notes Payable
John Jones .

10 000

5,000
5.000

00
00

Note.

You must remember that you have not been keeping the books of Mr. Stewart, but of the

SUPPLEMENTARY JOURNALIZING

flour and feed business which Mr. Stewart owned and conducted, Mr. Stewart's entire resources may
or may not have been invested in this business. As a matter of law, all of a man's property is liable
for the debts of his business; but as a matter of bookkeeping, the investment consists of just what he
puts in the business. He may conduct a number of businesses, with a different investment for each one.
When a proprietary investment consists of both assets and liabilities, sometimes one journal entry
is made instead of two. The assets are listed as debits, and the liabilities as credits, the proprietor's
account being credited for the difference. This last amount appears as the last liability in the list,
making the assets equal to the liabilities, in conformity to the rule requiring equal debits and credits
for every journal entry. Thus the two entries above could be combined in one entry, as follows:

Cash

Mdse

Real Estate ....
Notes Payable
John Jones . .
D. B. Stewart .

10,000
6,000
5,000

5,000

10,000

It will be seen that Mr. Stewart's investment, as shown by the last entry, is the difference between
his credit shown in the first entry and his debit shown in the second entry.

In case the proprietor makes a further investment at any time, he is credited with it by the business,
just as the business would credit any other person for what that person produced. Should he make
a withdrawal, he would be debited on the books of the business, just as any other person would be debited
who cost the business something. If a private debt of the proprietor should be paid or assumed by the
business at any time, it would be treated as a withdrawal.

Journalize the following, using loose sheets of paper:

19—

Feb. 1. Geo. E. Matthews commenced business with the following: Cash on hand, $1,800.00;
Mdse, $3,400.00; E. R. Munger's note for $600.00; John Johnson owes on account, $150.00.

Feb. 5. E. M. Price owed, on commencing business: E. C. Conway, on note, $450.00; B. F. Mills,
on account, $180.00.

Feb. 10. J. H. Purcell commenced business with the following assets: Mdse. on hand, $1,800.00
cash in bank, $750.00; store and lot valued at $2,000.00. His liabilities were : C. Baine, on note, $400.00;
Henry Munson, on account, $80.00.

Debit the assets, credit the liabilities, and credit J. H. Purcell with the difference to balance the
entry.

Feb. 12. J. H. Purcell has this day paid in cash from the cash register, grocery bill for family,
amounting to $35.00.

Feb. 13. J. N. Parker's assets at the time of commencing business, which he invested in the business,
were: Cash, $3,500.00; merchandise, $4,800.00; sundry persons' notes, amounting to $1,250.00; and
an account against John D. Cooper for $675.00. His liabilities, which were assumed by the business,
were: Outstanding notes amounting to $1,875.00, and an account due Geo. W. Porter for $250.00.

Feb. 15. J. N. Parker has paid cash from the cash register for new suit of clothes, for personal use,
$40.00.

Feb. 16. Geo. M. Peters commenced business with cash on hand, $250.00; deposit in First National
Bank, $1,700.00; eight shares C, B. & Q. R. R. stock, at $100.00 per share, $800.00; merchandise,
$4,000.00. He also invested the store building on Main Street, worth $7,000.00, upon which there was
a mortgage note of $1,000.00, favor G. Mason, with $25.00 interest due on it. He owed Geo. Hainline,
on account, $760.00, and this was assumed by the business.

The mortgages payable account is handled in the same way as the notes payable account.

Feb. 17. Geo. M. Peters has taken from the cash drawer, for personal use, $20.00.

Feb. 18. Geo. M. Peters having received a legacy of $360.00 in cash from a deceased parent, has
invested it in the business.

SUPPLEMENTARY JOURNALIZING 93

Feb. 19. M. L. Smith has to-day invested in business as follows: Cash, 4,000.00; stock of Mdse.»
$5,270.00; note signed by Mead & Coe, $250.00; and an account against Geo. Waters, $87.50.

Feb. 20. G. W. Brown has to-day begun business. His investments are: Cash, $2,500.00; Mdse.,
$3,465.20; store and lot, valued at $5,500.00; and an account against Jos. Leiter, $149.65. His debts,
which are assumed by the business, are: His note in favor A. L. Hill, $500.00; an account due G. M.
Wilcox, $240.00.

Feb. 21. H. L. Gray begins business to-day with the following investments: Cash, $1,400.00;
note signed by R. H. Perkins, $100.00; interest accrued on foregoing note amounting to $4.33. He
owes Henry Patterson, on account, $100.00; he owes S. K. Willis, on note, $450.00; interest accrued on
foregoing note for two months at 6%, $4.50.

Feb. 22. B. C. Dalton and E. F. Gaines have to-day engaged in business as partners. Mr. Dalton
invests: Cash, $245.65; Mdse., $6,540.26; store and lot worth $4,000.00; furniture and fixtures valued
at $325.00. He owes Newman & Co. $650.00, on account, and has signed a note in favor of Strickland
& Co. for $650.00, on which interest to the amount of $7.90 has accumulated. Mr. Gaines brings into
the business: Cash, $4,500.00; an account against James Ford for $720.65; and a note signed by Waller
& Co. for $2,000.00, on which interest has accrued for one year at 5%. Make separate entries for the
two partners.

Feb. 23. Settled our account with Jarvis & Whitman. Amount due them, $1,260.00. Gave
them a note which we hold against R. W. Munger for $500.00, on which $10.00 interest has accrued;
our own note for $400.00; and cash for the balance.

Feb. 24. Received from P. M. King, in settlement of his account of $350.00, the following items:
One second-hand typewriter, $50.00; an account of $50.00 against Belknap & Co., which he transfers
to us; a note against E. B. Hamilton, $150.00 plus interest for six months at 6%; and cash for the
balance.

Feb. 25. Bought from K. V. Handley, Mdse. amounting to $500.00. Gave him in exchange a
note signed by C. C. McLain for $250.00, and an account against E. M. Goltra for $250.00.

Feb. 26. Parker Doane, of Jacksonville, 111., owes us $100.00. We owe Henry English, of Jackson-
ville, 111., the same amount. We write an order on Parker Doane for $100.00, payable to Henry English,
and send the order to English, When Doane pays English the $100.00, Doane's debt to us is settled.
Make the entry.

Feb. 27. A bank collector calls upon us to-day, presenting an order from H, M, Wright for $150.00.
We ascertain from our books that we owe Wright $150.00, and pay the $150.00 in cash to the bank
collector. Make the journal entry just as if we had paid the cash to Mr. Wright direct.

Feb. 28. We owe Fullenweider & Co. $180.00. They send a representative to call upon us, who
produces a note promising to pay Fullenweider & Co., $180.00, which he asks us to sign. We sign the
note and deliver it to him. Make the entry.

Review Questions. 1. What class of transactions are entered in the sales book? 2. Describe
the sales book as to form. 3. How is the sales book posted from? 4. Show how the principle of equal
debit and credit is preserved in posting from the sales book. 5, How is the labor of posting lessened
by the use of the sales book? 6. What other advantages does the use of a sales book present? 7. When
a sales book and journal are kept, which should be posted from first? Why? 8. Assume that a regular
customer buys Mdse for cash. "What entries will be made? 9. In the foregoing case, could the trans-
action have been disposed of by one entry? WTiy would this have been less satisfactory? 10. What
is the purpose of the Notes Receivable book? Describe the book. WTiat would you call its most impor-
tant feature? 11. Answer the foregoing questions as to the Notes Payable book. 12. Are the bill books
books of original entry? Of final entry? If neither of these, what are they? Why? 13. How should
the accuracy of the bill books be tested? 14. How should a depositor proceed to withdraw cash from
bis bank account?

EQUALITY OF DEBIT AND CREDIT

How much is a man worth? Mr. Black has $1000.00 in cash. He owns nothing else and owes nothing.
This is the simplest case imaginable, and we say

$1000.00 ="\Miat Mr. Black is worth.

Problem 1. A has $86.75 in his cash register and $500.00 on deposit at the bank. He owns nothing
else and owes nothing. How much is he worth?

Problem 2. B has $50.75 in his cash drawer, $226.65 on deposit at the First National Bank, and
$500.00 deposited in the savings bank. He owns nothing else and owes nothing. How much is he worth?

94 EQUALITY OF DEBIT AND CREDIT

In bookkeeping we deal with the affairs of a business, not a man. Mr. Black may have part of his
thousand dollars invested in one business and part in another. Let us assume that he has $500.00 invested
in a certain business. This case is also simple, and we say

$500.00 cash = Mr. Black's investment in the business, $500.00.

It is not necessary that an investment be entirely cash. It may consist of or include anything of
value which the proprietor owns and wishes to put into the business. Suppose that Mr. Black had put
into the business a stock of merchandise worth $200.00, furniture and fixtures worth $100.00, a note against
Mr. Brown for $100.00, and only $100.00 in cash. His investment would have been just the same as in
the preceding illustration, but would have been expressed thus:

Cash, $100,00 1

Mdse., $200.00 iv/r Ul 1 - • * * ecnn nn

Furn. & Fix., $100.00 =^^- ^'^^^ « investment, $500.00.
Notes Rec, $100.00 J

Problem 3. C invests $225.00 in cash, Mdse. worth $526.70, furniture and fixtures which he values
at $175.00, and an account against X for $120.60. Ho owns nothing else and owes nothing. How much
is the business worth? Prepare your statement in the form shown above.

Problem 4. D has $96.50 in his cash register and $452.60 on deposit at the bank. He owns a store
and lot valued at $8600.00, Mdse. inventoried at $2346.75, and fixtures valued at $236.50. He holds a
note against X for $100.00, and an account against Z for $76.90. He owns nothing else and owes nothing.
If this is all invested in a business, how much is the business worth?

It will be noted that the total of the items on the left-hand side in the illustration above are exactly
equal to the amount of Mr. Black's investment, as shown at the right. If a journal entry were made,
the four items on the left would be entered as debits and the amount of Mr. Black's investment would be
entered as a credit. State the reason in each case.

If such a journal entry were made and posted, the four items on the left, showing as debits in the
journal entry, would be posted to the left-hand or debit side of the ledger. Similarly the item on the
right, showing as a credit- in the journal entry, would be posted to the right-hand or credit side of the ledger.
It is apparent that there would then be $500.00 on the debit side of the ledger and $500.00 on the credit
side of the ledger. This equality between the debit and credit sides of the ledger is always maintained
to the cent. To further illustrate this point, let us again take up Mr. Black's business.

As Mr. Black's ledger now stands the debit and credit sides are exactly equal, as follows:

Debit Side Credit Side
$500.00 = $500.00

Suppose that Mdse. is sold for cash, $100.00. The journal entry for this transaction would debit cash
$100.00 and credit Mdse. $100.00. This debit and credit would be posted to the ledger, without disturb-
ing the equality of the debit and credit sides, as the following will show:

Debit Side Credit Side

$500.00 $500.00

100.00 100.00

$600.00 $600.00

Assuming that other transactions take place as noted below, trace the effect of each transaction upon
the ledger, particularly noting that since the debit side and the credit side are increased by the same amounts
each time, the equality between the two sides is not disturbed.

Transactions Journal Entry Ledger

Debit Side Credit
$500.00 $500.00
100.00 100.00

$600.00 $600.00
Bought Mdse. for cash, $50.00 Dr. Mdse., $50.00, Cr. Cash, $50.00 50.00 50.00

$650.00 $650.00
Sold Mdse. to Geo. Green on acct. $75.00 Dr. Geo. Green, $75.00, Cr. Mdse., $75.00 75.00 75.00

$725.00 $725.00

Rec'd cash $101.00, for note, $100.00, Dr. Cash $101.00, Cr. Notes Rec. $100.00, 101 .00 100.00

and Int. $1.00 Cr. Int. $1.00 1.00

$826.00 $826.00

And so this exercise might be continued indefinitely without disturbing the equality between the two
sides of the ledger. The original investment consists of equal debits and credits, so that the footings of
the ledger are equal to start with. Every transaction consists of equal debits and credits. The two sides
of the ledger are therefore increased equally for each transaction, leaving the total footings equal at all times.

THE CASH BOOK

This section is to be thoroughly mastered before the work of Chapter IV is attempted.

At the beginning of your study of this text you learned that books were classified
as to the nature of the entries made in them into books of original entry, books of sub-
sequent or final entry, and auxiliary or memorandum books.

The first book of original entry you used was the journal. All debits and credits
were entered in this book, as you first used it. You next learned the use of the sales
book. You were taught to enter all sales of merchandise in this book, omitting these
transactions from the journal. You will now learn to use the Cash Book. All trans-
actions involving debits and credits of cash are entered in the cash book at the time of
their occurrence and are omitted from the journal.

When cash is received an entry is made on the debit side of the cash book at once.
The name of the account which should be credited is entered in the explanatory column,
and the entry is later posted to the credit of that account in the ledger.

When cash is paid out, an entry is made on the credit side of the cash book at onco.
The name of the account to be debited in the same transaction is written in the ex-
planatory column and the entry is later posted to the debit of that account in the ledger.

Since the debits of cash are posted to the credit side of the ledger and the credits
of cash are posted to the debit side of the ledger, it follows that if total debits and total
credits of the cash book be included in the trial balance the rule of equal debits and
credits will have been preserved. In practice, the debit and credit totals are not entered
in the trial balance, but the excess of the debit over the credit side is entered as a single item.

The preceding three paragraphs may not seem perfectly clear to you. Study carefully the illus-
trative exercise, illustration, and explanation which follow; then return to the three paragraphs referred
to, and their meaning will be clear.

Illustrative Exercise:

19—

Jan. 1. H. T. Patten invested cash in the business, $4,000.00.

2. Paid for rent of store for January, $80.00.

3. Gave J. E. Thompson our check for goods bought yesterday, $1,000.00.

4. Received from E. B. Dorsey cash on account, $175.50.

5. Paid the clerk's salary for the week in cash, $12.00.

7. Received F. R. Hoppe's check for Mdse. sold him Jan. 4, $125.00.

8. Paid the janitor's wages, $7.50.

9. Received cash from G. M. Baker for his note of Jan. 4 in our favor, $250.00.
10. Paid cash to J. B. Williams on account, $85.00.

12. Paid cash to E. D. Woods for our note in his favor, dated Dec, 28, 19 — ,

$200.00, and interest for 15 days at 6%, .50 (two entries).
15. Bought a Hosier safe for $150.00 cash.

Explanation : (See form on pages 88 and 89)

The cash book extends across two pages, a left and a right. These two pages are used in the same
way as the two sides of a ledger account; i. e., the left-hand page is for the debits and the right-hand
page is for the credits. Note that the left-hand page and the right-hand page bear the same page
number.

THE CASH BOOK

^'?-

C 't:z^J^Ji^ i/j>Ly.

oyyi^.

7
f

-Account CrcUiteet

- J/oyTLy.^

^c^-^^hJy ..^...^^€..^.^^.^7,^

/C?«z-<>tsz-?^-<:-^-^

Ztenrf

^000

/ zj-

Tcfa.L

^SSO

A^J-SO

3 O/S ^O

J'O

At the top of each column in the illustration the purpose of the column is stated, in parenthesis.
Trace the entries from the illustrative exercise to the illustration (twelve entries) and then make them
on a double sheet of paper, without reference to the illustration. Do not rule up or attempt to balance
the cash book until instructed to do so.

If the four entries on the debit side of the cash book were each journalized, they would be as
follows:

January 1, 19 —

Cash

H. T. Patten
4

4,000

Cash

E. B. Dorsey
7

176

175

Cash

F. R. Hoppe
9

125

Casb

Notes Rec.

250

THE CASH BOOK

dM^

C tz,J^-A^&y:

Z
3

/J-
/J"

■rVccount J)edited.

/temf

/z
7

ZO o

/so

/S3S
3 0/S

A^SSO

Note that cash has been debited each time. If these were condensed into one entry, that entry
would be:

Cash

H. T Patten

E. B. Dorsey

F. R. Hoppe
Notes Rec-

4,550

4,000
175
125
250

00
50
00
00

It is apparent that if the four items be separately posted from the cash book to the credit side of
the ledger and the total appear in the trial balance as a debit of cash, the rule of equal debits and credits
will have been observed, and the condition of the ledger after this posting has been done will be the
same as if the transactions had been handled through the journal. For the purposes of taking a trial
balance, however, the footing need not be actually posted to the ledger, provided it be included in the
trial balance.

If you will study again the third, fourth and fifth paragraphs of this section they should now be
perfectly clear to you.

Journalize the separate entries on the credit side of the cash book as shown above
for the debit side. Condense these separate entries into a single entry.

98 the cash book

Closing the Cash Book,

The cash book is balanced as follows: The Items column is ruled up on each side,
and added, the total being placed in the Total column on the first blank line. The
balance is ascertained and written on the credit side just below the total of payments.
It is dated as of the last business day. A single line is ruled just below and across the
Total column only. On the same line with this, a single line is ruled across the Total
column of the debit side. (If the debit side should have more items than the credit
side, this line would be ruled just beneath the total on the debit side, and the ruling on
the credit side would be made just opposite it, a few lines being left blank on the credit
side.)

The total of the debit side is then brought down beneath the last line ruled, and
on the credit side the balance is added to the total and their sum is written beneath
the line. The debit and credit footings are now equal. A double line is ruled under
the footings, extending across all but the explanatory columns, and the balance is brought
down on the debit side, in the Total column. The balance thus brought down is dated as
of the next business day. The next time the book is balanced the balance must be added
to the total receipts to give the debit footing.

The final resvilt would be the same even if the balance were brought down into the wrong column
on the debit side. But if the balance were brought down into the Items column it would be added
into the footing of that column. The footing would then not represent the total of receipts since the
last closing only, as it should. It is particularly important that the receipts should be shown as sep-
arate from the previous balance when a cash account is kept in the ledger to which footings are posted,
as is sometimes the case; for if the total posted should include anything besides the items for which
credits have been passed to the ledger, the ledger would be thrown out of balance.

Exercises on the Cash Book
exebcise i

Write a cash book for the following transactions:

19—

Feb. 1. E. S. Conway invested in business cash, $3,500.00.

2. Paid Jacob Reis & Co. $850.50 for Mdse. bought Feb. 1.

3. Paid rent for February in cash, $50.00.

4. Received J. E. Baker's check for $45.17 for Mdse. sold him on the 2d inst.

5. Bought an office desk and chair for $23.75 in cash,

6. Paid the clerk's salary for the week, $8.50.

8. Received $147.63 in cash from M. W. Hopper for Mdse. sold him vesterday.

9. Received from J. E. Baker on account, $10.00.

10. Redeemed our note in favor of L. E. Rockwell. Face of note, $100.00.

Interest accrued, 15 days at 6%, 25c. (Make two entries on the credit
side of the cash book, the first debiting Notes Payable, the second debit-
ing Interest.)

11. Received a check from M. W. Hopper for $27.50 in payment for Mdse.

invoiced to him on Feb. 8.

12. E. W. Wilson's note in our favor fell due this day. Received cash for

the note, $57.50, and interest, 20c. (Two entries, as in transaction on
Feb. 10.)

THE CASH BOOK 99

Feb. 13. Gave Jacob Reis & Co., our check for $140.00 for Mdse. bought of them
on Feb. 11.
13. Paid the salary of the clerk as on Feb. 6.

Post the entries to the ledger, using as an explanation the initial C. Put five accounts
on each page.

Take a trial balance, which must include the balance of the cash book. When the
trial balance has been approved, close your cash book.

EXERCISE II

Work out the following set without business papers.
Books used: Journal, cash book, sales book and ledger.

Open the following accounts in the ledger, in the order named. Give each account
one line for the heading, one line for the top ruling, and the number of lines indicated.

C. B. Brammer, 8 lines; Furniture & Fixtures, 8 lines; Mdse., 14 lines; Interest, 6 lines; Expense, 11
lines; Loss & Gain, 6 lines; Notes Rec, 6 lines; W. H. Henry, 7 lines; M. J. Morrissey, 9 lines; J. E. Allen,
7 lines; G. W. McHenry, 6 lines; Notes Payable, 5 lines; W. T. Smith & Son, 6 lines; Marshall Field & Co.,
5 lines; Farr & Bailey, 6 lines; Roxbury Tapestry Co., 6 lines.

In opening ledger accounts, it is customary to observe some regular arrangement, which in this case
is as follows: The proprietary account or accounts, loss or gain accounts, notes and accounts receivable,
notes and accounts payable. The reason for this is apparent, as the accounts on the first pages of the
ledger under this arrangement are those more permanent in their nature, while the accounts receivable
and payable are subject to constant change. Often, however, the loss or gain accounts are placed between
the receivable and payable accounts. Sometimes the proprietary accoimts are put last.

Transactions

19—

March 1. C. D. Brammer has engaged in business at 1260 State St., Chicago, 111.,
with a cash capital of $3,750.00.

March 1. Bought furniture and fixtures for the office and storeroom, $120.00,
paying for them in cash.

March 1 . Paid rent for March in cash, $75.00.

March 2. Opened an account with W. T. Smith & Son, textile manufacturers,
Philadelphia, Pa. Bought of them on credit 12 Axminster rugs, at $10.00 each; and 15
oriental rugs, at $15.25. (Make an entry in the journal.) Paid freight in cash, $10.75.
(Debit Mdse.)

It is a matter of some contention among bookkeepers whether to charge freight to Mdse. or to Ex-
pense. The usxial rule is to debit Mdse. with such items, on the theory that the cost of merchandise
Ls the amount the proprietor must part with in order to get the goods into the storeroom; this would
include freight charges. Some bookkeepers, however, prefer to charge Mdse. with only its net cost,
charging freight to Expense, or, if it seems desirable to keep a record of the exact cost of freight, charg-
ing it to a special account called Freight. When no account is kept with Freight, freight items must be
charged to either Mdse. or Expense. You will debit Mdse. as above instructed.

March 3. Sold to W. H. Henry, 1264 Harvard Ave., for cash, 1 Axminster rug,
$15.00, and one oriental rug, $20.75.

Charge \V. H. Henry in the sales book for the goods he purchased, and give him credit through the
cash book for the amount of his payment. These items when posted will balance each other, but the
entire transaction will then show in the ledger.

March 4. Bought of Marshall Field & Co., 124 Fifth Ave., City, 250 yds. Jap matting,

100 THE CASH BOOK

at 173^c per yard. Paid the bill in cash. (Make two entries, one in the journal, and one
in the cash book.)

March 5. Sold to M. J. Morrissey, Austin, 111., on account, 2 Axminster rugs, $14.50
and $17.00; and 26 yds. Jap matting at 28c per yd.

March 6. Paid the bookkeeper's salary in cash, $12.50.

March 8. Sold to W. H. Henry on his 15-day note bearing 6% interest, 3 oriental
rugs at $20.00, $21.00, and $22.00 respectively; and 75 yards Jap matting, at 27c.
(Make the charge through the sales book. Give credit through the journal.)

March 9. Bought of Farr & Bailey, 629 La Salle St., City, on account, 75 yds.
linoleum, 4 yds. wide, 300 sq. yds., at 32c per sq. yd.

March 10. Sold to J. E. Allen, 6250 Cottage Grove Ave., on account, 48 yds. Jap
matting at 28c; and 20 sq. yds. linoleum, at 45c.

March 11. Sold to M. J. Morrissey for cash, 6 rugs, at $15.00, $17.00, $17.50, $18.00,
$19.00 and $22.50 respectively; and 100 sq. yds. of linoleum at 423^c. (Make two entries
as in the transaction on Mar. 3.)

March 12. Bought of the Roxbury Tapestry Co., Roxbury, Mass., 3 dozen assorted
velvet rugs, at an average price of $18.75 each; and 1 doz. 9x12 Royal Wilton velvet
rugs, at $33.00 each. Gave them our note at 30 days without interest for the amount of
the invoice. (Make two entries, both in the journal.) Paid the freight in cash, $16.50.

March 13. Paid the bookkeeper's salary in cash, $12.50.

March 15. Sold to W. H. Henry for cash three velvet rugs, at $26.50 each. (Two
entries.)

March 16. Sold to M. J. Morrissey on account 20 sq. yds. of linoleum, at 45c. Mr.
Morrissey paid cash to be applied on his bill of Mar. 5, $15.00.

March 17. Sold to G. W. McHenry, 26 Clarendon Court, on his 6% note at ten days,
3 Royal Wilton velvet rugs at $45.00 each, and 26 yds. Jap matting, at 28c. (Sales book
and journal.)

March 18. Bought of W. T. Smith & Son, 4 dozen Axminster rugs, at $10.50 each;
and 2^j doz. oriental rugs at $15.00 each. Remitted them cash for the bill bought of
them on March 2.

March 18. Paid freight on the shipment from W. T. Smith & Son, $17.65.

March 20. Paid the bookkeeper's salary for the week, as on March 13.

March 21. Sold to M. J. Morrissey for cash, 4 velvet rugs, at $30.00 each.

March 22. Received from J. E. Allen $10.00, to be applied on his account.

March 23. W. H. Henry paid in cash for his note of the 8th inst. and interest.

March 25. Bought of Farr & Bailey on account, 300 yds. of linoleum 2 yds. wide,
at 333^c per sq. yd.

March 26. M. J. Morrissey paid us in cash enough to settle our invoice of March
5 in full. (He had already paid $15.00 on the bill on March 16.)

March 27. G. W. McHenry paid in cash for his note dated March 17 and interest.

March 27. Paid the bookkeeper's salary as before.

March 29. J. E. Allen paid his account in full.

Inspect the sales book to see what sales have been made to him. Inspect the cash book and journal
to see what has been passed to his credit.

March 30. Remitted $150.00 to Farr & Bailey to be applied on account.

THE CASH BOOK

XQl

March 31. The drayman presented his bill for deliveries for the month and we paid
it in cash, $11.65. (Expense.)

Post the sales book, journal, and cash book, in the order named.

Take a trial balance, leaving out accounts that balance. Do not fail to include the
balance of the cash book.

Leaving out of the trial balance accounts that have equal footings on both sides or omitting equal
amounts from the debit and credit sides of any accoimt, is permissible, since equal amounts can be deducted
from both sides without destroying the balance.

Inventories :

Mdse. on hand, $2,436.71

Furniture and fixtures valued at 11500

Salary due bookkeeper (Liability inventory to Expense) 7.14

Make statements. Rule up the sales book. Close the cash book, remembering to
bring down the balance into the Total column on the debit side. Close the ledger accounts
in the following order: (1) Notes Receivable; (2) Loss or Gain accounts; (3) The
proprietor's account.

It is proper to rule up a personal account that balances, whenever an entry is posted which balances
it. This simply takes ofif equal amounts from both sides of the account and does not affect the
equilibrium of the ledger. It makes it easier to examine the account at any time and reduces the
labor of preparing the trial balance. In case there is only one item on each side of an account so ruled up,
it is of course unnecessary to go through the farce of p>erforming an addition — omit the single line and
footing, using the double ruling only.

In making financial statements it Ls customary to arrange the items in a definite order. The assets
are listed in the order of their realization (availability); that is, those most quickly and easily converted
into cash are listed first. For the assets in the financial statement called for above, the arrangement
should be: Cash, Mdse., Furniture & Fixtures, and personal accovmts receivable. The liabilities are
arranged in the order of liquidation (pajTnent), the most pressing first. In this case, the salary due
the bookkeeper would be paid first if the business should go into a receiver's hands, and it therefore
comes first. Liabilities for which notes have been given are considered more pressing than liabili-
ties on open account, since notes specify a day of payment, and therefore notes payable come next
on the list. Accovmts payable come last.

Legal Point, The Statute of Limitations declares that an open accoimt is outlawed after * years
have elapsed during which time no part of it has been paid, no acknowledgment of the obligation made
by the debtor, and no legal steps for collection taken by the creditor. In the case of promissory notes,
however, t years must elapse under the same conditions before the debt is outlawed. In most states,
notes are good for a longer time than open accounts. I'his seems to be a recognition of the superiority
of the note as an evidence of debt, and might furnish one reason why notes should be listed before
personal accoimts.

STATE

Ala.

Ariz

Ark

Cal

Colo

Conn

Del

D. C

Fla

Idaho 4

111 5

Ind e

6 Iowa 5 10 Neb.

4 Kan

5 Ky

4 La

6 Me

6 Md

6 Mass

3 Mich

5 Minn 6

6 Miss 3

5 Mo 5

10 Mont 5

5
5
5
6
3
6
6
6
6
10

Nev 4

N. H 6

N. J 6

N. Mex 4

N. Y 6

N. Car 3

N. Dak 6

Ohio
Okla.
Ore..
Pa...

t
5
6
6
6
6
6
3
6
15
5
6
6

STATU

R.I.

S. Car 6

S. Dak 6

Tenn 6

Tex 2

Utah 4

Vt 6

Va 2

Wash 3

W. Va 5

Wis 6

Wyo 8

6
6
G
4
6
6
5
6
10
6
5

CHAPTER IV
PRACTICAL OFFICE WORK AND BOOKKEEPING-Continued

THE FURNITURE BUSINESS

BUSINESS FOR MARCH, 19—

During the past two months Mr. Stewart's profits have only been about $175.00 per
month. This is not as much profit as he should have received from an investment of
over $10,000.00 in cash and of his entire time and effort.

He decides to retrench on expenses. His heaviest expense, aside from his rent,
is the salary he has been paying you. He decides to do his own bookkeeping in future,
and therefore lets you go, giving you a letter of recommendation which reads as follows:

CHICAGO, Feb. 28, 19 — . To whom it may Concern: It gives me pleasure to recommend

(Your name) ^^ ^ thorough and competent bookkeeper and cashier.

M f Your name) j^^^^ been in my employ for the past two months and has given the

highest satisfaction. (He or she) is only leaving me because I no longer find it necessary to employ a
bookkeeper. Respectfully, D. B. Stewart.

Question: What would Mr. Stewart's profits for February have amounted to if he had not paid
you $80.00 as salary?

Write a letter to H. T. Raynor, furniture dealer at 364 Wabash Ave., City, applying
for a position as bookkeeper in his office. You have seen his advertisement in yester-
day's Record-Herald. Tell him where you have been working and why you are leaving
Mr. Stewart's employ. Enclose a copy of Mr. Stewart's recommendation, properly ar-
ranged as to margins, spacing, etc., at the top of which you have written the word "copy."
Request the privilege of a personal interview.

Mr. Raynor will not return the copy of Mr. Stewart's letter of recommendation, If you had sent
him the original of Mr. Stewart's letter, it would have been proper for you to ask for its return, provided
you had inclosed a two-cent stamp for the purpose.

Opening a Set of Books

March 2. You are employed by Mr. Raynor as bookkeeper and cashier at a salary
of $20.00 per week, the same as you have been receiving from Mr. Stewart.

Mr. Raynor has not been satisfied with the system of bookkeeping he has been using
and has decided to install a set of books similar to those you have been using while in Mr.
Stewart's employ, with the addition of a cash book. He has ordered of A. C. McClurg
& Co. 1 journal, 1 sales book, 1 ledger, 1 bill book, and 1 cash book ruled the same as the
journal.

McClurg's man arrives with the blank books ordered and hands you a bill for them.

Ordinarily, the entry for this transaction should be made at once. As you have not yet opened
the new books, however, Mr. Raynor pays the $6.00 out of his own pocket, has the bill receipted, and
holds it until you are ready to make the entry.

102

OPENING NEW BOOKS

103

Filing. Place Incoming Paper No, 27 temporarily in the miscellaneous incoming
papers section of the file. Do nothing else in regard to this until further instructed.

TRANSFERRING THE ACCOUNTS TO THE NEW BOOKS

From an examination of Mr. Raynor's books, from his inventory of Mdse., and from
his valuation of property on hand, you find that his assets and liabilities at this time are
as follows:

Assets

Cash $ 286 . 00

Bal. from O. L., page 4. Your teacher will hand you $86.00 in cur-
rency taken from your old files. Take $200.00 from currency Env.

Furniture & Fixtures 670 . 00

Inventory. Office furniture on hand.

Merchandise 5259 .50

Inventory. This was ascertained by an actual count and valua-
tion of Mdse. on hand. (See detailed list below.*)

Notes Receivable **** ,

Bal. from O. L., page 26. (Incoming Papers No. 28 & 29.)

Interest * .

Inventory. Accrued interest on J. F. Sprague's note for 30 days
and on W. H. Harrison's note for 15 days.

Palmer House Co., cor. State and Monroe Sts 225. 00

Bal. from O. L., page 43

Harvard Hotel Co., 5714 Washington Ave 170. 50

Bal. from O. L., page 26.

A. F. Harvey, La Grange, 111 56 . 75

Bal. from O. L., page 34.

* INVENTORY OF STOCK. MARCH 2, 19—

Cat. No. Description Article Quan. Cost Price

1982 Mahogany Chairs 30 2.50 3

1684 Mahogany Rockers 45 5.66^

184-5 Mission Chairs 36 2.25

417 All sizes Brass beds 15 12.00

584 All sizes Brass beds 15 18.00

8030 All sizes Brass beds 18 21.00

970 Mahogany Dressers 16 21.00

630 B. E. Maple Drefeers 15 28.00

714 Tuna Mahogany Dressers 12 30.00

530 Oak Chiffoniers 6 18.00

530 Oak Dressing tables 6 17.00

530 Oak Dressers 6 21.00

417 Pine Kitchen tables 24 2.50

357 Oak Dining tables 15 12.00

1729 Mahogany Parlor suites 2 180.00

184 Qr. sawed oak Unit book shelves 50 2.00

Assorted 7x10 Jute rugs 50 15.00

Assorted 9x12 Turkish rugs 21 37.50

6529 All sizes Hair mattresses 12 16.50

2460 AH sizes Felt mattresses 30 4.10

4850 All sizes Cotton mattresses 5 2 . 00

Amount

** **

***

* ***

104

PRACTICAL OFFICE WORK AND BOOKKEEPING

Liabilities

Notes Payable $500 . 00

Bal. from O. L., page 48. Note at 30 days dated Feb. 10 of
this year, in favor of S. Karpen & Bros., 187 Michigan Ave., and
bearing 6% interest from its date.

Interest *.h«*

Inventory. Int. on note favor S. Karpen & Bros., ** days at 6%.

The Ford & Johnson Co., 1441 Wabash Ave 450. 00

Bal. from O. L., page 60.

Balkwill and Patch, 404 FuUerton Ave 320 . 60

Bal. from O. L., page 64.

Bookkeeping. Your first entries in the new books will be two journal entries and a
cash book entry setting forth the above assets and liabilities, as follows:

In Journal
MARCH 2, 19—

H, T. Raynor has this day opened a new set of books. His
assets, aside from cash, as ascertained from the old books
and the inventories, are as follows:

Furniture and Fixtures . . . Inventory of office furniture

Merchandise Inventory

Notes Receivable Bal. from O. L. page 26

Interest Inventory. On J. F. Sprague's note,

30 ds. at 6%, $*.**. On W. H. Harri-
son's note, 15 ds. at 6%, $*.**. . . .

Palmer House Co cor State and Monroe Streets.

Bal. from O. L. page 43

Harvard Hotel Co 5714 Washington Ave.

Bal. from O. L. page 25

A. F. Harvey La Grange, 111.

Bal. from O. L. page 34

H. T. Raynor .... Investment

Mr.
H. T.

Raynor's liabilities at this date are as follows:
Raynor Investment

Notes Payable . .
Interest

The Ford & Johnson Go.
Balkwill & Patch

Bal. from O. L. page 48. . .
On note favor Karpen, **

ds. at 6%

1441 Wabash Ave.

Bal. from O. L. page 60. . .

404 Fullerton Ave.

Bal. from O. L. page 64. . .

*
**

****

***

Explanation:

In the first entry the separate assets are debited and H. T. Raynor is credited for the total. In
the second entry the separate liabilities are credited, Mr. Raynor being debited for the total. When
these entries are posted, the ledger will be in balance.

The interest inventories represent amounts which have accrued on notes receivable and payable
for the time between the date of issue and the current date (March 2) in each case. The accrued interest
on notes receivable is an asset. The accrued interest on the note payable is a liability.

OPENING NEW BOOKS

105

"Bal. fromO. L." Balance from old ledger. As a matter of reference, the entries should show
what pages of the old ledger these accounts can be found on. In such a case the old ledger should
be closed by means of an entry in each account showing to what page in the new ledger it has beea
transferred.

19—

In Cash Book
CASH, DR.

Mar.

H. T. Eaynor

Investment

286

Make the entries in your journal and cash book. Number the pages of the cash
book, giving corresponding left and right hand pages the same number. Enter the notes
receivable and payable in the bill book.

Posting.

Open accounts in the ledger in the order given below, allowing for each account one
line for the heading, one line for the ruling, and for the entries the number of lines indi-
cated. Write the names of the accounts in your very best penmanship, slightly larger
than your usual handwriting.

H. T. Raynor 14 lines

Furniture & Fixtures 11 lines

Merchandise 1 page

Interest 1 page

Expense 1 page

Loss & Gain. 18 lines

Petty Cash Sales 6 lines

Notes Receivable 7 Unes

Palmer House Co., cor. State & Monroe Sts. 8 lines
Harvard Hotel Co., 5714 Washington St.. 15 lines

A. F. Harvey, La Grange, 111 8 lines

C. E. Birch, 1224 Harrison St 14 lines

A. E. Robson, 4226 Central Ave 12 lines

C. I. Brown, 405 Monroe St., Peoria, 111., 5 lines

Louis N. Powers, 1821 Belmont Ave 14 lines

B. A. Dalton, 2323 Water St 5 Unes

D. G. Boleyn, 1816 Lake St 12 lines

Notes Payable 18 lines

The Ford & Johnson Co. , 1 441 Wabash Ave. 8 lines

Balkwill & Patch, 404 Fullerton Ave 5 lines

Michigan Stove Co., Detroit, Mich 10 lines

Kimball & Chappell Co., 2834 Loomis St. 10 lines
Detroit Folding Cart Co., Detroit, Mich. .10 lines

St. Johns Table Co., Cadillac, Mich 7 lines

W. P. Dunn Co., 429 La Salle St 7 lines

Heywood Bros. & Wakefield Co., Gardner,

Mass 7 lines

S. Karpen & Bros., 187 Michigan Ave 7 lines

Post the opening entries. In posting from the journal use the explanation " Inven-
tory," " Bal. from 0. L. page — ," or " Investment," the same as in the journal. In
posting from the cash book, use the explanation " Investment."

Transaction No. z

March 2. Mr. Raynor now turns over to you the bill for blank books bought of
McClurg, instructing you to reimburse him from the cash register for the money advanced
by himself when the books arrived. Take McClurg's bill from the Miscellaneous Incom-
ing Papers section. It has already been receipted.

Bookkeeping. Make the entry in the cash book, charging Expense.

Note that Mr. Raynor has placed his O.K. upon this bill. He instructs you that all
bills must be O.K.'d by him. Always look for this O.K. on all incoming invoices before
making the required entries.

106 PRACTICAL OFFICE WORK AND BOOKKEEPING

Transaction No. 2

March 2. Mr, Raynor is renting the store at 364 Wabash Ave. from M. C. Whitney,
whose office is in the Monadnock Building, at a monthly rental of $100.00. He instructs
you to take Mr. Whitney cash for the March rent and to bring back his receipt.

The receipt is Incoming Paper No. 30 in the pad of incoming papers.

Business and legal Points. Receipts have no money value, but should be carefully preserved as

acknowledgments of payment. Form receipts are not as good evidences of payment as receipted
bills, for a receipted bill shows positively what the payment was made for. A receipt is prima facie
evidence of the payment of a debt; that is, it will be accepted as proof unless better proof to the con-
trary be produced. There can be no better proof of payment than a canceled check that has been en-
dorsed, but even this will not be accepted as proof that the bill was paid in full, even though the words
"in full" be written upon the check.

Transaction No. 3

March 3. A. H. V. Love, representing Critchell, Miller, Whitney & Barbour, agents
for the Commercial Union Insurance Co., has for some time been soliciting Mr. Raynor
to take out insurance on his stock of Mdse., and Mr. Raynor has finally concluded to take
out a $4,000.00 policy. The rate for one year is $1.25 per hundred dollars. Compute
the amount of the premium due the company on a $4,000.00 policy and pay it in cash.

The policy, signed by the officers of the insurance company, accompanies your
outfit. Examine it carefully.

In no way can you learn more about insurance than by a careful study of the policy itself. The
form of policy shown is what is called a New York Standard policy and contains all the usual provisions.
Answer the following questions on important points mentioned in the body of the policy.

1. What is the extent of the company's liability in case any loss or damage occurs? (See line 1.)

2. What may the company do instead of giving cash indemnity? (Line 4.)

3. State several causes for which the policy may be declared void? (Line 7.)

4. When is the company not responsible? (Line 27.)

5. Would the company be liable if an earthquake should destroy a house and the house should
then catch fire from the hot coals of the kitchen stove? (Line 32.)

6. How can an insurer know whether a man claiming to be an agent for a certain company is what
he claims to be? (Line 42.)

7. May the insured cancel this policy? If so, how much of his paid premium will be retvuned
to him? If the company cancels his insurance, how much wiU be returned? (Line 45.)

8. What must the insured do in case of fire? (line 59.)

9. How is the amount of a fire loss decided upon? (Line 75.)

10. What proportion of any loss will a given company pay? (liine 84.)

11. May an agent alter the printed terms of a policy? (Line 99.)

Special Provisions. The regular provisions of the policy, as printed in the standard policy, may
be altered by special provisions, written in or printed and attached to the policy. These provisions may
be on separate printed slips (called "riders") pasted to the policy, or several of them may be printed
on one form which is then attached. Study carefully the rider represented on the policy Mr. Raynor
received and answer the following questions :

1. May the insured carry other insurance on the same property?

2. Will the company pay for property which has been sold but not delivered and is in the building
at the time of the fire?

3. How much insurance must be carried?

4. If the insured does not carry the fuU amoimt required, what proportion of the loss must he
bear himself?

FIBE INSURANCE POLICY 107

It should be noted that many of these special provisions are opposed to the regiilar provisions in
the body of the policy; they invalidate the regular provisions with which they conflict. The eighty
per cent, co-insurance clause can be better understood after you have read the following explanation:

The Eighty Per Cent Clause. This provides that the insured must carry insurance to the
extent of at least eighty per cent of the value of his property (any other per cent may be specified,
but eighty is usual). Assume, for illustration, that a man has property worth $10,000.00. He must
carry $8,000.00 insurance. Assume that he does carry $8,000.00, having 8 policies of $1,000.00 each,
in different companies. Each company agrees to bear J^ of any loss, and the eight policies cover his
loss in full. But if he carries only five $1,000.00 policies, he can collect only ^4 of his loss. He is thus
forced to bear % of the loss himself; this is what is meant by saying that he is "co-insurer." The com-
panies do not propose to pay him in full for a small loss unless he insures in full and pays the larger pre-
mium. Suppose for instance he is insured for $5,000.00 in the above case (when he should have been
insured for $8,000.00) and a $5,000.00 loss occurs. The company will not pay his full loss, though
the policy is big enough to cover it. They will pay him only % of his loss, or $3, 125.00.

The reason the companies do riot insist that property be insured for full value (100%) is that the
owner might then be tempted to burn his own property for its insurance, or that at least he might then
be less careful than he would be if not fully insured.

Special Rates for Residences. Residences, household goods, and rents being regarded as good
risks, the companies will often insure for three years for double the rate for one year. Insurance
of rents is the company's agreement that if the building should burn down they wiU continue paying
the rentals to the owner until he has had time to rebuild.

Take the money from the cash register and pay Mr. Love. He will give you a re-
ceipted bill. (Incoming Paper No. 31.)

Filing. Place the cash paid out in the outgoing papers file. Fold the policy so that
the form of brief will be on the oustide, fill out the brief, and file it with the miscellaneous
incoming papers.

Transaction No. 4

March 4. Mr. Raynor has made a sale and hands you a "sale ticket" upon which he
has written all the data necessary for your bookkeeping entry. He has adopted this plan
of using sale tickets for all sales, and your information in regard to what sales have been
made, and the terms of sale in each case will in future be ascertained from sale tickets.

The sale tickets are in a separate pad, from which you will detach them whenever
instructed to do so as your work proceeds. They are clearly marked with the numbers
of the transactions they accompany, so that you can make no mistake.

Detach the sale ticket marked "Transaction No. 4." Verify Mr. Raynor's figures.

Make out an invoice, giving it our number 151. The next invoice of goods sold
will be number 152.

As a matter of convenience, you may now number several of Mr. Raynor's billheads
in advance. This will save you the trouble of looking up the number each time a bill
is made out.

Bookkeeping. Make the entry for this transaction in the sales book. This is the
first entry in the sales book, so you will write the date out in full at the top of the page.
Be sure to write Mr. Birch's address in the entry. Number the pages of the sales book
at this time.

Filing. Place the invoice in the outgoing papers section of the file. Place the sale
ticket in the envelope marked " Sale Tickets," observing carefully the instructions printed
upon the envelope.

108 PRACTICAL OFFICE WORK AND BOOKKEEPING

Transaction No. 5

March 4. Mr. Raynor hands you a notice of freight received, which came in the
morning's mail. (Incoming paper No. 32.)

There is a place on this notice for your signature authorizing the agent of the rail-
road company to deliver the goods to a drayage company. Sign this, in the space
marked "Consignee", but do not fill out the space indicating to what driver the freight
is to be delivered. This gives the road the authority to send it out by any delivery
company.

Filing. Return the signed notice to the railroad company by filing it with the out-
going papers.

You could, if you wished, fill in the name of some particular driver or company, and hand the
freight notice to him. He would present it to the freight agent, and the freight agent would be bound
to deliver to him. Many firms have regular arrangements with certain drayage companies to do all
of their hauling.

The expressman arrives with the freight and an expense bill. This is the bill for the
freight, at the bottom of which has been added the extra charge for drayage, $2.00.
The expense bill is Incoming Paper No. 33. Note that it has been receipted by the rail-
road. Pay the driver cash.

Bookkeeping. Make an entry in the cash book, charging Mdse.

Filing. Take $12.00 from the cash register and place it in the outgoing papers
section. You will have to make change.

Business Note. If Mr. Raynor had sent his own driver for the goods, he would have had to send
the amount of the freight charges ($10.00), as the railroad demands cash before it will release the goods.
Had he hired an expressman, the expressman might have advanced the $10.00 freight charges and
collected $12.00, which includes his own charge of $2.00.

Transaction No. 6

March. 4. Mr. Raynor now hands you the invoice for the above shipment. (In-
coming paper No. 34.)

The invoice was received by Mr. Raynor yesterday, having been mailed at the time the goods were
shipped (March 2). It takes less time for mail to reach its destination than for freight; this explains
why the bill arrived in advance of the goods. As Mr. Raynor deals in stoves, this is Mdse.

See that Mr. Raynor's O.K. is on the bill. The O.K. indicates to you that the
quantities and prices on the bill are in accordance with Mr. Raynor's agreement when he
bought the goods. You will also find opposite each item on the bill a check mark (V)
which indicates that the quantities actually received agree exactly with the quantities
billed. Verify the computations on the bill.

Trade Discount. The stoves are invoiced by The Michigan Stove Co. at $58.50 and $37.20.
But a 25% discount from these prices is given to "the trade." This kind of a discount is called a "trade
discount." You will learn more about trade discounts later. For the present simply bear in mind
that the amount of the bill is $259.20, not $345.60.

Bookkeeping. Enter the transaction in the journal making note of the fact that the
bill is dated March 2.

Filing. Place the bill with the "Invoices Payable."

As you are not nov/ using in your bookkeeping system any device for reminding you
when bills fall due, you must watch the "Invoices Payable" section of the file very
closely.

THE EXPENSE BILL 109

Transaction No. 7

March 5. Mr, Raynor places upon your desk a sale ticket which explains itself.
Detach this from the pad of sale tickets. See that the ticket you detach is marked
"Transaction No. 7." Make out an invoice.

Filing. File the sale ticket as in Transaction No. 4. Do this with all sales tickets
in future as soon as the bookkeeping entries are made.

Transaction No. 8

March 5. Receive a check from the Harvard Hotel Co. for $75.00 on account (Incom-
ing Paper No. 35). They ask for a receipt.

Bookkeeping. Make the entry in the cash book crediting the Harvard Hotel Co.

Transaction No. 9

March 7. A sale is made and the sale ticket is handed to you.

You may take the proper amount of cash from the outgoing papers section.

Make out an invoice and receipt it.

Observe that the selling price of the stove is the same as the price on The Michigan Stove Co.'s bill
to us. The profit we make is in the trade discount (25%) allowed to us from this list price.
Question: What was the percentage of profit realized by us on the sale?

Bookkeeping. Make an entry in the sales book debiting C. E. Birch. Make an
entry in the cash book at once giving him credit for the payment.

About noon to-day Mr. Raynor hears that the H. Tarrant Savings Bank is about to suspend pay-
ment. This is the bank on which the Harvard Hotel Co.'s check is drawn. He therefore urges you to
make all speed to the bank and cash the check if possible.

Read business and legal point under Transaction No. 14, page 46, and then explain Mr. Raynor's
anxiety to get this check cashed at once.

Upon arriving at the bank you find that the doors are closed. Above them hangs a notice signed
by the president that the bank is fully solvent and able to pay its depositors if given time, but that a
run on the bank has exhausted the ready cash and therefore they have been forced to close their doors
imtil they can exchange some of their securities for cash. You are therefore compelled to return to Mr.
Raynor with the check uncashed. Nothing further can be done about the matter at this time.

Question : Should the bank ultimately be able to pay only 60c on the dollar, what would be the extent
of Mr. Raynor's loss on the check?

Transaction No. lo

March 7. Your salary for the first week is now due, and Mr. Raynor pays you in cash.

William Johnson has been employed as clerk and stock boy at a salary of $10.00 per
week. His services are to begin Monday, March 9. Make a notation of these facts in
the journal. Write nothing in the money columns.

Posting. As it is now the end of the week, Mr. Raynor requests you to post all
original entries up to date, prove the cash, and take a trial balance.

First: Post all sales book entries to the debit of the proper accounts, using the initial
S as an explanation in each case. Do not post the footing to the credit of Mdse. at this
time.

220 PRACTICAL OFFICE WORK AND BOOKKEEPING

Neatness and Care in Posting. The ambitious student, anxious to do good work and receive good
grades, will naturally bring to bear his very best efforts at all times. There is an especial reason, how-
ever, for the exercise of care in posting. Posting, except at the very beginning when one is learning how,
is a purely mechanical process involving no thinking or reasoning. For this reason the bookkeeper posts
rapidly and sometimes carelessly. Mistakes are likely to occur, and carelessly-made figures are likely
to give a great deal of trouble. Errors that arise from carelessly-made figures are very difficult to dis-
cover, as the bookkeeper is ahnost certain to read a given figure, the second time he adds a column, the
same way he read it at first.

Second: Post all unposted journal entries.

Third: Post all unposted cash debits to the credit of the accounts named in the
explanatory column, and post all cash credits to the debit of the accounts named. Use
the initial C as an explanation in each case.

The reasons for the order of posting suggested above are: (1) The sales book contains charges against
customers, and these should be posted before the credits to the customers are posted from the journal
or cash book; (2) The journal contains credits to those from whom we purchase, and should be posted
before the debits (our payments) are posted from the cash book.

Fourth: Close the cash book with a red ink balance. This being Saturday, March 7,
the balance brought down may be dated March 9.

Does this balance agree with the amount of cash in the cash registel- (including the
check for $75.00)?

Fifth: Take a trial balance. This must include the amount of the cash balance, and
must include the total of Mdse. sales (taken from the lead pencil footings) as a credit.

Student's Report No. 9. You will fill out Student's Report No. 9 in the same way
you have filled out former reports. You cannot fill out the cash proof and bank proof
on this report, as Mr. Raynor has no bank account as yet. Your files were emptied at
the end of February ; therefore your report will include nothing but Mr. Raynor's business.

Transaction No. xi

March 9. Mr. Raynor has just learned that the H. Tarrant Savings Bank is not
insolvent, as he had feared, but will be able to pay all obligations. He has been taught
a valuable lesson, however, and will make it a rule in future to hold no checks longer than
twenty-four hours.

After investigating the standing of the Merchant's Exchange Bank, of this city, Mr.
Raynor has decided to open an account with that bank, as its resources are ample, its
reputation of the best, and its directors and officers cautious in their investments and con-
servative in their management. He instructs you to deposit the check and all cash on
hand except $68.00 in the Merchant's Exchange Bank. He has already made arrange-
ments with the bank and has left his signature.

Open an account with the bank, consulting page 38 for the procedure. Use your old
pass book and check book, beginning each on a new page.

Did you remember to endorse the check at the time of depositing?

variable selling prices
Variable Selling Prices*

111

Ask your teacher to assign to you one of the following lists, and in future when selling
beds or mattresses invoice them at the prices named in the list.

List 1

List 2

Lists

List 4

List 5

List 6

List 7

No. 417 brass beds

$18.00
27.00
26.90

3.20
24.70

6.10

$17.50
27.50
30.00

3.25
24.25

5.95

$17.75
27.25
30.25

3.30
24.50

6.05

$18.00
27.00
30.50

3.25
24.75

6.15

$18.25
26.75
30.75

3.20
25.00

6.25

$18.50
26.50
31.00

3.15
25.25

6.35

$18.00

No. 584 brass beds

No. 6030 brass beds

27.05
30.00

No. 91 1 iron beds

3.00

No. 6529 hair mattresses

25.00

No. 2460 felt mattresses . .

6.00

No. 417 brass beds

No. 584 brass beds

No. 6030 brass beds

No. 911 iron beds

No. 6529 hair mattresses
No. 2460 felt mattresses.

Lists

$18.10

27.10

30.25

3.10

24.00

6.05

List 9

$18.20
27.15
30.50

3.20
24.25

6.10

List 10

$18.30
27.20
30.75

3.30
24.50

6.15

List 11

$18.40

27.25

31.00

3.40

24.75

6.20

List 12

$18.50
27.30
26.50

3.50
25.00

6.25

List 13

$18.60
27.35
26.75

3.05
25.25

6.30

List 14

$18.70

27.40

27.00

3.15

25.50

6.00

List 15

List 16

List 17

List 18

List 19

List 20

No. 417 brass beds

$18.80

27.45

27.25

3.25

24.10

6.05

$18.90

27.50

3.35

24.20

6.10

$19.00
27.55
27.75

3.45
24.30

6.20

$18.05
27.60
28.00

3.50
24.40

6.30

$18.15
27 65
28.25

3.25
24.50

6.40

$18.25

No. 584 brass beds

27.70

No. 6030 brass beds

28.50

No. 911 iron beds

3.00

No. 6529 hair mattresses

24.60

No. 2460 felt mattresses

6 50

No. 417 brass beds

No. 584 brass beds

No. 6030 brass beds

No. 911 iron beds

No. 6529 hair mattresses,
No. 2460 felt mattresses .

List 21

List 22

List 23

List 24

List 25

$18.35

$18.45

$18.55

$18.65

$18.75

27.75

27.80

27.85

27.90

27.95

28.75

29.00

29.25

29.50

30.00

2.75

2.80

2.90

3.00

3.10

24.70

24.80

24.90

25.00

24.50

6.15

6.25

6.35

6.00

6.45

List 26

$18.85
27.50
30.50

3.20
24.25

6.00

Transaction No. 12

March 10. Receive from the Kimball & Chappell Company, 2834 Loomis St., Chicago
111., an invoice (Incoming Paper No. 36). See that it has been O.K.'d by Mr. Ilaynor
as to prices and quantities listed on it.

Note that the terms are "Cash." As soon as you have verified the extensions, you
may give them a check. The invoice is already receipted.

112 PRACTICAL OFFICE WORK AND BOOKKEEPING

Bookkeeping. Make two entries, one in the journal, crediting the Kimball & Chappell
Co. for the amount of the purchase, and one in the cash book, debiting them for our pay-
ment. Thus a complete record of the transaction will be shown in the ledger when both
entries are posted.

Mr. Raynor wishes to keep complete records of all transactions with persons from whom he buys
Mdse. Whenever a purchase is made, even though settlement is made at once, the transaction is to be
carried through our ledger account with the person from whom we buy. The person is credited through
the journal in every case. Then if the payment is cash, the person is at once debited through the cash
book. If the payment is by note, then the person is debited through the journal. If the payment is
part cash and part note, entries debiting the person are required in both books.

Mr. Raynor also wishes to keep complete records of all transactions with persons to whom we sell
Mdse. (except in case of a 'petty cash sale, about which you will learn later). The person is charged through
the sales book, in every case. Then the credit is at once made through the cash book, the journal, or
both cash book and journal, depending upon whether the settlement is made in cash, by note, or part
cash and part note.

Transaction No. 13

March 10. Receive a check from the Palmer House Co., in full of account. Also
receive a check from the Harvard Hotel Co. on account. In each case a receipt is requested.

Note. When a check is given in payment of a bill, a receipt is not necessary, because the check itself
operates as a receipt. In order to cash a check or to deposit it, the payee must endorse it. The bank,
after paying the check or accepting it on deposit, stamps it "paid" and charges the account of the drawer
if he be a depositor in the same bank; or, if the check be drawn against some other bank, returns it to
that bank, which then charges the drawer. When the drawer gets his statement from the bank at the
end of the month, it is accompanied by the paid checks, as you have learned. These paid checks are
endorsed, each with the name of the payee. Hence one who pays by check has a receipt for such pay-
ment when the check is finally returned to him, and needs no other. For convenience, however, many
business men like to get receipts in every case, even though payment be made by check. The checks are
primarily records of business done with the bank, and it is not always convenient to refer to them. Separate
receipts are requested in such cases, and these can be filed under the name of the creditor. It goes with-
out saying that whenever a customer requests a receipt the creditor will oblige him.

Transaction No. 14

March 10. Make a deposit of the two checks now on hand.

Transaction No. 15

March 11. A sale ticket is handed to you. The prices for the first two items are to
be filled in by you from the special price list on page 103 which your teacher has assigned
to you.

Transaction No. 16

March 12. Mr. Raynor desires to know whether we have a large enough balance in
the bank to pay by check our note favor of S. Karpen & Bros, with accrued interest for
30 days.

TELEGRAMS 113

Compute the interest carefully. If you find that we have enough money in the bank,
draw a check for the amount of the note and interest.

Bookkeeping. Make two entries in the cash book, one for the note and one for interest.

Transaction No. 17

March 12. Mr. Raynor hands you this sale ticket.

Take $60.00 from outgoing papers; $20.00 from currency envelope. Make out an invoice and receipt it.

Mr. Raynor's note is returned by S. Karpen & Bros., canceled. (Incoming Paper
No. 39.) See that the cancellation is properly made, and file the paper with the receipts.

Transaction No. 18

March 13. A notice of freight received arrived in this morning's mail. (Incoming
Paper No. 40.) Sign and return it. (See Transaction No. 5, page 100.)

Later in the day an expressman arrives with the freight from the Michigan Central
depot, and hands you an expense bill. (Incoming Paper No. 41.) Pay it in cash.

Bookkeeping and filing same as in Transaction No. 5.

Transaction No. 19

March 13. Mr. Raynor hands you the invoice for this last shipment (Incoming Paper
No. 42) which he has O.K.'d. Verify the extensions and addition.

Transaction No. ao

March 13. Make a deposit of $100.00 in currency.

Transaction No. 2X

March 13. August Reese has been hired to wash the windows, scrub the floors and
polish furniture today. Mr. Raynor instructs you to pay him $2.00 in cash for his day's
work.

The cash must be paid dut of the cash register.

Transaction No. 22

March 14. Last Monday Mr. Raynor received a bill from the St. Johns Table Co.,
Cadillac, Mich. The bill was dated March 7 and we were advised that the tables were
shipped on that date via the Michigan Central; but we have not yet received them. Mr.
Raynor suggests that you wire them asking that they send a "tracer" after the goods.

A "tracer" is a paper sent after a shipment. It must start at the shipping point and go forward
through the hands of each raiboad employee who has handled the shipment. Each employee must note
thereon the time of receiving the shipment and the time it left his hands, with the reason for delay if there
was a delay. The use of a tracer often aids in correcting errors in transportation, and it is supposed to
accelerate the progress of the goods. Upon receipt of a request for a tracer, the railroad company will
issue the tracer, sending a dupUcate of it to the consignor who makes the request.

114

PRACTICAL OFFICE WORK AND BOOKKEEPING

Telegrams

The sender of a telegram must write it on the telegraph company's ruled blank. The blank is rtiled
into squares and the sender writes one word in each square. This is for the operator's convenience in
counting.

The company will charge for ten words at least. If a telegram should contain fewer than ten words,
the charge will be for ten words. The usual rate for messages that do not have to go a long distance
or to be transferred from one wire to another is 25c for the first ten words with 2c additional for each
word in excess of ten.

To guard against mistake, messages are often repeated; that is, the receiving operator wires back
to the sending operator, repeating the message for comparison. For this, one-half is added to the origi-
nal charge.

Messages can be sent during the night for less money, as the wires are less busy diu-ing the night.
Messages sent at the night rate wUl not be delivered until morning.

In coimting words, each figure is counted as one word. It is therefore better to spell out such
expressions as "Five thousand," "Seven thirty," etc.

The rate to Cadillac is 25c. Send a ten-word message. A telegraph blank accom-
panies your outfit.

In order to make the change it will be necessary for you to have some 25c pieces.
You will find four of these in the currency envelope. Place them in the outgoing papers
section of the file so that you can make change.

Pay the 25c from the cash register.

Transaction No. 23

March 14. Mr. Raynor instructs you to take from the cash register the amount of
your own salary and to pay Wm. Johnson $10.00 as agreed.

Bookkeeping. One entry only is required in the cash book. This entry should
show in detail to whom the money was paid, two lines being used thus:

19—

Mar.

Expense

Bookkeeper's salary, 20.00
Wm. Johnson's salary, 10.00

30 00

Take the cash from the cash register and file it with the outgoing papers.

Posting. The posting should now be brought up to date. Do not post the total
sales, nor rule up the sales book. (See instructions following Transaction No. 10.)

Trial Balance. Close the cash book, and take a trial balance. The sales total must
be included in the trial balance.

Report No. 10 should be made out at this time. The report on papers issued
should include all papers issued since March 1.

Transaction No. 24

March 16. A notice is received from the Michigan Central Railroad Co. that a ship-
ment has arrived for you from Cadillac, Mich. Sign and return it. (See Transaction
No. 6), The notice is Incoming Paper No. 43.

SHIPPING GOODS 115

The drayman arrives with the freight and an expense bill (Incoming Paper No. 44)

which we pay by check. See that it is receipted by the railroad company.
Bookkeeping and filing as in Transaction No. 5.

Transaction No. 25

March 16. Mr. Raynor now O.K.'s the invoice received from the St. Johns Table
Company (Incoming Paper No. 45) and hands it to you. Verify the extensions and
addition.

Bookkeeping and filing as in previous similar transactions.

Transaction No. 26

March 17. C. I. Brown, of Peoria, 111., left an order today for 1 oak bedroom suite
No. 530. Mr. Raynor made the sale and filled out the sale ticket in the usual way.

"F. 0. B." Mr. Raynor has written on the sale ticket "F. O. B. Chicago, via C. R.
I. & P.". "F. O. B. Chicago" (free on board at Chicago) means that the price at which
the goods were sold is the price at Chicago, which is another way of saying that Mr.
Brown must bear the freight expense. "Via C.R. I. & P." means "Ship by way of the
Chicago, Rock Island & Pacific Railway."

Shipping. The first thing to do is to make out the bill of lading (in triplicate) pre-
paratory to taking the goods to the freight depot.

The shipper does this for his own convenience. He has on hand a supply of bills of lading. His
shipping clerk fills them out in advance (all except the weight and rate and the railroad company's
signature) thus avoiding confusion and delay at the freight office. All that the receiving clerk at the
freight office has to do is to give them a number and affix his signature as agent for the railroad. If
the shipment is to be prepaid, or for some other reason the shipper desires it, the freight clerk will fill
in the weight (subject to correction) and have the rate inserted by the proper official.

A large shipper usually has his own supply of bills of lading in which he is allowed to have printed
his own name and location, and any matter which he may wish for the convenience of his shipping
clerk. A smaller shipper is usually content to use forms furnished him by the different railroad com-
panies, or stock forms in which he inserts his own name and location and the name of the road over
which he ships.

Bills of lading may be "straight" or "order." "Straight" bills of lading are used when the goods
are to go straight to the consignee. They are non-negotiable. They must be printed on white paper.
"Order" bill of lading are for shipments "to the order of" some one (usually the shipper) and may be
endorsed by that one over to another. They are used usually for the purpose of shipping C. O. D.
in which case they will not be endorsed over to the person for whom the goods are intended until he has
paid for the goods. "Order" bills of lading must be printed in colors — the first in yellow, and the second
and third in blue.

Mr. Raynor has a pad of stock forms of "straight" bills of lading. They are in tripli-
cate, that is, they come in sets of three which are filled out at once. The first is the
original; the second is the shipping order, the third is the memorandum. Detach one
set of three from the pad which accompanies your outfit and fill them out all alike (this
is usually done with carbon paper). Sign Mr. Raynor 's name followed by your initials
in the lower left hand corner. Study the forms carefully, especially the headings, which
explain the purpose and use of each of the three papers constituting the set.

116

PRACTICAL OFFICE WORK AND BOOKKEEPING

£
IS

Uniform Bill of Lading

(^/f^}^

STRAIGHT BILL OF LADING-ORIGINAL-NOT NEGOTIABLE.'

Railroad Company^

Skipper's No>..j^....
Agent** No.

iffs in effect oo tbe date of Issue of thii

19— _

FROM

tbe property de^ribed below, in apparent good order, except as noted (contents and condition of contents of packac^s unknown), marked, consitrned and destined as Id*
dlcated below, which said comoanr aerees to carry to its usual place of delivery at said destination, if on Its roadM>iherwise to deliver to another carrier on the route M
said destinaiion. It is mutually agreed, as to each carrierof allorany of said property, over all or any portion of said route to destination, and as to each party at any
time interested In all or any of said property, that every service to be performed hereunder, shall be subject to all the conditions, whether printed or written herein
contained (INCLUDING CONDITIONS DM BACK HEREOF) and which are agreed toby the shipper and accepted for himself and his assigns. w

The rate of freight from.

to..

Is in Cents per 100 lbs.

IF.TimetM

IF Ut CliM

IF2ilCliit

IF Rule 26

IF 3d Glut

IFRttla26

IF RttI* 28

IF4tliCI«n

IFBtliCUn

IFSthClau

IF S»Mial

IF (MCtal

Mf - -

(Mail Addiew— Not for purpoaa* of DeUrerT.)

Per.

.j^£....^..f.t//e.?it.5/tf71..|i.j?..r€.J pe^

(TbU BUI ot Lading U to be siinied by tbe (hlpper and aceDiot^oufrierlMuliic'i

When your drayman takes the shipment to the freight depot, the agent, F. L. Ham-
mer (represented by your teacher), signs the bills of lading for the railroad company and
gives them the number 20167. He will keep the shipping order, returning the other two
to you. You are to keep the original, sending the memorandum to Mr. Brown.

The memorandum is valueless to the consignee except as a memorandum. He cannot get goods
from the railroad company on it. If he is not known and the company demands a bill of lading, he will
have to instruct the consignor to send him the original. In the above case, had Mr. Brown requested
Mr. Raynor to send him a bill of lading, you would have sent him the original and retained the memoran-
dum.

Filing. Mail the shipper's memorandum and Mr. Raynor's invoice to Mr. Brown by
filing them with the outgoing papers. File the original bill of lading with the miscellane-
ous incoming papers.

Transaction No. 27

March 18. A sale ticket is handed to you.

Transaction No. 28

March 19. Receive a bill from the Lord & Thomas advertising agency for ads
in the Chicago papers yesterday. This is Incoming Paper No. 46. Pay it by check.

straight bills of lading 117

Headings for the Three Forms

IMform Bill •! Ladla}— Standard lonii ol StnigM Bill «l Lading appromd by th« IntenUt Conimrc* Comnission by Ordtr No. 787 of JuM 27, 1908.

Railroad Company.

Shippers No. „,

STRAIGHT BILL OF LADING— ORIGINAL— NOT NEGOTIABLE.

Agents No.

RECEIVED, subject to the classiScatioox and tariffs Id effect on tbe date of Issne of tbis Origloal Bill of Lading.

£rc.

F«r UM in eonawiioa wtth tin Standard lorm ol Sbaiglil Bill ol Lading approved by the lnt(n!ate Co^nmerce Comnission by Order No 787 cl June 27, 1908.

Railroad Company.

Shippers No. ..._

THIS SHIPPING ORDER oiikI be leglbly tilled In, in Ink, in Indelible Pencil, or in Carbon, and
retained by Mie AgenL ^ggnjs No.

BSCCIVE, aaWwt to LI* <ihiwmctWDi and tariff* In effect oo tbe date of Ktue of tbis Sbipplnc Order. £^rC.

For UM In connection wiUi the Standard lorm ol Straiglit Bill ol Lading approved by Ibe Interstate Commerce Commission by Order No. 787 ol line 27, 1908.

Railroad Company.

THIS MEMORANDUM >> an acknowledgmem Hial a bill ol lading has been issued and is not the Shippers No.

Original Bill ol Lading, nor a copy or duplicate, covering ttie property

named herein, and is intended solely lor tiling or record. Agents No.

RECEIVED, subject to tbe classifications and tariffs In effect on tbe date of tbe receipt by tbe carrier of tbe propertr described
In tbe Original Bill of Lading, frc

Business Point. Many business houses have their advertising written and placed by advertising
firms. These firms profess to be expert at writing display ads and to have sujierior knowledge as to the
best advertising mediums for different purposes. They contract with newspapers and periodicals for a
large amount of advertising spqce and secure special discounts from them so that they can offer the adver-
tiser the usual rates and still make a good profit.

Write copy for a quarter-page newspaper advertisement and submit it to your teacher
for criticism.

Transaction No. 29

March 20. A sale ticket is handed to you. Insert the prices, as ascertained from
the price Ust which has been assigned you, as you did in Transaction No. 15.

Transaction No. 30

March 21. The W. P. Dunn Co., 429 La Salle St., submits a bill for printing adver-
tising circulars for us.

Transaction No. 31

March 21. Mr. Raynor hands you a sale ticket and a check (Incoming Paper No. 48)
to cover the amount of the sale. Make out an invoice and receipt it.

118 PRACTICAL OFFICE WORK AND BOOKKEEPING

Transaction No. 32

March 21. Pay the salaries of the bookkeeper and the stock boy in cash as on pre-
vious Saturdays. You will have to get the cash from the bank.

Procedure. Draw a check to "Currency" for the total salaries to be paid out. Have
it signed by Mr. Raynor, and draw the money at the bank by taking it from the outgoing
papers section. Then pay $20.00 to yourself as, bookkeeper, and $10.00 to the stock
boy, Wm. Johnson. See Transaction No. 23.

Transaction No. 33

March 21. Deposit the check received from D. G. Boleyn.

Transaction No. 34

March 21. Send The Ford & Johnson Co. our 60-day note for $450.00 in full of
account. The note is to bear 6% interest.

As this is Saturday night you will remember to post your books up to date. Close
the cash book, and take a trial balance.

Student's Report No. 1 1 should be made out at this time and handed to your teacher.

Transaction No. 35
March 23. A sale ticket is handed you. Proceed exactly as in Transaction No. 15.

Transaction No. 36

March 24. Receive of Heywood Brothers and Wakefield Company upholstered chairs
as per invoice (Incoming Paper No. 49). No terms being written on the invoice, it is
assumed that the purchase is "on account."

This company is located at Gardner, Mass., but has a Chicago office and the goods
were delivered from the local storeroom. For this reason there is no freight bill to pay.

Trade discount. The invoice reads "$162.00 less 50 and 5%." This means that 50% is taken off
and then 5% is taken off of the remainder. Questions: What would the trade discount have amounted
to had it been 55% instead of 50 and 5%? Why is a different result secured?

In many lines it is customary to give a series of discounts in this way. Sometimes three or four suc-
cessive discounts are given. In the hardware business it is not unusual to see a series like the following:
"70, 25, 7* and 5%."

These successive discounts are given separately because each exists for a special reason and may have
been made at a different time. In some lines the same printed catalog is used for both the retail and
wholesale trades. The dealer gets a discount to which the retail buyer is not entitled. The price may
go down on a certain article, and instead of printing another catalog, the dealer gives a second discount.
Some article may be hard to sell, and on it a third discount is given. Still another discount may be offered
in a certain territory in order to meet competition. And so on. The catalog price remains the same.
The real price to a certain customer is regulated by the discounts.

Problems:

1. Find the net amount of $100.00 less 70, 25, 10 and 5%.

2. Find the net amount of $674.00 less 50, 10 and 7J%.

3. Find the net amount of $500.00 less 25, 10, 10 and 5%.

4. Find the net amount of $500.00 less 10, 5, 10 and 25%.

5. Why is the answer to problem 4 the same as the answer to problem 3?

6. State as a general rule the conclusion you reached in answering the last question.

A BANK DRAFT

Transaction No. 37

119

March 25. Receive $100.00 in cash from A, E. Robson on account. The cash may
be taken from the currency envelope. Give Mr. Robson a receipt.

Transaction No. 38
March 25. A sale ticket is placed upon your desk. You know what to do with it.

Transaction No. 39

March 26. A letter from C. I. Brown of Peoria arrived in this morning's mail con-
taining a draft on the First National Bank of this city for $80.00 (Incoming Paper No.
50). The draft was drawn by the Commercial German Nat'l Bank of Peoria, and was
sent by Mr. Brown in payment for the furniture shipped to him on the 17th. Issue a
receipt to Mr. Brown.

Bookkeeping. The bank draft is an order for the First National Bank to pay us
money, and we will receive it as cash. Mr. Brown bought the draft of the Peoria bank
for $80.00, and sent it to us; therefore his account is to be credited.

Bank draft. Study the form received. You will see that the Peoria bank orders the Chicago bank
to pay $80.00 to H. T. Raynor. A bank draft does not differ in its nature from a check. The form of it
is different and the party drawing it is a bank instead of an individual or firm, but it is an order on
a bank to pay a sum of money to a certain party, the same as a check.

Parties. The parties to a bank draft are the drawer, in this case the Peoria bank; the drawee, in
this case the Chicago bank; and the payee, in this case, H. T. Raynor.

Transaction No. 40

March 26. Deposit the bank draft, endorsing it just as you would endorse a check.
At the same time deposit $50.00 in currency, as you have too much cash in your cash
register.

Transaction No. 41

March 27. A notice of freight received arrives in the morning's mail (Incoming
Paper No. 51). Sign it and return it to the railroad company.

The drayman arrives with three stoves from Detroit and an expense bill (Incoming
Paper No. 52) which you will pay by check. (See Transaction No. 5.)

Transaction No. 42

March 27. Mr Raynor hands you an invoice from The Michigan Stove Company
which he has O.K.'d as to the prices and quantities Hsted on it. This is Incoming Paper
No. 53. Verify the extensions, make the entry, and file the invoice.

Bookkeeping Point. The journal explanation should state that the bill is dated March 25.

Transaction No. 43

March 28. Pay the salaries in cash. Make the proper entries and attend to the
filing.

120 PRACTICAL OFFICE WORK AND BOOKKEEPING

This is the end of the week, but you need not post your books or make out a report
until March 31.

Transaction No. 44

March 30. Nothing has been done this month about the balance due Balkwill &
Patch. Mr. Raynor instructs you to send them our note at 15 days, bearing 6% interest.
See Transaction No. 3, page 40, for directions for making out a note.

Transaction No. 45

March 30. A sale ticket is handed to you. Make out an invoice, make the entry,
and file the invoice as in previous similar transactions.

Transaction No. 46

March 31. R. P. Smiddy has been attending to our draying for city deliveries, at
a uniform rate of 10c for each package, with a minimum charge of 25c for each delivery.
A bill for this work is left at our office today. (Incoming Paper No. 54.) Mr. Raynor
has O.K.'d the bill as to work done. If the charges are correctly extended pay it by
check. It is already receipted. Charge Expense.

The item is properly chargeable to Expense, rather than to Mdse. We charge freight and drayage
on goods coming in to the Mdse. account because these items constitute a part of the cost of the goods
as laid down in the store. Freight and drayage on goods going out, however, are not part of the orig-
inal cost of the goods, but are expenses incurred in the carrying on of the business.

Transaction No. 47

March 31. The bank delivers to Mr. Raynor to-day a statement of his account.
This statement is accompanied by the checks that have been paid and canceled by the
bank during the month.

The statement is Incoming Paper No. 55. The checks returned are our No. 1, 2,
3, 4, 5 and 6.

Take the six checks from the outgoing papers section and have them endorsed by the
proper parties and canceled by the bank.

What is the amount of the unpaid check? How can you explain why this check
has not been canceled and returned with the rest?

Post all your books up to date. Remember to post the total of sales to the credit of
Mdse.

Student's Report No. 12 should be made out at this time. Be sure you can answer
satisfactorily all of the questions on page 52 before handing in the report.

Take a trial balance.

Make a financial statement, loss and gain statement, and proof. In making the
statements use the following inventories:

Inventories March 31.

Merchandise.' $4,885.02

Furniture & Fixtures 665.00

Expense, 8,000 circulars 34.40

11 months' insurance **.**

Salaries due bookkeeper and clerk, 2 days 8.57

STATEMENTS

121

Inventories — Continued

Interest, Receivable on J. F. Sprague's note, ** days *.5M«

Receivable on W. H. Harrison's note, ** days *.**

Payable on note favor Ford & Johnson Co., ** days. . . .**

Outlines for the two statements follow. These outlines show the arrangement of
the statements, but the amounts are to be supphed by you.

Financial Statement, March 31, 19 —

Cash

Furniture & Fixtures

Merchandise

Notes Receivable

Harvard Hotel Co.

A. F. Harvey

C. E. Birch

A. E. Robson
Louis N. Powers

B. A. Dalton
Expense Invtys

Interest Invtys

Assets

Inventory
Inventory

66*5

4885
****

8000 circulars
11 Mo. Ins.

Sprague's note, ** ds.
Harrison's note, **d3.

Total Assets

***
**

***
**
34.40

*4: ** ** **

***
* **

00
02

**
**
**
**
**

Expense In%'ty

Notes Payable

Michigan Stove Co.

Detroit Folding Cart Co.

St. Johns Table Co.

W. P. Dunn Co.

Heywood Bros. & Wakefield Co.

Interest Invty

Liabilities
Salaries due, 2 ds.

Note favor Ford & Johnson, ** ds.
Total Liabilities
Net capital

8.57

*** **

4:4:* . **

***.

*** . **

**.

**.**

.**

**** . **

Note that in the above statement two of the expense inventories are listed as assets, and one as a
liabiUty. Also note that two of the interest inventories are assets, and one is a liability. Give the
reason for the classification in each case.

Note that the assets are arranged in the order of realization — those most easily converted into
cash, first. Cash itself heads the list. Then comes property. Notes take precedence over personal
accounts.

The liabilities are arranged in the order of liquidation — those which would have to be paid first are
placed first.

Each item taken from the ledger should be preceded by a folio.

122

PRACTICAL OFFICE WORK AND BOOKKEEPING

Merchandise

Interest

Loss and Gain Statement, March 31, 19 —
Gains

(subtract)

Cost
Invty

Cost of goods sold

Sales

Cost of goods sold

Credits *
Cr. Invty **

4885.02

(subtract)

He*** . **

(add)

** **

(add)

Debits *
Dr. Invty

(sub) *.**

Total gains

* **

Losses

Furniture & Fixtures Debits

(subtract) Inventory

Esqjense Debits

(add) Dr. Invty

(subtract) Cr. Invty
Total losses
Net gain

***.

I**!**!* . 1**I>

8.57

*** **

** ,**

*** . **

*** **

#t^^^ , n**!^

Proof

H. T. Raynor's Investment March 1
H. T. Raynor's Net Gain for March

Present Worth as per Fin. St.

By comparing the two statements you will see that all inventories are used in both. Every in-
ventory is cither an asset or a liability and appears as such in the financial statement. Every asset
inventory appears in the loss and gain statement a« an increase of some gain or a deduction from the
amount of some loss. Every liability inventory appears in the loss and gain statement as an increase
of some loss or a deduction from the amount of some gain.

To illustrate: The inventory of circulars on hand and the unexpired insurance are assets and appear
as such in the financial statement. They appear in the loss and gain statement as deductions from the
loss on expense.

The inventories of interest accrued on the two notes receivable arc assets and appear as such in the
financial statement. They appear in the loss and gain statement as an increase of the amount of gain
on interest.

The inventory of salaries due our help is a liability and appears as such in the financial statement.
The same inventory appears in the loss and gain statement as an increase of the loss on expense.

The inventory of interest due on notes payable is a liability and appears as such in the financial
statement. The same inventory appears in the loss and gain statement as a diminution of the gain on
interest.

THE STOCK RECORD

123

Closing the Ledger

As soon as your statements have been approved you may proceed to close the ledger
accounts as follows:

Close Notes Pavable. The following accounts should be ruled with a double red line,
omitting the footings as they balance with only one item on each side: Palmer House
Co., C. I. Brown, D. G. Boleyn, The Ford & Johnson Co., Balk will & Patch, Kimball &
Chappell Co.

Close all loss or gain accounts into Loss & Gain. Remember that both Expense
and Interest have inventories on both sides. Inventories should be entered separately
and brought down as separate items.

Balance. the proprietor's account.

Take a balance of the balances. This should correspond with the assets and liabilities
shown by the financial statement.

THE STOCK RECORD

Read what is said on page 67 about the stock record.

Prepare a stock record and inventory for March. First rule up on a loose sheet
of paper a form like the following:

Stock Record for March, 19-
H. T. Raynor.

article

Bot.

Sold

Left

Cost Price

Amount

No. 1982 mahogany chairs

No. 1684 mahogany rockers

663

243

No. 184-5 Mission chairs

No 417 brass bed

168

The above is only a partial form. Prepare a complete stock record. The amounts
in the "Bought" column are to be ascertained from the inventory of goods on hand
March 1 and from incoming bills. The items in the "Sold" column are to be ascertained
from the sales book. The cost prices are to be ascertained from the inventory on hand
March 1 and from incoming bills. The total of the "Amount" column should be $4,885.02,
which is the amount of the inventory used in making the statements.

This is a very important record in the furniture business, and one which is usually kept very care-
fully by furniture dealers, each purchase and sale being recorded at the time of its occurrence. There
are certain articles the storekeeper must always have on hand — the stock record will inform him when
the stock is getting low. By consulting the record frequently, he can also prevent over-stocking
on any particular article. No merchant wishes to have his money tied up in stock that will not be sold
for a long time. The merchant is most likely to be successful who can "turn over" his investment
oftenest — that is, who can keep his supply down so nearly to the demand that his sales during the year
are two or three times the amount of his investment at any time. He will not plan to carry more stock
than enough to last him for a few months, and will buy often and in small quantities (unless he can get
a liberal discount on a large purchase).

A large city offers visual opportunities to retail merchants to follow this plan, as it is a matter of
only a few days or hours to buy anything needed to replenish stock. Some of the smaller merchants

124

PRACTICAL OFFICE WORK AND BOOKKEEPING

in large cities, within easy reach of wholesale houses, plan to keep only one or two samples of each
article of furniture. When these are sold, new stock can be ordered at once and will be delivered to the
store almost before the old is sent out.

Problems

1. An advertiser placed a full page advertisement in the Times through an adver-
tising agency. The space would have cost him $500.00 had he placed the order direct,
but the agency was able to secure a 15% discount from the newspaper. The agency
made a charge of 15% of the net bill for its services in placing the advertisement and
preparing the copy. How much did the advertiser save?

2. B placed the following advertisements through the C. Co. and advertising agency:

Publication. Value of space. Discount Net cost

Ladies' Home Journal $750.00 10% ***.

Saturday Evening Post 500.00 15% ***.

McClure's Magazine 400.00 12J^% ***.

The C. Co. charged for services 15% of net cost

****.

What did the services of the C. Co. cost Mr. B. over and above what he would have
had to pay had he placed his advertising direct?

3. The catalog price of the X Z stove is $65.00. A dealer bought it at catalog price,
securing 25 and 5% trade discounts, and also securing 2% discount for cash. He sold
for cash at catalog price. What was his percentage of profit, based upon net cost?

4. A dealer bought $1,000.00 worth of Mdse. upon the terms 2/10 n/30 ds. Not
having the money to pay cash, he borrowed it on the tenth day at 6% and secured the
discount. Did he gain or lose by the transaction, and how much?

TWO WAYS OF ASCEETAINING GAIN

Condition I. No additional investment or withdrawals having been made by the pro-
prietor during a given period.

1. The net gain of the business for that period is the difference between the gains and
the losses for the period.

2. The net gain is also the difference between the capital at the beginning of the
period and the capital at the end of the period.

Illustration:

The footings taken from A's ledger on Jan. 31 are as follows:

A — capital account (unchanged since Jan. 1)

2,500

Mdse. (no Invty.)

1,800

2,200

Expense

100

Cash

2,000

Notes and Accounts Receivable

1,600

Notes and Accounts Payable

800

5,500

SUPPLEMENTARY PROBLEMS 125

Explanation:

1. The net gain is the difference between the gain, $400.00 (shown by the Mdse. account), and the
loss, $100.00 (shown by the Expense account).

2. The net gain may also be ascertained as follows:

Assets, $2,000.00 + $1,600.00 = $3,600.00

Liabilities 800.00

Net capital Jan. 31 2,800.00

Capital Jan. 1 2,500.00

Net Gain 300.00

Condition II. When the proprietor has increased his investment or has made a with-
drawal during the period, this must be taken into consideration before the increase of the
capital will agree with the amount of gain.

In the above illustration, if Mr. A had withdrawn $100.00 cash, the footings Jan. 31
would have been:

A — capital account

100

2,500

Mdse. (no Invty.)

1.800

2,200

Expense

100

Cash

2,000

100

Notes and Accounts Receivable

1,600

Notes and Accounts Payable

800

5,600

Explanation:

1. The net gain is, as before, the difference between the gains and the losses ($400 — $100 = $300.00.)

2. The withdrawal of $100.00 must be deducted from the capital invested Jan. 1, and the remain-
der deducted from the net capital as shown Jan. 31, in order to find the amount of gain, thus:

Assets Jan. 31. Cash $1,900

Notes Receivable 1 ,600 3,500

Liabilities Jan. 31 800

Net capital Jan. 31 2,700

Capital Jan. 1 2,500 .00

Withdrawal 100.00 2,400

Gain 300

126

PRACTICAL OFFICE WORK AND BOOKKEEPING

Problems

I. The last time Brown's ledger was closed was Jan. 31, 19-
the ledger were as follows:

On Feb. 28, 19—, the footings of

Brown (capital)

6,000

Real Estate

4,000

Furniture and Fixtures

1,000

Mdse.

1,700

1,200

Expense

190

Cash

2,000

400

Notes and Accounts Receivable

1,500

1,000

Notes and Accounts Payable

1,790

10,390

Inventories: Real Estate, $4,000.00; Furniture and Fixtures, $990.00; Mdse., $1,100.00.
Prepare two different statements, showing the two different ways of arriving at the amount of the
0et gain.

II. Assume that in the preceding case Brown withdrew $150.00 in cash for personal use during
February, and that on February 15 he received a legacy of $1,000.00 in cash which he added to the
capital of his business. Show trial balance and statements Feb. 28.

Note. Problems very similar to the foregoing (although more elaborate in detail) are very fre-
quently found in examinations given to candidates for the degree of Certified Public Accountant. The
principle involved is that withdrawals from or additions to capital do not reduce or increase profits
for the period.

Review Questions. 1. Describe the process of transferring accoimts from an old ledger to a new
one. 2. What is an insurance policy? 3. Answer the questions on the insurance policy, at the bottom
of page 98. 4. Describe how sale tickets are used. 5. What is an expense bill? 6. What may a depos-
itor do if he fails to bring his pass book when making a deposit? 7. What is a "tracer?" 8. How many
words are there in the following telegram: "Send me by telegraph $5000.00 at 7:30 p. M. tomorrow."
Write the foregoing telegram in ten words. 9. What is the meaning of the term "F. O. B. New York?"
10. What is a bill of lading? 11. Describe the "straight" bill of lading. 12. Describe the ' order"
bill of lading. 13. What is a bank draft? Name and define the parties thereto. 14. What is meant
by trade discount? 15. Why is a trade discount account not kept in the ledger? 16. How is the net
amount of a bill determined when the bill is subject to a series of discounts ? 17. Explain how a series
of discounts might originate. 18. State two ways of ascertaining the amount of gain or loss for a given
period.

CHAPTER V
BUSINESS FOR APRIL

Transaction No. 48. April 1. Mr. Raynor instructs you to pay the rent as on March
2. Make the payment by check and bring back Mr. Whitney's receipt (Incoming Paper
No. 56.)

Write the check. Fill out the check-book stub and deduct the amount of the check from the
balance. Detach the receipt from the pad of incoming papers. Make the bookkeeping entry.
File the receipt and the outgoing check.

The student is now presumed to be familiar with the bookkeeping and filing required for simple
transactions. From this point on, specific directions for bookkeeping and filing will be omitted except
in connection with transactions involving features which are unusual or with which the student is not
familiar.

Transaction No. 49. April 1. A check is received this morning from J. F. Sprague in
payment of his note of Jan. 31 and interest at 6%. The check is Incoming Paper No. 57.

Detach the check from the pad. Is it made out for the right amount? If so, take the note from
the section of the file marked "Cash Register and Notes Receivable" and cancel it. You will do this
by writing diagonally across the face in red ink, "Canceled April 1, 19 — . H. T. Raynor, by (your
initials)." Make two entries in the cash book, one for the note and one for interest. Fill out the
spaces under the heading "Disposed of,' ' in the bill book. File the check. Return the canceled note
to Mr. Sprague by filing it with the outgoing papers.

Transaction No. 50. April 2. Mr. Raynor instructs you to settle with the W. P.
Dunn Company for the circulars bought of them last month, paying by check.

Refer to the ledger for the amount of this bill, and write the check. Do not forget to fill out the
check-book stub. This should always be done before the check is detached. Take the bill from the
"Invoices Payable" section of the file and have it receipted by the W. P. Dunn Company. -Attend
to the bookkeeping and filing. .

Transaction No. 51. April 2. Deposit the check you received yesterday. Do not
forget to add the deposit to the check book stub.

Transaction No. 52. April 3. Mr. Raynor has made a sale for cash and hands you

the sale ticket.

Detach the sale ticket and verify its figures. Make out an invoice and receipt it. Take the
proper amount of currency from the Currency Envelope. Make two bookkeeping entries, one in the
sales book and one in the cash book. Attend to the filing.

Transaction No. 53. April 4. Deposit $300.00 in cash.
Are you remembering to add deposits to the check-book stub?

Transaction No. 54. April 4. Mr. Raynor instructs you to remit by check to The
Michigan Stove Co. the amount of their bill of March 4.

This invoice is now in the "Invoices Payable" section of the file. Write the check. Do not
forget the check-book stub. Make the bookkeeping entry. Attach the check to the invoice and
mail both to The Michigan Stove Company by filing in the proper section.

Transaction No. 55. April 4. Pay the salaries of yourself and Wm. Johnson in cash.

127

128 PRACTICAL OFFICE WORK AND BOOKKEEPING

This is Saturday night, but you need not post your books or make out a student's report at this
time, as you have had only four days' transactions since the last closing of the ledger.

Transaction No. 56. April 6, A sale tfcket is handed to you. You know what to
do.

Transaction No. 57. April 7. Mr. Raynor needs $100.00 for his personal use.
He instructs you to draw a check for the amount, payable to "Currency," and give
it to .him.

Filing. The Michigan Stove Go's invoice, which we paid Saturday, has been receipted and re-
turned to us. Take it from the outgoing papers section, have the receipt written on it and file it with
the receipts.

Transaction No. 58. April 8. An invoice is received today from The Ford and
Johnson Co. on account (Incoming Paper No. 58).

Detach the invoice. See that it is OK'd and the quantities checked. Verify the computations.
Attend to the bookkeeping and filing.

Transaction No. 59. April 9. Mr. Raynor instructs you to buy $5.00 worth of 2c
postage stamps for office use, paying currency from the cash register.

Transaction No. 60. April 10. A sale ticket is handed to you.

Observe that the sale was made on a 15-day note at 6 per cent. Look in the pad of incoming
papers for the note (Incoming Paper No. 59).

Detach the sale ticket from its pad and the note from the pad of incoming papers. Make out
an invoice and receipt it in the following words; "April 10, 19 — . Received 15-day note for the

amount of this invoice, H. T. Raynor, by " Make two entries, one in the

sales book and one in the journal. Record the note in the bill book. File the note and the invoice.

Transaction No. 61. April 11. The weekly salaries are now due. Your own salary
is paid in cash, but Wm. Johnson has bought four No. 1982 mahogany chairs at cost,
which he takes instead of his salary. No invoice is necessary for this.

Take the amount of your salary from the cash register and make an entry in the cash book. Enter
the $10.00 sale in the sales book, charging Expense, with the explanation, "Wm. Johnson, in lieu
of salary for week."

It is quite customary among business houses to sell to employees at cost. Employees should
never abuse this privilege by buying goods for their friends at this special rate, as such an act is dis-
honest.

Post your books up to date. You need not take a trial balance. Close the cash
book.

Student's Report No. 13 should be made out at this time.

Transaction No. 62. April 13, Louis N. Powers stepped in to the office today and
made arrangements with Mr. Raynor to give us $300.00 in cash and his 60-day note
at 6 per cent for the balance, to cover his account. The note is Incoming Paper No. 60.

Detach the note from the pad; take $100.00 from the outgoing papers file and $200.00 from the
currency envelope. See that the note is correctly made out in every respect and signed by Louis N.
Powers. Consult your ledger to see whether the amount received is correct. Write receipts on the
bottoms of the invoices covered by the payment. The receipts should show that the first invoice was
paid in cash, and that the second was paid part in cash and part by note.

Transaction No. 63. April 13. Deposit the $300.00 received today. Do not
forget the check-book stub.

A COMPROMISE WITH A DEBTOR - 129

Transaction No. 64. April 13. A sale ticket is handed to you. •

Transaction No. 65. April 13. Mr. Raynor instructs you to mail a check to the
Detroit Folding Cart Co. in settlement of the invoice received by us on March 13.

Transaction No. 66. April 14. Mr. Raynor has learned that B. A. Dalton's busi-
ness affairs are in bad shape and thinks it likely that his creditors may force him into
bankruptcy very soon. Rather than risk the trouble, delay, and loss that bankruptcy
proceedings would result in, Mr. Raynor has determined to compromise with Mr. Dalton
and take $20.00 spot cash for the account against him. The balance of the bill is a loss.

Take $20.00 from the outgoing papers section. Make an entry in the cash book crediting B. A.
Dalton, with the explanation "To settle account." Make another entry, in the journal, debiting
Loss and Gain and crediting B. A. Dalton for the amount of the loss. Follow this journal entry by
a complete explanation which sets forth the conditions of the settlement in detail. Give Mr. Dalton a
receipt for the full amount of his account.

Transaction No. 67. April 14. Mr. Raynor instructs you to give Balkwill & Patch
a check for our note in their favor due today with interest.

Refer to your bill book for the facts in regard to this note. Compute the interest and draw a
check for the full amount. Don't forget to fill out your check-book stub. Take the note from the
outgoing papers section and have Balkwill & Patch's cancellation written upon it. Make two entries
in the cash book, and make the proper memorandum of payment in the bill book. File the canceled
note and the check.

Transaction No. 68. April 15. A sale ticket is handed to you.

Transaction No. 69. April 16. A check is received from W. H. Harrison to cover
the amount of his note in our favor and interest. The check is Incoming Paper No.
61. (See Transaction No. 49.)

Transaction No. 70. April 17. Deposit the check received yesterday.

Filing. The Detroit Folding Cart Co. has returned the invoice we paid on April 13, receipted.
Take the invoice from the outgoing pap>ers file, have the receipt written on it, and file it properly.

Transaction No. 71. April 18. Pay the salaries for the week. The cash must
be secured from the bank by a check to currency.

Post your books. Do not post the sales book total.

Student's Report No. 14 should be made out at this time.

Close your cash book and take a trial balance. The trial balance should include
the cash balance and the unposted pencil footing of the sales book.

Transaction No. 72. April 20. A sale ticket is handed to you.

Note that this ticket is different from the others which you have received. It does not contain the
name and address of the party to whom the sale was made. Mr. Raynor does not care to keep ac-
counts with parties making occasional small purchases for cash, and requests you to open an account
called "Petty Cash Sales." This account will be debited for all such sales, through the sales book,
and will be credited, at the same time, through the cash book. When both the debit and the credit
of a given petty cash sale are posted, they will balance each other, so that the Petty Cash Sales ac-
count will always balance. Inspection of the ledger at any time after posting will show what the
petty cash sales have amounted to.

130

PRACTICAL OFFICE WORK AND BOOKKEEPING

Take $3.00 from the outgoing papers section of the file. No invoice is to be made out. Make an
entry in the sales book, debiting Petty Cash Sales. Make another entry in the cash book, crediting
Petty Cash Sales.

Transaction No. 73. April 21. A freight notice is received (Incoming Paper No,
62). Sign it and deliver it to the railroad company by filing it with the outgoing papers.
Later in the day the freight arrives and we are handed an expense bill (Incoming Paper
No. 63). Pay the expense bill (which is already receipted) in currency.

Transaction No. 74. April 21. Mr. Raynor hands you the bill for the goods just
received (Incoming Paper No. 64). It is OK'd and the item checked. Verify the
computation and make the entry. File the bill.

Transaction No. 75. April 22. In accordance with Mr. Raynor's agreement with
the St. Johns Table Company you are to mail them our 60-day notes bearing 6 per cent
interest to cover the two invoices for which we owe them, each note being dated as of
the date of the invoice which it covers.

Make out one note to cover the invoice received March 16, and date it as of the date of the invoice
(March 7). Make out another note to cover the invoice received yesterday and date it also as of the
date of the invoice (April 16).

Make a journal entry in the following form :

St. Johns Table Co

Notes Payable

Remitted the St. Johns Table Company our notes
as follows: 60-day note at 6 per cent., dated
Mar. *, to cover their invoice of same date, $***.**;
and 60-day note at 6 per cent., dated April **, to
cover their invoice of same date, $**.**

The two notes payable are listed separately in the above entry. They will be posted separately.
The items in the ledger account may then be readily compared with the bill book items.

Take the two invoices from the "InvoicesPayable" file, attach to them the notes respectively cover-
ing them, and mail them to the St. Johns Table Company by placing them in the outgoing papers file.

Transaction No. 76. April 23. A sale ticket is handed to you.

Transaction No. 77. April 24. Mr. Raynor instructs you to give Heywood Broth-
ers and Wakefield Company a check for the amount of the invoice bought of them on
March 24. Have them receipt the invoice.

Filing. The St. Johns Table Company has returned the two invoices which we paid by note
April 22. Take them from the outgoing papers section, have receipts written on the bottoms of
them, and file them.

Transaction No. 78. April 25. On the 1st of March and again on the 1st of April,
Mr. Raynor made attempts to collect $56.75 from A. F. Harvey, La Grange, 111., for
goods bought on Feb. 15. (This balance showed in the opening journal entry of Mr.
Raynor's new books, March 2.) He now instructs you, without further parley, to draw
on Mr. Harvey for the full amount due us on his account; this includes the invoices of
March 25 and of April 15.

DRAWING ON A SLOW CUSTOMER

131

Before following out this instruction, study carefully the form of draft shown below and the
explanation which follows it.

Form of Draft,

Explanation: The above is an order, or demand, made by H. T. Raynor upon A. F. Harvey.
The demand is made through a bank rather than by Mr. Raynor in person. Four principal advan-
tages of making collection in this manner are: First, it is convenient. Mr. Harvey lives outside of
the city. Mr. Raynor does not need to bother hunting up a collecting agency. His own bank, or any
bank, will attend to the matter. Second, it is inexpensive. The bank's fee, which is deducted from
the proceeds of collection (or, in case collection is not made, charged to the drawer) is very small as
compared with what a collecting agency would charge. Third, the chances of collection are reasonably
good, as many business men dislike to let bankers know that they are refusing to pay bills. Fourth,
if payment be refused, the fact of the refusal would thus be established in a definite, formal manner.
The drawer would no longer be in doubt as to whether the drawee intended to pay, and might proceed
at once to take legal steps to collect.

Interpretation : If the above demand were made in the form of a letter, the letter would read :

(To) A. F. Harvey,
La Grange, 111.

Chicago, 111., April 25, 19-

(Dear Sir):

At sight (t. e., when you see this) pay to the order of the Merchants Exchange Bank, one hundred
fourteen and no/100 dollars. (This paper is given for) value received. (When you have paid this money),
charge the same to (the) account of.

(Yours truly),

n. T. Raynor.

Parties: The parties to a draft are the drawer, who "draws," or makes demand (in this case, Mr.
Raynor) ; the drawee, or party drawn upon (in this case, Mr. Harvey) ; and the payee (in this case, the
bank or its order).

Write out the draft upon a blank which you will detach from the pad of blank drafts. Write a
short letter, as short as you can make it, to the Merchants Exchange Bank, stating that you are en-
closing the draft for "collection and deposit." (That means that you instruct them to keep the
returns from the collection, as a deposit to your account.)

When a drawee does not wish to deposit the proceeds of his draft, but to receive them in cash,
he sends the draft to the bank for "Collection and Returns," which means that the net proceeds are
returned to him.

132 PRACTICAL OFFICE WORK AND BOOKKEEPING

Write another short letter to A. F. Harvey, notifying him that you have drawn upon him, stating
the amount drawn, and enumerating the items covered by the draft.

Note. No bookkeeping entry will be made at this time. A memorandum of the fact that the
draft has been drawn, made on the stub from which the draft was detached, is sufficient. Sometimes
a register (or memorandum of drafts) is kept. The bookkeeping entry is made after the returns are
in. If there are no returns, no entry is made.

Transaction No. 79. April 25. A check is received from C. E. Birch (Incoming
Paper No. 65), which Mr. Raynor informs you is supposed to cover the invoice of goods
sold Mr. Birch on March 4 and Mr. Birch's note of April 10 with interest.

Detach the check from the pad of incoming papers and ascertain whether the amount is correct.
If you find it correct, make the entry. Receipt the invoice. Cancel the note and deliver it to Mr.
Birch.

You will observe that Mr. Raynor's name is spelled incorrectly on the body of the check. What
are you going to do about it when you deposit?

Transaction No. 80. April 25. Pay the salaries in cash. If there is not enough
currency in the cash register, draw a check for the entire amount.

This is the end of the week. Post your books and make out Report No. 15. Close
your cash book.

Transaction No. 81. April 27. Deposit the check received Saturday.

When you endorse the check for deposit, write Mr. Raynor's name as it is spelled in the body
of the check. Then write Mr. Raynor's name again just below this, spelling it correctly.

Transaction No. 82. April 27. Mr. Raynor instructs you to pay the Michigan
Stove Co. by check the balance due them. Proceed as in previous similar transac-
tions.

Transaction No. 83. April 28. Two sale tickets are handed to you.

The amounts on one of the sale tickets are to be filled in from your list prices.

For the satisfaction of yourself and your partner, make an estimate of the amount of profit made
today. Estimate roughly the average daily cost of doing business by dividing last month's expenses
by the number of work days in the month. Figure the profits on today's sales by comparing
costs and selling prices. The diflFerence will show you approximately how much profit you have
made to-day.

Transaction No. 84. April 29. An invoice is received today from S. Karpen &
Bros. (Incoming Paper No. 66). Observe that it is dated April 28 and that the terms
are " 30-day note at 6 per cent."

Detach the invoice. If it is OK'd and checked, make out a note, dating it April 28. Mr. Raynor
will sign the note. Make two bookkeeping entries, both in the journal. The first entry will credit
S. Karpen & Bros, and the second will debit them. Make the proper record in the bill book. The
invoice is already receipted.

Transaction No. 85. April. 30. A check is received in today's mail (Incoming
Paper No. 67).

The check is accompanied by a "voucher" (Incoming Paper No. 68). This is a
form which Mr. Boleyn uses in his office, which he wants you to sign and return as a
receipt.

Detach the check and voucher from the pad. Read the voucher carefully. As far as you are
concerned, the voucher is nothing but a form of receipt which Mr. Boleyn has prepared in advance
for you, ready for your signature. He has not returned your original invoice, as is usually done^

A VOUCHER 133

because the voucher itself contains all data, and enumerates in detail the items covered by the pay-
ment.

Make an entry in your cash book for the amount received, in the usual way. Fill out and sign
''the receipt form in the lower right hand corner of the voucher and return the voucher.

Vouchers. Some firms, rather than keep accounts with houses from which they buy, use a
"voucher system" for keeping track of invoices payable. When an obligation is incurred a voucher
is made out at once, and this voucher is kept on file, or left attached to its stub, until the time for the
payment arrives. The voucher itself serves as a constant reminder that the bill is unpaid.
When the due date, or date of the maturity of the obligation, arrives, the bill is paid. The voucher
is at that time detached from its stub, or taken from the file, and mailed with the remittance. At the
bottom of the voucher is a blank form in which the payee's receipt is to be written. The payee fills
out and signs this receipt, and returns the voucher. When the voucher is returned to the office from
which it went out, it is filed; filing is facilitated by the fact that the vouchers are all of the same size
and shape. When bills are paid in cash, voucher forms are used nevertheless, the voucher being signed
at once by the payee. Vouchers should be issued for all payments.

Some houses, instead of using regular voucher blanks, stamp voucher forms on the backs of in-
coming bills, using a rubber stamp for the purpose. This is very unsatisfactory on account of the
variation in size and shape in the different incoming bills, and for the further reason that in any
event the house would be compelled to have on hand regular voucher forms for use when cash pay-
ments were made for items for which no bills were submitted, as for instance when postage stamps
were bought for cash.

Voucher Bookeeping. Posting is usually done direct from the vouchers themselves or from their
stubs. The voucher is therefore an integral part of the bookkeeping system of the person paying
and must always be promptly returned to him by the payee. Sometimes a Voucher Register is kept
which is similar in form and nature to the bill book.

You cannot at this time expect to fully understand the voucher system. It is sufficient for your
present purpose if you understand what a voucher is, and realize the importance of returning promptly
any vouchers which may come to you for signature.

Do not confuse the word "voucher" as here used, with the more broad and general use of the
word. Any receipt or paper evidencing a transaction is a voucher in a broad sense. You have been
receiving and making out vouchers from the beginning of the course. The paper you received
to-day is a special form of voucher used by Mr. Bolcyn.

Transaction No. 86. April 30. Deposit the check received to day.

Transaction No. 87. April 30. A sale ticket is handed to you.
See Transaction No. 72. Get the cash from the outgoing papers file.

Transaction No. 88. April 30. Louis N. Powers steps into the office today with
$100.00 in cash which he wishes to apply on his note in our favor.

Take $100.00 in currency from the ciirrency envelope. Take Mr. Powers' note from the "Cash
Register and Notes Receivable" file and write upon the back of it in the place usually used for en-
dorsement, the words, "April 30, 19 — . Received $100.00 on this note. H. T. Raynor, by (your in-
itials)." Give Mr. Powers a receipt for his money. The last line of the receipt (preceding the sig-
nature) should read, "To apply on note dated April 13, 19 — ." Replace the note in the "Cash Reg-
ister and Notes Receivable" file. Attend to the bookkeeping and file the cash. Make a memorandum
of the part payment in the "Disposed of" columns of the bill book. Do this by writing "April 30"
in the "When" column, "$100.00" in the "Amount Paid" column, and "Cash" in the "How" col-
umn, writing in small, neat figures close to the line above the space in which you are writing, so as
to leave plenty of room for the entry which will be made when Mr. Powers finally redeems the note.

Transaction No. 89. April 30. August Reese has scrubbed the floors and cleaned
the windows today. Pay him $2.00 for his day's work.

134 PRACTICAL OFFICE WORK AND BOOKKEEPING

Transaction No. 90. April 30. A. E. Robson pays $50.00 in cash on account.
Give him a receipt. Take the currency from the outgoing papers file.

Transaction No. 91. April 30. Draw a check for $13.33, the amount of your salary up
to tonight, which check Mr. Raynor will sign. Proceed as in previous similar transactions.

Transaction No. 92. April 30. The bank's monthly statement (Incoming Paper
No. 69) arrives in today's mail, accompanied by ten canceled checks.

The checks returned are hsted on the statement. Proceed as on March 31. There are two out-
standing checks this month. These will have to be taken into consideration in reconciling the bank balance
as per the bank statement with the balance shown by your check-book stub. This reconcihation will be
shown by the bank proof, which you will fill out on this week's report.

You will note that the dates written opposite the checks listed in the bank statement do not in many
cases agree with the dates of the checks. This is because the date given on the statement in each case is the
date of the payment of the check by the bank, which is usually later than the date on which the check was
issued.

Post to date. The sales book total should be posted to Mdse. at this time.
Close the cash book and rule up the sales book.
Report No. 16 should now be made out.
Take a trial balance.

When the trial balance has been approved, make statements, using the following
inventories:

Merchandise 5032. 02

Furniture & Fixtures 660.00

Interest Receivable

Louis N. Powers' note . **

Interest Payable

On note favor The Ford & Johnson Co., ** days at 6 per cent * .

On note favor St. Johns Table Co., ** days at 6 per cent . **

On note favor St. Johns Table Co., ** days at 6 per cent .**

On note favor S. Karpen & Bros., * days at 6 per cent .**

Expense

10 months' insurance sj::!; . HsH*

Unpaid salary due Wm. Johnson 5.71

Observe that one of the expense inventories is a resource, and that the other is a liability.

In making the loss and gain statement, you will find that this month the losses ex-
ceed the gains. Rule up the statement just as you would ordinarily, but subtract the
upper figure (total gains) from the lower figure (total losses). The result is the net loss
of the business for April. In the proof, this must be subtracted from the investment
to give the net capital, which will then be in agreement with the net capital shown
by the financial statement.

Make out a stock inventory as you did on March 31. Its lesults should agree with
the inventory of Mdse given above.

MONTHLY STATEMENTS 135

When your statements have been approved, close the ledger. The result of the loss
and gain account will be a loss and this will be closed to H. T. Raynor's account, in
which it will be entered on the debit side.

After the ledger has been closed, take a balance of balances.

Monthly Statements.

It is the custom among most business houses to submit to their customers, usually
monthly, statements of account. There are many forms of statement used, but the
form described in the following is probably the most popular and the most satisfactory.

First, let us assume that the customer has received an invoice every time he has bought a bill
of goods. This invoice has shown in detail the items sold to him at that particular time, enumerating
the articles sold, the quantity and price of each, and the total of the bill. It is not necessary that all
this information be repeated in the statement, as the customer should save his invoices, and can
ascertain the details from them.

If statements are rendered monthly, no statement needs to contain more than the transactions
of the month which it covers, if the balance due at the beginning of the month be included.

The first item on a monthly statement should be the balance due on the first of the month, as
shown by the last statement which was rendered. This is followed by an enumeration of the dates
and totals of the several invoices sold to the customer during the month, and the footing is shown.
Below this is an enumeration of the dates and amounts of the several payments that have been made
during the month, with the total shown. This total is subtracted from the total of debits. The
result is the balance of the customer's account.

A statement is not always to be considered a demand for payment. If the customer should buy
goods on long time credit so that the amount will not be due for some time after the date when the
statement is made out, the amount of that invoice is shown on the statement nevertheless, for his
information. Statements containing such items are usually marked, ' 'This is a statement of account
and is not a demand for payment," or words to that efifect. Statements of accounts which are due
or overdue, often contain the words, ' 'Please remit."

In some lines of business, as, for instance, the retail grocery business, monthly statements often
show in detail all articles sold during the month, in spite of the fact that the articles have been listed
in detail in the separate invoices which accompanied the goods. This is often done in the retail
grocery business because many householders are careless and fail to save the invoices. This is called
an itemized statement.

On page 128 are statements of C. E, Birch's account Mar. 31 and April 30.

Render statements to all of H. T. Raynor's customers who owe anything on account.
The items for the statements should be taken from the ledger accounts. Submit these
statements to your teacher for approval. When approved, file them with the outgoing
papers.

It is not necessary to make out statements to creditors, as they will make out statements to Mr.
Raynor. Statements are submitted to customers only.

Partnership Problems

1. A and B are partners with investments of $6,000.00 and $8,000.00, respectively, at the be-
ginning of a certain year. Their agreement is to share gains or losses in proportion to their invest-
ments. At the end of the year their combined investment is. $20,000.00. Neither partner withdraw-
ing any profit, what is the investment of each?

2. C, D, E are partners with investments of $4,000.00, $5,000.00 and $6,000.00, respectively.
Their agreement is that losses or gains shall be divided as follows: C, 25 per cent; D, 35 per cent;
E, 40 per cent. At the end of the year the business is worth $21,500.00 before any profits are with-
drawn. Each partner withdraws J of his gain and leaves the rest in the business. What is the invest-
ment of each for the following year?

136

PRACTICAL OFFICE WORK AND BOOKKEEPING

3. X and Z are partners with respective investments at the time of going out of business of
$8,000.00 and $12,000.00. Their agreement as to division of profits and losses is that X shall receive
J of all profits and bear J of all net losses. The net losses incurred in winding up the affairs of the
business were $750.00. How did they divide the capital remaining?

4. M, N and O are partners with respective interests of $8,000.00, $10,000.00 and $12,000.00 on
Jan. 1, 1909. M is a silent partner, drawing no salary. N draws a salary of $1,500.00 per year and
O draws a salary of $2,500.00 per year. Profits are divided equally. On Jan. 1, 1910, the capital
of the firm is $40,000.00 before the partners' salaries are paid. If all salaries and profits are left in
the business, what is the interest of each partner on Jan. 1, 1910?

5. Smith, Brown and Jones are partners under an agreement to divide profits and losses equally
after each has been allowed 7 per cent on his investment. Their investments, July 1, 1909, were as
follows: Smith, $7,500.00; Brown, $10,000.00; Jones, $15,000.00. On July 1, 1910, the capital of
the firm is $41,350.50, no interest or profits having been withdrawn by any partner. What is the
investment of each?

BTAXKMEWX

Chicago. Ili

C^c^./i,:.^Jy

In ACCOUNT WITH H. T. RAYJ^OR
364 WABASH AVE.

i^yjy

JJL

u-A

.f^7?l^^^y.

STATEMENT

Chicago. Ill„

C^^jS.:.^jy

^Ay..^n-\ u

IN ACCOUNT w,T„ H. T. RAYNOR

364 WABASH AVE.

OA^.

i^y.

i^^y

LO.

Slat, rtndered.

.f^l^^^^y

32.2j£cl,

2./ " ^ OCT^^

/■^H:^^y^^'rt^yL- /^^y

A72^

c c

h^l^^

JIo

y£0_

In If If

-^2-7

i£^

7~OP

-7^

2=J^^JL

PRACTICAL OFFICE WORK AND BOOKKEEPING 137

REVIEW

Rules for Journalizing
Pe&ft Credit

Cash, when cash is received Cash, when cash is paid out

Notes Receivable, when a note signed by others Notes Receivable, when a note signed by others

is received is disposed of

Notes Payable, when we redeem our note Notes Payable, when we issue a note

Persons, when they cost us value Persons, when they return or produce us value

Real Estate, when it costs us value Real Estate, when it produces returns through

sale
Mdse., when it costs us value Mdse., when it produces returns through sale

Expense, when it costs vis value Expense, when items for which it has been debited

are disposed of for value or rebates on such
items made to us
Interest, when it costs us value Interest, when it produces returns

Loss & Gain, for the separate losses of the business Loss & Gain, for the separate gains of the business
The Proprietor, for his ■withdrawals and for the The Proprietor, for his investments and for the
net loss of the business net gam of the business

A thoughtful inspection of the rules given above will show you that there are but
three rules for debiting accounts and three rules for crediting accounts, as enumerated
in the following:

General Summary of Rules
Debit Any Account Credit Any Account

When the thing it names is received When the thing it names is disposed of

When the thing it names costs us value When the thing it names produces returns

When the thing it names occasions a loss When the thing it names produces a gain

Further reflection should show you that when a thing is received it costs; and that
when a thing occasions a loss, it costs. Also that when a thing is disposed of, it produces
returns; and that when a thing produces a gain, it produces a return. The foregoing
being true, we can reduce our rules down to a short general rule that will cover all cases,
as follows:

GENERAL RULE. Debit the account of that which costs; credit the account of that which
produces returns.

Let us see whether this general rule can be applied to all accounts. Refer to the separate rules for
each account, at the top of the page. The first one reads, "Debit cash when cash is received." Can we
apply the general rule, "Debit the account of that which costs"? Yes, because cash received costs us
something of value with which we have to part to get the cash. The same applies to Notes Receivable
and Notes Payable — in order to receive them, we must part with something of value; therefore, they cost
us. In the case of Persons, Real Estate, Mdse., Expense, and Interest, the separate rules as they stand
state that these accounts are debited when they cost us value. The rule for debiting the Loss & Gain
account reads, "Debit Loss & Gain for the separate losses of the business." A loss is certainly a cost.
The rule for debiting the proprietor reads, "Debit him for his withdrawals." A withdrawal is certainly
a cost to the business. From all of this, we have determined positively that the single rule, "Debit the
account of that which costs us value," can be applied in all cases.

Similarly, it can be shown that cash paid out. notes receivable disposed of, and notes payable issued,
all produce returns, since we always receive something of value in exchange for things we part with. It
is also e\ident that gains are returns. From this we deduce positively that the single rule, "Credit the
account of that which produces returns," can be applied in all cases.

Commit to memory, therefore, the general rule "Debit the account of that which
costs value; credit the account of that which produces returns." Or, if it seems more
clear to you, learn the rule, "Debit the account of that which is received or costs value;
Credit the account of that which is disposed of or produces returns." Having learned
the rule, bear it constantly in mind and apply it in all cases. You cannot make a mis-
take in journalizing if you always remember this rule and never violate it.

138

RECAPITULATION AND REVIEW

SUMMARY OF DEFINITIONS

You now have a practical working knowledge of bookkeeping in its simpler forms.
You understand the fundamental principles of accounting, and are familiar with the
language of business. At this point you should thoroughly master the definitions which
follow on the next two pages, the meaning of which should now be very clear to you.

^A business transaction consists of the exchange (see definitions 28 to 33), between the parties thereto
(see definitions 2 to 5), of things of value (see definitions 6 to 18). 'The parties to a business transaction
may be individuals, firms, or corporations. 'An individual conducting a business is called a proprietor.
*A firm or partnership consists of two or more persons who unite their capital or efforts, or both, for the
purpose of carrying on a business. ^A corporation is an association of individuals, existing under a state
charter and acting as one individual. "Things of value which may form the subject-matter of a business
transaction may be real estate, commodities, services, valuable promises (written, oral, or implied) or any
other thing having a value which can be estimated in money. 'Foremost in importance among valuable
things which may be exchanged are cash, property, services, written promises to pay
money, and oral or implied promises to pay money. ^Cash includes coin, currency, checks, bank drafts,
postal and express orders and other papers (except sight drafts not drawn on banks and demand notes,
aside from U. S. currency) payable in cash or on presentation. ^Property may be real or personal. Separate
accounts are usually kept with the different kinds of property, such as real estate, furniture and fixtures,
merchandise, etc. ^'^Services which have a monetary value may be exchanged for money or other valuable
consideration. ^^Written promises to pay are usually notes or accepted drafts. ^'An accepted draft is one
which the drawee has agreed to pay.

TWO PAGE STATEMENT FORMS

Extending across pages 130 and 131 are shown first a Loss and Gain Statement, and next, a Financial
Statement, in the two-page form. The Loss and Gain Statement shown is a sectional statement. The
first seven lines compose the "trading" section, which shows the profit on Mdse., debit items being written
on the left-hand page and credit items on the right. It is separated from the next section by a double
ruliag. The second section shows the profits and losses of the business, losses being on the left-hand page
and gains on the right. The first item of gain is the amount of the gain on Mdse., which it will be noticed

LOSS AND GAIN STATEMENT

Debits

Mdse. Invty Jan. 1, 19 —

Purchases during Jan.

4256
1264

75
50

Total cost of Mdse. for Jan.
Less Invty. Jan. 31

5521
4327

25
50

Cost of goods sold
Gain on trading (Red Ink)

1193
1373

Furn. & Fix. Dr.
Cr.

2567

750
210

Inventory, Jan. 31

540
525

Expense

Net gain (Red Ink)

124
1255
1395

75
96
71

FINANCIAL STATEMENT

Assets
Cash

Mdse. Invty Jan. 31, 19—
Furn. & Fix. Invty Jan. 31, 19—
Notes Receivable
Geo. W. Arnett
H. H. Keene

2346

4327

525

469

7748

72
50

50
65
87
24

RECAPITULATION AND KEVIEW

139

"Notes or accepted drafts in our favor are called A'otes Receivable or Bills Receivable. "Notes or drafts
which we must pay are called Xotes Payable. **Oral or implied promises to pay are claims against persons
for debt. These you have been taught to call personal accounts. ^Hnterest is the use of money belonging
to another. This is a valuable thing and one which is made the subject matter of many business transactions.
^''Expense is a name given to all amounts expended for the purpose of carrying on the business. When
such items are not classified imder some special title, they are called expense. **Separate records may be
kept of certain classes of expense such as rent, postage, insm-ance, etc., if desired.

^Bookkeeping is the science of making a systematic record of business transactions, ^hese rec-
ords are made in books of original entry, auxiliary books, and the ledger, which is the book of final entry.
*^Books of original entry, as the term implies, are the books in which the transactions are directly
recorded at the time of their occurrence. ^The journal, sales book, and cash book are books of original
entry. ^Books of original entry are characterized by the fact that in them entries are made at the time
of their occurrence and in the order of their occurrence and the fact that entries in them are posted to
the ledger. ^Posting is the process of a transferring transactions from books of original entry to the
ledger. ^The ledger is the book of final entry to which transactions are posted. *The ledger is charac-
terized by the fact that in it transactions are classified under their proper headings, in accounts.
"Auxiliary books are books of memorandum.

**Every business transaction, as stated in definition 1, involves an exchange of values — one thing is
given, another thing is received. "The thing which is received, costs the business, and the account with
that thing is debited, ^he thing which is given or disposed of, produces a return, and the account with
that thing is credited. ^^An account is a list of debits and credits affecting the same person or thing, grouped

has been brought down from the trading section. Sometimes a loss and gain statement is divided into
three or even four sections, but usually two sections give a sufficiently elaborate analysis. Below the
Loss and Gain Statement is a P'inancial Statement. The assets are shown on the left-hand page and the
liabilities on the right. The net capital is classed with the liabilities and is written as the last item on
the liability side. The two sides are exactly equal in total, and for this reason this statement is called a
"balanced" statement. When the balanced form is used, it is necessary to prepare the loss and gain
statement first, in order to know the amount of capital.

FOR MONTH OF JANUARY, 19—

Credits
Sales of Mdse. during Jan., 19 —

Gain on trading, brought down
Interest and Discbunt Cr.
Dr.

2567

1373
22

1395

JANUARY 31, ig-

LiABiLiTiEs & Capital
Notes Payable
Armstrong & Force
Net capital, Jan. 1, 19 —
Net gain as per Loss & Gain Statement
Net capital, Jan. 31, 19 —

6115
1255

126
250

7371

7748

140 RECAPITULATION AND REVIEW

together under one heading in the ledger for the purpose of showing some particular result in regard to that
thing. ^To debit means to charge. We debit the account of the person or thing which costs the business
something. ^To credit means to give credit for. We credit the account of that person or thing whicb
produces value.

**Accounts may be divided, as to the results shown (see definition 19), into two general classes: (a)
Those which exhibit as a result either an asset or a liability, (b) Those which exhibit as a result either a
loss or a gain. The former arc called Financial accounts; the latter are called Loss or Gain accounts.
^Single Entry bookkeeping is a method of bookkeeping in which usually, accounts with persons and cash
only (all Financial accounts) are kept. Hence, ordinarily, only the debit side or the credit side of a trans-
action is recorded and separate losses and gains are not shown. ^Double Entry bookkeeping is a method
in which a record is made of both debits and credits in every transaction. Accounts are kept with losses
and gains as well as with all assets and liabilities, and hence the progress of the business can be shown as
well as its condition, at any time.

^' The purpose of bookkeeping is to keep a record of all transactions in such a way that the result of any
account can be determined, and that the condition and progress of the business, as a whole, can be deter-
mined at any time. ^The condition of the business can be determined from the Financial accounts and
the inventories. ^An inventory is a list of property showing the kinds and quantities on hand and their
valuations, ^he statement setting forth the condition of the business is called the Financial Statement.
*'The Financial Statement shows the assets and the liabilities. ^Assets, or resources, are property on hand
or other things of value belonging to the business. ^^Liabilities are debts. **The difference between the
assets and the liabilities shows the condition of the business and is called the Net Capital, x>t Net Worth, or
Net Investment. **The progress of the business is its gain or loss. *'Progress is shown by accounts closing
with gain or loss. *'The statement showing gains and losses is called the Loss and Gain Statement.
^Double Entry bookkeeping shows the separate gains and losses of the business, and the net gain or loss can
be determined by a comparison of gains and losses. Single Entry bookkeeping does not show separate
gains and losses at all, and the net profit or loss can be determined only by a comparison of the Financial
Statement taken at one time with the Financial Statement taken at some earlier time.

Review carefully all of Chapter I.

Review the sections on Statements and Closing the Ledger, pages 56 to 66.

Review the instructions on the Sales Book, page 70, the Bill Books, pages 74-75, and
the Cash Book, pages 87 to 90.

Answer the following questions, based on the definitions given on this and the
preceding page. Each question is followed by a number indicating the number of the
definition which will answer the question.

QUESTIONS

(1) What is a business transaction?' (2) What does eveiy business transaction involve?**
(3) Who may be parties to a business transaction?^ (4) What is meant by " things of value"?* (5) Define
"proprietor".^ (6) Define "partnership".* (7) Define "corporation".* (8) Name five important
classes of things of value.'' (9) What is cash?' (10) Give two general divisions of property.' (11) When
are services "things of value"?'" (12) Name the two principal kinds of written promises to pay." (13)
What is an accepted draft?!^ (14) What are Notes Receivable?'^ (15) What are notes Payable?'* (16)
What is meant by "personal accounts?"'* (17) Define Interest." (18) Define Expense." (19) What
is bookkeeping?" (20) What are its purposes?^ (21) Name three classes of books. Define and describe
each.2o-" (22) What is an account?^' (23) Define "debit" and " credit ".^^-ss (24) Divide accounts
into two classes. How can you tell to which class a given account belongs?^ (25) What is Single Entry
bookkeeping?^ (26) What is Double Entry bookkeeping? State its principal advantage.^' (27) How
can the condition of the business be determined?^ (28) How can the progress of the business be deter-
mmed?** (29) What is the Financial Statement, and what does it show?*"-*' (30) What is the Loss and
Gain Statement?*' (31) Define "assets".** (32) What are " Liabilities" ?** (33) What is the difference
between assets and liabilities called?**

PART II

PRELIMINARY WORK FOR THE STUDENT

Review the rules for journalizing given on page 129, Part I, and be sure that you
have the general rule committed to memory. Journalize the following exercises, writing
your journal entries on loose sheets without explanations:

EXERCISE I

Jan, 1, 19 — . H. R. McComb, the proprietor, invested cash, $1800.00

Jan. 2. Pd. cash for the January rent, $50.00.

Jan. 3. Bought Mdse of R. W. Coriat on account, $400.00.

Jan. 4. Sold for cash Mdse invoiced at $40.00.

Jan. 5. Gave our 10-day note at 6% to R. W. Coriat on account, $100.00.

Jan. 6. Sold to M. B. Kelly Mdse on account, $65.00.

Jan. 8. Bought a lot on Suburban St., for business purposes, $1000.00. Paid $500.00
in cash, and gave a 15-day note bearing 5% interest for the balance.

Jan. 9. M. B. Kelly paid $40.00 on account in cash.

Jan. 10. Paid R. W. Coriat $150.00 cash on account.

Jan. 11. The proprietor withdrew $25.00 in cash.

Jan. 12. Received Jas. B. Read's 15-day note at 6% for Mdse invoiced at $175.00.

Jan. 13. Bought postage stamps for office use, $15.00 cash.

Jan. 15. Redeemed our note of Jan. 5 with accrued interest, in cash.

Jan. 16. Accepted an offer of $1200.00 for the lot on Suburban St. The buyer
paid $250.00 in cash and gave his 60-day note at 6% for the remainder.

Jan. 17. M. B. Kelly returned Mdse valued at $5.00, for which we gave him credit.

Jan. 18. Sold for cash 250 2c stamps.

Jan. 19. The proprietor increased his investment by $1000.00 cash.

Jan. 20. Sold Mdse to A. N. Wagner on 30 days' credit, $120.00.

Jan. 23. Redeemed our note issued Jan. 8 by giving a new note at 6% for the old
note and accrued interest.

Jan. 27. Jas. B. Read paid his note of Jan. 12 and accrued interest, in cash.

EXERCISE II

Feb. 1, 19—. The proprietor, H. E. Broker, invested cash, $1500.00; Mdse, $1250.00
and a note in his favor signed by W. L. Wilcox, $560.00. The note was dated Dec. 20,
and was for 60 days at 6%.

Feb. 2. Bought Mdse of C. H. Smith, $379.00. Gave him in exchange our note
for 10 days at 7%, $270.00; and our 30-day note at 7% for $109.00. . ,

Feb. 3. Billed to H. F. McClure Mdse amounting to $416.00.

Feb. 4. Sold to Fred W. Upham on account the note signed by W. L. Wilcox which
was invested Feb. 1, discounting it at the rate of 5% per annum.

To find the amount for which this note was sold, add to the face of the note the interest for 60 days
at 6%; then discount this total for the length of time the note yet has to run, discounting at 5%. The

141

142 PRELIMINARY WORK — PART II

amount credited to Interest & Discount is the difference between the face of the note and the amount
for which it was sold.

Feb. 5. Redeemed our 30-day note of Feb. 2 by paying in cash the face of the note
plus the interest accrued to date.

Feb. 6. Bought on account of Wm. A. Marshall & Co. Mdse amounting to $650.00.

Feb. 7. Received H. F. McClure's 10-day note at 6%, endorsed by W. J. Hilton,
for $250.00, and cash for the balance, to cover the invoice sold him on Feb. 3.

Feb. 9. Clyde H. Havens opened an account with us today by the purchase of Mdse
amounting to $185.00.

Feb. 10. Borrowed $1000.00 for 60 days at 10% from I. N. Marks. The rate being
usurious, Mr. Marks required Mr. Broker to add the interest for 60 days to the amount
borrowed and make him out a non-interest-bearing note for the full amount.

Feb. 11. Received Clyde H. Havens' 30-day note at 6% for $100.00.

Feb. 12. Redeemed our 10-day note of Feb. 2 in favor of C. H. Smith as follows:
Gave him $100.00 in cash, to be applied first on the interest accrued, and then on the
face of the note. Gave him a new note for 15 days at 7% for the balance due him on
the first note.

Feb. 13. Clyde H. Havens returned for credit Mdse which was billed to him on
Feb. 9 at $8.75, and paid cash for the balance due on the invoice of Feb. 9, $76.25.

Feb. 15. Gave William A. Marshall & Co. our 15-day note at 6% for the amount
of the invoice bought of them on Feb. 6.

Feb. 16. Borrowed $1000.00 from the First National Bank on our 60-day note at
6%. The bank required us to pay the interest in advance in cash; we paid this out of
the $1000.00.

Feb. 17. Discounted at the Second National Bank our 60-day note for $500.00,
dated today. Rate of discount, 6%.

There is no difference between the "discount" (bank discoimt) mentioned in this transaction and
the "interest" mentioned in the preceding transaction. The transactions are exactly ahke, but stated
differently.

Feb. 18. Presented H. F. McClure's note for payment today, and payment was
refused. We had the note protested, for which service we paid a notary public 25c protest
fee.

A protest is a formal statement, signed by a notary, that he has personally presented a paper for pay-
ment and that payment was refused. This definitely estabUshes the fact that the paper has been dis-
honored, and is a necessary prehminary to charging the endorser.

Feb. 22. Instituted foreclosure proceedings against a piece of property owned by
H. F. McClure, and it was sold in satisfaction of our claim agamst him, viz: a note for
$250.00 dated Feb. 7 and bearing 6% interest. The property was sold by the sheriff
for $260.00, and of this amount $25.00 was taken for court costs and legal fees. The
remainder was turned over to us.

Feb. 27. Redeemed our note of Feb. 12 and interest, in cash.

EXERCISE III

March 1, 19 — . Discounted at the bank a non-interest-bearing 60-day note which
we held against R. W. Masters. The note was for $600.00, and was dated Feb. 13. The
rate of discount charged was 6%.

JOURNALIZING EXERCISES J43

March 2. Discounted at the bank H. M. McGuire's note in our favor for $564.50
bearing 5% interest. The note was dated Jan. 31, and was to run for 90 days. The rate
of discount was 4%.

March 3. Redeemed in cash our note for $450.00 in favor of D. C. Walsh. The
note was dated 60 days ago and bore 4^% interest.

March 4. On Feb. 2 we issued a note in favor of M. J. Kingsley for $600.00 at
6% maturing April 3. Mr. Kingsley offered to allow us to discount this at 5% and we
gave him our check for the amount due.

March 5. Sold to J. H. Marion for cash a 60-day note which we held against B. F.
Adams. The note was for $750.00, was dated Feb. 1, and bore 6% interest. Mr. Marion
charged for discounting it at the rate of 5% per annum.

March 6. J. H. Osborne endorsed over to us on account a 30-day note signed by
H. M. Johnson. The note was for $425.00, was dated Feb. 16, and bore 6% interest.
We accepted it at its present worth.

March 7. Paid in cash J. C. Clemens' invoice for Mdse amounting to $376.00. The
invoice was dated Jan. 15 and was sold on 30 days' credit with the understanding that
interest would be charged at the rate of 6% per annum after maturity.

March 8. Our account against B. E. Stone, amounting to $150.00, fell due on Jan.
20 last, but we extended Mr. Stone's credit on condition that he pay us 7% interest after
maturity. Stone paid his account and interest today.

March 9. Borrowed $800.00 cash today, giving in exchange our 60-day note with
interest added at the rate of 8%.

March 10. Loaned William Morris $100.00 today, accepting his 10-day note at 6%.

March 10. Discounted for cash the note received from William Morris today. The
rate of discount was 5%.

March 11. Paid cash for our note issued on March 9, less discount at 5%.

March 12. Bought Mdse of N. N. Carlson today invoiced at $390.00. Transferred
to him in exchange an account which we held against O, Nelson, $120.00, gave him our
60-day note at 6% for $75.00, and paid him cash for the balance.

March 13. E. C. Jackson transferred to us an account against Pettibone and Co.,
$72.50, and gave us his 30-day note at 6% for $56.00, to apply on account.

March 15. Bought from C. C. Goodyear for cash a note which he held against
Coles & Co. for $150 00. The note was dated March 1, and bore 6% interest. We
accepted it at its face plus interest accrued to date.

March 16. Paid H. W. Ellis cash for his business. The assets turned over to us
were: Store and lot valued at $5600.00; stock of goods inventoried at $3476.50; an account
against R. H. Lorimer, $156.00; and a note signed by J. T. Sullivan, $84.75, upon which
interest had accrued for 44 days at 6%.

DRAFTS

Study again the form of draft shown on page 123, Part I, and the explana-
tion which follows it. Who is the drawer? The drawee? The payee? Give definitions.

Drafts are of two kinds, namely, sight drafts and time drafts. A sight draft is one
which is payable "at sight" or upon presentation. It reads, "At sight pay to, etc."
A time draft is one which by its terms is payable at some later time, as one which reads

144 PKELIMINARY WORK — PART II

"Ten days after sight" (or "At ten days' sight," which means the same thing), or
"Thirty days after date," or "On such-and-such a date," etc.

To "honor" a draft is to pay it, if it is a sight draft, or to "accept" it, if it is a time draft.

"Acceptance" is the agreement of the drawee to pay the amount of the draft, on the day specified,
to the party named therein. The drawee writes across the face of the draft the word "Accepted" or
"Good" or any equivalent term, with the date and his signature, thus: "Accepted, June 5, 19 — , John
Doe." The draft is then known as an "acceptance."

RULES FOR JOT7RNALIZING DRAFTS

When you are the one who draws, debit the one in whose favor the draft is drawn;
credit the one upon whom the draft is drawn.

When you are the one drawn upon, debit the one who drew upon you; credit Cash
or other thing of value disposed of, if it is a sight draft and you pay it. Credit Notes
Payable, if it is a time draft, and you "accept" it.

When the draft is drawn in your favor, debit cash or other thing of value received,
if it is a sight draft, and the amount is paid to you; debit Notes Receivable, if it is a time
draft, and is accepted in your favor; credit the person who drew it in your favor.

The plan followed throughout this text is that no entry is made by the drawer of a draft, at the
time it is drawn. A memorandum is made of the fact that a draft has been drawn, and the entry is made
when the payee reports that the draft has been honored. It is but fair to say in this connection, how-
ever, that many bookkeepers make their entry at the time they draw a draft. They rely upon the drawee
to honor it, either because they have confidence in the drawee or because they have a previous arrange-
ment with him to honor it. If payment is refused, the first entry can then be corrected by a counter entry.

Drafts may be drawn to the order of "Self" or "Ourselves," in which case the drawer
is also the payee. When a draft drawn to the order of yourself is honored, give the drawee
credit and debit cash (or other thing of value received) if it is a sight draft; if it is a time
draft, and is accepted, debit Notes Receivable.

A sight draft at no time becomes a note payable or receivable to any party. It is valueless until
honored, and when it is honored the transaction becomes a mere payment from one party to another.

A time draft is of no value until honored. When it is "accepted" it becomes of the same nature
as a note payable from the drawee to the payee.

DISCOTJNTS

Trade Discount.

When a certain per cent is deducted from the listed price of an article to arrive at
the real selling price, such a deduction is called a trade discount. This deduction might
indicate that the price has been lowered since the present list price was established; it
might be a reduction made as an inducement for a sale; it might be that the house merely
uses trade discounts as a means of regulating prices without changing catalog prices; or
it might be that the same catalogs are sent to all kinds of firms and the prices to each
regulated through trade discounts. Trade discounts are taken off of the invoices when
they are made out, and do not appear on the books.

Cash Discount.

After an article has been sold at a certain price, most houses will offer a cash dis-
count in order to induce a payment of cash within a certain time. For instance, a house

DISCOUNTS

145

might sell goods on 60 days' time, but offer a special discount of 2% for spot cash or for
cash in ten days. These items are entered in a "Cash Discount" account.

Discount for the ^se of money.

This is classed with interest, the ledger account being named "Interest and Discount."
Interest is the use of another's money, and the use of another's money has to be paid
for. When we borrow money or when we hold the money of others beyond the time
when it is due, we should allow them interest for it at the rate of a certain per cent per
annum. On the other hand, when we prepay accounts or notes not yet due, we are allow-
ing someone else to have the use of our money and should charge for that prepayment.
This kind of a discount should always be classed with interest.

Discounf is often allowed for the anticipation (payment in advance of their dating) of invoices which
have been dated ahead. This should properly be entered in the Interest and Discount account, as it is
usually based upon current interest rates, or only slightly in advance of them. Most bookkeepers, how-
ever, ignore the distinction that should exist between cash discount and discount for anticipation, and
class them together because it is convenient to do so. When an invoice is paid, the entire discount, includ-
ing both cash discount and discount for anticipation, is "lumped" in one item, which is posted to the
cash discount account.

Discount on Exchange.

This is a discount that affects the banking business. When exchange sells below
par (100%), it is said to be selling at a discount. When it sells above par, it is said to
be selling at a 'premium. Items of this kind are entered in the "Premium and Discount"
account. The Premium and Discount account will not be treated in this text.

An illustration follows which shows three different kinds of discount:

On May 1, 19 — , A. L. Smith bought of C. D Brown a stove listed in Brown's catalog at $100.00.
Brown allowed Smith trade discoiints of 20% and 10% from the list price. The invoice was made out
as follows:

Interest at the rate of 6 per cent per annum will be allowed for anticipation of biUs.

Chicago, 111., May 1, 19—.
A. L. Smith,

576 East Ave., City

TO 0. D. BROWN, DR.

Terms: 2/10 n/60 Dating: Sept. 1, 19—.

To 1 stove

Less 20% and 10%

100

The terms of the bill were 2/10 n/60. This means "Two per cent discount for cash in ten days,
or the net amount ($72.00) paid in 60 days." Had Mr. Smith taken advantage of the cash discount, he
would have made the following entry in his journal on Sept. 11:

Mdse

$72.00

Cash
Cash Dis.

$70.56
1.44

The bill was "dated ahead," being given the dating Sept. 1, 19 — . (This is often done when goods
are bought early in the season, or before their season.) Had Mr. Smith decided to "anticipate" the bill
by paying it on May 1, he would have been entitled, according to a strict construction of the terms printed

146 PRELIMINARY WORK — PART II

on the invoice, to a discount on the $70.56 for 133 days (May 1 to Sept. 11) at 6%, which would have
been $1.56. Mr. Smith's entry in this case would have been:

Mdse $72.00

Cash $69.00

Cash Dis. 1.44

Int. & Dis. 1.56

As previously explained, however, the general custom is to ignore the distinction between cash dis-
count and discount for anticipation. According to this general custom, the creditor would allow 2%
cash discount and ^% more discount for each month of anticipation (in this case, 4 months), allowing
a total deduction of 4% for payment any time between May 1 and May 11. The entry would be:

Mdse $72.00

Cash $69.12

Cash Discount 2.88

It should be noted that the amount of cash discount sho'wn in the above illustration differs slightly
from the accurate result secured in the illustration which precedes it. The general custom will be adhered
to, however, in the transactions which follow, even though it is slightly inaccurate.

EXERCISE ON DRAFTS
WOBKED BY THBEE STUDENTS

The teacher will divide the student body into groups of three. The members of
each group we will designate A, B, and C. Each keeps his own set of books, consisting of
a journal and a ledger. The exercise may be worked in two or three days.

All groups go through the same procedure, as outlined in the following exercise. Invoices should
be made out for all sales, and delivered to the proper parties. All cash payments are to be made by check.
All checks received must be deposited the same day. If there is no school bank, transactions with the
bank can be carried on with the teacher, who will receive deposits and paper offered for discount or col-
lection, and will make the pass book entries; or a student may be selected by the teacher to act as banker.
All transactions or communication between students must be by correspondence conducted under the
direction of the teacher. The teacher will devise a method by which mail may be collected and distributed.

Transactions.

May 1, 19 — . Three students, A, B, and C, each invest $1500.00 in cash.

Take from the currency envelope the slip marked, "This slip represents $1500.00 in cash."

May 1. The three students invest Mdse as follows:

A invests 4000 bu. com at 70^,
B invests 2800 bu. wheat at $1.00,
C invests 5600 bu. oats at 50^.
It will not be necessary for students to handle this Mdse. If the teacher thinks it necessary, for
this short exercise, stock records can be kept.

May 1. Each student deposits all cash on hand.

Deposit slips, checks, and all other blank forms necessary for the work of this exercise wiU be found
with your supplies for Part II. Use pages 6 and 7 of your old pass book.

May 2. A sells to B 2000 bu. corn at 780; B sells to C 1400 bu. wheat at $1.10; C
sells to A 2800 bu. oats at 560. The buyer in each case gives a check for $400.00, a 30-
day note at 6% for $500.00, and has the balance charged to his account.

May 3. C sells to B 1400 bu. oats at 550; B sells to A 700 bu. wheat at $1.08; and

EXERCISE ON DRAFTS 147

A sells to C 1000 bu. corn at 77^0. The sale is made in each case subject to a sight draft
for three-fourths of the amount of the bill; balance on account.

Each student draws at sight upon the student to whom he sold today and sends the draft to the
bank for collection. The drafts should be made payable to the order of the bank.

Each student now has on hand com, wheat, and oats, and has an accovmt with each of the other
students of his group.

May 4. The bank collects the amount of yesterday's draft from each of the three
students, who pay by check.

May 4, The bank reports to each student that his draft has been collected and the
amount placed to his credit, less 50^ collection fee.

Each student should now take his pass book to the bank and have the amount of the credit entered
therein.

May 5. A holds B's note, B holds C's note, and C holds A's note. In each case
the note is for $500.00, bears 6% interest, and is due June 1. Each student now discounts
the note which he holds, discounting it at the bank at 5%.

Discount of this kind is classed with interest. The ledger account should be named "Interest &
Discount" and all items of interest or discount (except cash discount) entered in it.

To compute the discount, add interest for 30 days to the face of the note, and from the amoimt so
computed deduct discount for 27 days at 5%.

Each student should take his pass book to the bank and have the proceeds of the discoimted note
entered therein.

May 7. Each student sells to the teacher 100 bu. corn at 77 fi, 100 bu. wheat at
$1.10, and 100 bu. oats at 550. In each case the sale is made on a 60-day note without
interest.

Make out the note for the teacher to sign, and present it to the teacher for signature accompanied
by an invoice.

May 7. Discount the note just received, discounting it at the bank at 5%.
Have the proceeds entered in the pass book.

May 8. A draws against B, B against C, and C against A, at ten days* sight, for
the balance due on the bill of May 2.

Draw the draft in your own favor and mail it to the drawee for acceptance.

May 8. As soon as the draft drawn today is returned accepted, discount it at the
bank at 5%.

Have the proceeds entered in your pass book.

May 9. A sells to B all corn on hand, at 750 a bushel; B sells to C all wheat on hand,
at $1.05 a bushel; and C sells to A all oats on hand, at 550 a bushel. The sale is in each
case made for cash less 2%, and is paid for by check.

A Cash Discount accovmt should now be opened.

May 10. Each student buys from the teacher for cash less 2%, as follows, paying
by check: B buys 1000 bu. corn at 700, and 1400 bu. oats at 500; C buys 700 bu. wheat
at $1.00, and 1000 bu. corn at 700; and A buys 1400 bu. oats at 500, and 700 bu. wheat
at $1.00.

To save the teacher trouble, each student may write out the invoice for the teacher to use in bill-
ing these goods.

148 PRELIMINARY WORK — PART II

May 11. C sells to B all corn on hand, at 760 per bu.; A sells to C all wheat on hand,
at $1.09 per bu.; and B sells to A all oats on hand, at 560 per bu. The terms in each case
are cash less 2%.

May 18. The bank presents to each student a draft due today which the student
pays by check. (No interest.)

May 19. Each student now sells out all Mdse on hand to the teacher, who gives
a non-interest-bearing 60-day note for the amount of the invoice in each case. A sells
his oats at 560; B sells his corn at 750; and C sells his wheat at $1.10.

Make out the note for the teacher to sign, as before. Present it for signature, accompanied by an
invoice.

May 19. Discount at the bank at 5% the note just received.
Have the proceeds entered in your pass book.

May 20. Each student owes an interest-bearing note which is held by the bank,
duo June 1. The bank consents to having these notes discounted at 4% by the makers.
Each student therefore discounts the note which he owes, giving the bank his check for
the amount due on it.

May 21. Post your journal, putting three accounts on each ledger page. Take a
trial balance. Make statements. Close your ledger.

FUNDAMENTAL PRINCIPLES OF BOOEEEEPINQ

When you go out from school and into the business world, you may never have
occasion to work on a set of books exactly like any set you have had in school. This
should not surprise you. You have opportunity while in school to work on only six or
seven different sets of books at most, and there are thousands of accounting systems
used in business, no two of which are alike in every detail. Even an experienced book-
keeper, in going from one position to another, would find it necessary to familiarize him-
self with many new features.

In respect to its exact details, every bookkeeping system differs more or less from
every other. But in respect to its underlying principles, every system is exactly like
every other. It is for you to learn what the fundamental principles of bookkeeping are,
and how to apply them to the varying conditions of business, trade, and accounting —
to learn how to construct a set of books that will show the facts and results which you
want shown. First make the principles your own, and then familiarize yourself with
as many as possible of the mechanical modifications of which those principles are
susceptible.

Among the most important principles* underlying all double entry bookkeeping are:

1. Equal debit and credit

2. Classification

3. Condensation

4. Analysis

1. The principle of equal debit and credit.

This principle you have already learned in your study of journalizing.

*It is contended by some that the word "principle" as applied to a truth of bookkeeping, is a mis-
nomer; that bookkeeping deals with processes and has characteristics, but not "principles."

FUNDAMENTAL PRINCIPLES OF BOOKKEEPING 149

2. The principle of classification.

The sales book is an illustration of this. Items of a similar kind are segregated (put by themselves),
so that desired facts in regard to that class of transactions can be readily secured. (If there were no such
thing as a sales book, the total sales for a given period, for instance, could be ascertained only by a laborious
search through the journal, or through old sales tickets.) This principle of classification finds expression
in many ways. Special columns can be kept in the cash book for Expense, Cash Discount, Merchandise
Sales, etc. Journals can be ruled with many columns, and entries may be classified through the use of
the columns. Purchases may be set by themselves in an invoice book similar in nature to the sales book.
And so on.

3. The principle of condensation.

This is closely allied to the principle of classification. When entries of a certain kind are classified
(as in the sales book), they occupy less space than they would in a journal, and labor in posting is saved
as well. This is condensation. It is economy.

4. The principle of analysis.

The expense account may be used as an illustration of this. As you have handled it thus far, there
has been no attempt at an analysis of expenses, except that Interest, which is sometimes entered as Expense,
has been kept in a separate account. You might, however, have kept a separate account with Adver-
tising, another with Salaries, another with Insurance, etc. Whether or not a separate account is to be
kept for a certain class of expenses, depends entirely upon whether or not it is considered necessary or
desirable to know how much that particular item of expense amounts to.

Many other principles of accounting might be named, but the above are the most
important. It would be difficult to find any set of books worthy the name which did
not utilize all of them to a greater or less degree. The number and kind of books used
and accounts kept in any business depends entirely upon the character and scope of the
business and the information desired. Whatever books and accounts are kept, how-
ever, the principle of equal debits and credits must always be observed (if a double entry
system is used), and the principles of classification, condensation, and analysis will be
made use of to a gi'eater or less extent.

In the wholesale boot and shoe business which follows, merchandise is bought and sold on 30 or
60 days' time. Discounts are secured from creditors for early cash payments, and discounts are given
to customers for early cash payments. This business condition makes it advisable that special columns
be kept on both sides of the cash book in which cash discounts may be entered. This is an illustration
of the fact that the nature of the business itself regulates the character of the books used.

The wholesale boot and shoe business is a business in which a great deal of freight is received, and
many shipments made; this necessitates the use of a separate account for Freight. A great deal of adver-
tising is done, and a separate account with Advertising is considered desirable. This illustrates the fact
that the number and kind of accounts kept depends upon the character of the business.

The special columns in the cash book illustrate classification and condensation. The Cash Dis^
count, Freight, and Advertising accoimts exemplify the principle of analysis.

Make up your mind now that you will not be content merely to learn what to do
and how to do it. Determine that you will master the principles of the science of account*
ing, not merely the processes in the art of keeping books. If you learn processes merely,
any set of books you attempt will seem strange and incomprehensible to you because
it will not be just like some other set you happen to be familiar with. If, on the other
hand, you learn jmnciples, all bookkeeping will be easily comprehended by you — to learn
a new set will require nothing more than the time necessary to familiarize yourself with
the details.

BOOT AND SHOE BUSINESS

Books used. The books used in the set which follows are: Journal, Sales Book,
Three Column Cash Book, Ledger, and Bill Book.

The journal, sales book, bill book, and ledger differ in no respect from those you
have been using.

THE THREE COLUMN GASH BOOK
Explanation of Dr. Side. (See form below.)

The first column is used for petty cash sales. Items of cash received from petty
cash sales will be entered in this column. This will include all cash sales except those
made to parties having accounts on our books. Items entered in this column will be
checked in the folio column and not posted separately. When the books are closed, the
footing of this column will be posted to the sales book.

The second column is for cash discounts allowed to customers. When a customer
pays for a bill of goods (and in this business most bills will be paid for separately when
due) the amount of cash discount allowed him is entered in the second column and the
net amount received from him is entered in the last column, which is headed "General,"
on the same line. Both the discount and the net amount received are posted to the
credit of the customer's account in the ledger (the amount from the General column being
posted first, and the discount being entered on the line below it), and the proper folio
is entered in the L. F. column. The total of the discount column is posted to the

19-

CASH DR.

Petty Cash
Sales

Cash Dis.
Dr.

General

June

Balance

4140

4
5
5

Petty Cash Sale
E. E. Merville
Expense

14 pre. Men's R. G. Blu. at 2.50
Inv. of May 26 less 1%
Merville Pd. Exch. in advance

85
15

Petty Cash Sales

For the day

***
*

Frazin & Oppenheim

Inv. of this date less 1%

85
**

252
**

95
**

25
30
30

DeMuth & Co.
Mdse Sales Cr.
Cash Discount Dr.

Inv. of June 15 less 1%
Entered in Sales Book

03
**

200
**

Balance

****

July

****

(The above is an illustration of form only)
150

THE THREE COLUMN CASH BOOK

151

debit of Cash Discount in the ledger at the time of closing. The net amount received
is, as it stands, a debit to Cash.

All other items of cash received are entered in the General column. They are posted
to the credit of the proper accounts in the ledger, and the folio entered in the L. F. column.

Explanation of the Or. Side. (See form below.)

Items of expense are entered in the first column. They are not posted separately,
but a check mark is placed in the folio column and the total is posted to the debit of
Expense at the time of closing the books.

The second column is for cash discounts allowed to us by creditors. When we pay
a bill and secure a cash discount on it, the amount of the discount is entered in the second
column and the amount of the net payment is entered in the last column, on the same
line. Both items are posted to the debit of the party paid, and the proper page number
written in the L. F. column The total of the discount column is posted to the credit
of Cash Discount at the time of closing the books. The amount of the net payment is,
as it stands, a credit to Cash.

All other items of cash paid are entered in the general column, from which they are
posted to the proper accounts in the ledger, and the folio entered in the L. F. column.

Balancing the Three Column Cash Book. Rule a single line across the first column
on the debit side and add. Post to the sales book, dating the entry as of the date of
closing, and using the explanation "Entered in Sales Book." In the L. F. column write
the page of the sales book to which the total was carried. Write the cash book page
in the folio column of the sales book. Rule a double line under the amount posted, rul-
ing across one column only. Write the total of this column in the general column just
opposite where it now appears, so that it will be added in with the cash received.

19—. CASH CR. .

1
1

3
6

30
30
30

Expense

Cash Dis.
Cr.

General

June

Expense §% taxes on ^ of $35000.00
Guthmann, Carpenter &

Telling Inv. of this date
Bradley & Metcalf Co. Inv. of May 25 less 4%
Expense Bookkeeper's Sal'y for week $20

Stenographer's Sal'y for week $16.5()

Expense Dr.
Cash Discount Cr.

Balance {Red Ink)

35
36

23
*

84
07

125
553

***
***
***

***

16
76

**
**
**
**
**

***

*=::

****

(The above is an illustration of form only)

152 BOOT AND SHOE BUSINESS

Rule a single line under the second column, on the same line with the double line
just ruled. Add the column. Post the total to the debit of Cash Discount, using the
explanation "Cash Discount Dr." Rule up this column the same way you ruled the
first column, but do not carry the total into the General column, as it is not a debit of cash
(it was posted to the debit of Cash Discount).

Post the footing of the Expense column on the credit side to the debit of Expense
and also write the amount in the General column of the cash book, credit side, on the
same line. Post the footing of the middle column to the credit of Cash Discount; but
do not vxrite this amount in the General column, as it is not a credit of cash.

Insert small, neat lead pencil footings in the two General columns. Ascertain the
balance and write it on the credit side in red ink, on the first blank line. The debit totals
and rulings should be just opposite the corresponding totals and rulings on the credit side.
The double rulings should extend clear across the pages, except that they are not ruled under
the explanatory columns. Bringthebalance down into the General column on the debit side.

Accounts Kept. Open in your ledger the following accounts, in the order named
below, allowing for each account one line for the heading, one. line for the ruling, and for
the items the number of lines named.

Investment 10 lines Willis & Atwood, 365 63d St 12 lines

Real Estate 10 lines E. E. Merville, Cleveland, Ohio 11 lines

Furniture & Fixtures 11 lines S. H. East, Indianapolis, Ind 8 lines

Horses & Wagons 7 lines H. E. Montgomery, Hartford, Conn 8 lines

Mdse 26 lines Sundry Debtors 12 lines

Interest & Discount. 25 lines C. O. D 11 lines

Cash Discount . . 8 lines Notes Payable 7 lines

Freight 8 lines Guthmann, Carpenter & Telling, 222

Advertising 10 lines Franklin St 12 lines

Expense 13 lines H. F. C. Dovenmuehle & Son, 248 Monroe

Loss & Gain 14 lines St 12 lines

Notes Receivable 12 lines Bradley & Metcalf Co., Milwaukee, Wis. . 12 lines

William Anderson, 307 W. 69th St 5 lines A. A. Putnam & Son, 207 Monroe St 7 lines

DeMuth & Co., 237 State St. 17 lines Hamilton Brown & Co., St. Louis, Mo 12 lines

Fargo, Keith & Co., 147 5th Ave 16 lines Pingree & Co., Detroit, Mich 12 lines

Frazin & Oppenheim, 266 State St 8 lines Roberts, Johnson & Rand, St. Louis, Mo. . 7 lincjj

O'Connor & Goldberg, 144 Clark St 8 lines Chicago Rubber Shoe Co., 153 Franklin St. 12 lines

Streeter Bros., 187 State St 15 lines Great Western Factory, Fond du Lac, Wis. 12 lines

The Investment Account. This is the capital account. There are several partners
interested in the business, but the accounts of the partners are kept in a Private Ledger
to which no one has access except the partners themselves. All you know, and all that
shows in the general ledger, is that the total investment is $74747.20, and this you keep
in an account entitled "Investment." The investment account is credited for the net
gain of the business or debited for its net loss.

The Interest & Discount Account. This account contains all items of either inter-
est or discount allowed or charged for the use of money.

A strict observance of the distinction between cash discount and discount for anticipation would necess-
itate including items of discount for anticipation in this account. This distinction will not be observed,
however, in the transactions which follow, but the general custom will be adhered to of "lumping" cash
discount and discount for anticipation in a single item and entering it as cash discount. See Discount for
the use of money, page 137; and Dating bills ahead, page 146.

ACCOUNTS KEPT 153

The Cash Discount Account. This account is debited with the total of the discounts
allowed to customers, as shown on the debit side of the cash book. It is credited with
the total of the discounts secured from creditors, as shown on the credit side of the cash
book. "Cash discount" will be understood, in the transactions which follow, to incluSe
any additional discount that is allowed or charged for anticipation. The difference
between the debit and credit sides is the gain or the loss on cash discount; it is closed
to Loss and Gain.

The Freight Account. Items paid for freight are charged to this account instead
of to the Mdse account. In the shoe business the buyer is usually supposed to bear the
freight expense. When we buy Mdse from out of the city there will be a freight bill to
pay. Usually this will be paid directly to the railroad company, but if for any reason
the house shipping to us should prepay the freight charges, then payment for the freight
should be made to them. When we sell, the goods are sold "F. O. B. Chicago," which
means that the house buying from us must bear the freight expense. If for any reason
we should prepay the freight charges, we would debit the buyer, and not debit freight.
The freight account will therefore show nothing but the cost of freight coming in. In
making the loss and gain statement, freight must be shown as an increase of the cost
of Mdse; and in closing the ledger the freight account must be closed into the Mdse account
before the Mdse account is closed.

Advertising. This is a special account which will contain items of advertising which
you have been in the habit of charging directly to Expense. The total cost of advertis-
ing will show in the loss and gain statement as an increase of the cost of expense, and
th)^ advertising account in the ledger will be closed into the expense account before the
ense account is closed.

Sundry Debtors. Occasionally you will make a sale to some house which has no
regular account, and does not buy often enough to justify you in opening one. Charges
for such sales may all be entered under the general head "Sundry Debtors." In posting
these items, allow two lines for each. On the debit side write the name of the house
charged and the amount of the charge on the first line, and the address and terms of sale
on the second line. (See illustration on page 158.) When payment is received, write
the amount received on the credit side on the same line with the amount of the charge
which it settles. Enter the discount on the credit side on the next line, directly opposite
the address which is on the debit side. "Sundry Debtors" is not an account, but a ledger
heading under which a number of small accounts are kept.

0. 0. D. C. 0. D. items are handled in the same way as the Sundry Debtors items.
All C. 0. D. sales are entered under this head, and each sale is allowed two lines.

Great Western Factory. This factory is owned and operated by the M. D. Wells
Co., which conducts the business represented in the following transactions. The factory
bills its product to the House, however, just as any other factory would, and its account
is kept in the same way as any other personal account with a creditor. Its bills are
always net, and settlements with the factory are made periodically, whereas bills against
us by other factories are usually settled separately as they mature.

Personal accounts are kept with all creditors, and all purchases are carried through
the ledger whether they are for cash or not.

Personal accounts are kept with all regular customers, and all sales to them are
carried through the ledger whether they are for cash or not.

154

BOOT AND SHOE BUSINESS

All sales for cash that are not made to regular customers who have accounts on out
books are entered as Petty Cash Sales. No account is kept in the ledger with Petty Cash
Sales, as the footing of the Petty Cash Sales column in the cash book is entered in the
sales book.

Dating Bills Ahead. This is a common custom in the boot and shoe business, as
well as in many other lines. The buyer must place his orders many months before the
season opens, both in the spring and in the fall. The shipper cannot hold all orders until
March 1 or August 1, as the case may be, and ship all out the same day. He prefers to
fill the orders and ship them at times which suit his convenience. The buyer has no
objection to this, provided he does not have to pay the bill at an early date. Hence the
custom has arisen of shipping early and dating ahead. The seller is usually willing to
allow the buyer to discount such a bill, allowing him a certain per cent or fraction of one
percent for every month of anticipation.

TRANSACTIONS FOR JUNE

This set is on the individual business practice plan with which you are familiar. All cash received
will be deposited daily, and all payments will be made by check. Use the same filing device you used
in Part I. No instructions for filing will be given, as you should know how to attend to this without
assistance by this time. Specific instructions for bookkeeping will be given only for transactions that
present some new features.

JUNE 1. 19—.

The ledger of the M. D. Wells Co., located at the corner of 5th Ave. and Monroe St.,
Chicago, 111., was closed at the end of May, and the balances brought down, all dated
June 1, are as shown by the following trial balance.

Balance of Balances, June 1, 19 — .

Investment (the capital account)

74747

Real Estate (Inventory)

35560

Furniture & Fixtures (Inventory)

5850

Horses & Wagons (Inventory)

875

Mdse

29703

Interest & Discount (Inventories)

Notes Receivable

1250

Wm. Anderson, 307 W. 69th St. '

346

Fargo, Keith & Co., 147 5th Ave.

250

E. E. Merville, Cleveland, 0.

S. H. East, Indianapolis, Ind.

126

Notes Pay.

345

Guthmann, Carpenter & Telling, 222 Franklin St.

782

H. F. C. Dovenmuehle & Son, 248 Monroe St.

1146

Bradley & Metcalf Co., Milwaukee, Wis.

576

Great Western Factory, Fond du Lac, Wis.
Cash

1124
4140

89
50

1712

79311

According to instructions, your ledger headings have all been written. Enter in
the ledger the items shown in the above trial balance, with the explanation "Inventory"
or "Balance" in each case. Write the cash balance in the General column on the debit
side of your cash book. See the illustration of the cash book, pages 142 and 143.

TRANSACTIONS FOR JUNE 155

The cash is all in the bank. Enter the amount, $4140.50, on the stub of your check book, and have
it entered as a balance in your pass book. (Use your old pass book.)

If your school has a bank, your banking business should be conducted through it. Inasmuch as
the bank will have accounts with a number of students, your account can be kept on its books as " (Your
Name) for M. D. Wells Co."*

The notes receivable are Incoming Paper No. 70 and Incoming Paper No. 71. Enter them as Notes
Receivable No. 1 and 2.

Notes Payable No. 1 is our 30-day note in favor of Pingree & Co. It is for $345.60 and is dated May
12. It bears 6% interest. Enter these facts in your Notes Payable Book.

Compute the interest secured on notes receivable and payable. Are the interest inventories correct
as shown in the trial balance of June 1 ?

Now take a trial balance from your own ledger to make sure that you have made no
mistakes in entering the balances and inventories.

You are now ready to proceed with the transactions of June 1.

JUNE 1

Pay the taxes on our real estate, b}' check No. 1 for $35.00. The check should be
drawn in favor of John P. Thompson, Cook County Collector. The receipt for this is
Incoming Paper No. 72.

Note that the receipt shows that a valuation of $35000.00 was placed upon our property by the assessor.
The property was taxed one-half of 1%, based upon a one-fifth valuation. Verify the correctness of the
amount of the tax, on this basis.

Make the bookkeeping entry on the credit side of the cash book, in the Expense column, and place
a check mark in the folio column, as shown in the illustration of the cash book, on pages 142 and 143.

Deliver the check to the County Collector by placing it in the outgoing papers section of the file. In
the future please bear in mind that outgoing mail is always to be placed in this section of the file. Attend
to this and other filing in future without special instructions. Use your old file.

Receive an invoice (Incoming Paper No. 73) and pay it at once by check. Two book-
keeping entries are required. The entry in the journal is made first; then the cash book
entry. You will find the cash book entry illustrated in the model on page 143.

"Wos." is the abbreviation commonly used in the boot and shoe business for "Women's."

In making the journal entry, it is not necessary to itemize the goods bought, because the items are
shown in detail on the invoice, which you keep in your files. In your explanation it is only necessary
to refer to this invoice, giving its date. (Sometimes invoices are numbered as they are received, and are
referred to by number.)

Read the terms carefully. Note that we are allowed to deduct interest on $126.00 for 30 days at
8% per annum if we pay the bill today. This is not, strictly speaking, a cash discount, but for purposes
of bookkeeping it is entered in the cash discount account. The matter is fully discusesd in the note at
the bottom of page 144.

Note that the invoice is already receipted. It is assumed that this is done at the time the amount
is paid by you.

JUNE 2

Sell to Wm. Anderson, 307 W. 69th St., City, on account, terms 1/10 n/30:

1870 7 pairs Men's Box Calf Bluchers at $2.65

442 7 " Men's University Patent Bluchers " 2.95

675 6 " Youth's Patent Leather Bluchers "2.40

* The teacher will have to make good to the bank the amount of this balance, either by check or by
a cash deposit.

Blu.

= Bluchers

0. G.

Pat.

= Patent

Bals.

Lea.

= Leather

Kang.

Ox.

= Oxfords

Vel.

Butt.

= Button

Gr.

156 BOOT AND SHOE BUSINESS

Make out an invoice. Give the invoice our number 1. Fill in the date, name and address, and terms,
in the spaces provided. Do not fill in the space opposite the words "Shipped Via," because the goods
are not shipped out of the city. In filling in the items do not use the words "Stock No.," "Pairs," etc.,
because these words are already printed at the heads of the columns. The following abbreviations should
be used in billing:

=Oil Grain Pol. = Polish

= Balmorals Russ. = Russet

= Kangaroo Wos. = Women's

=Velour Dong. =Dongola

= Grain Cong. == Congress

Hereafter make out invoices for all sales to persons having accounts with us without being reminded.
Your attention will not be called to this again.

"Terms 1/10 n/30" (1% 10 days, net 30 days) means that the bill was sold on thirty days' credit,
but that the customer can secure a 1% cash discount if he will pay within ten days. These are our "Reg-
ular" terms of sale for everything except rubber goods, and hereafter the expression "Terms Regular"
will be used to indicate "terms 1/10 n/30."

Be sure to get the stock numbers right when you make the entry in the sales book, as the description
is not complete without it. The description always tells whether the article described is for men, women,
youths, boys, girls, children, or infants. It usually tells the quality of the leather, as "Calf," "Patent
leather," "Vici Kid," "Velour," etc., and the shape or style of the shoe, as "Blucher," "Congress," etc.
Besides this it often uses a name indicating the brand, such as "Mastiff," "University," "Anchor Brand,"
etc. Yet with all this the description is incomplete without a stock number. There might be a dozen
different shoes which could be described as "Men's University Patent Leather Bluchers," but the descrip-
tion "Stock No. 442" would show definitely which one of them was meant.

JUNE 3

Receive an invoice (Incoming Paper No. 74).

The terms on which the goods were purchased are printed on the invoice. Be sure to make a note
of them in your journal entry.

Pay Bradley & Metcalf $553.76 by check. This is for goods purchased May 25 amount-
ing to $576.83, on the terms 4/10 n/30.

Bradley & Metcalf's account in the ledger stands credited with this amount. It is necessary to make
the remittance today so that it will reach them on June 4, in time to entitle us to the discount.

Enter the net amount of the payment in the General Column of the cash book, credit side, and the
amount of the discount in the Cash Discount Cr. column.

JTJNE 4

Sell to O'Connor & Goldberg, 144 Clark St., the following goods, terms Regular:

761 18 pairs Men's Oil Grain Seamless Balmorals at $1.50

1330 18 " Little Gents' Kid Blucher "Mastiff" " 1.35

2408 12 " Wos. Tan Vici Bluchers " 2.25

Sell for cash to a dealer who has no account with us, 14 pairs No. 427 Men's Russet
Grain Bluchers at $2.50 net.

Make the entry in the petty cash sales column of the cash book.

It will not be necessary either to make out an invoice or to give a receipt, as the customer has not
asked for either.

Take the proper amount of currency from the currency envelope. Enter the amount in the Petty
Cash Sales column in the cash book. Deposit the currency, and in future deposit all currency and checks
received on the same day they are received. You will not be reminded of this again.

TRANSACTIONS FOR JUNE 157

JUNE 5

Receive a check from E. E. Merville on account (Incoming Paper No. 75). This check
is to cover an invoice amounting to $79.65 which we sold to him on May 26 on our regular
terms. He drew his check for $79.00, which was 15^ more than the net amount due us,
so that we would not lose the amount of the bank's fee for exchange.

When a bank cashes an out-of-town check, it charges a fee for the service, except when the check
is drawn upon a bank with which it has an agreement that each will cash free of charge checks drawn
upon the other. This fee is called exchange. Anyone sending to another city a check drawn upon a local
bank, should make his check lai^e enough to cover exchange, unless he knows that no exchange will be
charged.

Credit E. E. Merville for the amount of his remittance (less 15^) in the General column on the debit
side of the cash book. Write the amount of the discount on the same line. On the next line, enter the
amount sent to cover the exchange (15<i) in the General column, crediting Expense.

Mr. Merville did not ask for a receipt, so it will not be necessary to send him one, as his check will
be canceled and returned to him in the course of time and our endorsement upon it will constitute a satis-
factory receipt.

When we deposit E. E. Merville's check, the bank charges us 15^ exchange.

Enter the 15^ in the Expense column of the cash book. Note that this, being a debit to Expense,
is canceled by the credit to Expense in the last entry, so that we have not lost.

When you take your deposit to the bank, the bank clerk will subtract \5i, the charge for exchange, from
the amount of the total deposit as you have entered it on the deposit slip. He will enter the net amount
of your deposit only, in the pass book. This net amount, $78.85, is the amount you should enter on your
check book stub.

Some depositors prefer to pay exchange charges in cash. WTien this is done, the plan of depositing
all cash receipts being followed, the cash receipts for a given period are in exact agreement with the total
shown by the pass book to have been deposited during that period.

JUNE 6

Sell to Fargo, Keith & Co., 147 Fifth Ave., terms Regular, August 1 dating, the follow-
ing goods:

1900 18 pairs Men's Gun Metal Bluchers at J2.85

1171 15 " Men's Vici Balmorals, Old Man's Last " 2.00

268 12 " Men's High Cut Work Shoes " 5.80

637 15 " Youth's Kangaroo Grain "High Cut" " 1.85

"Aug. 1 dating." See Dating Bills ahead, page 146. Make a note of the dating on the first line of

your sales book entry, between the address and the terms. The first line of your sales book entry will

read, "Fargo, Keith & Co., 147 Fifth Ave., Aug. 1 dating, Reg."

Pay the salaries of the bookkeeper, $20.00; and the stenographer, $16.50.

Draw a check to "currency" for the amount of both salaries. In accordance with your instructions
to make all payments by check, you will remember to make out a check for every disbursement. Your
attention will not be called to this again.

Enter this in the Expense column of the cash book, checking in the folio column. Use one line only.

Petty cash sale made today, $23.65. Detach Incoming Paper No. 76 from the pad
of incoming papers.

JUNE 8

Sell to S. H. East, Indianapolis, Ind., terms Regular, an invoice of shoes as follows:

1855 30 pairs Men's Kid "Go Easy" Bluchers at $3.15

1805 24 " Men's Kid Balmorals " 2.50

478 12 « Men's University Velour Calf Bluchers " 2.95

36 " Men's Para Rubbers "Acton" " .**

158

BOOT AND SHOE BUSINESS

Ask your teacher to assign to you one of the following price lists, and in this and all
future sales use the prices in the list assigned you, on the articles named in the list:

Variable Price Lists

List 1

List 2

List 3

List 4

List 5

List 6

List 7

List 8

List 9

Men's Para Rubbers "Acton"

Women's Rubbers "Zephyr Croquet".
Men's American Rubbers "Puritan". .
Boys' Para Rubbers "Heavy Over". . .
Wos. American Rubbers "Sensible". . .
Men's Rubbers "Everstick"

.75
.60
.90
.65
.68
.85
1.40

.80
.65
.95
.70
.69
.86
1.42i

.85
.70

1.00
.65
.67
.85

1.45

.80
.65
.90
.70
.66
.86
1.42i

.75
.65
.95
.75
.65
.85
1.40

.£0
.GO

1.00
.65
.64
.86

1.45

.75
.GO
.95
.70
.65
.90
1.42^

.80
.65
.95
.65
.64
.85
1.40

.75
.70
1.00
.75
.65
.86

Boys' Gum Lumbermen's Overs

1.42i

Men's Para Rubbers "Acton"

Women's Rubbers "Zephyr Croquet"
Men's American Rubbers "Puritan"..
Boys' Para Rubbers "Heavy Over". .
Wos. American Rubbers "Sensible"..

Men's Rubbers "Everstick"

Boys' Gum Lumbermen's Overs

List 10

List 11

List 12

List 13

List 14

List 15

List 16

List 17

.80

.85

.90

.85

.80

.75

.80

.60

.65

.70

.60

.65

.70

.90

.95

1.00

.90

.95

1.00

.90

.60

.70

.60

.70

.60

.65

.66

.67

.68

.69

.70

.65

.64

.65

.85

.86

.85

.86

.85

.86

.87

.88

1.45

1.40

1.37i

1.40

1.42 J

1.45

1.40

1.42i

List 18

.75
.60
.90
.70
.66
.89
1.45

Men's Para Rubbers "Acton"

Women's Rubbers "Zephyr Croquet"
Men's American Rubbers "Puritan". ,
Boys' Para Rubbers "Heavy Over". .
Wos. American Rubbers "Sensible"..

Men's Rubbers "Everstick". . .

Boys' Gum Lumbermen's Overs

List 19

List 20

List 21

List 22

List 23

List 24

List 25

.80

.85

.80

.75

.80

.85

.75

.60

.65

.70

.75

.60

.65

.70

.95

1.00

.90

.95

1.00

.65

.60

.70

.65

.70

.67

.68

.69

.70

.65

.66

.67

.90

.65

.66

.67

.68

.69

.70

1.45

1.40

1.42 J

1.45

1.42i

1.40

List 26

.80
.60
.90
.60
.68
.65
1.45

Shipping. — The shipment is made via the Baltimore & Ohio Railroad. Fill out a
"straight" bill of lading, in triplicate, giving it the shippers' number L Describe the
Mdse. as "2 boxes shoes." You are already familiar with the details of filling out a bill
of lading. The agent, C. L. Grafton, returns the "original" and "memorandum" to you
with the agent's number 17649, the weight entered as 160 pounds, and his signature as
agent. Send the "memorandum" to the customer, retaining the "original."

JUNE 10

Receive a note signed by S. H. East (Incoming Paper No. 77). This note is to cover
an invoice of Mdse. sold him on May 15, and bears the date of the invoice.

Pay the Chicago Record-Herald for advertising during May. Their receipted bill is
Incoming Paper No. 78.

H. F. C. Dovenmuehle & Son's account shows a balance of $1146.78 in their favor.
This consists of two items: One an invoice amounting to $500.00 net, due June 2; the
other an invoice amounting to $646.78 net, due June 20. Pay both bills today. The
first invoice draws interest at 6% from the due date until the date of payment. On the
second, we are entitled to discount at 6% from June 10 to June 20,

TRANSACTIONS FOR JUNE 159

The discount item is larger than the interest item. The net result of the two items is therefore a
saving to us. Enter it in the Cash Discount Cr. column in the cash book. Strictly speaking, this is not
a Cash Discount item, but an Interest and Discount item, because it is a payment of money in advance
of the average due date of the biUs, and the amount of the discount is determined by the number of days
of prepayment at an annual rate of discount, whereas a cash discount, strictly speaking, is a lump siun
deducted as a consideration for payment within a given number of days after the goods have been billed.
The plan of handling the cash discount account in this set has already been fully explained on page 144,
however, and in accordance with that plan you will credit Cash Discount.

JUNE 11

Draw at sight on Wm. Anderson for $346.75 due today and draw at two days' sight
on Fargo, Keith & Co. for $250.00 due on June 13. Both drafts are to be drawn in favor
of Guthmann, Carpenter & Telling, to be appUed on their bill of $782.25 against us due
June 13 without discount. Remit the drafts to Guthmann, Carpenter & Telling for credit,
with our check for the balance of the $782.25.

This requires an entry in the cash book and a full explanation in the journal. Make no entry in the
journal until Guthmann, Carpenter & Telling report that the drafts have been honored.

As has been previously explained, some bookkeepers would make the entry for these drafts at once,
risking the possible necessity of a correction entry in preference to the certain trouble of keeping track
of a memorandum entry.

Sell Streeter Bros., 187 State St., terms Regular, the following bill:

754 36 pairs Men's Kangaroo Grain "Kant Rip" at $1.75

1311 30 " Boys' Box Calf Blucher "Mastiff" "1.75

2806 18 " Misses' Kid Blucher, patent tip " 1.42*

4005 24 " Infants' Velour Polish, patent tip " 1.20

Pay by check our note in favor of Pingree & Co. due today with interest at 6%. The
canceled note is Incoming Paper No. 79.

Make two entries in the general column of the cash book, one for the note and one for interest.
We hold a note against Streeter Bros, due July 1. Discount it at the bank at 5%.

The interest from the date of the note until the date of its maturity must be added to the face of the
note, and the discount figured on the full amount. The discount is figured from June 11 to July 1.

You will find the total amovmt allowed by the bank to be greater than the face of the note. The
difference is credited to Interest and Discount. Make two entries in the General column on the debit
side of the cash book, and add the full amount allowed by the bank to the balance of your check book stub.
Remember that the note must be endorsed.

JUNE 12

Sell to Frazin & Oppenheim, 266 State St., July 2 dating, terms Regular, the follow-
ing bill:

247 48 pairs Men's Russet Grain Bluchers at $2 . 50

637 36 " Youth's Kang. Grain "High Cut" " 1.85

2408 24 " Wos. Tan Vici Bluchers " 2.25

4005 18 " Infants' Velour PoUsh, patent tip " .90

"July 2 dating," This means that the terms 1/10 n/30 begin to be effective on July 2,
just as if the bill were dated July 2. In making out the invoice, date it June 12 as you
would in any case; but opposite the word "Terms" write: "July 2 dating. Regular."
Read Dating Bills Ahead, page 146.

160 BOOT AND SHOE BUSINESS

Frazin & Oppenheim pay spot cash for this order. This entitles them to 1% cash
discount. In addition to this, allow them an extra i% for one month's anticipation of
the cash payment. Their check is Incoming Paper No. 80.

Read again the explanation of this matter given at the top of page 145. If the check is drawn for
the correct amount, make the entry. Write a receipt upon the bill.

Receive an invoice from the Chicago Rubber Co. (Incoming Paper No. 81). Make
careful note of the dating and terms.

Receive a check from Wm. Anderson (Incoming . Paper No. 82). This is to cover
our invoice of June 2, less our regular discount. Be sure the amount of the check is correct.

Take the invoice from the outgoing papers section of the file, receipt it and return it to the same sec-
tion. Remember in future to do this whenever you receive payment for an invoice. Your attention
will not be called to this again.

Guthmann, Carpenter & Telling report that both drafts sent them June 11 have been
honored, the sight draft having been paid and the 2-day draft having been accepted.
Now make the entries in the Journal. Consult Rules for Journalizing Drafts, page 136.

JUNE 13

Streeter Bros, telephone us today offering to duplicate their order of June 11, if we
will give them the terms 1/30 n/60 on today's order. To this we agree.

This means that they want us to send out to them another order exactly like their order of June 11
as to kinds, quantities, and prices. Do not wait for a letter from them confirming the telephone message,
but fill the order at once. If they had wished us to wait for their letter they would not have taken the
trouble to telephone the order in.

H. F. C. Dovenmuehle & Son's invoice of June 3 falls due today. Pay it by check
after deducting the discount to which we are entitled by its terms.

Whenever you make payment for an invoice, see that it is receipted by the proper parties and returned
to you. Then file it with the receipts. Do this in every case except when you pay spot cash for an invoice
and it comes to you already receipted.

Pay the salaries for the week as on June 6.

JUNE 16

Receive an invoice from the Bradley & Metcalf Co., Milwaukee, Wis. (Incoming Paper
No. 83). Note the dating and terms.

The freight on this shipment amounts to 85^, which we pay to the Goodrich Trans-
portation Co., plus 50^ dray age charges.

Charge $1.35 to the freight account. Drayage is classed with freight in such a case as this.
The student by this time is familiar with the forms of freight notices and expense bills, and these papers
will be omitted from the pad of incoming papers.

Sell to DeMuth &* Co., 237 State St., terms Regular:

1870 24 pairs Men's Box Calf Bluchers at $2.65

1900 30 " Men's Gun Metal Bluchers " 2.75

1855 18 « Men's "Go-Easy" Bluchers "3.15

TRANSACTIONS FOR JUNE 161

Sell to H. E. Montgomery, Hartford, Conn., the following bill of rubber goods, terms
2/10 n/60, F. O. B. Chicago:

24 pairs Men's Para Rubbers "Acton" at .**

18 " Women's Am. Rubbers "Zephyr Croquet"" .**

12 " Boys' Para Rubbers "Heavy Over" " .**

(Consult page 150 for prices.)

Ship the above bill via the B. & 0. R. R., prepaying the charges, $2.30.

Since this invoice is sold "F. O. B. Chicago," the freight expense must be borne by the purchaser.
In this instance, we prepay the charges because Mr. Montgomery has requested that we do so, charging
the amount so advanced, to his account.* Make a memorandum of this beneath the sales book entry,
writing nothing in the money columns. If Mr. Montgomery should at any time request a duplicate of this
bill, the presence of the memorandum in the sales book would safeguard us against the omission of this
item. Add the amount of the freight to the total of the invoice.

Fill out a "straight" bill of lading in triplicate, giving it the shipper's number 2. Describe the goods
as "1 box shoes." Write the words "To be prepaid" in the space provided. The agent, C. L. Grafton,
will then give the bill the agent's number 18216, fill in the weight, 65 pounds, and collect $2.30 from you,
receipting for it in the space provided for that purpose. He will then sign and return to you the "original"
and "memorandum." You will forward the memorandum to the customer, retaining the original.

It is not likely that the railroad will permit its agent to accept a check except upon his own responsi-
bility, so you should draw your check to "currency" and cash it, giving the cash to the agent. Charge
the $2.30 toH. E. Montgomery through the cash book.

Responsible firms may make special arrangements whereby their prepaid freight is handled promptly,
no delay being occasioned by waiting for the charges to be ascertained and actually paid before the goods
are started. Payment for such an item is supposed to be made by the shipper immediately upon receipt
of notification of the amount of the charge. This notification may be by mail, or a collector may call
with the expense bill.

Receive a bill from the Sleepeck-Helman Printing Co., and pay it by check. Their
bill is Incoming Paper No. 84; note that it is already receipted.
Buy 2000 l^i and 250 20 stamps.

The 20 stamps are for regular office use. The 10 stamps are to be used in mailing circulars. You
will therefore charge a part of the $25.00 to Expense and a part to Advertising.

The Post Office will not accept your check. Draw a check to Currency and pay for the stamps in cash.

Petty Cash Sales for the day amount to $15.75.

Take this amount from the currency envelope.

A check is received from O'Connor & Goldberg (Incoming Paper No. 85). This in
settlement of our invoice of June 4, less discount.

If the check is for the right amount, make the entry. Note that O'Connor and Goldberg have taken
the discount, though eleven days have passed since June 4. This is permissible because the 14th was
Sunday.

At this point, post your books and take a trial balance. Do not post the footings
of the sales book or cash book, however. Make neat pencil footings in these books, writ-
ing them close to the last item in each column. Include in the trial balance the total
of Mdse. Sales, Petty Cash Sales, Expense, Cash Discount Dr. and Cr., and the cash bal-

*0n every railroad line there are certain stations maintained, called "prepay stations," where there
are no agents. Freight will be delivered to one of these stations, if the charges have been prepaid, but,
if not, the freight will be delivered to the nearest station where there is an agent, who can collect. For
the convenience of the customer, the shipper will prepay freight to one of these "prepay" points-
Hartford, Conn , is, of course, not a "prepay" station; the freight charges in the above case were prepaid
at the customer's request, for reasons which he has not stated.

162 BOOT AND SHOE BUSINESS

ance. In determining the cash balance, take into consideration the Petty Cash Sales
column and the Expense column. There are six personal accounts in the ledger that
balance. These should be closed.

JUNE 16

Sell to WilHs & Atwood, 365 63d St., City, terms Regular, on a July 1 dating:
478 6 pairs Men's University Calf Bluchers at $2 . 95

780 12 " Wos. University Vici Kid Bluchers "2.60

1363 9 " Misses' Favorite Vici Kid Bluchers "1.15

Receive an invoice from A. A. Putnam & Son (Incoming Paper No. 86).
Receive a check from Willis & Atwood for their note in our favor, due today with
interest (Incoming Paper No. 87).

Make sure that the amount is correct before making the entry Cancel and return the note.

Receive from the A. H. Andrews Co. an invoice for office furniture (Incoming Paper
No. 88) and pay it by check.

No account is kept with the A. H. Andrews Co. Enter the transaction in the cash book, charging
Furniture & Fixtures. Note that the invoice is already receipted.

JUNE 17

Receive an invoice (Incoming Paper No. 89). Note the terms carefully. Pay freight
and drayage on the goods in cash, $3.50.

Get the cash by drawing a check in favor of "Currency."

Remit to Hamilton, Brown & Co. at once by check for the goods received today.

We are entitled to two percent cash discount. We are also entitled to additional discount of i%
a month for the two months' anticipation. Attach the check to the invoice and mail both to Hamilton,
Brown & Co.

Pay cash for 50 bushels of corn at 52^, for horse feed. This is charged to Expense.

If there were many such items as the foregoing, a special expense account should be kept, under the
title Barn Expense, or Delivery Expense, or City Delivery Expense, or some similar title, into which account
would be entered all items of current expense connected with the making of deliveries by wagon. Nat-
urally this would include such items as barn rental, wages of drivers, feed and care of horses, repairs of
wagons, etc. But it would not include the inventory of horses and wagons, which is a part of the invest-
ment, and not an expense item. A Horse and Wagon account should be kept for this inventory, as it
is kept in this set.

The purpose of keeping a City Delivery Expense account is to show the exact cost of this branch of
the service, so that it can be determined whether it would be more economical for the concern to do its
own delivering or to have it done by some express company or individual who might have facilities for
attending to deliveries cheaply and promptly.

JUNE 18

A. W. Wilson, purchasing agent for the Illinois State Reformatory at Pontiac, 111.,
leaves an order for 50 pairs No. 1311 Boys' Box Calf Blucher "Mastiff" at $1.85, terms
Regular. The freight charges are to be paid by him.

Ship via the Chicago & Alton Railroad. Fill out a "straight" bill of lading in triplicate, shipper's
number 3. Describe the goods as "1 box shoes." Proceed as in the transaction on June 15. H. H.
Hill, the agent, inserts the agent's number as 14125 and the weight as 62 pounds.

This institution buys shoes only once or twice a year, and there is no reason for opening an account
with it. The sales book entry is made in the usual way, but in posting enter the amount under Sundry
Debtors. (See the explanation of Sundry Debtors in the introduction.)

TRANSACTIONS FOR JUNE 163

Discount S. H. East's note due July 14, at the bank, at 5%.

Add to the face of the note the interest for the 60 days. The discount is figured on the full amount)
for the number of days the note has yet to run. Don't forget to endorse the note. See the last paragraphs
under June 11, for an explanation of the procedure of discounting a note at the bank.

JTJKE 19

Receive an invoice (Incoming Paper No. 90). The freight charges were prepaid by
Roberts, Johnson & Rand, and they have added the amount prepaid by them to the face
of the bill.

Make two separate journal entries crediting Roberts, Johnson & Rand.

Sell to E. E. Merville, Cleveland, Ohio, on our regular terms, F. O. B. Chicago:

1171 48 pairs Men's Vici Bals., Old Man's Last at $2.00

2408 24 " Wos. Tan Vici Bluchers " 2.25

2806 24 " Children's Kid Bluchers, Pat. tip " 1.20

The expense for freight on this shipment is to be borne by E. E. Merville, but at his request we prepay
the charges for him

Fill out a "straight" bill of lading in triplicate, shipper's number 4. Shipment is made via the B. & O.
Describe the goods as "2 boxes shoes." Proceed as in previous similar transactions. C. L. Grafton,
the agent, inserts the agent's number as 19120, and the weight as 138 pounds. The charges amount to
$3.75, which you will pay in cash, drawing a check to "currency" as usual.

Add the amount of the prepaid charges to the face of the invoice. Charge the amount to Mr. Merville
through the cash book. Make a memorandum of this in the sales book beneath the charge entry, but
make no extension in the money columns.

The invoice for which we made remittance to Hamilton, Brown & Co. on the 17th,
is returned today receipted.

In future the student may attend to the matter of securing these receipts, without specific instructions.
Ship C. 0. D. by freight to L. C. McCann, Reading, Pa.:

780 24 pairs Wos. University Vici Kid Bluchers at $2.95

2806 18 " Misses' Kid Bluchers, Pat. tip " 1.42i

4005 12 " Infants' Velour Pol. Pat. tip " 1,20

The first line of the entry in the sales book should read, "C. O. D., L. C. McCann,
Reading, Pa., Reg."

Mr. McCann is of course entitled to our regular cash discount of 1%. Enter the amount of the cash
discount ($1.11) in the Cash Discount Dr. column of the cash book now, so that when it is posted the
C. O. D. account will show only the net amount which is to be returned.

Shipping C. O. D. requires the use of the "Order" bill of lading. This is issued in triplicate. The
"original" is printed on yellow paper. The "shipping order" and "memorandum" are blue. This kind
of a bill of lading is transferable by endorsement. Read the paragraph relating to this which is printed
in heavy black type on each of the three forms.

Fill out the three forms. As the goods are to be shipped via the Pittsburg, Ft. Wayne & Chicago
railroad, insert the name of that company in the space to the left of the words "Railroad Company."
Give the bill of lading the shipper's number 5. Insert the shipping point, the date, and the name of
your house as shipper in the proper spaces. In the space opposite the words "Consigned to Order of,"
write the name of your own company. Destination, Reading, Pa. (Omit the name of the county as
unnecessary in this case.) Opposite the word "Notify" write "L. C. McCann" and write his address
on the line below. Enter the number and description as " 1 box shoes." Sign for your firm as shipper.

Upon your delivery of the goods to the railroad company, the agent, H. C. Manton, gives to your
bill of lading a number (Agent's No. 1176), fills in the weight, 50 lbs., signs for the company, and returns
to you the Original and Memorandum. File the Memorandum with your receipts. Endorse the Original

164 BOOT AND SHOE BUSINESS

to the order of L. C. McCann, and mail it to the First National Bank, Reading, Pa., with sight draft
attached for the amount due from Mr. McCann. Accompany the draft and bill of lading with a letter
to the bank instructing them to collect the amount of the draft plus collection and exchange and deliver
the endorsed bill of lading to Mr. McCann. The words "With collection and exchange charges" should
be written on the face of the draft, preceding the signature. Write to Mr. McCann advising him of ship-
ment, and stating that you have drawn upon him through the First National Bank of his city for $ ,

the net amount due on the invoice.

If you do not instruct the bank to collect its fees for collection (the work of collecting the money)
and exchange (the trouble of remitting the returns to us) from Mr. McCann, the face of the draft only will
be collected and the charges for collection and exchange will be deducted from the remittance to us. It
is only fair that Mr. McCann shall bear this expense; we should not be expected to bear any expense in
collecting from him and we certainly do not propose to bear the expense of having the money sent to us —
if we should follow such a plan all customers would buy C. O. D. so as to save the exchange charges in
remitting.

JUNE 20

Receive an invoice from H. F. C. Dovenmuehle & Son (Incoming Paper No. 91).
Sell to Frazin & Oppenheim, on our regular terms, July 1 dating:

1901 24 pairs Men's Box Calf Bluchers at $1.75

2100 18 " Wos. Dongola Polish " 1.45

12 " Wos. Rubbers "Zephyr Croquet" " .**
(Consult your price list for last item.)

Pay the office salaries as on previous Saturdays.

JUNE 22

Sell to Fargo, Keith & Co., net on their 30-day note without interest:

3872 18 pairs Men's Blackstone Bluchers at $2.25

5252 18 " Men's Hartford Bluchers " 1.85

1607 12 " Men's King George Oxfords " 2.60

Fill out a note for Fargo, Keith & Co. to sign. Your teacher or some student he may appoint will
affix Fargo, Keith & Co's signature.

Pay the Chicago Rubber Shoe Co's bill of June 12, less the discount allowed.

The discount allowed includes 1% cash discount and 1% a month for anticipation, making a total
of 6%, all of which is entered as cash discount.

H.E.Montgomery, Hartford, Conn., requests a duplicate of the invoice of goods shipped
him on the 15th of this month. Refer to your salesbook for the items. Do not fail to
add to the total of the bill the amount of the freight charges advanced, as you did when
you made out the original invoice.

Remit to the Bradley & Metcalf Co. a check in payment of their invoice dated June
13 less discount.

Receive a check from Streeter Bros. (Incoming Paper No. 92) to cover our invoice
of June 11 less 1%.

This amount was due June 21, but as June 21 was Sunday, we will allow the discount today, in accord-
ance with law and the customs of business.

JUNE 28

Sell to Willis & Atwood, on our regular terms:

754 18 pairs Men's Kang. Grain "Kant Rip" at $1.75

780 12 " Wos. University Vici Kid Bluchers " 2 . 50

1716 12 " Children's A. B. C. Vici Pat. tip Blu. " .75

. TRANSACTIONS FOR JUNE 165

The First National Bank of Reading, Pa., reports collection of our draft against L. C.
McCann, which we drew on June 19 to cover the amount due on Mr. McCann's C. O. D.
order. They have collected their fee from Mr. McCann, so we have no collection charges
to pay. Their Chicago bank draft for the amount is Incoming Paper No. 93. Deposit
it the same as a check. Credit the C. 0. D. account.

Receive an invoice from Pingree & Co., Detroit, Mich. (Incoming Paper No. 94).

Pay the freight charges in cash, $2.75, following the same procedure as formerly.

Sell to H. C. Carriel, buyer for the Illinois State Hospital for the Insane at Jackson-
ville, 111., on our regular terms, the freight charges to be paid by the buyer:

1629 24 pairs Men's Calf Congress at $1 .85

1855 24 " Men's Kid "Go Easy" Bluchers " 3.15

2408 24 " Wos. Tan Vici Bluchers " 2.25

1311 12 " Boys' Box Calf Blucher "Mastiff" " 1.75

Fill out straight bill of lading, shipper's number 6, shipping via the Chicago & Alton railroad. Describe

the shipment as "2 boxes shoes." The agent, H. H. Hill, gives it the agent's number 5765, enters the

weight as 150 pounds, and returns the signed original and memorandum to you. Proceed as instructed

in previous similar transactions.

Post this item to Sundry Debtors.

Receive from our Great Western Factory, Fond du Lac, Wis., a large shipment of our
leading brands, billed at net prices (Incoming Paper No. 95).

Although these goods are billed from our own factory, a bill to the Chicago office is made out in the
usual way. Enter the transaction on the books just as you would enter any other purchase.

JUNE 25

Receive a check from DeMuth & Co. (Incoming Paper No. 96) for the net amount of
our invoice dated June 15.

JUNE 26

Sell to DeMuth & Co. on our regular terms:

1900 48 pairs Men's Gun Metal Balmorals at $2.50

249 24 " Men's Russet Grain Bluchers " 2.50

4005 18 " Infants' Velour PoHsh, patent tip, " 1.20

Mail our check to A. A. Putnam & Son to cover the amount due on their invoice of
June 16.

JUNE 27

Pay the office salaries in cash, $36.50.

JUNE 29

Receive a Chicago draft (Incoming Paper No. 97) from G. M. Whitmore, treasurer of
the Illinois State Reformatory at Pontiac, 111., for the net amount of our invoice of June 18.

See page 158 for the method of posting this entry. It is entered under Sundry Debtors.

Note that the draft was originally made out in favor of the Illinois State Reformatory and afterwards
endorsed by them over to you. There are two ways of remitting by bank draft. One method is to have
the draft issued by the bank in favor of the person to whom the money is sent; this method has already
beeri illustrated in Part I. The other method is to have the draft issued to the order of the buyer, who
then endorses it to the payee; this method is illustrated in the above transaction.

The method illustrated in this transaction is the better for the foUdwing reasons: First, the name
of the buyer of the draft shows on its face, and his endorsement is on the back; if it becomes necessary

166

BOOT AND SHOE BUSINESS

for him to prove that he made the remittance, this can be proved from the paper itself, which is returned,
after payment, to the issuing bank. Second, this method is much the easier and quicker when several
drafts are bought at the same time. The buyer need not supply the bank with a different name for every
draft, and this saves time and labor for both himself and the bank.

The bank draft furnishes a convenient means for carrying funds, as in traveling, when one would not
wish to carry too much cash. The buyer would have the draft made out to his own order, and would
cash it whenever he wished the money.

Sometimes the buyer of the draft is not the real owner, but an agent. For instance, a traveling man
might make collections for his house, receiving checks from his customers, and then offer the checks so
collected in payment of a draft to be sent to his house. In such a case, the bank would probably insist
upon issuing the draft in favor of the house, so as to protect it from the possible fraudulent intentions
of the agent.

Receive a New York draft (Incoming Paper No. 98) from E. E. Merville, Cleveland,
Ohio, for the amount due on our invoice of June 19, less 1% cash discount, and plus $3.75
for freight charges advanced by us. Ascertain whether the draft is properly endorsed.

Note that Mr. Merville is not entitled to a discount on the S3. 75. The cash discount was taken from
the amount of the invoice only.

JUNE 80

Post your books up to date. Close the sales book and cash book and post the foot-
ings. See page 143 for instructions as to the manner of closing the cash book.

The account of the Illinois State Reformatory (see transaction June 18) will appear
as follows when posted under the head "Sundry Debtors," except that the folios are
omitted. Leave the third line blank.

19—

SUNDRY DEBTORS
19—

June

111. State Reformatory,

Pontiac, 111., Reg.

June

Cash
Cash Dis.

$31226.75

35500.00

5900.00

870.00

Make statements, using the following inventories:

Merchandise

Real Estate

Furniture & Fixtures

Horses & Wagons

Interest & Discount (A liability inventory)

Discount at 6% on Keith, Fargo & Co.'s

note due July 22 without interest
Expense inventories

45 bu. Com on hand, at 52^ **.**

Salaries due bookkeeper and stenographer,

2 ds. (a habihty inventory) 2/7 of $36.50 **.**

One month's taxes have accrued on next year's account. This could be included as a liability Inven-
tory under Expense, but for the sake of simplicity it is here omitted.

LOSS AND GAIN STATEMENT

167

No special instruction is necessary in regard to the Financial Statement. In mak-
ing the Loss & Gain Statement use the following form:

LOSS & GAIN STATEMENT, JUNE 80. 19—.
Gains

Mdse

Cost (Mdse Dr.)
Freight

Total Cost
Goods Unsold

Cost of goods sold

Sales (Mdse Cr.)
Cost of goods sold

Interest & Discount

Cr.
Dr.
Dr. Invty.

Cr.
Dr.

* **
.**

Cash Discount

Total Gains

*****

****

*)»* *«

Losses

Real Estate

Dr.

Invty.

Dr.
Invty.

Dr.

Invty.

Dr.

Dr. Invty.

Advg.

Cr.

Cr. Invty.

Total Losses

Net Gain

***

**
**

*****
*****

*****

Furniture & Fix.

******
****

Horses & Wagons

***

Expense

*****
** **

*:i:
**

*** **

Note that Freight is added into the cost of Mdse, and that Advg. is added into the cost of Expense.

Close all loss or gain accounts in the ledger so that they will show the results shown
by the Loss & Gain Statement. This will be accomplished by closing Freight into Mdse
before Mdse is closed, and closing Advg. into Expense before Expense is closed. Close
Loss & Gain. Close the investment account. Close all financial accounts except such
as have only one item.

168 BOOT AND SHOE BUSINESS

Make out statements for all open accounts.

The bank returns to you checks 1 to 23 inclusive, and check No. 25 canceled, together
with a monthly statement of 24 vouchers returned (Incoming Paper No. 99). Make out
a bank proof.

In checking for a bank proof, do not try to identify a check by the date as shown on the bank state-
ment, for this is the date of payment by the bank and may be a day or two later than the date on the
check. Compare the amounts of the checks issued as shown by your check book stub with the amounts
shown on the bank statement.

JOURNALIZING

Make journal entries for the following:

Jan. 1, 19 — . D. E. McLain and Myron Keats are partners. The firm holds a 90-day note against
H. E. Drake for $100.00 due today with 4% interest accrued. Mr. Drake wishes to give a new note for
the amount due, the new note to mature sixty days from date, and to bear 6% interest. The partners
disagree as to the advisability of accepting the new note, and Myron Keats finally offers to guarantee it.

Make the entry in the firm's journal upon receipt of the new note. Then

(1) If Myron Keats should redeem the new note in cash the day it is received, what would be the
journal entry? What endorsement would be necessary?

(2) If Myron Keats should have the note endorsed over to him on account, what entry would be
made in the journal?

(3) If Myron Keats should guarantee the note by a guaranty endorsement, what entry would be
made?

Why should Myron Keats prefer either the first or second plans to the third? Of the first two plans
suggested, which is preferable?

Myron Keats withdraws from the firm of McLain & Keats on the first of February, receiving a cash
settlement from D. E. McLain, who continues to conduct the business in his own name. On Mar. 2, H. E.
Drake, not knowing that his note has been assumed by Myron Keats, calls and pays $102.01 to Mr. McLain's
bookkeeper, and the bookkeeper, though he can find no note, enters the amount in the cash book in the
usual way, promising to cancel and return the note later. Journalize the entry.

Mar. 2, 19 — . The bookkeeper, discovering his error, mails Myron Keats a check for $102.01. Jour-
nalize the entry.

Mar. 15, 19 — . H. K. Hart, who has owed McLain and Keats $50.00 for ten years, pays the account
in cash. This account was given up as uncollectible before the dissolution of partnership and was written
off the books, being charged to Loss & Gain. It was therefore not considered in the settlement between
the partners, and Mr. Keats is entitled to his half of it. Make D. E. McLain's entry.

Mar. 20, 19 — . At the time of the settlement between the partners, there were on hand some old
fixtures which Mr. McLain refused to inventory at any price. These are sold today for $12.50 cash. Make
D. E. McLain's entry.

April 2, 19 — . The Farmers' National Bank failed several months before the dissolution of the
partnership of McLain & Keats, paying them 50% on a $2500.00 deposit balance. The receivers, having
just sold some real estate owned by the bankrupt bank, now find that they can pay another 10%. Make
the entry on McLain's books for his half.

Apr. 15. H. J. Babb remits $.78 in postage stamps to cover his account. Show journalizing for
two different methods by which this entry can be handled. State what book would be used in each case.

1051

268

2408

1726

4005

TRANSACTIONS FOR JULY 169

TRANSACTIONS FOR JULY

BOOT AND SHOE BUSINESS CONTINUED

JULY 1

Pay Geo. S. Haskell by check for insurance for one year as follows, from the Aetna
Fire Insurance Co. On Mdse., furniture, and fixtures, $29000.00, at $1.24 premium for
each $100.00 of insurance; on the building, $16000.00, at 970 per hundred. Haskell's
memorandum of premiums due, receipted, is Incoming Paper No. 100.

In addition to your cash book entry make a very full and clear memorandum in the journal embody-
ing all of the above facts in regard to the policy. Your cash book explanation should refer to the page of
the journal on which these facts are given.

As the student is already familiar with the form of a fire insurance policy, this policy is not included
in the outfit.

Receive an invoice from the Chicago Rubber Shoe Co. (Incoming Paper No. 101).
Note carefully the terms and dating; also the conditions printed at the top of the invoice.
Sell to Streeter Bros, on our regular terms:

Stock No.

1870 12 pairs Men's Box Calf Bluchers at $2.65

Men's Vici Kid Congress " 2.50

Men's High Cut Work Shoes, Kangaroo " 5 . 75

Wos. Tan Vici Bluchers " 2.25

Children's Kid Bluchers, patent tip " 1.20

Infants' Velour Polish, patent tip " .90

Petty cash sale made today, $21.65.

Detach from the pad Incoming Paper No, 102.

This check is drawn on an Aurora bank. It may be cashed in Chicago without the payment of exchange,
however, because the Aurora bank has made arrangements with some Chicago bank to care for its busi-
ness through the Chicago Clearing House. Note that the check has printed on it in the lower left-hand
corner the words "Payable through the Chicago Clearing House." A Clearing House is an association
of banks in a certain locality having for one of its objects the facilitating of the exchange between its
members of the checks drawn on each and cashed by the others.* An exchange fee is charged for cash-
ing out-of-town checks unless special arrangements are made as above described.

JULY 2

Sell to Willis & Atwood, August 1 dating, terms Regular:

1167 12 pairs Men's Gun Metal Balmorals at $2.25

761 18 " Men's Oil Grain Seamless Balmorals " 2.00

1330 12 " Little Gents' Kid Blucher "Mastiff" " 1.35

780 12 " Wos. University Vici Kid Bluchers " 2.50

1712 6 " Children's A. B. C. Vici Bluchers, Pat. tip " .75

Ship to E. E. Merville, Cleveland, Ohio, on an August 1 dating, terms Regular:

1900 12 pairs Men's Gun Metal Bahnorals at $2.50

249 12 " Men's Russet Grain Bluchers " 2.50

12 " Men's Rubbers, "Everstick" " .**
Consult your price list for selling price on last item.

* For a more extended description of the clearing house system, the student is referred to "How Busi-
ness is Done," published by J. A. Lyons & Company.

170 BOOT AND SHOE BUSINESS

At Mr. Merville's request, prepay the freight on the above shipment, $2.20, and charge
the amount advanced to the account of E. E. Merville through the cash book.

Ship via the B. & O., giving the B/L the number 7, and entering the goods as " 1 box shoes." Write
"To be prepaid" in the proper space. The agent, C. L. Grafton, gives the B/L the number 21240, enters
the weight as 55 pounds, collects $2.20 from you, receipts for it, and hands you the "original" and "mem-
orandum" signed for the company. Proceed as in previous similar transactions.

Make a memorandum of the freight charges in the sales book, and add the amount of the freight to
the invoice.

JULY 8

Receive a check from Willis & Atwood (Incoming Paper No. 103) to cover both bills
sold them last month, one due today less 1% cash discount, the other due July 11 with
1% cash discount.

Mail our check to Pingree & Co., Detroit, Mich., to cover the invoice bought of them
on June 23, less 4%.

Pay the office salaries for the week in cash as follows: Bookkeeper, $25.00; stenog-
rapher, $16.50.

JULY 6

Receive an invoice from H. F. C. Dovenmuehle & Son (Incoming Paper No. 104).
Note the terms.

Receive DeMuth & Co.'s check (Incoming Paper No. 105) for the amount due on the
invoice sold them on June 26.

Pay by check the Chicago Record-Herald's bill for advertising (Incoming Paper No.
106). It is already receipted.

JULY 7

Ship C. 0. D. by the Adams Express Company to J. H. Cox, Galesburg, 111., the follow-
ing invoice, charges collect:

1805 24 pairs Men's Kid Balmorals at $2 . 50

1051 24 " Men's Vici Kid Congress " 2.50

1171 12 " Men's Vici Balmorals, Old Man's Last " 2.00

Make out an invoice for the amount of this sale less 1% cash discount, and mark it "C. O. D." Receipt

it as though paid today. Take from your outfit the Adams Express Go's G. O. D. envelope, and put

the receipted G. O. D. bill inside; the express company will deliver it to the customer when the amount

is paid, and will then return the envelope to you with the cash returns inclosed. Fill the blanks on the

outside of the envelope as follows: Write the net amount to be returned in the space opposite the words

"Bill for collection." Write "Gollect" opposite the words "Gharges for returning money," as we wish

the customer to pay these charges. (In business, the sender would also mark on the package itself the

words "G. O. D. and return charges.") Write Mr. Gox's name and address in the spaces opposite the

word "On," and write our own name and address in the spaces for "Return money to." In the space

opposite the words "Goods billed to" write "Galesburg, 111."

In practice, such large shipments as this would not be sent by express, unless there were unusual
reasons for haste.

The package must be receipted for by the Adams Express Company. You will find
a blank form of express receipt in your outfit. Fill this out as follows: After filling in
the date, write "1 Box" under the heading Article; insert the amount to be collected,

TRANSACTIONS FOR JULY 171

$142.56, in the C. 0. D. column; insert J. H. Cox's name, as consignee, and "Galesburg,
111.," as the destination; under the heading Charges, write "C. O. D.," as we want the
transportation charges to be collected from Mr. Cox.

When the expressman calls for the package, he signs his name, A. D. Jackson, in the column headed
Received for the Company, and writes the figure 1 in the column headed No. of Pieces Received. Your
teacher will give instructions as to how this shall be attended to.

It is not necessary for the shipper to fill out this receipt, all but the expressman's signature, himself,
but it is generally done as it is more convenient for both the shipper and the company to have it made
out in advance. Shippers usually have receipt books (bound books supplied by the company), each page
of which is a blank receipt form. If a person shipping is not a regular patron of the company, and has
no receipt book, the company \\-ill furnish him a blank receipt to fill out or the agent will fill it out for him.

Charge the C. O. D. account with the full amount of the bill, crediting it at once, through the Cash
Diacount Dr. column in the cash book, for the amount of the discount.

Discount at the bank at 4% Fargo, Keith & Co.'s note of June 22 in our favor. The
note is non-interest-bearing. Make two entries in the cash book, one on each side, in
the General column in each case.

Have the net amount allowed you by the bank entered as a deposit in your pass book.

Pay $100.00 for a year's subscription to the R. G. Dun Mercantile Agency.

Subscribers to the R. G. Dun Agency are entitled to receive the reports which the Agency makes

it its business to secure, concerning the standing of merchants throughout the country. The "credit

man," who decides whether or not credit shall be extended to purchasers, how much credit shall be given

in each case, and for how long a time credit shall be granted, finds Dun's reports, and Bradstreet's reports,

of great value to him.

JULY 8

Sell to DeMuth & Co., on our regular terms, subject to an August 1 dating:

1805 12 pairs Men's Kid Balmorals at $2 . 50

249 9 " Men's Russet Grain Bluchers " 2.50

780 12 " Wos. University Vici Kid Bluchers " 2.45

1846 18 " Boys' Box Calf Bluchers " 1.65

Sell toH. E. Montgomery, Hartford, Conn., on his 60-day note at 6%:

1855 12 pairs Men's "Go Easy" Bluchers at $3.15

657 12 " Youth's Kang. Grain "High Cut" " 1.85

4005 18 " Infants' Velour Polish, patent tip " 1.20

2806 12 " Misses' Kid Bluchers, patent tip " 1.42 J

The freight charges are to be paid by the buyer.

Shipment is to be made via the B. & O. Fill out the "straight" form of B/L, giving it the number 8,
and entering the description as "1 box shoes." The agent, C. L. Grafton, will return two of the three
forms to you, numbered 21711, with the weight entered as 90 pounds, signed for the company. Proceed
as in previous similar transactions.

Fill out a note for Mr. Montgomery to sign. Your teacher or some student he may appoint will
aflfix Mr. Montgomery's signature.

Three men have been at work today repairing and varnishing the furniture. Pay
them $3.50 each for their labor, and reimburse them for the cost of varnish, screws and
nails used, $1.50.

Charge this to Expense, not to Furniture & Fixtures. Why?

JULY 9

Receive an invoice from Guthmann, Carpenter & Telling (Incoming Paper No. 107)f
Note the terms.

172 BOOT AND SHOE BUSINESS

Sell to Fargo, Keith & Co., on our regular terms, August 1 dating:

1900 12 pairs Men's Gun Metal Bluchers at $2.75

1855 18 " Men's Kid "Go Easy" Bluchers " 3.15

1805 9 " Men's Kid Balmorals "2.50

761 12 " Men's Oil Grain Seamless Balmorals " 1.50

12 " Men's Para Rubbers "Acton" " .**

12 " Wos. American Rubbers "Sensible" " .**

Consult your price list for prices on the last two items.

Petty cash sales for the day, $5.75.

Take this from the currency envelope.

JULY 10

Sell to Streeter Bros., on our regular terms:

1167 12 pairs Men's Gun Metal Balmorals at $2.25

754 18 " Men's Kangaroo Grain "Kant Rip" " 1.75

2806 12 " Misses' Kid Bluchers, patent tip " 1.42 J

1311 9 " Boys' Box Calf Blucher "Mastiff" « 1.75

4005 12 " Infants' Velour PoUsh, patent tip " 1.20

The Adams Express Company returns to us the C. 0. D. Envelope sent out on the
7th inst., with a check drawn on a Galesburg bank for $142.56 signed by J. H. Cox. (The
check is Incoming Paper No. 108.)

In practice, this check would be returned inside of the envelope, which would be carefully sealed.

No charges were deducted by the Express Company, as its fee was collected from Mr. Cox. The check
does not include exchange, because by a special arrangement between the Bank of Galesburg and its Chicago
correspondent bank (the First National Bank of Chicago), Mr. Cox has been given the privilege of stamp-
ing on his Bank of Galesburg checks the words "Payable if desired at the First National Bank, Chicago,"
(see check) and his signature is honored at the latter bank the same as it would be at the Bank of Gales-
burg. This is an unusual condition; a far more satisfactory plan, at least as far as the First National
Bank of Chicago is concerned, would be for Mr. Cox to carry balances in both banks.

JULY 11

Sell to Willis & Atwood, on our regular terms and on an August 1 dating:

637 18 pairs Youths' Kangaroo Grain "High Cut" at $1.85

675 18 " Youths' Patent Leather Bluchers " 2.40

18 " Boys' Gum Lumbermen's Overs " *.**
Consult your price list for the price on the last item.

Receive a check from Streeter Bros. (Incoming Paper No. 109) for the amount of
our invoice of July 1, less regular discount.

Receive $50.00 in cash from Frazin & Oppenheim to apply on our bill of June 20.
Take a $50.00 bill from the currency envelope.

Pay the office salaries as on July 3.

Pay $5.00 to the Leather Worker's Union for five tickets to their charity ball.

This is not a legitimate business expense. Charge the Loss & Gain account direct.

JULY 18

Streeter Bros, claim that the shoes in one lot sold them on June 13 are defective. They
offer to return the shoes for credit, but we prefer to adjust the matter by allowing them
a credit of 150 each on 30 pairs No. 1311 Boys' Box Calf Blucher "Mastiff."

TRANSACTIONS FOR JULY * 173

Debit Mdse. and credit Streeter Bros, through the journal. Send Streeter Bros, a Credit Memoran-
dum, writing out the form in full on blank paper.

In a business of any magnitude or where items of goods returned by purchasers, claims allowed pur-
chasers on account, etc., are frequent, a special book is sometimes kept in which these items can be entered,
called the Returned Goods— Credit Book. It is similar in form to the sales book, but its exact opposite.
The separate entries are credited to the individual parties, and the total debited to Mdse. or deducted from
the total sales.

Receive Streeter Bros.' check (Incoming Paper No. 110) for the balance due today on
the bill of June 13, less discount.

Bear in mind that they are not entitled to any discount on the amount of the allowance we made
them today.

Pay H. F. C. Dovenmuehle & Son cash for a job lot of men's shoes. Their invoice
is Incoming Paper No. 111. Two entries; why?

A "job lot" is an assorted lot of samples, odds and ends, broken sizes, etc. They are thrown together
and sold at a cheap price.

JULY 14

Sell for cash the job lot bought yesterday, 24 pairs men's shoes at $2.05, receiving a
check from the buyer (Incoming Paper No. 112.)
Enter this in the petty cash sales column.

Anticipate the invoice bought of the Chicago Rubber Shoe Co. on July 1, paying them
by check after deducting 5%.

Paid Wm. Raasch $2,00 for cleaning the windows, scrubbing, etc., today

JULY 16

Sell to DeMuth & Co. on our regular terms, giving them an August 1 dating:

12 pairs Men's Box Calf Bluchers at $2 . 65

Men's Gun Metal Bluchers " 2.75

Men's Kid "Go Easy" Bluchers " 3.15

Men's Kid Balmorals " 2.50

Wos. Tan Vici Bluchers " 2.25

Boys' Box Calf Blucher "Mastiff" " 1 .75

Little Gents' Kid Blucher "Mastiff" " 1.35

Youths' Kangaroo Grain "High Cut" " 1.85

Misses' Kid Bluchers, patent tip " 1.42 J

Infants' Velour Polish, patent tip " .90

Men's White Duck Balmorals " 1.05

Use two invoices in billing this order, carrying the footing of the first to the top of the second.

We have had an addition built to our shipping room, for which we are charged $320.00.
We have also had new floors laid in the shipping room and the walls and ceiling replastered,
at a cost of $120.00. All of this work was done by Arthur E. Miller, Give him our check
for the full amount.

How much of this should be debited to Expense? How much to Real Estate? Give reasons. Make
two entries in the cash book. See page 199,

Post and take a trial balance as on June 15. Do not close any books of original entry.
Rule up personal accounts that balance.

1870

1900

1855

1805

2408

1311

1330

637

2806

4005

174 ■ BOOT AND SHOE BUSINESS

JULY 16

Sell to Fargo, Keith & Co. on our regular terms:

478 12 pairs Men's University Velour Calf Bluchers at $2.95

1805 12 " Men's Kid Balmorals " 2 . 50

1855 18 " Men's Kid "Go Easy" Bluchers " 3.15

637. 12 " Youths' Kangaroo Grain "High Cut" " 1.85

Pay by check for the Mdse. bought on July 6 from H. F. C. Dovenmuehle & Son, less
discount allowed by the terms of sale.
Petty cash sale made today, $43.75.
Detach Incoming Paper No. 113 from the pad.

JULY 18

Receive an invoice from Hamilton, Brown & Co., St. Louis, Mo. (Incoming Paper
No. 114). Pay the freight charges in cash, $3.15.

Sell to Streeter Bros, on our regular terms, with an August 1 dating:

1311 24 pairs Boys' Box Calf Blucher "Mastiff" at $1.75

4005 12 " Infants' Velour Polish, patent tip " 1.20

2408 12 " Wos. Tan Vici Bluchers "2.25

2806 18 " Misses' Kid Bluchers, patent tip " 1.42 J

Receive a Chicago draft from S. H. East, Indianapolis, Ind. (Incoming Paper No.
115), to apply on the invoice sold him on June 8. Is it properly endorsed?
Pay the office salaries as on July 3.

JULY 20

Receive an invoice from H. F. C. Dovenmuehle & Son. (Incoming Paper No. 116.)

Note the dating and terms.

Sell to Willis & Atwood, terms Regular:

1900 12 pairs Men's Gun Metal Bluchers at $2.75

1363 9 " Misses' Favorite Vici Kid Bluchers " 1.15

478 12 " Men's University Calf Bluchers " 2.95

780 12 " Wos. University Vici Kid Bluchers " 2.60

2408 6 " Wos. Tan Vici Bluchers " 2.25

Streeter Bros.' check received today (Incoming Paper No. 117) is for the net amount
due on the invoice sold them on July 10.

JULY 22

Sell to DeMuth & Co. on their 60-day note at 6%:

249 24 pairs Men's Russet Grain Bluchers at $2.50

1900 12 " Men's Gun Metal Balmorals " 2.50

2408 12 " Wos. Tan Vici Bluchers " 2.25

1726 12 " Children's Kid Bluchers, patent tip " 1.20

4005 12 " Infants' Velour Polish, patent tip " .90
Two entries. The note is Incoming Paper No. 118.

We lose one of our horses today, and purchase another at once from W. T. Rinaker,
giving him our check for $165.00 in payment.

We find that 12 pairs Men's No. 3873 Blackstone Bluchers are slightly damaged.
Return them to the firm from whom they were purchased, for credit at $2.25 a pair.

1900

268

1311

1330

2408

TRANSACTIONS FOR JULY 175

In a business where claims against creditors for damaged goods, returned goods, rebates, overcharges,
etc., are frequent, a special book is often kept for these items, called the Returned Goods — Debit Book.
Creditors are debited for the separate items, and the total is credited to Mdse. or deducted from the total
of purchases.

JUL.Y 23

Fill the following order from Fargo, Keith & Co., billing on our usual terms:

1171 12 pairs Men's Vici Balmorals, Old Man's Last at $2.00

Men's Gun Metal Bluchers " 2.85

Men's High Cut Work Shoes " 5.80

Boys' Box Calf Blucher "Mastiff" « 1 .75

Little Gents' Kid Blucher "Mastiff" " 1.35

Wos. Tan Vici Bluchers " 2.25

H. C. Winslow, Treasurer of the Illinois State Hospital for the Insane at Jackson-
ville, 111., sends us a Chicago draft (Incoming Paper No. 119) in full settlement of the
invoice sold to that institution on June 23. Is the draft properly endorsed?

This account will be found under Sundry Debtors.

A petty cash sale was made today, $12.60. (Incoming Paper No. 120.)

JULY 24

Mrs. Mary Lloyde, matron of the Orphan's Home, 1416 Michigan Ave., purchases 27
pairs No. 1726 Children's Kid Bluchers, patent tip, at 90^ a pair, to be charged to the Home.
Enter this account under Simdry Debtors. See the transaction on June 18.

Discount at the bank at 4% the interest-bearing note we received on the 22d inst.
from DeMuth & Co. (See last paragraph under date of June 11.)

JXTLY 26

An invoice is received from the Bradley & Metcalf Co., Milwaukee, Wis. (Incoming
Paper No. 121). Pay the freight and drayage charges, $1.10, by check drawn to currency.
Pay by check H. F. C. Dovenmuehle & Son's invoice of June 20.

This invoice was sold on a July 15 dating. We therefore deduct 2% , as the terms of sale were 2/10 n/30.
Pay the ofl&ce salaries as on July 3.

JULY 27

Fargo, Keith' & Co. settle our bill of July 16 by a check for the amount less discount
(Incoming Paper No. 122.)

Petty cash sales for the day, $20.50.
Take this amoimt from the currency envelope.

JULY 80
Sell to DeMuth & Co., terms Regular:

1870 12 pairs Men's Box Calf Bluchers at $2.65

Men's Gun Metal Bluchers " 2.75

Wos Tan Vici Bluchers " 2.25

Infants' Velour Polish, patent tip " .90

Men's White Duck Balmorals " 1.05'

Men's American Rubbers "Puritan" " .**
Correct your price list for the last item.

1900

2408

4005

176

BOOT AND SHOE BUSINESS

Also sell to Fargo, Keith & Co., on the same terms:
1607 12 pairs Men's King George Oxfords

5252
3872

18
12

Men's Hartford Bluchers
Men's Blackstone Bluchers

$2.60
1.85
2.25

Receive a check from Willis & Atwood (Incoming Paper No. 123) to cover our bill
of July 20 less the usual discount.

JULY 81

Post all your books up to date.

Take a trial balance.

Make statements, using the following inventories:

Merchandise $30,734 .90

Real Estate 35,800 .00

Furniture & Fixtures 5,900 .00

Horses & Wagons 870 .00

Interest & Discount

Interest onH. E. Montgomery 's note, $**.**, for ** ds. at 6% . **

Expense Inventories

Salaries due for 5 days ** **

Insurance paid up for 11 months *** . **

In making your statements proceed just as you did on June 30.

Note that the inventory of Real Estate has not been materially depreciated, and the inventory of
Furniture & Fixtures has not been changed.

The fact that the Furniture & Fixtures inventory remains unchanged makes it unnecessary to close
that account in the ledger, or to include it in the loss and gain statement.

Some bookkeepers go to great lengths to estimate inventories of interest on overdue accounts and
inventories of cash discounts which will be allowed next month on goods sold this month. The student
need not attempt to do this. Compute only the inventories indicated in the above list.

Close your ledger, following the instructions given on June 30.

Make out statements of all open accounts.

The bank returns paid checks Nos. 25 to 41, No. 43, and No. 45, together with its
monthly statement (Incoming Paper No. 124). Reconcile the statement with your
check book.

PROBLEMS

1. A's net capital on Jan. 1 was $5674.60. On Jan. 10 he withdrew $75.00 for his personal use,
and on Jan. 20 he added $1500.00 to his investments. On Jan. 31 his assets amounted to $9375.00 and
his liabilities were $1875.65. What was the amount of his gain or loss during January?

2. B's trial balance on Feb. 28 was as below. His Mdse inventory was $5580.00. What was his
gain between the last time the books were closed and Feb. 28?

Cash

Mdse

Expense. . ,
Notes Rec.
Accts. Rec,
Notes Pay.
Accts. Pay

1245

6000

200

1300

576

450

20
00
00
00
00
00

6574

1000

200

1375
621

00
65

SUPPLEMENTARY PROBLEMS " 177

3. C and D are partners under an agreement that each is to be allowed interest at 6% on his invest-
ment and that the profit remaining after the partners are credited for such interest is to be equally divided.
C's investment on March 1 is $6000.00, D's investment on the same date is $7000.00. On March 31 the
firm's capital is $14000.00. What is the investment of each partner on March 31, neither partner having
withdrawn any interest or profits?

4. E, F & G are partners with respective investments on Apr. 1 of $4000.00, $5000.00, and $8000.00.
Their agreement is that each is to be allowed a monthly salary of $100.00 and 7% interest on investment,
the remaining profit to be equally divided between them. April 15, E withdrew $100.00, and G with-
drew $200.00, On April 20, F added $500.00 to his investment. On April 30 the firm's capital was
$18000. No partner having withdrawn any salary or interest or profits, what was the investment of
each on April 30?

5. H, I and J are partners under an agreement that each is to be allowed 6% interest on his invest-
ment and to participate equally in the balance of the profits. On May 31, interest for one month was
allowed the partners as follows: H, $30.00; I, $40.00; J, $45.00, and $450.00 was left to divide equally
as profits. What was the capital of each partner on May 31, no partner having withdrawn any interest
or profits?

INSOLVENCY AND BANKRUPTCY

The terms "insolvency" and "bankruptcy" are often confused by persons who
imagine that they are synonymous. They are not. Both terms imply a condition wherein
the proprietor is unable to pay his debts, but here the resemblance ends.

When a man's liabilities are in excess of his assets, his business is in a condition of
insolvency, and he is insolvent. , Many a man's business has been in this condition, how-
ever, and yet he has been able to "pull through" without being declared a bankrupt.
He has been able to keep the secrets of his business to himself and to meet his obligations
as they fall due, until more prosperous times have changed his condition to that of com-
plete solvency. In other words, he has continued to make money and his assets have
grown until they exceeded his Habilities.

On the other hand, it is not unusual, especially during "hard times," for a perfectly
solvent business to be forced into bankruptcy. A bankrupt is one who has been legally
declared unable to pay his debts, and whose property has been seized for the benefit of
his creditors. Sometimes the creditors of a bank (its depositors) become without good
reason afraid that the bank will fail and their money be lost. A "run on the bank"
results, each depositor demanding all his money in cash. The bank is unable to pay
them and unable to borrow enough cash to pay them. A receiver is appointed, who
proceeds to sell the bank's properties and investments, perhaps being unable to get for
them anything near their real value, or what the bank could have realized upon them
had it been given time. Thus a perfectly good business has been bankrupted through a
peculiar chain of circumstances.

Insolvency is a business condition which may or may not become publicly known.
Bankruptcy is a legal condition wherein the affairs of the bankrupt are settled by a receiver
appointed by a court.

Bankruptcy may be voluntary or involuntary. That is, a man may declare himself
a bankrupt, or he may be declared bankrupt through legal proceedings started by his
creditors. When his affairs are once settled by proceedings in bankruptcy, each creditor
receiving a proper proportion of the net cash realized from a full settlement of his affairs,
he begins life anew, owing no one.

178

SUPPLEMENTARY PROBLEMS

PBOBLEMS

1. A was adjudged a bankrupt. The net cash remaining after his property was
sold and the receiver's expenses were paid was $10000.00. His debts were as follows:
He owed B, $5000.00; C, $4000.00; and D, $3000.00. How much did each creditor receive?

2. E failed owing F, $2500.00; G, $3500.00; and H, $4000.00. His assets brought
$8000.00 and the legal expenses, which had to be paid in full before any creditors were
satisfied, amounted to $500.00. What percent did each creditor receive? How much
money did each creditor receive? How much did E owe to F, G and H after the settle-
ment in bankruptcy was made?

3. I became a bankrupt with assets which brought $12000.00, and owing the follow-
ing persons: J, $6000.00; K, $5000.00; and L $8000.00. The workmen's payroll amounted
to $400.00 and was unpaid. (Workmen are preferred creditors.) The receiver's expenses
amounted to $600.00. How much did the creditors each receive?

4. L's store burned down on July 1. He had no insurance on his store, his furniture
and fixtures, or his stock of Mdse, and all were completely destroyed. The City Wreck-
ing Co., however, made him an offer of $50.00 for the wreckage, and the lot on which
his store had stood was worth $5000.00. L's balance of the closed ledger June 30 showed
the following items: L (Capital), Cr. $10950.00; Cash, Dr. $2000.00; Mdse (Invty), Dr.
$6540.00; Furn. & Fix. (Invty), Dr. $1000.00; Real Estate, Dr. $10000.00; Accounts
Receivable, $3500.00; Accounts Payable, $12090.00.

Cash (in Bank)

Mdse (Invty)

Fur. & Fix. (Invty)

Real Estate

Accounts Receivable
Accounts Payable . .

2000
6540
1000
10000
3500

23040

00
00
00
00
00

10950

12090

23040

00_

oo"

Immediately after the fire, L's creditors instituted proceedings in bankruptcy against
him. The receiver took possession of the cash in bank, sold the land for $5000.00, accepted
the City Wrecking Co.'s offer for the wreckage, and collected the accounts receivable.
The receivers' fees and expenses amounted to $410.00. What percentage of his original
claim did each creditor receive?

5. M, a dealer in clothing, has a record as follows: In 1902 he had a fire, and was
fully insured. In 1904 he filed a voluntary petition in bankruptcy. In 1905 he had
another fire, having insured his stock of goods heavily only two months before. You
know of a concern which has held a bill against him since July 1, 1904, which he now
refuses to pay because it is outlawed. He now writes you ordering a bill of goods to be
shipped to him on 90 days' credit. Write an answer to his letter.

6. Read the following newspaper clipping. If the court appoints a receiver for
the Miller Products Co., how much will the receiver pay each of the creditors named,
assuming the total expenses of the receivership to be $5000.00?

The Miller Products Company, which deals in flour, owes debts amounting to $90,000.00, according
to the petition of creditors filed by attorneys Gregory, Poppenhausen & McNab. The company's assets
are $80,000.00. The Pillsbury company has a claim of $30,000.00. Besides the Pillsbury concern as
the chief petitioning creditors, Frank Clark of Chicago, with a claim of $112.50, and John T. Canvin of
Chicagp, with a claixn of $100.00, are named.

SUPPLEMENTARY PROBLEMS 179

CORRECTING ERRORS

In correcting errors, the bookkeeper is called upon for the exercise of considerable judgment, skill,
and good taste. The kinds of errors that can exist are so numerous and the methods of correction so
various, that general rules to fit all cases cannot be laid down. There are certain things, however, that
the bookkeeper should always have in mind in making a correction: (1) The incorrect entry must
be removed. (2) The correct entry must be made. (3) The books must not seem to have been
fraudulently tampered with. (4) The neat appearance of the books must be preserved if possible.

Simple methods of making corrections are always best. If an entry has not been posted, draw lines
through the items neatly or write the word "void" across the entry and place check marks in the folio
column opposite the items, so that they cannot be posted. This effectually removes the error and the
correct entry can then be made and posted in the usual way. Do not erase or change figures, as that
might give an appearance of fraudulent entry. Let the books show that an incorrect entry has been
made and ruled off or voided. In making corrections in books of original entry, it is especially important
that this rule be carefully observed, since these books are admissible as evidence in a court of law, and
any appearance of fraudulent alterations or erasures would have a tendency to impair their credibility.

Even when an entry has been posted, the plan suggested in the foregoing paragraph can be followed^
by making corrections in the ledger in the same way, provided the ledger accounts are not closed, and
also provided the sales book or other books of original entry are not footed and posted.

Correction Entries. WTien an entry has been carried along so far into the books that the simple
method of correction suggested in the foregoing is not practicable, correction entries must be resorted to.
If a certain account has been charged or credited too little, or an entire entry has been omitted, the dis-
crepancy or omission can be cared for easily and simply, by making another entry. If an account has
been debited or credited too much, a reverse or counter entry becomes necessary, the effect of which will
be to subtract the amount of the over-charge or over-credit. If an entry has been made debiting an
account which should have been credited or crediting an account which should have been debited a reverse
entry for the exact amount of the original error will have the effect of canceling it, after which the correct
entry must be made; or a reverse entry for double the amount will have the effect of wiping off the error
and at the same time placing the correct entry on the books. Changes should be made without resort-
ing to correction or reverse entries, if possible. Whenever any entry is ruled off, voided, or corrected,
reference should there be made to the page where the correct entry or the correction entry is found; and
the new entry or the correction entry, as the case may be, should refer to the former entry. When state-
ments of account are copied from ledger accounts which have been corrected, they should show only the
correct data as it would stand had there been no error in the first place — this, by the way, furnishes one
reason correction entries should be avoided if possible, as it is easier and less confusing to copy statements
from a ledger that is not full of correction entries. Make correction entries for the following:

Problem 1. In a certain business, A has a half interest, and B and C each a one-fourth interest.
After closing the books on Feb. 1, 19 — , and crediting the account of each partner with his share of the
profits, it is discovered that Field and Co. have a bill against the firm for Mdse, $120.00, which has never
been entered. The bill falls due Feb. 10. WTiat entries are necessary for adjusting this on Feb. 10 with-
out reopening the Merchandise account; in what book shall they be made, and how?

Problem 2. On Mar. 31, 19 — , the bank notified you that interest amounting to $4.50 had been
passed to your credit, and you entered this on the credit side of the cash book by mistake, afterwards
closing the cash book. What entry or entries are necessary to make the correction; in what book shall
they be made, and how?

Problem 3. Feb. 1, 19 — . Smith & Co. keep a three-column cash book (same form as used in Boot
and Shoe business). They have just closed this cash book with a balance of $177.91 brought down, but
have only $133.54 in cash actually on hand. On examination, you find the following errors: (1) On Jan.
4, $45.37 was paid out in cash but the amount was by mistake entered in the Cash Discount Cr. column
instead of the General Column. (2) The footing of the General column on the debit side of page 101 was
forwarded to page 102 as $2525.75, instead of $2516.75 as it should have been. (3) D. C. Brown, a cus-
tomer, paid $10.00 on account on Jan. 20, and the item was not entered in the cash book.

Rule a form of three-column cash book, enter the balance as Smith & Co. had it on Feb. 1, make the
correction entries, and make another closing, which will give the correct balance.

DRY GOODS BUSINESS

A large wholesale or jobbing house in the dry goods line usually has many depart-
ments. Dress goods, silks, domestics, notions, etc., are handled in separate departments,
each having its own manager. Employees, except general salesmen and other employees
directly connected with the head office, usually work in one department only.

All articles of Mdse are not billed on the same terms of credit, but each has its own
terms of sale. A customer might order a number of items at the same time and find
some billed to him at 2/10 1/30 n/60, some at 2/10 n/30, some at 1/10 n/30, some at
6/10 5/30 4/60, some net cash, etc. These items might be listed one after another on
his bill and the terms of discount separately noted after each item; they might be all on
one bill but classified as to terms of discount by the use of special columns; or the items
might be classified as to terms of discount, and a separate invoice rendered for each class.

Just what the terms shall be depends largely upon the customs in the locality where
the goods are sold, and upon the conditions of trade at the time of sale. Competition
influences discounts, the tendency being for competitive houses to offer the same terms
on the same articles. In this way, the terms offered by leading wholesale dry goods
houses, such as Marshall Field & Co., Chicago; The H. B. Claflin Co., New York; John
V. Farwell & Co., Chicago; Carson, Pirie, Scott & Co., Chicago; and Ely & Walker, St.
Louis; go far toward establishing the terms of sale used throughout the country. Many
smaller houses, however, will offer larger than the customary discounts, as an induce-
ment to get trade. In a general way, it may be said that small discounts are usually
offered on staple articles, while larger discounts are offered on fancy goods, laces,
embroideries, etc.

The transactions which follow are of necessity brief — too brief for any attempt to
show the division of the business into departments or to illustrate the somewhat elaborate
systems of house management, procedure in buying and selling, methods of billing, etc.,
that usually obtain in the larger houses. The accounting methods will of necessity be
much simpler than those actually in use in large wholesale dry goods concerns, many
subordinate and auxiliary features being omitted. But the transactions presented are
typical of the business from which they were selected, and are arranged to take you one
step farther in your study of bookkeeping.

Books Used.

The books used in the transactions for August and September are the Journal, Sales
Book, Purchase Book, Cash Book, Ledger, and Bill Book. All of these, except the Pur-
chase Book, are books with which you are already familiar, and will be handled just as
in previous sets. A special explanation of the Purchase Book follows.

The Purchase Book.

This book is similar to the sales book in principle. All purchases of Mdse are entered
in it and omitted from the journal. The items are separately posted to the credit of

180

THE PURCHASE BOOK

181

those from whom the purchases are made, and the total is periodically posted to the debit
of the Mdse. Purchases account, about which you will read on the next page.

The Purchase Book presents the same advantages as the Sales Book. Its use materially reduces
the number of entries in the journal. The entries occupy less space than they would in a journal. The
labor of posting (as far as those entries are concerned) is reduced one-haK.

The classification of entries by the use of special books is not only valuable in itself, but makes possi-
ble a division of labor. One bookkeeper can work on the sales book, another on the purchase book, etc.
This division of labor can be canied out still further, if the magnitude of the business demands it, by sub-
dividing the sales book and piu-chase book alphabetically, territorially, or by departments.

In form, the Purchase Book is as follows :

19 — . August 1, 19 —

Aug.

July
Aug.

John V. Farwell & Co., 148 Market St.
H. B. Claflin Co., New York
Marshall Field & Co., 200 Adams St.
V. Perrin & Cie, Grenoble, France
Ely & Walker, St. Louis

Mdse. Purchases Dr. for Total

2/10 n/60

1/10 n/30

30-day note at 6%

2/30 n/60

6/10 5/30 4/60

870
760
950
110
35450

304525

(The above form is an illustration only)

Note that the date is written at the left and that each item occupies one line, which contains the
date, space for the ledger foUo, the name of the account to be credited, the address, terms, and amount.
The date given should always be the date of the invoice, not the date on which the invoice was received.
The second item in the above form is an illustration of this. The invoice was received on August 3, but
the date recorded is August 1, which was the date the invoice was shipped and billed from New York.
This plan of dating enables the bookkeeper to ascertain the due date easily, since the discoimt period
begins to run from the date of the invoice.

As invoices are received they are usually given a serial number, which is recorded in the Purchase
Book, but this feature is omitted from this set.

In connection with the Purchase Book, some device for calling the attention of the bookkeeper to
the dates on which discounts may be secured, is usually adopted. This might be a filing device, wherein
each bill could be filed under the date of its maturity; it might be a register, somewhat similar to a bill
book, the central feature of which would be a series of columns for the different months, in which the dis-
count dates of each invoice could be shown; or it might be some other device of filing or of record, the
purpose of which would be to show the dates of maturity. None of these au:dUaries will be used.

Discounts.

Some houses make it a rule to pay all bills promptly, doing away entirely with the purchase book
and with all purchase accounts. Two plans for affecting this are in general use: (1) To pay all bills as
they fall due, incidentally taking all discounts offered for payment within a certain time. In this case it
is only necessary to estabhsh some device for keeping track of the bills so that no discounts will be lost.
Amounts paid are debited directly to the Mdse. account or other account affected, at the time of payment.
(2) To pay once a month the amounts called for by the creditors in their monthly statements. If this plan
be followed it is necessary to save the bills until they can be checked against the statement to prove the
accuracy of the latter. At the time of payment the amount paid on each statement is distributed among
the accounts which should be charged. In either case all old bills are saved as records for future reference.

Nowhere is it more evident than in the dry goods business that the man who would
make money must take advantage of his discounts. Competition is keen and the margins
of profit are small. The jobber especially must not fail to discount his bills. On many
articles, the wholesale price is a matter of public knowledge. Regular market quotations
on some staple lines are pubUshed monthly in some of the leading dry goods journals.
On these articles the jobber must be able to quote prices not materially different from

182 DRY GOODS BUSINESS

published market prices. He is assisted somewhat by special trade discounts and other
concessions he is able to secure from manufacturers, but competition is so keen that he
must take advantage of his cash discounts or his business will not be profitable.

When a dealer buys Mdse on the terms "2/10 n/30", he has an opportunity to save 2% by paying
the bill 20 days before he would have to pay it anyway. If he could save 2% every 20 days, he would
save 36% in the course of a year — a very good percentage of profit.

The trade discounts and cash discounts secured by the jobber on his purchases are largely a matter
of bargaining between himself and the wholesaler; and the selling terms vary and fluctuate with the con-
ditions of trade. Therefore in the wholesale dry goods line it cannot be said that the terms either of pur-
chase or of sale, are weU estabUshed and practically invariable, as in some other lines.

Practically no Dating Ahead.

Dating ahead on invoices sold is not a customary practice in this line, as it is in some
other lines. When an advance dating is given it is usually for the purpose of accommo-
dating a customer by enabling him to dispose of his goods before his bill for them falls
due. He is not supposed to anticipate such a bill, and anticipation of post-dated bills
is practically unknown in the dry goods business, though it would probably be permitted,
at prevailing interest rates. The securing of advance datings on purchases is largely a
matter of bargaining between the jobber and the wholesaler.

Freight.

Freight on goods sold by the jobber is presumed to be paid by the retail merchant.
Sometimes freight is prepaid to certain stations where there are no agents, or express
is prepaid in cases where a cheaper rate can be secured by so doing; but in such cases the
charges so advanced are almost always charged to the buyer. Cases when the freight
expense on sales is borne by the jobber are very rare.

Importing.

When an invoice comes from abroad, there is a Customs House duty to pay. This
may be a specific duty, or ad valorem, or both. A specific duty is a duty based upon the
weight or measure of the article without regard to its value. Ad valorem duty is a duty
of a certain per cent of the cost of the goods imported.

When foreign invoices are received, it is not possible to enter them on our books accurately in the
original entry. Suppose, for instance, an invoice should be received amounting to £100, due in 4 months.
An accurate entry cannot be made, because nobody knows what £100 will be worth in U. S. money in
4 months, owing to the fluctuation in the rate of exchange between this country and England. An entry
at the exact rate of exchange current on the date of the purchase would be unreUable. It is customary
to use an approximately coiTect rate of exchange (in the case of English pounds, $4.90) in computing
the amount of the original entry. When the bill is eventually paid, the discrepancy between the rate
of exchange entered in the books and the actual rate paid, will operate either as an increase or a decrease
of the amount of cash discount. This will be treated more definitely in connection with specific transactions.

PROBLEMS IN FOREIGN EXCHANGE

1. What is the cost of a draft on London for £890, the exchange rate being $4,863?

2. " " " " " Berhn for 720 marks, a Reichsmark (4 marks) being worth 94f^?

3. " " " " " Parisfor 456 francs, therateofexchangebeing5.15francstothedolIar?

4. What would have been the cost in each of the above cases had a 2% cash discount been secured
on the amount named?

The Merchandise Account Subdivided. '

For the purpose of a closer analysis of the merchandise transactions, three merchan-
dise accounts will be kept instead of one, as shown by the following diagram:

^S^L^^^'^^^JyM^.f^ ' f

THE MERCHANDISE ACCOUNT SUBDIVIDED

183

Freight & Duties

Hdse. Piircliases

Mdse. Sales

Mdse. (Trading)

The Mdse. Purchases account.

This account is debited at the end of thef month with the total purchases for the month,
as posted from the purchase book. It is also debited at the end of the month with the total
of the Freight & Duties account, which account is closed into it, as shown in the diagram.
It is credited during the month with amounts of goods returned by us to creditors, as posted
from the journal. The final result shown by this account is the net purchases for the month.
It is closed into the Mdse (Trading) account, as shown by the diagram.

The Mdse. Sales account.

This account is credited at the end of the month with the total sales for the month,
as posted from the sales book. It is also credited at the end of the month with the total
of petty cash sales, as posted from the cash book. It is debited during the month with
amounts of goods returned to us by customers, as posted from the journal. The final
result shown by this account is the net sales for the month. It is closed into the Mdse.
(Trading) account, as shown by the diagram.

The Mdse. (Trading) accoiint.

The trading or general merchandise account is the principal merchandise account,
and the one into which the other merchandise accounts are closed. At the beginning
of the month it is debited with the inventory at that time. At the end of the month the
Mdse. Purchases and Mdse. Sales accounts are closed into it. It is then credited with the
inventory at the end of the month and closed into the Loss & Gain account.

Problems 1, 2 and 3 of the supplementary problems following this set may be solved at this time
if desired.
Accounts Kept.

Open the following accounts in the ledger, allowing for each account one line for
the heading, one line for the top ruling, and for the entries the number of lines indicated.

Jas. H. Morrison 10 Knes y^. B. Palmer & Co., Lawrence, Kan 7 lines

V^hur E. Clark 10 Hnes v^lackman Bros. «fe Co., Pullman, Wash 7 hnes

^urnitur^ & Fixtures 11 hnes ^. C. Nichol, Foley, Minn 7 hnes

-^dse Purchases 8 lines ^^awndale Dry Goods Co., 1579 Ogden Ave. 8 lines

/Mdse Sales 8 lines ^^askett & Co., 579 Madison St 10 hnes

x^Idse Trading 8 hnes xC. A. Ross, Doniphan, Neb 6 hnes ^

freight & Duties 10 lines *<J. H. McCabe, 716 47th St 8 hnes

•Interest & Discount 13 lines v^- E. Austin 6 lines

•Cash Discount 8 lines ^^otes Payable 6 hnes

^^arshaU Field & Co., 200 Adams St 12 hnes

^ohn V. Farwell Co., 148 Market St 13 hnes

y^. B. Claflin Co., New York 9 lines

y^. Perrin & Cie, Grenoble, France 6 lines

•^ly & Walker, St. Louis, Mo 6 lines

- ^eifridge & Co., London, Eng 6 hnes /

•' -Carson, Pirie, Scott & Co. , Adams & Franklin . 1 1 lines

^ills & Gibb, 42 Madison St 9 lines

/^. W. Klemm, Bloomington, 111 10 lines _^has. Rubens & Co., 267 Frankhn St 6 lines y

/fitrawbridge & Clothier, Philadelphia, Pa. ..11 lines ^chraeder & Kramer, Berhn, Germany 5 lines

/Expense 10 lines

/Traveling Expense 12 lines

/Loss & Gain 13 lines

/$^otes Receivable 6 lines

v«. Nugent & Bros., St. Louis, Mo 10 lines

yXjeo. W. Graham Co., Crawfordsville, Ind. . 10 hnes

Aom Smith, Peoria, 111 10 lines

•*Samstag & Hilder Bros., New York 10 lines

184 DRY GOODS BUSINESS

TRANSACTIONS FOR AUGUST

AUGUST 1, 19—,

Jas. H. Morrison and Arthur E. Clark became equal partners in the wholesale dry
goods business at 147 Fifth Ave., Chicago, 111., under the firm name Morrison & Clark.
Each invested $12500.00. Mr. Clark's investment consisted entirely of cash. Mr. Morri-
son's investment was as follows:

Stock of Mdse on hand $7684 . 50

Furniture & Fixtures 782 . 50

Accounts receivable frona the following:

B. Nugent & Bros., St. Louis, Mo. 1075.60
' • Geo. W. Graham Co., Crawfordsville, Ind. 860.75

Toga^Sm^th, Peoria, 111. 750.

.• Samstag & Hilder Bros., New York 1273.87

C. W. Klemm, Bloomington, III. ' 72 . 78
,Make the original entries for the above investments and post at once.

j/ Bought of John V. Farwell Co., 148 Market St., terms 2/10 n/60, an invoice of

goods amounting to $270.00.
^.-'■^ Record this in the purchase book. The items are always enumerated on the invoice itself, which is
f then given a number and filed for record and future reference. Therefore the items will be omitted from

the purchase book entry.
/

''Sold to Strawbridge & Clothier, Philadelphia, Pa., terms 2/10 1/30 n/60:

1 pc. Lonsdale cambric muslin, 56 yds., at 1O|0

6 pes. Utica 45-inch bleached musUn, 41, 42, 43, 41, 42 — 209 yds. at 11|0

4 pes. Dependon L L brown sheeting, 50, 49 j, 50 J, 51 j — 201 yds. at 5^)4

6 pes. Crown cambric, 46, 44 1, 43 f, 52 ^ 47 1, 50— *** yds. at 4ft

Use a very condensed style of writing, and small, neat figures, in making this and subsequent entries

in the sales book. Give each item one line only, omitting the figures which denote the lengths of the

different pieces. Then write these figures just above the item, making them very small and neat.

The tendency of students, and in fact of everybody except experienced accountants, is to write a
large, sprawling hand which is unsuitable for bookkeeping, in which it is often necessary to write a great
deal in a small space. The sales book entries for August and September will afford you excellent practice
to the end of acquiring the style of penmanship you need for bookkeeping work. Do not abbreviate,
aside from the use of well-known and customary abbreviations.

Pajd rent for August in cash, $125.00.

AUGUST 8

Engaged Chas. O. Leonard as bookkeeper and stenographer, at a salary of $25.00
a week, beginning this morning.

Make a memorandum in your journal.

Bought of the H. B. Claflin Co., New York, an invoice amounting to $568.25, terms
1/10 n/30. The invoice was dated August 1.

The' entry in the purchase book must be dated August 1.

vPaid freight on the above invoice, $7.60. Charge Freight & Duties.
iX^ught of Marshall Field & Co., 200 Adams St., on our 30-day note at 6%, Mdse
invoicing at $950.00 net. (Two entries, purchase book and journal.)
j^^x^nsured our stock of Mdse with the Phoenix Insurance Co. of Hartford, Conn. Face
of policy, $6200.00. Rate for 1 year, $1.20 per hundred. Paid the premium in cash.

TRANSACTIONS FOR AUGUST

185

*** yds. at

♦** yds. at

10^0

Sold to P. B. Palmer & Co., Lawrence, Kan., terms 2/10 1/30 n/60:

6 pes. Falcon percale, 28, 28§, 29, 28|, 28, 29J

8 pes. Simpson Novelty print, 56, 56f, 57, 56^ 59, 58i, 57^, 57

4 pes. Lonsdale cambric muslin, 57, 58?, 56, 59

Petty cash sales for the day, $34.50.

^Sold to Blackman Bros. & Co., Pullman, Wash., terms net 60 days:

6 pes. 27-in. White India linen, 24 yds. each *** yds. at

10 pes. 32-in. White Persian lawn, 24 yds. each, *** yds. at

8 pes. 45-in. White French lawn, 35 yds. each, *** yds. at

Ask your teacher to assign to you one of the following price lists, and use the list assigned you when-
ever sales are made of any of the articles named in the list.

Variable Selling Prices

Article

27-in. White India linen

32-in. White Persian lawn

45-in White French lawn

32-in. Swiss mull

67-in. French organdie

36-in. Handkerchief linen, sheer

Princess longcloth

Nainsook, plain

List 1

List 2

Lists

List 4

List 5

List 6

List 7

List 8

10^

12i

12^

17^

27^

27i

32^

27i

27^

12^

List 9

4i
11
10
20
31
30

8^
12

LisTlO

List 11

List 12

List 13

List 14

List 15

List 16

List 17

10|

12i

12^

17^

27^

32^

12^

List 18

27-in. White India linen

32-in. White Persian lawn

45-in. White French lawn

32-in. Swiss mull

67-in. French organdie

36-in. Handkerchief linen, sheer,

Princess longcloth

Nainsook, plain

15
35
30
10

27-in. White India linen

32-in. White Persian lawn

45-in. White French lawn

32-in. Swiss mull

67-in. French organdie

36-in. Handkerchief linen, sheer,

Princess longcloth

Nainsook, plain

List 19

List20

List21

List22

List23

List24

List25

List26

12^

17^

17i

17^

27f

32|

27^

27i

32^

Part of the goods received today from the H. B. Claflin Co. were not as ordered and
these were returned to them for credit, $7.50.

Make an entry in the journal debiting the H. B. Claflin Co., and crediting Mdse Purchases.

186 DRY GOODS BUSINESS

AuansT 6

Bought of V. Perrin & Cie, Grenoble, France, an invoice of gloves amounting to 550
francs. The invoice was dated July 22, terms 2/30 n/60.

In changing this to U. S. money for the purpose of making the entry on our books, consider 1 franc
as 20^. This is approximately correct, and you have no way of knowing exactly what exchange on Paris
can be bought for when the final settlement is made.

- Paid freight and duties on the above in cash. The freight charges amounted to
$2.25. The duty was $4.00 per dozen for 10 dozen gloves.

Charge Freight & Duties for the entire amount of cash paid out.

The $4.00 per dozen charge is called a specific duty. It is based on quantity. When the duty is
a certain per cent of the value, it is called an ad valorem duty.

Received of Samstag & Hilder Bros., New York, their check in settlement of two
invoices due today, as follows: One invoice dated July 26, $314.50 less 6% for cash in
ten days; one invoice dated July 26, $305.00 less 2% for cash in ten days. Amount of
check, $594.53.

Received a 60-day note bearing 6% interest, from Tom Smith, Peoria, 111., for $750.00,
to cover the balance due on his account.

Sold to J. C. Nichol, Foley, Minn., terms 1/10 n/30:

12 gro. Farwell Brand needles at 1.05 **.**

60 doz. Klostersilk floss at .30 **.

16 doz. Coats' spool cotton at 58^ 9.28

Less7% .66 *.**

AUaUST 6

Engaged R. E. Austin as traveling salesman, at a salary of $100.00 per month and
expenses.

Make a memorandum of this in the journal.

Bought of the National Trunk Co., 300 W. Madison St., City, on our 30-day note at
' 6%, two trunks for the use of Mr. Austin. The trunks cost $25.00 and $13.50.

Charge Traveling Expense.

Advanced Mr. Austin $100.00 as expense money, with the understanding that he
was to keep a record of his expenditures and submit an itemized report of them whenever
called upon to do so.

Charge the $100.00 to R. E. Austin. When he submits reports of expenditures, his account will
be credited and Traveling Expenses debited with the amounts reported by him as spent. In this manner
the entire $100.00 will eventually be written off of his account and charged into the Traveling Expense
account.

Sold to the Lawndale Dry Goods Co., 1579 Ogden Ave., City, terms 1/10 n/60:

20 pes. 32-in. Swiss mull, 24 yds each, *** yds at .**

8 pes. 67-in. French organdie, 16| yds each, *** yds at . **

8 pes. 36-in. Handkerchief linen, sheer, 12 yds each, *** yds at . **

AUGUST 7

Bought of Ely & Walker, St. Louis, Mo., an invoice of Mdse amounting to $354.50,
terms 6/10 5/30 4/60. The invoice was dated August 4.

Paid freight on the above, $6.35. i

TRANSACTIONS FOR AUGUST 187

Received a bill from The A. H. Andrews Co., 156 Wabash Ave., for office furniture,
$69.50. Paid the bill at once by check.

No account is kept with the A. H. Andrews Co. Charge the Furniture & Fixtures account direct
in the cash book.

Received Geo. W. Graham Co.'s 15-day note at 6% for $860.75, the amount of the
balance due on their account.

The Lawndale Dry Goods Co. returned 10 pes. 32-in. Swiss mull sold to them yesterday,
claiming that their order was for 10 pes. only, instead of 20 pes. as billed. Gave them a
credit memo for the 10 pes. returned.

Enter in journal, debiting Mdse Sales.

Subscribed to the Dry Goods Reporter for one year, paying the subscription price
in cash, $5.00.

Sold to Haskett & Co., 579 Madison St., City, terms 2/10 1/30 n/60:

4 pes. Imperial chambray, 53, 54|, 52, 53 — *** yds at lljlf
6 pes. Gibraltar percale, 29, 30^, 31, 30i, 29f, 30— *** yds at 61^

5 pes. Berkeley 300 cambric musUn, 44, 44J, 43f, 42^ 43i— *** yds at 20)4

AUanST 8

Sold to Samstag & Hilder Bros., New York, terms 6/10 5/30 4/60:

10 pes. 27-in Adora silk, 25^ 26J, 24f , 25, 26|, 24^, 26, 24, 25^, 26 *** yds at 280

432 pes. K 3632-1 Featherstitch braid, per doz. pieces 750

432 pes. K 3631-1, do. at 850

Remitted to H. B. Claflin Co. our check in settlement of the invoice received from
them on August 3, dated August 1, less 1% discount.

\ Look this up in the purchase books and journal. Discount only the net amount of goods kept by us.
'The remittance was made two days ahead of time to allow for the time consumed in sending the
check from Chicago to New York.

Received C. W. Klemm's check in settlement of an invoice sold him on July 30.
The amount of the invoice was $72.78; terms 2/10 n/30. The amount of the check was
$71.47, the extra 15^ being included to cover exchange.
-See. tcaixsaction dated Jime 5, page 152.

Paid Chas. 0. Leonard's salary for the week in cash, $25.00.

Post your books to date in the following order : Journal, Sales Book, Purchase Book,
Cash Book. Do not take a trial balance. Rule up any personal accounts that balance.

AUOUST 11

Bought of Selfridge & Co., London, England, an invoice of woolens amounting to
£120. The invoice was dated August 4, terms 2/30, n/60.

In entering this item, change English pounds to U. S. dollars by multiplying by 4.90. You have
no way of knowing what London exchange will be when the bill is settled, but $4.90 is approximately
correct.

_^_ The freight and duty on the above amounted to $137.65, which we paid in cash.

We deposited the check received yesterday from C. W. Klemm and were charged
15^ exchange.

188 DRY GOODS BUSINESS

Gave our check to John V. Farwell Co. for the net amount of the invoice purchased
of them on August 1.

Received New York exchange from Strawbridge & Clothier in settlement of the
invoice sold them on August 1.

Jteek this up in the sales book.

Petty cash sales for the day, $10.75.

AUGUST 13

Bought two invoices of Carson, Pirie, Scott & Co., Cor. Adams & Franklin Sts., both
dated August 13. One was for lace curtains, $176.70, terms 6/10 5/30 4/60. One was
for domestics, $110.50, terms 2/10 1/30 n/60. (Make two entries in the purchase book.)

A peculiar feature of the terms on the first bill is that no discount less than 4% is offered, and that
the customer does not get an extension of time for a payment of the full amount of the bill. If he fails
to take his 4% at the expiration of the 60-day period, he must pay the full price, and in most cases interest
would be charged up to him from the 61st day.

Received a check from P. B. Palmer & Co., for the net amount due for Mdse sold
them on August 3.

On August 1 the balance due from B. Nugent & Bros., St. Louis, Mo., was $1075.60.
Received their 60-day note at 6% dated June 25, for the entire amount.

Remitted to Ely & Walker net cash for their invoice dated August 4 (See transac-
tion on August 7).

Received J. C. Nichol's check for our invoice of August 5, less 1%.

Jas. H. Morrison withdrew $45.00 for his personal use.

AUGUST 15

bmtons, and lace trimmings amounting to $175.00. Terms, 6/10 5/30 4/60.

y Remitted to V. Perrin & Cie, Paris exchange for 550 francs less 2%. The rate of

\)r exchange was 5.15 (5'Vioo francs to the dollar). This was for the invoice received on the

5th inst., dated July 22. Our remittance was sent six days early as we wished it to reach

them in time to entitle us to the discount.

To ascertain the cost of the draft on Paris, first deduct 2% from the 550 francs. This gives 539
francs as the net amount. Divide by 5.15, the current rate of exchange. The result will be the net cost
to us, expressed in U. S. money, and will be entered in the General column. The difference between this
amount and the $110.00 already entered on our books, will be entered as cash discount.

It should be noted that the cash discount entered as above is not all cash discount. The result
secured ($5.84) includes the amount of the actual cash discount (11 francs or $2.14) and $3.20, the amount
of the discrepancy in our first entry.

Received Samstag & Hilder Bros.' check in settlement of an invoice amounting to
$654.37 sold them on July 17 on the following terms: 6/10 5/30 4/60. Amount of check,
$621.65. J

Received Haskett & Co.'s check for our invoice of August 7, less 2%.

Paid Chas. O. Leonard's salary for the week in cash.

Post your books. Take a trial balance, which must include the unposted lead pencil
footings from the sales book, purchase book, and special columns in the cash book, and
the cash balance. In determining the amount of the cash balance, take into consideration
the totals of the Petty Cash Sales and Expense columns. Make no statements. Close
any personal accounts that balance.

TRANSACTIONS FOR AUGUST 189

AUGUST 17

Sold to Blackman Bros. & Co., Pullman, Wash., terms net 60 days:

10 pes. Princess longcloth, 12 yds. each, *** yds. at . **

12 pes. Nainsook, plain, 24 yards, each, *** yds. at . **

Sold to B. Nugent & Bros., St. Louis, Mo., terms net 60 days:

6 pes. 27-in. \Miite India linen, 24 yds. each, *** yds. at . **

8 pes. 32-in. White Persian lawn, 24 yds. each, *** yds. at

AUGUST 18

Bought of Carson, Pirie, Scott & Co. an invoice of corsets amounting to $137.25.
Terms 1/10 n/30.

Received a check from Samstag & Hilder Bros, in payment of our invoice of August
8, less 6%.

Sold to Strawbridge & Clothier, Philadelphia, terms 2/10 1/30 n/60:

7 pes. Fruit of the Loom cambric muslin, 56, 58, 57^, 56J, 58j, 57, 58 — • *** yds. at 11^

8 pes. Wamsutta cambric muslin, 57j, 59, 56, 58j, 57, 561, 59, 60§ — • *** yds. at 11^
134 rolls White Rose cotton batts (12 oz.) — at 150

Sold to Geo. W. Graham Co., Crawfordsville, Ind., terms 6/10 5/30 4/60:
12 doz. Ladies' long "Dependon" mocha gloves, at $24.00 ***.

Less 25% **. $*♦*.

6 doz. Ladies' American Taffeta umbrellas, at $12.00 *♦ . **

5 doz. No. 484 40-inch shawls, wool squares, at $10.50 **.**

$♦**.**

Returned to Carson, Pirie, Scott & Co., as not up to sample, goods received today
invoiced at $9.75.

Make an entry in the journal as on Aug. 3.

Petty cash sales for the day, $18.90.

AUGUST SO

Bought from John V. Farwell Co. an invoice of toweling amounting to $164.50.
Tmi^s, 2/10 1/30 n/60.

Sold to Tom Smith, Peoria, 111., terms 2/10 1/30 n/60:

20 pes. Imperial F. unbleached bunting, 944 yds. at Z\^

6 pes. Amoskeag denim, 45, 47|, 45^, 46f, 47, 45| — *** yds. at 130

7 pes. Washington prints, turkey red, 49i, 50, 49, 49, 50f, 49i, 50— *** yds. at 4|0

Sold to Haskett & Co., 579 W. Madison St., City, terms 1/30 n/60:

18 prs. 50 X 72 White cotton blankets, at 750

24 prs. 64 x 76 Gray cotton blankets, at 92^0

12 doz. 18 X 39 Unbleached Turkish towels, at 700

6 pes. Amoskeag denim, 45, 47^, 49, 46, 47, 46 — *** yds. at 130

AUGUST 22

Received a shipment of Mdse from the H. B. Claflin Co., New York. The invoice
amounted to $537.86. Terms 1/30 n/60. The bill was dated August 18.
Paid $6.57 for freight and drayage on the above shipment.

190 DRY GOODS BUSINESS

Sold to the Lawndale Dry Goods Co., 1579 Ogden Ave., City, terms 1/10 n/30:

6 pes. Lonsdale cambric muslin, 56, 57j, 57, 58f, 57, 56 — *** yds. at lOj)^

2 pes. Pequot 10-4 sheeting, brown, 50, 495 — ** yds. at 26^

3 pes. Pequot 10-4 sheeting, bleached, 51, 49|, 49— *** yds. at 2S^
1 pc. 32-in. Swiss mull, 24 yds. at _♦*

Geo. W. Graham & Co.'s note in our favor fell due today and was paid by check with
accrued interest. The check was drawn upon a Chicago bank, hence there was no ex-
change included.

Many large retail houses throughout the central states which buy extensively from wholesale and
jobbing houses in Chicago, carry accounts in Chicago banks in order to avoid the necessity of including
exchange on checks sent to Chicago.

Bought gloves of Marshall Field & Co. amounting to $300.00. Two invoices were
received: One for $190.00 less 6/10 5/30 4/60, and one for $110.00 less 2/10 1/30.

Paid by check both of Carson, Pirie, Scott & Co.'s invoices of August 13, less dis-
counts allowed.

Paid Mr. Leonard's salary in cash.

Strawbridge & Clothier returned 1 pc. Fruit of the Loom cambric musUn, 58 yds.,
as defective, and we allowed them credit for it at invoice price.

Post your books, but do not take a trial balance.

AUGUST 24

Received B. Nugent & Bros.' check for the amount of their note in our favor, due
today with accrued interest.

Paid Mills & Gibb for their invoice of Aug. 15 less discount allowed by the terms
of the purchase. /

AUOUST 26

Bought of Marshall Field & Co. an invoice of handkerchiefs amounting to $125.00.
Terms 6/10 5/30 4/60.

Sold to B. Nugent & Bros., St. Louis, Mo., terms 2/10 n/30:

100 doz. Klostersilk floss, at 300 **.

40 doz. Coats' Spool Cotton, at 500 ** **

Less 7%

40 gro. Upholstery tacks, at 2.10
Less 90%

and less 10%

*.**

****

*♦

Sold to Haskett & Co., 579 W. Madison St., City, terms 2/10 1/30 n/60:

2 pes. Lonsdale cambric muslin, 56, 58^ — *** yds. at lOf^

4 pes. Utica 45-in. bleached musUn, 42, 43 i 43, 42— *** yds. at lU^

2 pes. Dependon LL brown sheeting, 50, 49 § — ** yds. at 05 J j^

4 pes. Crown cambric, 44|, 45i, 43f, 50 — ■ ' *** yds. at 04 ^

TRANSACTIONS FOR AUGUST 191

AuansT 28

Received a check from Strawbridge & Clothier for the amount due on our invoice
dated August 18.

The Geo. W. Graham Co. paid by check the amount due today on the invoice sold
them on the 18th inst.

Paid in cash the invoice bought of Carson, Pu-ie, Scott & Co. August 18, less dis-
count allowed. Remember that the discount is figured only on the amount due for goods
kept by us.

Sold to C. W. Klemm, Bloommgton, 111., terms 1/30 n/60:

10 pes. Falcon percale, 28, 29|, 29, 28|, 27, 28^ 28, 30, 29i, 28J— *** yds. at 7^
6 pes. Simpson Novelty prints, 56, 58 J, 57, 575, 58, 59 — *** yds. at 6fS

Sold Mdse to Chas. O. Leonard, the bookkeeper, for cash at cost, $17.65.
This is a petty cash sale.

Haskett & Co., clauning overcharge, asked for a rebate of $2.00 on our bill of Aug.
26, and we allowed this.

AUOUST S9

Received an express money order from Tom Smith, Peoria, 111., in settlement for
the Mdse billed him on the 20th inst. less 2% discount.

Arthur E. Clark withdrew $40.00 cash.

R. E. Austin, traveling salesman, returned today from his first trip for the house.
He submitted a statement of expenses amounting to $76.60.

Debit Traveling Expense and credit R. E. Austin's account for $76.60 (Journal entry).

Paid John V. Farwell Co. the amoimt due on their invoice of August 20, less cash
discount.

Paid Mr. Leonard's salary for the week in cash.

^,^ AUGUST SI

Paid R. E. Austin's salary from August 6 to date in cash, $80.65. (Charge Travel-
ing Expense.)

Post your books. The footings of the sales book, purchase book, and cash book
must be posted at this time, and those books ruled up. The Petty Cash Sales Colunm
in the cash book must be posted to the Sales Book before the sales book total is posted.

Take a trial balance, which must include the balance of the cash book.

Make statements, using the following inventories:

Merchandise 11625.60

Furniture & Fixtures 850.00

Interest on Tom Smith's note in our favor

« ** *f* '

Interest on our note favor Marshall Field & Co. *.** ^ -^^

Interest on our note favor National Trunk Co. .** yw -^ -, — ^.-v o

Insurance paid for and unused, 11 mo. {Expense Invty) **.**

Trunks (Traveling Expense In\'ty) 35.00

Salary earned and unpaid (Chas. O. Leonard, 1 day) 3.57

You will have to determine from the nature of the above inventories whether they are resources
or Uabilities.

192 DRY GOODS BUSINESS

In making the loss and gain statement, show Freight & Duties as an increase oi the
cost of Mdse, and in closing the ledger, close Freight & Duties into Mdse before closing
the latter account. Also show Traveling Expense in the loss and gain statement as an
increase of the loss on Expense, and in closing the ledger, close Traveling Expense into
Expense before closing the latter account.

Close Loss <fe Gain with two red ink entries, showing the profit as equally divided
between the partners. Close the proprietors' accounts, but close no other financial
accounts except personal accounts which balance.

Partnership Problems.

1. F. E. Farrell and Geo. H. Ritchie began business as partners on January 1, 1913, with invest-
ments as follows: Farrel, $4473.25; Ritchie, $3276.84. Their agreement was to divide profits equally.
The profits for the first year amounted to $5246.84. On December 31, 1913, Ritchie retired from the
business, in consideration of a payment of $5000.00 in cash made to him personally by Farrell. What
entry or entries in the books of the business were necessary?

2. George B. Duncan and H. E. Evans, both printers, united their plants on January 1, 1913,
under the firm name of Duncan and Evans, with an agreement that profits were to be divided equally
between them. Mr. Duncan brought into the firm the following assets and liabilities: Cash, $1250.00;
accounts receivable, $1375.20; notes receivable, $72.50 with interest at 6% since April 1, 1912; printing
machinery and equipment, $2346.50; accounts payable, $425.69; notes payable, $1000.00 with interest
at 4% since December 1, 1912. Mr. Evans brought into the partnership notes receivable, $260.25, with
interest at 5% since Sept. 1, 1912* accounts receivable, $63.50; printing machinery and equipment worth
$1725.62; stock of paper, $574.83; accounts payable, $500.00; notes payable, $650.00, with interest at
41% since October 1, 1912. If the net profit for 1913 was $5762.50, what were the investments of the
partners on December 31, 1913, no money having been withdrawn by either?

3. The investments of Geo. B. Duncan and H. E. Evans on January 1, 1914, were the same as
on December 31, 1913, as determined in the last problem. On April 1, 1914, each partner withdrew
$1000.00 in cash from the business. On September 1, 1914, H. E. Evans withdrew $2000.00 in cash.
The net profit for the year was $5264.28. On December 31, 1914, H. E. Evans withdrew from the part-
nership, the consideration being $5000.00 paid to him by Geo. B. Duncan personally. What entry or
entries should the bookkeeper make on December 31, 1914, to show the dissolution? What is the amount
of Geo. B. Duncan's net investment at the beginning of the new year?

4. J. W. Shaw and Henry E. Field were partners with investments of $12560.00 and $11248.26
respectively on February 28, 1913, on which day Shaw retired from the partnership, being paid $12560.00
in cash out of the funds of the business. What entry or entries in the books of the business were neces-
sary?

5. Paul Peters and W. L. Ryan dissolved partnership on May 1, 1913, their respective invest-
ments at the time being $7428.39 and $5892.73. Mr. Peters accepted $7000.00 for his interest in the
business, and this sum was paid in cash out of the funds of the business. What entry or entries in the
books of the business were necessary?

6. E. E. Morrill and A. H. Ashley, partners, had investments of $12728.95 and $13842.96 respect-
ively on July 1, 1914. Morrill offered Ashley $16000.00 for his interest in the business and Ashley ac-
cepted. Ashley took in payment the building occupied by the business, at $12000.00, the amount at
which it was carried in the ledger, and $4000.00 in cash from the funds of the business. What entry or
entries in the books of the business were necessary?

7. J. A. Long engaged in the dry goods business on January 1, 1913, investing $8000.00 cash.
His profit for the first year was $3500.00, which he allowed to remain in the business. On January 1,
1914, he took in as partner E. C. Dolan, transferring to him a one-fom-th interest in the business in con-
sideration of $4000.00 cash, the cash being paid to Mr. Long personally by Mr. Dolan without increas-
ing the capital of the business. What entry or entries in the books of the business were necessary?

TRANSACTIONS FOR SEPTEMBER 193

8. On July 1, 1913, E. A. Cameron was sole proprietor of a business the capital of which, as shown
by the capital account, was $6342.96. He received C. E. Carpenter as an equal partner at that time
upon condition that Carpenter should pay $8000.00 into the business in cash. Only one capital account
was to be kept. What entry was necessary?

9. A. M. Adams engaged in business on January 1, 1913, with a cash investment of $4000.00.
During January the net loss of the business was $190.50. On January 31 the books showed that Adams
owed Charles E. Rogers $1500.00 on account and that Rogers also held Adams' note for $1000.00 without
interest. On February 1, Adams took in Rogers as an equal partner on condition that Rogers should pay
in in cash an amoimt sufficient to make the investments of the two partners equal. What entry or entries
in the books of the business were necessary?

10. B. J. Arnold and W. R. Higgins became partners on July 1, 1913, imder an agreement to
divide profits in proportion to investments. B. J. Arnold invested cash, $1726.82; merchandise, $5246.80;
and furniture, $920.65. W. R. Higgins invested cash, $10000.00. No personal accounts or notes either
payable or receivable were invested by either partner. The cash receipts during the first year amounted
to $22542.60, of which $7569.27 was from cash sales and the rest on personal accounts opened during
the year. The cash disbursements during the year amounted to $24526.00, of which $5542.60 was for
expense and the rest for merchandise. On June 30, 1914, the accounts receivable (all new merchandise
sales accounts) amounted to $825.43, the accounts payable (all new merchandise purchases accounts)
amounted to $1264.75, and the inventories were as follows: Merchandise, $15469.27; furniture and
fixtures, $900.00. From the foregoing facts determine: (1) The cash balance at the end of the year;
(2) the merchandise purchases for the year; (3) the merchandise sales for the year; (4) the profit on mer-
chandise for the year; (5) the net profit of the business for the year; (6) the net worth of the business
on June 30, 1914, determined in two ways; (7) the investment of each partner on July 1, 1914, neither
having withdrawn any money from the business.

11. On July 1, 1914, the investments of Arnold and Higgins were as determined in the preceding
problem. The profit of the business for the second year was $4327.60. On June 30, 1915, Mr. Higgins
retired from the partnership, receiving the amount of his investment in cash from the business. TVTiat
entry should the bookkeeper make?

12. A, B, and C are partners whose investments are respectively 25, 35, and 40% of the total in-
vestment. Gains are divided or losses borne by the partners in the proportions which their investments
bear to each other. The following trial balance shows all items in the ledger before closing except the
balances of the partners' accounts. (1) Ascertain and insert these balances. (2) Determine the amount
of the gain or loss since the books were last closed, using the following inventories: Real Estate,
$16450.00; Mdse., $12500.00; Salaries due clerks, $23.75; Interest receivable, $5.20; Interest payable,
$2.37. (3) Prepare a trial balance showing the condition of the ledger after closing.

Cash 2346.50

Real Estate 16500.00

Mdse 14230.75 2475.00

Expense 275.00

Interest 24.50 37.75

Notes & Accts. Rec. 2532.60

Notes & Accts. Pay. 1475.00

TRANSACTIONS FOR SEPTEMBER
DBT GOODS BUSINESS — CONTINUED
SEPTSMBEB 1

Arthur E. Clark retired from the business, transferring his entire interest to Jas.
H. Morrison for S13,500.(X) paid to him by Mr. Morrison out of private funds.

Purchased 6 trucks from The Standard Scale & Supply Co., 52 S. Canal St., at $4.50
each. Gave them our 10-day note at 6% for the amount due.

194 DRY GOODS BUSINESS

We have no reason for keeping an account with this supply company. Handle this transaction
entirely through the journal, debiting Furniture & Fixtures.

Paid Marshall Field & Co. for one invoice dated August 22. Two invoices were
received on that date; we paid today the one on which the larger discount was allowed.

Advanced R. E. Austin $75.00 in cash and started him out on his second business
trip.

Sold to Blackman Bros. & Co., Pullman, Wash., terms 1/10 n/30:

4 pes. Lonsdale cambric muslin, 63, 55|, 56j, 54 — *** yds. at 10^^

6 pes. 45-in. White French lawn, 35 yds. each, *** yds. at .**

4 pes. 67-in. French organdie, 16f yds. each, *** yds. at .**

Paid the rent for September in cash, $125.00.

SEPTEMBER 2

Bought of Mills & Gibb Mdse amounting to $145.25, terms 2/10 1/30 n/60. Upon
receipt of the goods we found one lot slightly damaged and wrote advising them of the
condition in which the shipment was received.

Remitted to Self ridge & Co. London exchange at 4.91 1 for the invoice received
August 11, dated August 4, £120 less 2%.

Refer to the second transaction on August 15 for an explanation of this entry.

Redeemed our note issued on August 3 in favor of Marshall Field & Co., with
interest accrued to date in cash.

Sold to Haskett & Co., 579 W. Madison St., City, terms net 30 days:
r 4 pes. Falcon percale, 29, 28|, 30^, 28f— *♦* yds. at 70

/ 10 pes. 36-in. Handkerchief linen, sheer, 12 yds. each, *** yds. at .**

I. 8 pes. 32-in. Swiss Mull, 24 yds. each, *** yds. at .**

SEPTEMBER 4

Received a shipment of Mdse from Ely & Walker, St. Louis, Mo., amounting to
$265.40. The invoice was dated Sept. 1. Terms, net 10 days.

Paid the freight charges on the above shipment in cash, $5.42.

Discounted at the bank the 60-day note received from Tom Smith on August 5.
The bank charged for discounting it at the rate of 4% per annum.

Make two entries on the debit side of the cash book, one for Notes Receivable, and one for Interest
& Discount, the latter being the net amount received in excess of the face of the note.

Sold to Strawbridge & Clothier, Philadelphia, Pa., terms 2/10 1/30 n/60:

6 pes. Dependon LL brown sheeting, 50, 49§, 51, 501, 49, 50 — *** yds. at b\t
10 pes. Crown cambric, 44^, 43f, 52, 50, 52^, 51, 50, 50|, 49|, 46—*** yds. at 4^
20 gro. Farwell Brand needles, at $1.05

SEPTEMBER 6

Gave the National Trunk Co. our check for our note in their favor dated August 6,
and accrued interest.

Paid Marshall Field & Co., cash in settlement of their invoice of August 26, less
discount.

Petty cash sales for the day, $7.95.

TRANSACTIONS FOR SEPTEMBER 195

Bought of Chas. Rubens & Co., 267 Franklin St., an invoice of buttons, $150.00
less 10%. Terms 2/10 1/30 n/60.

Received an invoice of laces and embroidery from Schraeder & Kramer, Berlin,
Germany, amounting to 860 marks. The invoice was dated August 28, terms 2/30 n/60.

A mark is worth approximately 24^. (See the first transaction on August 5.)

Paid freight and duty on the above in cash. The freight amounted to S4.60. The
duty was 60% ad valorem. (The duty was paid at the exchange rate of 96/ for 1 Reichs-
mark, or 4 marks.)

Paid Chas. O. Leonard's salary in cash, $25.00.

Received a letter from Mills & Gibb, containing a credit memorandum for $6.50
as an allowance for damages to goods received by us on Sept. 2.

Strawbridge & Clothier returned to us, as soiled, two pes. Crown cambric, 49^ and
50j yds., and we gave them credit for the goods at invoice price.

Post your books.

SEPTEMBER 9

Bought of Carson, Pirie, Scott & Co. an invoice of domestics amounting to $164.20,
terms 2/10 1/30 n/60.

Sold to C. A. Ross, Doniphan, Neb., terms 6/10 5/30 4/60:

4 pes. Berkeley 300 cambric muslin, 46, 4A\, 45, 43| — *** yds. at 200

4 pes. 6-in. Androscoggin pillow tubing, 41, 40$, 39, 40J — *** yds. at 140

Sold to J. H. McCabe, 716 47th St., City, terms 2/10 n/30:

6 pes. Pequot 10-4 sheeting, brown, 40, 4U, 41, 40J, 46i 44—*** yds. at 260

5 pes. Dwight Anchor 9-4 sheeting, bleached, 41, 40|, 42, 39i, 41 f*** yds. at 240
4 pes. Amoskeag XX ticking, 33, 34, 34f, 35 — ♦** yds. at 130

Returned to Carson, Pirie, Scott & Co. Mdse amounting to $21.50.

SEPTEMBEB 11

Remitted Chicago exchange to Ely & Walker, St. Louis, Mo., for the net amount
of the invoice from them on the 4th inst., dated Sept. 1.

Paid our note issued on Sept. 1 in favor of the Standard Scale & Supply Co., and
accrued interest, by check.

Sold to Haskett & Co., terms 2/10 1/30 n/60:

4 pes. Imperial chambray, 51, 53 i, 54, 52^ — ♦** yds. at 110

4 pes. Berkeley 300 musUn cambric, 44^, 43i, 42|, 43— *** yds. at 200

40 doz. Klostersilk floss, at 300

BEPTEMBES 12

Gave Mills & Gibb our check for the net amount due today on their invoice of Sep-
tember 2.

Mr. Austin, our traveling salesman, submitted a report of expenses amounting
to $37.65.

Bought an invoice of Mdse amounting to $254.90 from John V. Farwell & Co.,
terms 6/10 5/30 4/60.

196 DRY GOOODS BUSINESS

Sold to the Lawndale Dry Goods Co., City, terms net 10 days:

12 pes. 27-in. White India linen, 24 yds. each, ***yds. at .**

4 pes. Pride of the West sheeting, bleaehed, 49, 50^, 49f, 50— ***yds. at lie

10 pes. Prineess longcloth, 12 yds. eaeh, ***yds. at .**

Sold to the Geo. W. Graham Co., Crawfordsville, Ind., terms 30 days net:

12 pes. Nainsook, plain, 24 yds. each, ***yds. at .**

4 pes. Foulard silk imported, 29, 30|, 31, 29f— ***yds. at 65c

Paid Chas. O. Leonard's salary in cash.

Post your books and take a trial balance. Rule up personal accounts that balance.

SEPTEMBEB 14

Received Strawbridge & Clothier's check for our invoice of Sept. 4 less 2%.

Paid Chas. Rubens & Co., for the invoice purchased of them on Sept. 5, less discount.

We offered to return as defective a part of the goods bought of John V. Farwell &
Co., on Sept. 13, but they preferred to allow us $10.50 on account and let us keep the
Mdse. They therefore sent us a credit memorandum for $10.50.

Sold to Tom Smith, Peoria, 111., terms 2/10 1/30 n/60:

3 pes. Lonsdale cambric muslin, 56, STj, 57 — • *** yds. at 10|j5
6 pes. Falcon percale, 28, 30i 29, 281, 29, 28— *** yds. at 7jt

12 doz. Coats' Spool Cotton, at 580 *.♦*

Less 7% .*♦

Petty cash sales for the day, $14.40.

SEPTEMBER 17

Bought of Marshall Field & Co., an invoice amounting to $234.50, terms 2/10 n/60.
Lord & Thomas submitted a bill amounting to $142.50 for magazine advertising
done for us. We gave them our 30-day note at 6%.

No account is kept with Lord & Thomas. Handle this transaction through the journal. Debit
Expense, as no advertising account is kept.

Paid by check H. B. Claflin & Co.'s bill dated August 18, less 1% discount (See
tr ansactio n of August 22).

Sold to J. H. McCabe, terms 1/10 n/60:

4 pes. Indian Head sheeting, bleached, 4U, 39, 40i, 39f— ***yds. at ll§c
6 pes. Indian Head sheeting, brown, 39, 39^ 42, 39f, 40, 41— ***yds. at 8c

10 pes. 32-in. White Persian lawn, 24 yds. each ***yds. at .**

SEPTEMBEB 19

Bought of Mills & Gibb Mdse invoiced at $150.00, terms 2/10 n/30 October 1 dating.

Haskett & Co. paid for the Mdse sold them on August 20, less the discount allowed
them.

Received J. H. McCabe's check for the amount of the invoice sold him on Sept. 9
less the discount allowed.

TRANSACTIONS FOR SEPTEMBER 197

Paid Carson, Pirie, Scott & Co., in cash for the Mdse invoiced to us on the 9th inst.,
less discount.

Before computing the discount on this bill, deduct the amount of the goods returned on Sept. 9,
as it is apparent that we are not entitled to any discount on goods we did not keep.

Petty cash sales for the day, $17.30.

Paid Mr. Leonard's salary in cash.

Post your books. Close any personal accounts that balance.

SEPTEMBEB 21

Haskett & Co. settled for the bill of goods they bought of us on Sept. 11, discount-
ing in accordance with the terms of sale.

Sold to Strawbridge & Clothier, Philadelphia, Pa., terms 6/10 5/30 4/60:

268 rolls White Rose cotton batts (12 oz.), at 15^

140 doz. Klostersilk floss, at 30^

10 pes. 4.5-in. White French lawn, 35 yds. each, •** yds. at .**

4 pes. Wamsutta cambric muslin, 56|, 57, 56, 58i — *** yds. at 11^

6 pes. Gibraltar percales, 29^, 28, SOJ, 31, 29, 30— *** yds. at 6i^

Sold to B. Nugent & Bros., St. Louis, Mo., terms 2/10 1/30 n/60:

4 pes. Imperial F. unbleached bunting, 47, 48J, 47J, 48 — *** yds. at 3iji

6 pes. Fruit of the Loom cambric muslin, 56, 58, 57 J, 56i, 59, 62 — *** yds. at 1 10

20 p>c8. 32-in. Swiss mull, 24 yds. each, *** yds. at .**

Paid Marshall Field & Co.'s mvoice dated August 22, for $110.00.

SEPTEMBER 2i

Received the Lawndale Dry Goods Co.'s 30-day note at 6% for the invoice sold
them on September 12.

Bought Mdse of Marshall Field & Co. amounting to $132.30. Terms, 6/10 5/30 4/60.
Paid John V. Farwell & Co. for their bill of September 12, less 6% discount.
Deduct the amount of the allowance they made to us on Sept. 14 before computing the discount.

Discounted at the bank at 4% the interest-bearing note received today from the
Lawndale Dry Goods Co.

Purchased Mdse amounting to $59.60 from Carson, Pirie, Scott & Co., terms net
30 days.

Received Chicago exchange from Tom Smith, Peoria, 111., in settlement of our bill
against him dated September 14.

Received a credit memorandum from Marshall Field & Co., $7.35, to cover a short-
age on goods received from them today.

SEPTEMBER 26

Paid Marshall Field & Co.'s bill of the 17th inst., less discount.

Mr. Austin submits a report of traveling expenses amounting to $51.50.

Paid Mr. Leonard's salary in cash.

Post your books.

198 DRY GOODS BUSINESS

SEPTEMBER 28

Sold to J. H. McCabe, 716 47th St., City, terms 2/10 n/30:

4 pes. Dwight Anchor 9-4 sheeting, bleached, 41, 40J, 42, 39i— *** yds. at 24^
3 pes. Amoskeag XX ticking, 33, 34, 34 1 — *** yds. at 13^

5 pes. Pequot 10-4 sheeting, brown, 40, 41 1, 41, 40i, 46^— *** yds. at 260
10 pes. 27-in. White India linen, 24 yd. pes., *** yds. at .**

Sold to B. Nugent & Bros., St. Louis, Mo., terms 2/10 1/30 n/60:

3 pes. Gibraltar percale, 28, 30^, 293 — ** yds. at 6i0

4 pes. Amoskeag denim, 465, 45, 47J, 49 — *** yds. at 130

3 pes. Berkeley 300 cambric muslin, 57, 59J, 58 — *** yds. at 200
8 pes. 32-in. White Persian lawn, 24 yds. each, *** yds. at .**

Sold to Haskett & Co., City, terms 2/10 1/30 11/6O:

30 doz. Klostersilk floss, at 30(i

3 pes. Berkeley 300 muslin cambric, 44^, 43}, 42J— ♦♦♦ yds. at 200

3 pes. Imperial chambray, 51, 53j, 54 — *** yds. at 110

10 pes. 45-in. White French lawn, 35 yds. each, *** yds. at .**

SEPTEMBER 29

Bought of John V. Farwell Co., an invoice of Mdse amounting to $84.50, terms
2/10 1/30 n/60.

Sold to Geo. W. Graham Co., Crawfordsville, Ind., terms 2/10 1/30 n/60
6 pes. Berkeley 300 cambric muslin, 67, 60, 59 J, 58, 60, 60i— *** yds. at 200
6 pes. Amoskeag denim, 46^, 45, 47f, 49, 48 — *** yds. at 130

4 pes. Gibraltar percales, 28, 30^, 29 f, 29— *♦* yds. at 6i0

Also the following, billed at 6/10 5/30 4/60:

10 pes. 36-in. Handkerchief linen, sheer, 12 yds. each, *** yds. at .*•

12 pes. Princess longcloth, 12 yds. each, *** yds. at .**

Petty cash sales for the day, $35.20.

SEPTEMBER SO

The Geo. W. Graham Co. put in a claim for $24.00 for goods received in damaged
condition and we allowed this claim.

Paid Mr. Austin's salary, $100.00, in cash.

Post, take a trial balance, make statements, and close ledger accounts, following
the instructions given on August 31. In making your statements, use the following
inventories :

Merchandise

$12769.65

Furniture & Fixtures

875.00

Unexpired Insurance, 10 months

** **

Trunks

32.50

Salary earned and unpaid, 3 days

10.71

Int. due on note favor Lord & Thomas

^**

SUPPLEMENTARY PROBLEMS

The purpose of the work which follows is to give you practice in solving some of the
problems most frequently arising in practical accounting, and at the same time to give
you a broader comprehension of the subject through familiarizing you with many new
terms, and showing you how the principles you learned can be applied to many new con-
ditions. In mastering these problems, you wUl receive much more benefit than that
derived from the keen mental exercise they will give you; for each problem presents some
important phase of accounting or of business. A careful study of the problems in this
section will give you a sharper appetite for the more advanced accounting which you
will encounter in your study of Wholesale Accounting, Mercantile Accounting, and Modern
Corporation Accounting.

THE MERCHANDISE ACCOUNT SUBDIVIDED

In all of your work except the last set, j-ou carried in your ledger one Mdse. account, which was
debited with all costs of Mdse and credited with all returns. In houses where the bookkeeping is vol-
uminous or it is desired to more closely anal3'ze the trading transactions, it is usual to subdivide the Mdse
account. One subdivision of the Mdse account was illustrated in the last set. The following exercises
illustrate several other more or less extensive subdivisions of the Mdse account.

PROBLEMS

Problem 1. Mr. A keeps three Mdse accounts, called respectively Mdse Sales, Mdse Purchases, and
Mdse-Gerierul. Mdse-General shows an inventory of $6574.50. Mdse Sales is credited $1245.00 and
debited $143.25. Mdse Purchases is debited $2369.70 and credited $175.00. Open these three accounts,
filling in amounts only, without dates or explanations. Close Mdse Purchases and Mdse Sales into Mdse-
General. Close Mdse-General with an inventory of $7813.69. What is the gain on Mdse? What is the
cost of the goods sold? What is the percentage of profit, based on the cost of the gootls sold? What
is the percentage of the "turn-over;" that is, what ratio does the cost of the goods sold bear to the entire
cost of the goods handled?

Problem 2. Mr. B keeps the same accounts as Mr. A in problem 1, and he also keeps an In-Freight
account and an Out-Freight account (In-Freight includes freight and drayage on goods coming into the
store; Out- Freight includes freight and drayage on goods shipped out.) These accounts stand as follows:
In-Freight, Dr. 125.00; Cr. 13.50. Out-Freight, Dr. 64.75; Cr. 23.50. Mdse Sales, Dr. 15.60; Cr. 1343.65.
Mdse Purchases, Dr. 1500.00; Cr. 120.00. Mdse-General has an inventory dated the first of the month,
of $5360.00. Open the accounts. Close In-Freight into Mdse Purchases. Close Out-Freight into Mdse
Sales. Close Mdse Sales and Mdse Purchases into Mdse-General. Close Mdse-General with an inventory
of $5495.75. Answer the questions asked at the end of problem 1.

Problem 3. Mr. C keeps a very complete system of Mdse costs and returns. The following chart

will show you at a glance what trading accounts he keeps and how he closes them, as well as showing how

these accounts stood at the time of the last trial balance. You will have to determine which items are

debits and which are credits.

Accotmts Kept by Mr. C.

Cash Dis. Dr. Debit footing $74.50 ^

Out-Freight Paid for freight $49.70 I Mdse Sales

Charged back to customers $10.00 (" Total Sales $1569.00
_ . .. J

Rebates By Us Total allowances to customers $27.65

Cash Dis. Cr. Credit footing $210.50
In-Freight Paid ior frei^t $220.00

Charged back to creditors $76.25
Rebates To Us Total allowances by creditors $70.00

Mdse Purchases

Total Purchases $1246.79

Mdse-General

Last In-

V e n t o ry

$7895.00

Open all accounts with the items shown in the above list. Close them in the order suggested by the
outline, closing Mdse-General last with an inventory of $8150.00. Answer the questions asked at the
end of Problem 1.

199

200

SUPPLEMENTARY PROBLEMS

COSTS AND EXPENSES SUBDIVIDED

Problem 4. Mr. D, a manufacturer of Tools and Implements, must keep records not only of his
purchases and sales, but of his costs of manufacturing. The outline below shows what trading and manu-
facturing accounts he keeps and how he closes them, as well as showing you the condition of these accounts
at the time of the last trial balance, June 1. You will have to determine whether the amounts are debits
or credits.

Accounts Kept by Mr. D.

Materials

Invty June 1, $6726.00

Purchased during June $789.50
Labor

Invty June 1, $125.00 (brought
down on Credit side)

Payrolls during June $457.50
Buying Expense

Buyers' Salaries & Exp. $476.25
In-Freight

Paid for freight $72.60

Charged back to creditors $10.00
Cash Discounts on Purchases

Total discounts taken $100.50
Rebates and Allowances on Pur.

Total footing $25.00

Selling Expense

Salesmen's Salys & Exp. $650.00
Shipping Expense

Salys and Exp. $100.00
Out-P'reight

Paid for freight $97.20

Charged back to customers $12.50
Cash Discounts on Sales

Total discounts allowed $220.00
Rebates and Allowances on Sales

Total footing $10.75

' Mfg. Cost

Sales

Total sales for June, $3924.50

Tools & Implements
(The Mdse ucct)
' Inventory June 1,
$24350.00

Explanation

The Materials account contains a record of costs of Materials purchased. This account is often greatly
subdivided, separate accounts being kept with all classes of materials used.

The Labor account contains a record of all costs of labor of manufacture. The inventory June 1
is the amount of unpaid wages due workmen at that time. This account is often greatly subdivided,
separate accounts being kept with all the different classes of labor performed.

Buying Expense. The house has to employ buyers to select the materials used. Their salaries and
the expenses they incur in the business trips they must take from time to time are properly chargeable
to this account.

Open accounts with the balances given in the outline. Close the accounts as indicated by the out-
line, using the following inventories, and dating the closing entries June 30: Materials (raw materials
and unfinished tools and implements) $6543.60. Labor (unpaid wages of workmen) $56.70. Tools &
Implements, $25467.75. Find the gain.

SCHEDULES

In most lines of business, the number of accounts in the ledger or ledgers is so great that a statement
showing them all in detail would be a very long document. The custom has therefore arisen of showing
condensed statements, so called because items of a similar kind are condensed into a single item in order
to make the statement shorter and more easily comprehended. The items so condensed are shown on
separate sheets, called schedules. Thus, all sales accounts might be shown on a schedule, and their total-
only shown in the statement. Purchase accounts, notes receivable, notes payable, inventories, etc., may
also be treated in this manner.

SCHEDULES

201

Problem 6.

CONDENSED FINANCIAL STATEMENT

Assets

Cash See Schedule A

Properties See Schedule B

Mdse Invty See Schedule C

Expense Inventys-Assets See Schedule C

Notes Rec. with accrued Int See Schedule D

Accounts Receivable See Schedule D

Total assets

lAabUities

Expense Invtys-Liabilities See Schedule C

Notes Pay. with accrued Int See Schedule E

Accounts Payable See Schedule E

Total liabilities

Net Investment

****

*****

****

***

*♦

****

*4c«*4t **

** **

******

*** **

Cash Assets — Schedvile A

Cash in Safe $ 250.00

Cash on Hand at Branch Store 75.50

On Deposit 1st Natl 1256.00

2d Natl 780.00

Petty Cash 45.75

Properties — Schedule B

Store & Lot at 236 Main St.
Barn at 5673 Church St.
2 Horses and 2 Wagons
Furn. & Fix. at 236 Main St.
Mortgage, 238 Main St.

*4t** **

$12500.00

725.00

520.00

825.00

4000.00

***** **

Merchandise and Other Inventories

Schedule

2000 bu. Wheat at $1.05

4000 bu. Oats at .60

3000 bu. SheUed Corn at .56

Total Mdse

Postage Stamps Unused
10 Mo. Fire Ins. Unexpired

Total Ex. Invtys-assets
Less Sal. due employees

******
**** **

$12.00
100.00

27.50

«:* **

Notes and Accts Rec — Schedule D

Sales Accounts Dr

J. D. Arnold
E. C. Smith >■

A. L. Adams
Jno. C. Stamp

Less E. B. Hamilton Cr. Bal.

Notes Receivable (Int. Accrued)
C.O.Bowman $100.50 (2.25)
R. A. Gates 475.00 (1.27)

125.00
472.00
275.65
756.70

****

***

****

Notes and Accts Pay. — Schedule E

Accoutits
Frank P. Carson 500.00

Victor Moore 127.75

Notes (Int. Accrued)
F. L. Steams $1000 .00 (4 . 50)
A. D. Wilt & Co. 750 .00 (2 . 17)

Prepare the five schedules and the financial statement.

202

SUPPLEMENTARY PROBLEMS

CORRECTIONS AND ADJUSTMENTS

Read again the instruction for Correcting Errors, given on page 171.

Problem 6. On Jan. 24, 19 — , you debited the Expense account for a freight bill of S27.50 for Mdse
received. On January 27 you discovered your error and made a correction entry in the journal. Show
the entry.

Problem 7. During the month of January, 19 — , four C.O.D. sales were made, totaling $240.00.
These were entered in the sales book at full price, and posted to the C.O.D. account. The collections
were made on a basis of 1% discount, and the C.O.D. account credited with net cash returns only. What
entry is necessary to balance the C.O.D. account?

Adjustment Entries. An adjustment entry is an entry which is made for the purpose of changing
or altering certain balances so that they shall more correctly represent business conditions. An instance
of this is an entry which equalizes partners' accounts, the consideration being a payment from one partner
to the other not entered on the books. Another instance is an entry crediting the partners with interest
on their respective investments; such an entry equalizes or adjusts the difference between the partners
arising from the fact that the investment of one is larger than that of the other. A correction entry is
usually occasioned by a definite error or omission of an entry; an adjustment entry is usually made neces-
sary by some wrong condition that does not show in any specific entries in the books.

Problem 8. W. J. Simms and R. E. Glavis are partners under an agreement that they are to share
gains and bear losses equally, the difference in their average investment being adjusted on a basis of 6%
interest. At the end of the year 1910 it is found that W. J. Simms' average investment has been $9000.00,
while the average investment of R. E. Glavis has been $6000.00. Three ways of adjusting the difference
in investment are proposed: First, each partner to be credited with interest on his total average invest-
ment; Second, W. J. Simms to be credited with interest on the excess of his investment over that of his
partner; Third, one partner to be credited and the other debited with a certain amount. Make a proper
journal entry for each case. State what would be the effect of each plan upon the firm's showing of profits
for the year, and upon its net capital, as shown in the statements before closing; as shown by the closed
ledger.

Problem 9. A and B are partners in business under an agreement that they are to keep the amounts
of their investments equal and are to share equally in gains and losses. The fiscal year ends July 1, 19 — ,
On January 1, 19 — , B withdraws $1000.00 from the firm. Money is considered worth 6%. At the end
of the fiscal year, July 1, three methods of settlement are proposed: First, B to pay A a certain amount
of cash; second, B to pay into the business a certain amount of cash; third, A to withdraw a certain amount
of cash. State the equitable amount in each case and tell what the debits and credits on the books
would be.

Problem 10. H. S. Gray and W. H. Butler are partners whose investments are respectively 40%
and 60% of the entire capital. They have on hand R. E. Parker's note for $750.00 which Mr. Gray con-
siders bad. Mr. Butler disagrees with him, and offers to buy his share of the note for $250.00. Show
the necessary journal entry, making proper explanations.

PARTNERSHIP

Problem 11. Jan. 1, 1910. E. M. Adler and Claude Brown united in business. Mr. Brown invested.
Mdse, $3500.00; Accounts Receivable, $1500.00; and brought into the partnership debts amounting to
$650.00, $100.00 of which was on a note. Mr. Adler invested: Furniture and Fixtures, $534.50; Mdse,
$362.75; Accounts Receivable, $2050.00; and brought into the partnership accounts payable amounting
to $750.00. Each partner deposited to the credit of the firm cash enough to bring his total investment
up to $7500.00. The profits of losses were to be divided equally. Journalize the opening entries and
post them to the ledger.

During the year following, the business done was as follows: Mdse purchases on account, $12500.00;
Mdse sales on account, $20560.00; cash sales of Mdse, $2500.00; cash received on account, $17240 00;
cash paid on account, $13430.00; note paid (with $1.50 interest), $101.50; expenses for the year, paid in
cash, $3875.60; cash invested in real estate, $5000.00; E. M. Adler and Claude Brown each withdrew $50.00
a month in cash, throughout the year (not salary). Make the journal entries for the foregoing, dating
them Dec. 31, 1910, and post them.

proprietors' private accounts 203

At the close of the year, Adler & Brown found that they had on hand fvimiture and fixtures valued
at $510.00 and a stock of Mdse worth $4234.50. They valued the real estate at cost. Take a trial bal-
ance and make statements, as of Dec. 31, 1910, showing the condition of the business and the investments
of the partners after the profits of the business hud been credited to them.

Jan. 1, 1911. Claude Brown retired from the business. Upon the consideration of his absolute
withdrawal from the same line of business in the same city for five years, E. M. Adler agreed to pay him
$3000.00 more than the balance of his investment. The cash balance was not large enough to permit
a cash settlement with Mr. Brown, but there were several ways in which a settlement could be effected.
Make the journal entries required for each of the following cases.

Case 1. Claude Brown selected $6000.00 worth of customers' accounts which he considered good,
and Adler & Brown assigned them to him, together with cash for the balance of his investment as shown
in the ledger. E, M, Adler gave him his note for the $3000.00 bonus, charging Goodwill.

GOODWILL

The reputation and standing of a business house, the fact that it is well known to those who buy the
things it has for sale, and many other factors, combine to produce a strong probability of future patronage,
which probability has a money value, and is called Goodwill (i.e., the goodwill of the community, which
the house has earned). This Goodwill often exists without any showing on the books (in fact, more often
than not this is the case); but when money is actually paid out to an incoming partner for goodwill he
brings with him or to an outgoing partner for goodwill he leaves behind him, an account should be opened
called Goodwill, which should be charged with the amount of Goodwill purchased. Goodwill is an asset.
It is an uncertain asset, it is true, because a breath of suspicion may cause it to dissolve and vanish at
once and for the further reason that its value is always a debatable quantity. Hence it is a dangerous
item to carry on the books, and the greatest judgment must be exercised in determining the extent to
which it shall be carried. A safe rule is to carry such items only when goodwill is actually bought or sold,
as suggested above. When it does appear on the books, however, it appears as an asset; if money is
received from an incoming partner for his share of the goodwill of the business (i.e., goodwill is sold), the
goodwill account should be credited if there is a goodwill account already on the books which adequately
represents the value of the firm's goodwill; but if not, the item should be credited to the investment
accounts of the original partners or paid to them in cash or other assets; thus the debit side of the good-
will account will always be the larger unless the account balances.

Case 2. Claude Brown owes a personal note of $5000.00 to the First National Bank, which Adler
assumes; Adler gives Brown his note for $4000.00, and pays him cash for the balance due him including
the $3000.00 bonus for his share of the goodwill.

Note: — If Mr. Brown's share of the goodwill was worth $3000.00, Mr. Adler's share should be estimated
at a like sum. If Mr. Adler should wish this additional $3000.00 worth of goodwill to show on the books,
he could debit Goodwill and credit his investment account for the amount.

PROPRIETOR'S PRIVATE ACCOUNTS

The proprietor may wish to keep a separate record of current petty charges and credits on his own
account. In this case he opens an account for this purpose which he calls his "private" account, to dis-
tinguish it from his "investment" account.

This plan of keeping a private account and an investment account is particularly desirable when there
are partners whose investments should constantly bear a certain proportion to each other. The private
accounts of the partners are debited with all small charges for merchandise or cash withdrawn, and credited
with payments made on them, if any. The losses and gains of the business are usually carried to the
private accounts. The investment accoimts remain unchanged, except when by special agreement a partner
increases or decreases his own capital. When interest is allowed each partner on his investment, this
interest is figured on the balance of the investment account, and is usually credited to the private account.
Should the balance of the private account grow to any considerable amount, it or a part of it may be
closed to the investment account, thus increasing or decreasing the latter. There is no legal distinction
between the two accounts; the distinction is a purely technical one in bookkeeping, and the two accounts
are usually kept separate for purposes of business convenience solely.

204 SUPPLEMENTARY PROBLEMS

Problem 12. Geo. S. Harding and E. H. Swift are partners. Each has an investment account and
a private account in the ledger. They are to divide gains or bear losses in the proportion which their
investment accounts bear to each other. Gains are carried to the private accounts, but each has the
privilege of adding to his investment as often and as much as he wishes. The smallest balance shown
by a partner's investment account during a given period is the amount on which his share of the gain
is to be figured. On Jan. 1, 19 — , the proprietor's accounts stood as follows: Geo. S. Harding — Invest-
ment, Cr., $10000.00; Geo. S. Harding— Private, Dr., $27.50, Cr., $128.75; E. H. Swift— Investment,
Cr., $7000.00. E. H. Swift— Private, Dr., $15.00, Cr., $90.13. Open four ledger accounts as above,
and enter in them the debits and credits affecting them in the following transactions.
19—.
Jan. 4. Geo. S. Harding withdrew $5.00 in cash.
Jan. 6. E. H. Swift took Mdse for his own use, $15.70.
Jan. 31. The gain for the month, $319.60, was divided between the partners.
Feb. 2. E. H. Swift lost $10.00 of the firm's money.
Feb. 15. Geo. S. Harding took Mdse for personal use, $24.50.
Feb. 28. The gain for the month, $285.60, was divided between the partners.

Feb. 28. Geo. S. Harding increased his investment $400.00, withdrawing the amount from his private
account.

Mar. 5. E. H. Swift withdrew $100.00 for personal use. '
Mar. 10. Geo. S. Harding took Mdse worth $12.50 for his home.

Mar. 15. E. H. Swift withdrew $150.00 from his personal account and added it to his investment.
Mar. 31. The loss for the month was $86.40.
Close the two private accounts.

Problem 13. M. H. Tiffany, E. C. Case, and G. D. Ware are partners under an agreement that each
shall be allowed interest at 6% on the excess of his investment over the average investment, or charged
interest at 6% on the deficiency if his investment is less than the average, the gains or losses to be equally
divided. Mr. Tiffany is a dormant partner, Mr. Case draws a salary of $125.00 a month, and Mr. Ware
draws a monthly salary of $75.00. Open six ledger accounts as of Jan. 1, 19 — , as follows: M. H. Tiffany
—Investment, Cr. $15000.00; M. H. Tiffany— Private, Cr. $120.00; E. C. Case— Investment, Cr. $10000.00;
E. C. Case— Private, Dr. $65.00, Cr. $100.00; G. D. Ware— Investment, Cr. $5000.00; G. D. Ware-
Private, Dr. $23.50.
19—.
Jan. 5. G. D. Ware withdrew cash $10.00.

Jan. 7. E. C. Case turned over to the firm a second-hand bookcase for which he was allowed $23.50
on his private account.

Jan. 20. M. H. Tiffany drew against the firm for $50.00 and the draft was honored.
The salaries of the partners were credited to them.
The interest on the investments of the partners was adjusted.
The gain of the business for the month was $852.00.
M. H. Tiffany increased his investment $3000.00 by a cash payment.
E. C. Case took Mdse for his personal use, $37.50.
G. D. Ware withdrew cash, $12.50.
M. H. Tiffany's bill for personal taxes due the city was at his request paid by the firm in

G. D. Ware's salary was paid to him in cash. Mr. Case's salary was credited to him.
The interest on the investments of the partners was adjusted.
The gain of the business for the month was $762.75.

Each partner added $500.00 to his investment, taken from his private account.
Close the partners' personal accounts.

PRIVATE LEDGERS

When it is desired to withhold from the bookkeepers certain important facts in regard to the business,
this can be done through the use of a private ledger, the aggregate footings of this ledger, or the total of
its balance, being supplied for the completion of the trial balance.

Jan.

31.

Jan.

31.

Jan.

31.

Jan.

31.

Feb.

cash, $14.50.

Feb.

28.

Feb.

28.

Feb.

28.

Feb.

28.

CONTROLLING ACCOUNTS 205

Problem 14. Mills & Co. is a partnership of three persons whose investment accounts are kept in
a private ledger, though their private accounts are kept in the general ledger. The Real Estate account
is also kept in the private ledger, the Reserve for Depreciation on Real Estate account being kept in the
general ledger. The trial balance of the general ledger is as follows: Cash, $1562.50; Mdse, Dr. $8750.65,
Cr. $763.49; Expense, $275.40; Accounts Receivable, $1456.70; Accoiuits Payable, $476.50; E. C. Mills
(Prop.)— Private Accovmt, Dr. $10.20, Cr. $100.00; H. W. Roberts (Prop. )— Private Account, Dr. $14.50;
F. E. Hauser (Prop.) — Private Account, Dr. $4.50, Cr. $50.00; Reserve For Depreciation on Real Estate,
Dr. $200.00, Cr. $560.00. The bookkeeper is given the balance of the private ledger, $****.**, and is
informed that $100.00 is to be allowed for depreciation on real estate. The merchandise inventory is
$8500.00.

Make the entry for depreciation on real estate. Prepare a trial balance before closing, statements,
ftnd a trial balance after closing. (In reconciling the results of the two statements, i.e., preparing the
"proof," at the bottom of the Loss & Gain statement, bear in mind that the present worth equals the
sum of the Reserve for Depreciation on Real Estate and the balance of the Private Ledger.) You will
have to determine from the figures you have, the amount of the balance of the general ledger in each trial
balance. In practice this figure would be supplied to you or your figures would be checked by the person
having charge of the genera) ledger.

CONTROLLING ACCOUNTS

This is the term applied to accoimts in the general ledger which represent in each case the aggregate
balances of accounts of a certain kind kept in a special ledger, the controlling account alone appearing
in the trial balance. An instance of this is the Accounts Receivable account in the general ledger, which
represents the totals of the sundry sales accounts in the sales ledger. You have already worked some
problems in which his account has appeared. The term "controlling account" is a misnomer, as the
smaller accounts really control the larger one and indicate what its balance is. The term "representa-
tive" would be a better one, but custom seems to favor the word "controlling." An extended discus-
sion of controlling accounts cannot be given here, but a problem is given which will illustrate the use of
a controlling account in connection with individual customers' accounts.

Problem 15. Books kept: Sales Book, Three-column Cash Book (Dr. side only). Journal, Sales
Ledger, and General Ledger.

Rule: — Whenever items are posted to customers' accounts in the Sales Ledger, their total should be
posted to the General Ledger in the usual way and should also be posted to the Accounts Receivable
account in the General Ledger on the same side as that affected in the Sales Ledger.

Sales were made as follows: March 1, 19 — . D. G. Calvert, $15.60; Mar. 2, T. B. Sullins, $25.75;
Mar. 3, Jas. Wilson, $35.60; Mar. 7, D. G. Calvert, $23.70; Mar. 10, L. A. Arnold, $10.54; Mar. 13, Jas.
Wilson, $15.20; Mar. 15, T. B. Sullins, $10.00; Mar. 20, D. G. Calvert, $40.50; Mar. 21, L. A. Arnold, $23.65;
Mar. 23, T. B. Sullins, $20.00; Mar. 27, L. A. Arnold, $43.60; Mar. 28, D. G. Calvert, $23.50. Enter them
in the Sales Book. Post the entries to the Sales Ledger. Post the total to the debit of Accounts Receiv-
able and to the Credit of Mdse Sales in the General Ledger.

Cash Payments were made as follows (The debit columns of the cash book are headed, from left to
right. Cash Discount, Accounts Receivable Credits, General): March 11, 19 — . D. G. Calvert, $15.60
less 2%; Mar. 12, T. B. Sullins, $25.75 less 2%; Mar. 17, D. G. Calvert, $23.70 less 2%; Mar. 20, L. A.
Arnold, $10.54 less 2%; Mar. 23, Jas. Wilson, $15.20 less 2%; Mar. 25, T. B. Sullins, $10.00 less 2%; Mar,
30, D. G. Calvert, $40.50 less 2%; Mar. 31, L. A. Arnold, $23.65 less 2%. Enter them in the cash book.
Post them separately to the sales ledger. Post the total of the Cash Discount column in the cash book
to the debit of the Cash Discount account and to the credit of the Accounts Receivable account. Post
the total of the Accounts Receivable Credits column to the credit of Accounts Receivable and enter the
footing in the general column on the debit side of the cash book.

On Mar. 16, Jas. Wilson gave us his note for $35.60. Make a journal entry. Post the credit item
to Jas. Wilson's account in the sales ledger and also to the Accounts Receivable account in the general
ledger. The ledger is not thrown out of balance by this "double posting," since only the controlling
account appears in the trial balance. The effect of the double posting is to keep the sales ledger and
the Accounts Receivable account in the general ledger in agreement.

206 SUPPLEMENTARY PROBLEMS

If you have followed the rule stated at the beginning of this problem, the sum of the sales ledger bal-
ances should equal the balance of the Accounts Receivable account in the general ledger. Prepare an
Accounts Receivable Proof, which is a list of the balances of the sales ledger accounts showing that their
total equals the balance of the controlling account in the general ledger. Prepare a trial balance of the
general ledger.

INVENTORIES

Inventories are of three kinds.

(1) Property that is bought and sold in the regular course of business — a resource inventory.

(2) Property that is part of the permanent fbced investment.
Real estate, furniture & fixtures, horses & wagons — resources.

(3) Unexpired or unused parts of items which have been charged to Expense. "I Resources
Accrued interest due us from others. j

Accrued expenses of any kind for which bills have not been submitted to us. \ y . j^-i-^-
Accrued interest due others from us. / ^'^DUiues.

1. Property that is bought and sold in the regular course of business.

The problem of ascertaining the Mdse inventory is very simple and easily understood. All that is
necessary is to count the quantities of each item on hand, multiply the quantity by the price in each case
and find the total. Stock records can be kept so as to obviate the necessity for actually handling the
goods (i.e., taking a physical inventory) and various schemes for keeping an inventory of Mdse by account-
ing have been devised. The final test of the Mdse inventory, however, is its exact count and actual valu-
ation (what it would cost to replace it at the time provided this is not higher than original cost), and
there are few merchants who do not take an actual physical valuation of stock at least once a year.

2. Property that is part of the fixed investment may be coimted and valued in the same way, but
ordinarily such items are simply kept on the books at a valuation which is regularly and uniformly reduced
from year to year so as to provide for deterioration, wear and tear, obsolescense (going out of use) and
so forth. This reduction may be accomplished in either of three principal ways: (a) The amount of the
inventory may be reduced; (b) A part of the profits can be set aside as a reserve from which to repair and
replace the property as it wears out; (c) Heavy repairs may be made, thus greatly improving the prop-
erty and making it unnecessary to depreciate the inventory, which remains unchanged, as the repairs are
charged to a separate account, which is classed as expense.

If depreciation is not made periodically on the books, nevertheless depreciation is in fact constantly
going on, and when a proper valuation is eventually made it will seem that a heavy loss has suddenly
occurred. This loss has not been sudden in fact, but gradual; therefore, it should be distributed equitably
throughout the different periods of time and should not all fall on one period. Depreciation, whether
accomplished by "writing inventories down" or by the carrying of a reserve, is merely a device for taking
care of losses and renewals of property gradually in advance out of the profits of the business during the
time that the depreciation in fact is actually taking place. If this were not done, the time would even-
tually come when a costly property, though on the books at its original cost, would be as a matter of fact
worthless. To replace it with new property would occasion such a heavy outlay that the business, although
in good condition, might not be able to pay profits for years.

The plan of carrying a Reserve for Depreciation account is far better than that of "writing off" peri-
odical amounts from the inventory. When the reserve account is carried, the original cost of the property
shows in the property account unaltered by charges for repairs and replacements or by changes caused
by writing off depreciation. The repairs and replacements are charged to the Reserve for Depreciation
account, when such an account is kept, and do not show in the property account.

If a property inventory should be written down to less than the real value of the property (and most
conservative business men depreciate property inventories rapidly), it would make a showing on the books
which might be prejudicial to the best interests of the proprietor if he should wish to sell the property,
or if the property should be destroyed by fire and it should become necessary to prove its value to the
insurance adjusters, or if the proprietor should desire to borrow money on the property, or if any other
situation should arise in which it might be desired that the book valuation of the property should not
appear too small.

COST OF GOODS SOLD 207

3. Inventories of expense items and interest items need only be computed, but it must be known
what they are and where and how to find them. Their existence as inventories is a matter of fact with
which the alert bookkeeper should be conversant, and if he does not know of their existence he should
be sharp enough to discover them through an examination of cash book and bill book items and of previous
inventories. If the cash book shows coal and stamps purchased, or last month's inventories show items
on hand which had been charged to expense, he should determine by an examination of the premises
whether any of these items are still on hand.

RESERVE FOR BAD DEBTS

In order to provide against the loss of a certain jjer cent of the accounts receivable as uncollectible
a reserve is sometimes created under the title "Reserve for Bad Debts." This reserve is created out of
profits, the Loss and Gain account (or Profit and Loss account, as it is sometimes called) being debited
and Reserve for Bad Debts being credited, for an amount sufficient to provide for losses of this kind. When
an account is found to be uncollectible, it is closed by an entry charging its balance to Reserve for Bad
Debts.

Problem 16. Trial Balance. Cash, $2040.00; Lands, $9000.00; Machinery, $7000.00; Tools, $1500.00;
Mdse Inventory, $4500.00; Mdse Costs, $11000; Sales, $30500.00; Sales Returns, $230.00; Discount
& Allowances on Sales, $G00.00; Wages, $6000.00; Freight & Express, $800.00; Salaries, $3200.00;
Taxes, $450.00; Rents, Cr. $150.00; E.xpense, $800.00; Accounts Receivable, $5030.00; Accounts
Payable, $1500.00; Capital, $20000.00.

Open accounts as above. Create a Reserve for Depreciation account. Make a journal entry pro-
viding for depreciation as follows: Machinery, 5%; Tools, 20%, Provide a reserve of $100.00 for bad
debts (journal entry). Having failed to collect from H. J. Jones $30.00 which he owes us on accoimt,
charge this item to the Reserve for Bad Debts account, crediting Accounts Receivable. Post the fore-
going entries, opening whatever new accounts are necessary. Also open a Mdse-General account.

The Inventory of Mdse at closing is $8500.00. Expenses amounting to $110.00 have been incurred
for which bills have not been received. We estimate that discounts will be allowed on outstanding sales
accounts amounting to $40.00. Prepare statements, bearing in mind that the Sales Returns, and Dis-
count & Allowances accounts are subordinate to the Mdse Sales account; the Mdse Inventory, Freight &
Express, and Wages accounts are subordinate to the Mdse Costs account; the Mdse Sales and Mdse Costs
accounts are subordinate to the Mdse-General account; the Salaries, Taxes, and Rents accounts are sub-
ordinate to the Expense account; the two reserve accounts are classed with the capital in the Profit &
Loss statement since they are really profits which instead of being closed to capital have been reserved
for special purposes. The net profit may be called L^nreserved Profit. Close the ledger accounts, closing
all subordinate accounts named above into the accounts to which they are subordinate, then closing Mdse-
General and Expense into Profit and Loss, then closing Profit & Loss into capital. Prepare a trial balance
as after closing.

COST OP GOODS SOLD. PERCENTAGE OF PROFIT

Problem 17. What was the cost of the goods sold, in problem 16 ? What was the percent of profit
on Mdse (based upon cost of goods sold) ? What percent must goods be marked above cost to cover
expenses? How much should the proprietor, in problem 16, receive net for an article costing (not in-
cluding freight) $5.00, in order to cover original cost, freight, the net expenses of the business, and de-
preciation on tools and machinery, and to make 20% ? Assuming that he loses 5% of the sale price in
discounts and allowances and that he has to set aside 2% of his accounts receivable to cover bad debts,
how much must his selling price on the above article be ?

Problem 18. Merchandise purchases, $15640.00; merchandise sales, $11976.00; inventory at clos-
ing, $8850.00. Required the cost of the goods sold.

Problem 19. Merchandise purchases, $26800.00; merchandise sales, $32500.00; inventory at clos.
ing, $8900.00. Required the percent of gain on the cost of the goods sold.

Prablem 20. Inventory at beginning, $3290.50; merchandise purchases, $8976.30; merchandise
sales, $9849.60; inventory at closing, $5243.30. Required the percent of gain on the cost of the goods sold

208

SUPPLEMENTARY PROBLEMS

Problem 21. Journalize and post the following:

Jan. 1, 19 — . A began business with $5000.00 in cash.

Jan. 2. He paid $3000.00 for Mdse, in cash.

Jan. 3. He sold half of his Mdse. for $2000.00 cash.

Jan. 4. He sold the remainder of his Mdse to B for $1400.00, receiving two notes for $700.00 each.

Show trial balance and statements Jan. 31, assuming that interest has accrued on one note amount-
ing to $3.15, and estimating $2.63 discount on the other note.

Of the four transactions in the foregoing, two involve neither gain nor loss, one involves a gain, and
one a loss. Of the two inventories, one represents gain, and the other represents loss. Read the fourth
and fifth paragraphs from the bottom, page 61, Part I, and then analyze the above transactions. Explain
why the difference between the assets and liabilities exactly equals the difference between the losses and
gains, using the foregoing transactions to illustrate your argument. /

WEEKLY PAYROLLS

Large factories and other business concerns employing many workmen, find it desirable to install
a regular payroll system, usually requiring the services of a time clerk (or using a time register) and a
paying clerk. As it is desirable to have each workman's envelope ready to be handed to him, the time
and pay sheet should show the exact change required for each.

TIME AND PAY

8HEE1

No.

Name

Th.

Total
Hours

Rate

Total
Due

sio

5(V

25f*

10^

Jas. Strong

30^

$16.50

L. L. Williams

25^

14.00

Frank Burns

20^

9.40

Geo. Morris

27^

16.20

Jno. Gray

50^

23.00

$79.10

Note that the device at the right for showing exact change also, by its totals, furnishes a check upon
the accuracy of the payroll total. Rule a form similar to the above and prepare a weekly time and pay
sheet for the Cummins Mfg. Co. for the week ending May 16, 19 — , from the following data furnished by
the time clerk. Always use the smallest number of pieces, in figuring change.

Problem 22. Geo. Gannon: Monday, 10 hrs.; Tuesday, 8 hrs.; Wednesday, 8 hrs.; Thursday, 8 hrs. ;
Friday, 10 hrs.; Saturday, 10 hrs.; wages per hour, 25^. William King: Monday, 10 hrs.; Tuesday, 10
hrs.; Wednesday, 10 hrs.; Thursday, 10 hrs.; Friday, 10 hrs.; Saturday, 5 hrs.; wages per hour, 22^. John
Warner: Monday, 10 hrs.; Tuesday, 9 hrs.; Wednesday, 10 hrs.; Thursday, 10 hrs.; Friday, 10 hrs.; Satur-
day, 10 hrs.; wages per hour, 20^. Edgar Thomas: Monday, 10 hrs.; Tuesday, 5 hrs.; Wednesday, 10 hrs.;
Thursday, 9 hrs.; Friday, 9 hrs.; Saturday, 9 hrs.; wages per hour, 24 <S. Gus Erickson: Monday, 10 hrs.;
Tuesday, hrs.; Wednesday, 10 hrs.; Thursday, 8 hrs.; Friday, 10 hrs.; Saturday, 10 hrs.; wages per hour,
20^. Chas. O'Neil: Monday, 10 hrs.; Tuesday, 10 hrs.; Wednesday, 10 hrs.; Thursday, 6 hrs.; Friday,
10 hrs.; Saturday, 5 hrs.; wages per hour, 17^^. Will Naegele: Monday, 8 hrs.; Tuesday, 10 hrs.; Wednes-
day, 10 hrs.; Thursday, 8 hrs.; Friday, 10 hrs.; Saturday, 5 hrs.; wages per hour, 20^. Con Goettig: Mon-
day, 10 hrs.; Tuesday, 10 hrs.; Wednesday, 5 hrs.; Thursday, 10 hrs.; Friday, 8 hrs.; Saturday, 5 hrs.;
wages per hour, 28^. Frank Ryan: Monday, 9 hrs.; Tuesday, 9 hrs.; Wednesday, 9 hrs.; Thursday, 9
hrs.; Friday, 9 hrs.; Saturday, 9 hrs.; wages per hour, 30^. Fred Ristau: Monday, 10 hrs.; Tuesday, 10 hrs.;
Wednesday, 8 hrs.; Thursday, 8 hrs.; Friday, 8 hrs.; Saturday, 5 hrs.; wages per hour, 22^. Geo. Bates:
Monday, 7 hrs.; Tuesday, 10 hrs.; Wednesday, 10 hrs.; Thursday, 10 hrs.; Friday, hrs.; Saturday, 5 hrs.;
wages per hour, 28^. John Brown: Monday, 10 hrs.; Tuesday, 10 hrs.; Wednesday, 10 hrs.; Thursday,
10 hrs.; Friday, 6 hrs.; Saturday, 5 hrs.; wages per hour, 18^. Frank Long: Monday, 10 hrs.; Tuesday,
10 hrs.; Wednesday, 4 hrs.; Thursday, 8^ hrs.; Friday, 10 hrs.; Saturday, 5 hrs.; wages per hour, 20^.
Vincent Daly: Monday, 10 hrs.; Tuesday, 5 hrs.; Wednesday, 10 hrs.; Thursday, 10 hrs.; Friday, 10 hrs.;
Saturday, hrs.; wages per hour, 17^^. Albin Corkell: Monday, 10 hrs.; Tuesday, 10 hrs.; Wednesday,

BORROWING MONEY 209

7 hrs.; Thursday, 7 hrs.; Friday, 10 hrs.; Saturday, 10 hrs.; wages per hour, 27|^. Tom Calkins: Mon-
day, 10 hrs.; Tuesday, 5 hrs.; Wednesday, 10 hrs.; Thursday, 10 hrs.; Friday, 10 hrs.; Saturday, hrs.;
wages per hour, 15<i.

BORROWING MONET [/

The individual who makes a practice of borrowing money is often an improvident fellow, who is not
really entitled to the consideration which he solicits. In business, however, borrowing money is not a
discreditable performance, nor does it carry with it any implication of lack of financial responsibility.
The soundest financial institution at times finds a temporary cash loan to be a great business convenience
and the very fact that it is soimd financially enables it to secure the loan.

Suppose that a perfectly solvent concern finds all its assets tied up in investments, with only a small
amount (say $250.00) of ready cash on hand. Suppose that invoices payable exist amounting to $2000.00
upon which cash discounts of 2% to 10% can be saved. The manager who would overlook this oppor-
tunity to save $40.00 to $200.00 by borrowing $2000.00 temporarily would not be wise. Interest on $2000.00
for a short time would be a very small item compared with the saving on discounts.

Money can be secured for emergencies without borrowing. Notes receivable can be discounted;
accounts receivable can be assigned; merchandise can be sold at a great reduction; property of all kinds
can be sold. But in any of the above cases the loss will usually be far greater than the cost of interest
on money borrowed.

Problem 23. Financial Statement, Jan. 1, 19 — . Assets: Cash, $250.00; Real Estate, $10000.00;
Furniture & Fixtures, $1250.00; Merchandise Inventory, $9000.00; Notes Receivable, $1500.00, with
accrued Interest, $27.50; Accounts Receivable, $2500.00. Liabilities: Mortgages Payable, $50Q0.00; Notes
Payable, $1000.00; Accounts Payable, $2000.00.

Make journal entries for the following:

The proprietor, wishing to raise $10000.00 more in cash at once, discounted two notes receivable, one
a 90-day note for $600.00 at 4% dated 60 days ago, one a 30-day note for $500.00 at 5% dated 20 days
ago; the rate of discount in each case was 0%. He then assigned $2000.00 of his accounts receivable, dis-
counting them at 5%. He then held a bargain sale of merchandise, and sold goods at 10% below cost
until he had raised the rest of the $10000.00. His expenses during the month required for this work were
$220.00, cash. What did it cost him to realize $10000.00 on his assets in this manner? Show a state-
ment of his financial condition after the above entries were posted and closed, inventories being: Mdse
$****.**; Interest Receivable, $25.00; other inventories unchanged.

Problem 24. If instead of trying to realize on his assets by direct sale, the proprietor in the preced-
ing problem had given a second mortgage upon his real estate for $2500.00, payable in 30 days at 5%,
receiving the $2500.00 in cash; had given a chattel mortgage upon his stock of merchandise for $5000.00,
payable in 30 days at 6%, receiving the $5000.00 in cash; and had secured the balance of the $10000.00
from the First National Bank, giving his note due in 30 days for an amount which discounted at 5% would
yield him the desired balance in cash; what would it have cost him to realize $10000.00 cash in this
manner? Journalize the entries necessary for the above transactions. Post them. Show a statement of
condition after the $10000.00 was realized, interest receivable inventory being $27.50. Aside from the
fact that by this plan the money is raised thirty days earlier, is it preferable to the plan suggested in the
preceding problem, or not? Why?

Note: — In order to borrow $2500.00 from the bank on his note without specific security it was neces-
sary to schedule all his assets and liabilities. Show this schedule. The schedule, in form, should be pre-
pared about as follows: It should be addressed to the bank, as an application for a loan of $2500.00. This
application should be immediately followed by the statement of assets and liabilities. Below this should
be a statement of the amount of contingent hability outstanding against the firm (in this case, none) and
a statement of the insurance carried (in this case $6000.00 on real estate and $8000.00 on Merchandise
and Furniture & Fixtures). This should be followed by a statement of important facts in regard to the
personnel of the partners, the relation of each to the business, etc. (which facts you may omit from this
schedule), and the signature, for which you may use your own name.

RECONCILIATION V

Reconciliation is the general term applied to the process of showing the agreement between two accoimts
or statements which should agree, by supplying the items missing from one or the other, or otherwise

210 SUPPLEMENTARY PROBLEMS

explaining seeming discrepancies between them. A familiar instance of this is the reconciliation of the
bank statement with the balance shown by the check book stub. You have already learned how this
is done.

Problem 25. On Mar. 1, the bank statement showed a balance of $850.60, three checks being still
unpaid of $25.00, $37.50, and $27.60. On Apr. 1, the check book stub showed a balance of $759.60, the
check for $27.60 being still unpaid, as well as two checks which were issued during March for $10.00 and
$15.67 respectively. What was the balance of the check book stub on March 1? What was the balance
of the bank statement on April 1?

INVESTMENTS

It is a good plan to invest capital that is not being used, in good securities, preferably in something
that can be realized upon quickly if the funds invested in it are suddenly needed in the business. Well-
secured bonds might for this reason be preferred to stocks or to real estate, or mortgages, the value of stocks
being somewhat uncertain, and it being sometimes difficult to realize upon real estate or mortgages quickly.

Problem 26. A has $5000.00 invested in City Railway 5% bonds. He needs $1000.00 cash for 30
days and can secure it at 4% by giving the bonds as security. How much does he gain by borrowing
instead of selling $1000.00 worth of the bonds?

Problem 27. B has $2000.00 in the savings bank on March 1, 19 — . The money has been on deposit
at 4% for two months, but no interest will be paid on any money withdrawn before the end of the third
month. He purchases goods invoicing at $1000.00 on the terms 2/10 n/30. He has a choice of three
plans: (a) He may let the bill run 30 days, (b) In ten days he may withdraw from the savings bank
enough money to pay the net amount due on the bill, (c) He may borrow the money from the bank for
20 days, giving his note for an amount which will yield him the cash he needs, at 5% bank discount, after-
wards discounting the bill. Make the entries required for each of the three plans. Which is the best
plan? How much better is it than each of the other plans?

CHARGES TO EXPENSE AND TO CAPITAL

It is always an important question whether to charge a given item to an expense account or to an
asset account. Take for instance repairs: Shall $50.00 paid for repairs to a building be charged to expense
or to real estate? In the former case the item will quickly find its way into the Loss & Gain accoimt;
in the latter case it will be shown on the books as an increase in the value of the real estate, and in order
to get it into the Loss & Gain account. Real Estate will have to be closed to Loss & Gain.

This question is of grave importance when depreciation is cared for through reserve accounts and
the property accounts are not closed to Loss & Gain, for such an item as the above if charged to Real
Estate would stand as an asset although it really had not increased the asset.

The question becomes vital when the business is run by a manager who shares in the current profits,
but has no interest, or only a small interest in the assets of the concern.

Problem 28. C is manager for D. He owns no share in the assets, and is responsible for no losses,
but he gets 50% of the gains. He replaces three office desks which are worn out with three new ones
costing $60.00 each and charges the Furniture account, in which the old office desks appear at $30.00
each, the price at which they were inventoried when he took charge of the busihess. At the end of the
year he submits a statement of profits which shows that $2560.00 is due him. To how much is he really
entitled?

BOOK VALUES AND ACTUAL VALUES

If a bookkeeper writes off too much or too little depreciation from the values of property, or if the
market rises or drops so that values are materially affected, there is a difference between what his books
say his properties are worth and what they are actually worth. Many instances might be cited of the
difference between book values and actual values. When a bookkeeper makes a statement of the condi-
tion of a business, if it is not practicable to correct the books so that they will show true values, he should
always make notes of the true facts in his statement.

Problem 29. J. C. Evans bought out F. L. Bewick for $10000.00 on April 1, 19 — , and found the
following assets and liabilities shown on the books: Real Estate, $6500.00; Furniture & Fixtures, $1000.00;
Merchandise (Invty), $2780.00; Accounts Receivable, $2500.00; Accounts Payable, $3500.00; F. L. Bewick,
$9280.00. Open these ledger accounts, and test the balance of the ledger. Make a journal entry for the
purchase of the business by J. C. Evans, no Goodwill account being opened.

THE SUSPENSE ACCOUNT 211

Mr. Evans makes a revaluation of the inventories as follows: Real Estate, $7000.00; Furniture &
Fixtures, $750.00; Merchandise, $2500.00 (These are the prices at which he bought them of Mr. Bewick).
Make journal entries adjusting the balances of the foregoing accounts. During March Mr. Evans had
secured from every customer but one an acknowledgment of his indebtedness; this customer repudiated
a bill amounting to $50.00 and Mr. Evans decided not to press the claim; make a journal entry. Post
all the above entries, balance the accounts, and show a new trial balance.

THE SUSPENSE ACCOUNT [^

The term ''suspense," as used in bookkeeping, has both a general and a special meaning. In general,
the term is applied to all accounts which are temporarily set aside out of the general ledger. Suppose
a merchant has several accounts receivable the collection of which he considers doubtful (Not "bad"
accounts, for these are actually written off the books). He sets these aside, "in suspense," by taking
them out of the ledger and placing them in a separate ledger for suspense accounts. In their place in
the principal ledger he places a "Suspended Accounts" account, which he may depreciate as he deems
advisable, so that the ledger will show only the collectable accounts as assets. The suspended accounts
remain intact in the ledger, which is now merely a memorandum ledger. This is one illustration of the
general use of the term "suspense." Its special use is described in the following paragraph.

An account is sometimes carried in the ledger called the Suspense account, into which are carried
miscellaneous items which the bookkeeper cannot immediately dispose of in their proper accounts. Dis-
crepancies in trial balances, shortages or overs in cash, items of debit or credit which the bookkeeper wishes
to hold suspended until the manager advises him what accoimt to post them to, etc., are carried to the
Suspense account. When the discrepancy, shortage, or over is found, or the difficulty, whatever it is,
is solved, the bookkeeper must make an entry taking the item out of the Suspense account, and making
a final and proper disposition of it.

The following problem is given because it is believed that the student should know something about
the Suspense account, what it is and how to use it. But the student cannot be too strongly cautioned
in regard to its use. Entries to Suspense should never be resorted to except in cases of extreme necessity,
and many hold that it is better not to have such an account in the ledger at all, as it is a convenience
too likely to be abused. Generally speaking, the safe plan would be to solve all bookkeeping difficulties
at the time of their occurrence, making final disposition of them at that time; the Suspense account offers
a constant temptation to "put off" difficulties.

Problem 30. Open a Suspense account and enter in it the debits and credits which should go to
it in the following transactions:

June 4, 19 — . Cash was found to be $5.00 short.

June 5. Paid a carpenter $20.00 upon completion of some wall shelves and the bookkeeper did
not know whether to charge Real Estate or Fixtures.

June 7. $10.00 too much was found in the cash drawer.

June 9. The proprietor advised the bookkeeper to charge the item of June 5 to Real Estate. Why?

June 31. Mrs. Smith, a customer, indignantly declared that her bill for the month was $10.00 too
large. She stated that she had paid this amovmt on June 7, but had not been credited for it.

June 31. The proprietor instructed that the cash shortage of June 4 be charged to Loss & Gain, as
it had not been accounted for.

June 31. The trial balance was "off," the debit side being $7.20 larger than the credit side.

Feb. 5. The bookkeeper finally discovered the error in the trial balance. A charge against D. W
Adams on June 20 had been entered as $8.00 instead of 80^.

CHECKING DEBITS AGAINST CREDITS

A system for checking credits against debits in the sales ledger is suggested in the following problem.
This system could also be used in the purchase ledger. Note that the folio columns are used for check-
ing instead of page references. Explain why the page references are unnecessary.

Problem 31. Open an account with The L. D. Smith Grocery Co., using ordinary ledger paper with
one debit column and one credit column. Enter the following charges (all but one are for Mdse): July
2, 19—, $30.85; July 3, $3.10; July 4, $4.50; July 5, $5.20; July 6, $3.18; July 7, $8.26; July 9, $9.64; July

212 SUPPLEMENTARY PROBLEMS

10, Freight Advanced as per CB7, $5.34; July 12, $4.63; July 13, $5.82; July 14, $27.82; July 16, $12.25;
July 18, $13.24; July 19, $17.62. On July 5, a cash payment was made to cover items of July 2 and 3.
Make the entry on the credit side of the ledger. Check in the folio columns opposite the credit entry and
the two debits it covers, using the check figure 1 in all three places. On July 11 a cash payment was
made covering the debits of July 4, 5, 6, and 7. Make the entry and check in five places, using the check
figure 2. On July 12 a cash payment of $9.64 was made to cover the debit of July 9. Enter, and check
in two places, using the check figure 3. On July 13 a credit of $2.34 was made, which checks against
nothing. On July 18, a cash payment of $50.52 was made to cover the bills of Sept. 12, 13, 14, and 16.

Quickly determine the balance by adding the unchecked debits, and deducting the amount of the
unchecked credit. Does this agree with the balance you secure by taking the difference between the
totals of the two sides in the usual way?

Note: — Dates or checkmarks could have been used in the c?iecking column in the foregoing problem;
instead of check numbers.

COMPARATIVE STATEMENTS

There are so many ways in which comparative statements may be prepared, depending upon the
comparisons desired to be shown, that a full discussion of the subject would require a volume. Follow-
ing is an illustration of a form prepared to show a comparison of the assets and liabilities on a given date
with the same items one year previous.

Problem 32.

COMPARATIVE STATEMENT OF CONDITION AT CLOSE OF BUSINESS DEC. 31

Resources

1910 1911

Cash 1000.00 1059.60

Real Estate 9000.00 9000.00

Fum. & Fix 2500.00 2500.00

Mdse Invty 7500.00 9750.50

Notes Eec 1000 .00 1500 .00

Accts. Rec 3500 .00 4000 .00

Total 24500.00 27810.10

lAabHities

Notes Pay 2000 .00 1000 .00

Accts Pay 3500.00 3000.00

Reserves

Res. for Depr. on R. E 450 .00 675.00

Res. for Depr. on F. & F 500 .00 550 .00

Res. for Bad Debts 125.00 140.00

Capital and Profits

Undivided Profits 2925.00 7445.10

Capital 15000.00 15000.00

. 24500.00 27810.10

Note: — The above is the statement of a corporation. It is customary in such statements, for reasons
which you will understand when you study Modern Corporation Accounting, to add capital, profits, and
reserves to liabilities, making a balanced statement. Show the profits between Dec. 31, 1910, and Dec.
31, 1911, in three ways.

INCOME OR REVENUE STATEMENTS

The Loss and Gain statement is also variously called the Profit and Loss statement, the Income and
Expenditure statement, the Revenue statement, etc., etc. While custom has not indicated clean-cut
distinctions in the uses of the foregoing terms, it would seem that the two former are more appropriately
used by mercantile or manufacturing concerns, which buy or manufacture articles of merchandise and
sell them, while the two latter terms should be used by. concerns which maintain and sell services or accom-
modations of some kind, no tangible commodity being handled: A man working on a salary of $1800.00

MISCELLANEOUS PROBLEMS 213

might properly call that salary his "income," because it is the amount which comes in to him; but it
would be manifestly improper for a merchant who sells $100,000.00 worth of goods a year to speak of
this amount as his income. It is equally improper to speak of the balance remaining after costs and
expenses are paid as "income" — it is properly called his "gain" or "profit."

"Income" or "Revenue" are terms properly used by railroad concerns, theaters, clubs, taxing bodies,
and by other concerns disposing of services, accommodations, or other things for which definite intrinsic
values cannot be assigned to each separate thing disposed of. If I sell you a hat, after having sold two
hundred hats, I am parting with specific value which I would not part with if you should not buy the
hat. But if I sell you a ticket to my theater after I have sold two hundred others, I have not parted with
any value for you specifically. My theatrical performance would cost me just the same whether I received
the extra income from you or not.

An Income statement sets forth the different sources and amounts of income, and from their total
deducts the total of the expenses, which are also shown in detail.
Problem 33.

Income Statement of the B. C. Club
General Revenue:

Dues $28000 .00

Special Fees 565 . 60

Sub-Rentals 1000 .00 $29565.60

Operation of Departments:

Net Income from Gaffe 5000 .00

Net Income from Gymnasium 1000 .00

Net Loss on Barber Shop 500.00* 5500.00

Total Income 35065.60

Expenses:

Housekeeping Expense 20000 .00

Special Appropriations 1569 . 17

General Expense 15060.00

Total Expense 36629 . 17

Loss on Operation 1563 . 57

Interest on Bonds , 4500 .00

Total Loss 6063.57

Subtract*.

Assuming that you are elected a member of the Board of Directors of the B. C. Club, make three sug-
gestions for bettering its financial condition.

MISCELLANEOUS PROBLEMS

Problem 34. On Jan. 1, 1911, A's investment account shows a debit balance of $343.75 after clos-
ing. His Loss & Gain Statement of Dec. 31, 1910, shows that he lost $567.80 during December. His
Loss & Gain statement of Nov. 30 rfiows a gain of $205.00 for November. His withdrawals for personal
use were as follows: Nov. 15, $20.00; Nov. 25, $25.00; Dec. 10, $30.00. Show his ledger account from
Nov. 1, 1910, to Jan. 1, 1911.

Problem 35. B's capital Jan. 1, 1910, was $8750.00, which Included a stock of Merchandise worth
$4500.00. During 1910 his purchases of Merchandise amounted to $8600.00, his sales amounted to
$8950.00, his expenses were $1260.00, and his property depreciations aggr^ated $150.00. There were
no losses other than those shown by his expense account and bis property account, and his only source
of profit was his Merchandise account. On Jan. 1, 1911, his capital was $9250.00, and he had withdrawn
$750.00 for personal use during the year. Show his Merchandise account from Jan. 1, 1910, to Jan. 1, 1911.

Problem 36. C's sales for 1910 amounted to $18000.00. His Merchandise inventory on Dec. 31,
1910, was $7500.00, an increase of $750.00 over the inventory a year previous. His gain on Merchandise
for the year was $5200.00. Determine the amount of his purchases for the year-, and show his Merchan-
dise account from Jan. 1, 1910, to Jan. X, 1911.

Problem 37. D keeps a journal, sales book, cash book, and loose-leaf ledger. On Mar. 1, he lost
page 105 from his ledger. This page contained the account of W. G. Simpson. Reference to the monthly
trial balances shows that Simpson owed $15.69 on Jan. 1; $30.50 on Feb. 1; $25.70 on Mar. 1. The cash

214 SUPPLEMENTARY PROBLEMS

book shows the following payments: Jan. 15, $10.00; Jan. 25, $42.60; Feb. 15, $27.75; Feb. 20, $15.60.
The journal shows that he gave D his note for $50.00 on Feb. 10. What were the sales to him during
January? During February ? How would you proceed to write up his account in full?

Problem 38. On Dec. 31, 1910, E's ledger showed the following footings: Cash, $5000.00; Mer-
chandise, Dr. $17500.00, Cr. $14000.00; Expense, $1250.60; Accounts Receivable, $3750.00; Accounts
Payable, $5000.00. The Merchandise Inventory on Dec. 31 was $6500.00. If E's capital on Jan. 1, 1910,
was $12000.00, how much has he withdrawn during the year for personal use? Show E's ledger account
from Jan. 1, 1910, to Jan. 1, 1911.

Problem 39. May 1, 19 — . You take as a partner C. B. Quincy, one of your creditors. He invests
in the business $3500.00, the amount which you owe him, and $5000.00 in cash. Make the journal entry.
If your own investment is $12750.00, in what proportion should the profits be divided between you and
Mr, Quincy, assuming that profits are divided in proportion to investment?

Problem 40. A bill for $1352.64, dated July 25, 1910, is subject to a series of trade discounts of
20, 16f , and 12^, and time discounts as follows: 10 per cent 30 days, 5 per cent 60 days. The bill is paid
August 30, 1910. What is the purchaser's entry?

Problem 41. In a set of books consisting of journal, sales book, cash book, and ledger, indicate
the order in which the work should be done, including the closing of the books.

Problem 42. Write the following forms using the current date, your own name as maker, and sup-
plying other data: (a) A check (b) A promissory note (c) A sight draft (d) A time draft (e) An invoice
(f) A statement of account (g) A credit memorandum.

Problem 43. A 90-day note for $398.42, bearing interest at 6 per cent, dated Sept. 21, 1910, is dis-
counted at a bank Oct. 31, 1910, at 7 per cent. What is the endorser's entry?

Problem 44. R. E. Parker and C. A. Brown began business July 1, 1911. Parker invested as fol-
lows: Cash, $2530.00; Merchandise, $4276.00; Notes Receivable, $2250.00, with accrued interest for 35
days at 6%; a City of Chicago bond for $1000.00 at 1|% premium. His liabilities are: Notes Payable,
$1780.00, with accrued interest for 46 days at 5%. Brown invests: Cash, $7500.00, and an account
against L. E. Blake for $960.00. The latter the firm accepts at 15% discount. Make the opening journal
entries.

Problem 45. Give argimients in favor of making statements before closing the books, rather than
after.

Problem 46. An analysis of the ledger shows the following items: Goods on hand, Jan. 1, 1910,
$10000.00; purchases during the year, $50000.00; sales during the year, $60000.00; purchases returned,
$3000.00; sales returned, $7000.00; freight in, $500.00; freight out, $390.00; value of goods on hand, Jan.
1, 1911, $20000.00. Find the per cent of profit on merchandise account.

Problem 47. The following merchandise accounts were found on a ledger: Inventory at com-
mencing, $5000.00; purchases, $21000.00; sales, $36000.00; freight in, $360.00; purchases returned,
$1500.00; sales returned, $2,400.00. The inventory at closing was $3000.00. What per cent profit was
made on the merchandise account?

Problem 48. Trial balance of the X. Y. Z. Co. on Jan. 1, 1910: Cash, $20,000.00; Real Estate,
$7,500.00; Mdse, Dr. $30,000.00; Cr. $10,000.00; Expense, $3,000.00; Interest & Discount, Cr. $500.00;
Notes Rec, $5,000.00; Accts. Rec, $14,000.00; Notes Pay., $8,000.00; Accts. Pay., $7000.00; Invest-
ment, $54,000. Additional information: Merchandise unsold, $26,000.00; real estate on hand valued
at $6,000.00; items charged to expense not used, $1,200.00; wages due and not paid, $300.00. Make
statements.

Problem 49. From the following balances and inventory (proprietor's account omitted) determine,
first, the investment; second, the gain or loss; third, the present worth: Cash on hand, $5,286.92; Mer-
chandise, Dr. $1,238.06; Cr. $911.50; Expense, $273.27; Int. & Dis., Cr. $3.75; Notes Receivable, $529.72;
C. O. Smith, Dr. $65.75; C. H. Hathaway & Co., Dr. $79.36; Notes Payable, $342.18; H. T. Clark, Cr.
$526.00; Merchandise on hand, $876.25.

Problem 50. J. H. Hall and C. H. Howard began business January 1, 1910. J. H. Hall's invest-
ment was as follows: Merchandise, $3500.00; Cash, $2500.00; Notes Receivable, $1500.00, with accrued
interest for fifty-four days at 6 per cent. His liabilities were: Notes Payable, $425.00, with accrued
interest for thirty-nine days at 6 per cent; an account in favor of W. D. Bridges for $250.00. C. H. Howard
invested: Cash, $7000.00; account against A. R. Dunn for $850.00, which the firm accepts at 20 per cent
discovmt. Make the opening journal entries.

FINDING ERRORS 215

FINDING ERRORS*

When the trial balance will not balance the bookkeeper should first ascertain the exact amount of
the difference between the two sides. He does this in the hope that a knowledge of the amount of the
discrepancy may enable him to find the error without an exhaustive search for it. If there is only one
error it is sometimes possible to locate it in this way:

(1) Having found the amount of the error, examine your books of original entry to see whether you
can find any item of the same amount which may have been omitted. (2) If this sheds no light, divide the
amount of the discrepancy by two and again examine your books of original entry to see whether an item
of this size (half of the amount of the discrepancy) has been posted to the wrong side of an account. For
instance, if the amount $5.00 has been posted to the wrong side of the ledger the result will be that one
side of the trial balance will be $10.00 larger than the other side. (3) If the error is still undiscovered,
it may be that there has been a transposition of figures; that is to say, two figures have been reversed,
as when the number 18 has been written as 81. The amount of the discrepancy caused by such an error
is always divisible by 9. In the foregoing illustration, the difference between 81 and 18 is 63, which is
divisible by 9. (4) If the bookkeeper writes an amount one or two spaces to the right or the left of the
columns in which he should have written it the amount of the discrepancy so caused is divisible by 9.
For instance, if 81^ is written as $81.00 the difference is $80.19, which is divisible by 9. This being a
slide of two columns, it is also divisible by 99, the result of such division being 81, the exact figures that
were misplaced.

It must be borne in mind that none of the plans suggested above will throw any light whatever upon
the difficulty if there is more than one mistake, and it is by no means certain that the discrepancy will
be located by any of these plans even if there is only one mistake. However, they are worth trying, as
it only requires a few minutes after the amount of the discrepancy is determined to search for possible
errors of one of the four kinds above mentioned.

In a great majority of cases, however, the bookkeeper finds that the mistake has to be hunted for.
A thorough exhaustive search for the mistake must be instituted and the plan for conducting the search
should be as follows: All of the work must be carefully gone over in an order that just reverses the order
in which it was done in the first place.

First Step. The last thing you did was to add the debit and credit columns of the trial balance.
The first thing that you will do in hunting for the error is to verify this addition by adding it in a direc-
tion opposite to that in which you added it before.

Second Step. Assuming that your addition of the trial balance is correct and the error is still undis-
covered, the next step is to check the amounts shown in the trial balance back to the ledger. You have
in your ledger lead pencil footings which you transferred to the trial balance. Now from the trial balance
check back to these lead pencil footings, placing check marks opposite the items in the trial balance and
the footings in the ledger as you find they are in agreement. When this has been done, inspect the trial
balance to see that everything has been checked, and inspect the ledger to see that all footings are checked.

Third Step. The mistake still remaining undiscovered, it is necessary to go back one step further.
Add the debit and credit columns of the ledger, verifying the lead pencil footings therein.

Fourth Step. The mistake still being undiscovered, and having verified the addition of all the ledger
colunms, it is necessary to check the ledger items back to the books of original entry. Trace back from
the ledger to the book of original entry, placing a check mark opposite the ledger item and another check
mark opposite the original entry "hi each case as you find they are in agreement. This work being com-
pleted, carefully inspect the ledger to see that all items are checked, and do the same thing with the books
of original entry.

Fifth Step. The mistake still remaining undiscovered, it is necessary to go back one step further.
Inspect all books of original entry to see that you have equal debits and credits. This will include the
verification of all totals of special books.

You have now gone over your entire work in an order reverse to that in which you performed the
work in the first place, and if the checking has been done conscientiously and thoroughly the mistake has
been discovered. The process above described consists of steps which absolutely cover the ground and
there is no possibility that the error will remain undiscovered if the work is done carefully and thoroughly.
There is, however, one possibility of undiscovered error that still remains. It may be that the books were
not in balance at the time of the last closing. In other words, you did not have a balance to start with
•See also page 36, Part I.

216 SUPPLEMENTARY PROBLEMS

when you began the bookkeeping for the period just closed. In order to be sure that this is not the case,
carefully verify the balance at the beginning of the period. Some bookkeepers do this first, because it
is so frequently found to be the source of error. Needless to say, it is necessary that all of the previous
balance entries be checked as the preceding trial balance is verified.

REVIEW QUESTIONS No. 5

Review Questions. 1. What is meant by "compromising with a debtor?" 2. What is a petty
cash sale? 3. Describe the petty cash sales account. 3. What is a draft? 4. Name the parties to a
draft and give definitions. 5. Describe the voucher system of keeping track of invoices payable. 6.
What is a statement of account? How often are statements usually submitted to customers? 7. What
are "articles of co-partnership"' and what points should such a document cover? 8. What is a bill of
sale? 9. What is a memorandum of credit? How is it used? 10 What entries are usually made by
the customer when a memorandum of credit is issued? 11. What is an express money order? Describe
it. Tell how it is used. 12. What is a sight draft? A time draft? 13 How is a sight draft honored?
A time draft? 14. Give the rule for journalizing drafts Ca) When you are the one who draws (b) When
you are the one drawn upon (c) When the draft is in your favor. 15. What is cash discount? Dis-
tinguish between trade discount and cash discount. 16. What is discount for the use of money? Why
should this be classed with interest? 17. What is meant by "discount for the anticipation of bills?"
With what kind of discount is this customarily classed? Is this a good classification? If not, why does
the custom exist? 18. What is meant by "discount" and "premium" as applied to exchange? 19,
Name four of the most important principles of double entry bookkeeping. Show how each is applied.
Show how the three-column cash book illustrates all four principles.

Wholesale Boot & Shoe Business. 1. Name the columns used in the three-column cash book
in this set and state the purpose of each. 2. How is the three-column book posted? 3. Describe in
detail the process of closing the three-column cash book and posting the footings. 4. Turn to the illus-
tration of the cash book on pages 146-7 and be prepared to trace any item, on either side, from the orig-
inal entry through to the ledger, where it must appear on both debit and credit sides. 5. What are the
advantages of a three-column cash book? 6. How may the proprietors of a business conceal from the
bookkeeper the amounts of their respective interests in the business? 7. Into what account is the Freight
account closed? Why? 8. Into what account is the Advertising account closed? Why? 9. How are
Sundry Debtors* accounts handled in the ledger? 10. How are C. O. D. items handled in the ledger?
11. Why are bills sometimes dated ahead? 12. When a trial balance is taken without closing the books,
what lead pencil footings must be included, if a journal, sales book, and three-column cash book are kept?
13. Is one entitled to any discount who makes a part payment on a bill within the discount period? 14.
On Jan. 1 we sold Mdse amounting to $250.00; terms 2/10 n/30. On Jan. 3 goods were returned amount-
ing to $50.00. What amount of cash settled the bill on Jan. 11? 15. When is the C. O. D. account
credited for cash discount? Why? 16. What is an exchange fee? 17. What special book :s some-
times kept for goods returned by customers? How is it bandied? 13. What special book is sometimes
kept for goods returned to creditors? How is it handled? 19. How does the amount of repair work
done on furniture or real estate during a given period affect the amount which should be written off of
the inventory for depreciation? 20. What is insolvency? Bankruptcy? Distinguish between them.
21. What is voluntary bankruptcy? Involuntary bankruptcy?

Wholesale Dry Goods Business. 1. What is the ptirpose of the purchase book? Describe it,
2. What devices are sometimes used to remind the bookkeeper when to pay bills in order to secure a
cash discount? 3. How is the purchase book posted from? 4. What is the proper order of posting
when the journal, sales book, purchase book, and cash book are used? 5. What is a specific duty? 6.
What is ad valorem duty? 7. What is the basis of English exchange? German? French? 8. What
is the purpose of the traveling expense account? How is it handled? 9. How do you ascertain the
amount to be credited to Cash Discount when paying a foreign invoice?

The Mdse Account Subdivided. 1. If you were to divide your Mdse account into three parts,
what would they be? 2, Upon what is the percentage of profit based? 3. If you kept separate accounts
with Mdse Sales, Mdse Purchases, Merchandise, In-Freight and Out-Freight, how would you close these
accounts? 4. Into what account should Rebates By Us be closed? 5. Into what account should Rebates
to Us be closed? 6. What are the principal items that go to make up Manufacturing Cost? 7. What
expenses should be deducted from sales instead of being added to cost?

APPENDIX— SINGLE ENTRY

PRELIMINARY CONSIDERATIONS

You have now mastered the elementary principles of double entry bookkeeping. This
will make the work of single entry very easy, as there is nothing in single entry that
you have not already learned in double entry. Before proceeding with the single entry
set, however, work the following problems:

Problem I. W. S. Ashby keeps a double entry ledger. On June 30, 1910, he
attempted to take a trial balance but found that one page of the ledger, the page on which
was his own account as proprietor, had been so defaced that the balance could not be
read. Everything else was legible and correct. Make a copy of the partial trial balance
shown below and complete it by inserting W. S. Ashby's balance and the footings:

W. S. Ashby's Partial, Trial Balance, June 30, 1910

Cash

Real Estate . . .
Furniture & Fixtures

Mdse

Expense

J. S. Dickey . .
J. L. Harmon . .
Cherry Bros. . . .
W. S. Ashby . . .

1526
5000
670
4000
500
500
363

72
00
00
00
00
00
50

4250

1076

Problem 11. A. C. Minter keeps a single entry ledger. On July 31, 1910, he found that the page
of his ledger on which his account as proprietor had been kept had been destroyed. Since a single entry
ledger contains no accounts except with persons, the only information that can be secured from Mr. Minter's
ledger is that personal accounts receivable and payable stand as follows: C. V. Burton, Dr., $49.60; Cr.,
$10.00. A. D. Taylor, Dr., $175.60; Cr., $62.50. H. P Towers, Dr., $265.00; Cr., $125.50. Libby &
Son, Dr., $100.00; Cr., $243.64, Manning & Martin, Cr., $215.00

Your problem is to find Mr. Minter's present worth, or the net capital of the business. If there were
no other assets or liabilities besides the personal accounts in the ledger, the problem would be simple.
But you know that there are usually other assets, and you expect to find them in this case. You there-
fore question Mr Minter and he replies, as follows:

You: "How much cash have you on hand?" Mr. Minter (indicating the cash drawer): "About
$480.00." Opening the cash drawer, you find in it $457.63 in currency and coin, and R. D. Smith's check
for $25.00 payable to Mr. Minter. In taking out the cash to count it, you come across a note signed by
T. J. Green in Mr. Minter's favor for $500.00, and a list of goods on hand totaling $5647.20. You: " I find
here a note for $500.00 signed by T. J. Green. Do you hold any other notes?" Mr. Minter: "No; but
I owe $1000.00 to the First National Bank on a note. There are no other notes either receivable or pay-
able." You: "Do you owe any interest on the note in favor of the bank or is any interest due you on
Mr. Green's note?" Mr. Minter: "Some interest has accrued on each note but the two interest items
exactly cancel each other." You: "Is this list of merchandise on hand correct?" Mr. Minter: "Yes,
it was taken yesterday." You: "Is there any other property belonging to the business?" Mr. Minter:
"The store fixtures are mine, and I value them at $500.00. There is no other property belonging to the
business, and I do not owe a cent except for the accounts shown in the ledger and the note for $1000.00."

Prepare a financial account, as you always have in previous sets. The only difference is that in this
case less information can be secured from the ledger than from a double entry ledger. The net capital
shown by the statement shovild appear in the ledger as the credit balance of the proprietor's account.

U SINGLE ENTRY

INTRODUCTION TO SINGLE ENTRY

Progressive business men prefer double entry because they find it desirable to know
certain facts about their business affairs which a single entry system will not reveal. This
is especially true when their business interests are large or extensive, in which case a
double entry set of books is almost imperative.

While pure single entry is little used among the best houses, many retail concerns
employ a combination of single and double entry, and for this reason, if for no other,
it is well for the student to understand what the single entry method is. The work of
this chapter will be of value to the student in teaching him the principles of single entry,
not so much because he- may be called upon to keep a set of single entry books, but because
he is likely to come in contact with accounting in which some single entry features are
incorporated in a double entry system, subordinate to the general double entry scheme.

Single entry bookkeeping is a method of keeping unrelated memorandums and records
of business transactions such as the proprietor of a business may deem necessary for his
protection and information.

The facts of which memorandums are usually kept in single entry are: (1) The receipts
and payments of cash, (2) The charges against and credits to persons, on account. Some-
times the inventories of property owned are kept as a matter of record.

Single entry derives its name from the circumstance that each entry is a record of
a single fact, either a debit or a credit, rather than a record of two or more facts affecting
both sides of the ledger equally, as in double entry.

Comparison Between Single and Double Entry.

In Single Entry, accounts are kept only with persons, cash and sometimes property
inventories, and since accounts with persons and cash, and inventories, must exhibit
either assets or liabilities, and not losses or gains, it is apparent that separate losses and
gains cannot be shown by the single entry method. This failure to show the separate
losses and gains constitutes the chief disadvantage of single entry as a system, and is the
principal reason for its inferiority to double entry.

In double entry, equal debits and credits are recorded for every transaction. These
are posted to the ledger. As the debits posted are exactly equal to the credits posted,
the equality of the two sides of the ledger is constantly preserved. If the trial balance
fails to exhibit this equality, the bookkeeper at once knows (provided no original entry
is out of balance) that there has been an error or omission in posting. When the single
entry method is used, the bookkeeper has no such systematic, almost automatic, device
for the detection of errors of this kind (errors in posting), which occur more frequently,
probably, than all others combined.

Double entry is a scientific system of bookkeeping by which the chances of error are
reduced to the mininum and under which it is possible to so classify and analyze the busi-
ness transactions that almost any desired facts in regard to the progress or condition
of the business can be ascertained. Single entry is an unscientific bookkeeping expedient
by which only the barest facts as to the current assets and liabilities of the business are
set forth with no further guarantee of their accuracy than the carefulness of the book-
keeper who made and posted the entries.

SINGLE ENTRY

A SINGLE ENTRT SET

Since the facts which are to be recorded in single entry have to do with persons and
.cash only, as has been stated, it is only necessary that three books be kept, as follows:

(a) The Cash Book, in which are kept the receipts and disbursements of cash.

(b) The Day Book, in which debits and credits to personal accounts are recorded
as they occur.

Auxiliary books or books of memorandum of almost any kind can be kept if desired;
as, the bill book, invoices payable register, etc.

THE CASH BOOK

The single entry cash book usually differs in form from the double entry cash book,
though not necessarily so. The accompanying illustration shows the first few cash book
entries and also shows the method of ruling for balancing the book. Note that the Debit
and Credit columns are side by side on the same page. This arrangement affords a wide
column for the explanatory matter and presents the debits and credits in the order in
which they occurred. Note the placing of the dates, and do not forget the year dates.*

19-

CASH BOOK

Dr.

Cb.

Oct.

1
1

Cash invested as per Day Book entry

Paid rent for October, 1910, by check

***

Paid The American Cereal Co. in full of account . .

Paid Students' salary for week ending Oct. 6 . . .

Received from cash sales as per Cash Reg

Balance

**
**

***

Balance

***

Oct.

***

THE DAY BOOK

This book corresponds to the double entry journal in that it is the book in which the
original entries of debits and credits are made which are later posted to the ledger, and
in the fact that the entries are made as the transactions occur and in the order of their
occurrence. It is also somewhat similar in form and ruling to the double entry journal.
But here the resemblance ends. The single entry day book does not record equal debits
and credits as does the double entry journal, but each entry records a single debit or a
single credit, as the case may be. The separate items, if any, are written in the left-
hand column and the total in the right-hand column. In this set the total only is posted,
but the separate items could be posted instead, if preferred. The following form shows
a few t}'pical day book entries for the single entry set.

Note that opposite the name of each account debited or credited in the day book is
placed the abbreviation Dr. or Cr. This is the means of indicating which side of the
ledger the transaction is to be posted to, and you must not forget to write it as you make
each entry.

*These and other forms shown in this chapter are intended as illustrations merely, and are not to
be relied upon by the student in writing entries in his books.

SINGLE ENTRY

Note that the transaction on Oct. 6 appears in both the cash book and the day book.
Whenever any money is paid out, an entry is made in the cash book to show the
payment of cash; if the payment is on account, another entry is made in the day book,
to show the debit of the personal account. When money is received on account, an
entry crediting the person is made in the day book, and the cash received is recorded
in the cash register, the total being periodically entered in the cash book as a receipt,
as will be shown later.

DAY BOOK
• October 1, 19—

F. P. Nissen, Proprietor Cr.

F. P. Nissen is engaged in the retail grocery busi-
ness at 105 Oak Park Ave., Oak Park, 111. His assets
at this time are as follows:

Cash in bank

Cash in cash register

Stock of groceries on hand valued at

Horse and wagon valued at

Furniture and fixtures valued at

Accounts receivable as follows.

Mrs. Wm. Conant, 110 S. East Ave.
Mrs. Chas. P. French, 157 S. East Ave.

Mrs. Wm. Conant, 110 S. East Ave.
To groceries as per order slip No.

Dr.

Mrs. Chas, P. French, 157 S. East Ave.,
By cash on account

Cr.

H. J. Heinz Co., 1814 S. Clark St., Chicago Cr

3 doz. Med. Baked Beans and Sauce 1 .40

1 doz. 10-oz. Royal Select Queen olives

2 doz, 8-oz. Octagon Ketchup 1 . 35

The American Cereal Co., 9 Jackson Boul., Chicago Dr.
To cash in full of account

***

**
**

THE LEDGER

The single entry ledger differs from the double entry ledger in form only, though. it
does not necessarily differ even in that respect, because a center-ruled ledger could be
used as well for single entry as for double entry. Following is an illustration of the form
used in this set.

MRS. WM. CONANT
19— 110 S. East Ave. Dr. Cr.

Oct.

8
12

Balance due

To groceries as per order slip No. 1
To groceries as per order slip No, 7
By cash as per Day Book

To groceries as per order slip No. 15
To groceries as per order slip No. 22

SINGLE ENTRY

Order Slips

Your outfit contains a pad of blank order slips. These ordinarily come in dupli-
cate and are filled out by the salesman, who sends one copy with the goods and
one copy to the cashier's desk. Sometimes order slips come in triplicate, the third
copy being put to some special use in connection with either the accounting of delivery
system.

In order that you may get a comprehensive idea of the procedure in the retail grocery business, you
are to perform a part of the duties of the salesman in addition to your work as bookkeeper and cashier.
As salesman you are to fill out the order slips. As cashier, you have charge of the cash register. As book-
keeper you make the proper entries in the books for all transactions.

The duties of cashier and bookkeeper are so intimately connected that they are usually performed
by the same person; and it is not unusual, especially in the smaller stores, for the bookkeeper and cashier
to act as salesman as well, especially at times when there is no other salesman in the store, or when an
order comes by telephone.

The pad of order slips which accompanies your outfit consists of single slips. It will
be assumed that, as salesman, you have filled them out in duplicate and send both copies

to the cashier, who after stamping on the
duplicate the date and number of the sale,
the amount and kind of the sale, and the
initial of the salesman (all done automatic-
ally by the cash register in one operation),
has sent it with the goods. The original,
which is the slip you fill out, is filed. When
you fill out an order, write at the bottom
the expression "Charged," "Paid," or
"CO. D.," as the case may be.

Filled orders are either taken away by the cus-
tomer or sent to the delivery clerk to be delivered,
but you will have nothing to do with this part of
the work. The duplicate order slip accompanies the
goods whether the goods are taken by the customer
or sent to the delivery clerk.

The order slip must always contain thft
name and address of the customer, if it is a
charge slip, whether the goods are taken by
the customer or delivered. C. 0. D. goods
are always delivered; therefore the name and
address must always be written on a C. 0. D.
slip. In the case of paid orders, the name
and address of the customer must always
ORDER SLIP ^^ shown if the goods are to be delivered.

F. P. IVISSEN

105 OAK PARK AV-ENUE

Groceries AND >1eats

Oak Park, HI., i^/1 19.rrr

o .J . Mrs. William Conant

Sold to

A AAA.^. no S. East Ave.
Salesman Address

Quan.

ARTICLES

Price!

Amount

Leg Spring Lamb 5 lb.

cans French Pea^

heads Lettuce

bat. Olive Oil

Vb. BuUer

Charge

Cash Slips

If the customer pays for the goods and takes them with him, an order slip is not made
out. A cash slip is filled out. This does not contain the name and address of the cus-
tomer, but is a mere list of the items sold, with the total, if more than one item is sold.

SINGLE ENTRY

At the top of the slip ace printed the words "Pay the Cashier"— a direction to the cus-
tomer. The cash shps are numbered consecutively and each is attached to a stub

which bears the same number, on which the
amount of the sale must be noted at the
time the slip itself is made out.

No. 1 $ -^^

Perforated line

F.P. NISSEN, Groceries and Meats

Pay the Cashier

Salesman .4 OAK PARK, \LL.,1^./ L 19.—

Quan.

ARTICLE

Price

Amount

Bread

lb. Bacon

doz. Eggs

CASH SLIP

Customers' Receipts

When a customer makes a payment on
account, a customers' receipt is issued for the
amount recorded in the cash register as re-
ceived. These are ordinarily issued in dupli-
cate; one copy is given to the customer after
being placed in the machine and stampedj
the other copy is retained and filed.

The pad of customers' receipts which
accompanies your outflt consists of single
slips. These are to be filed by the cashier,
it being assumed in each case that a dupli-
cate has been made, stamped, and given to
the customer.

The Cash Register

In connection with the retail grocery
business which is illustrated in the following
single entry set, it is assumed that the student as cashier uses a cash register, now con-
sidered to be an almost indispensable adjunct of an extensive retail business. The cash
register is an automatically-locking device for holding money, which can be unlocked
and opened only by pressing buttons or keys in front. There are five rows of these buttons
consisting of nine buttons each When the cashier presses the proper buttons, the money-
drawer opens and at the same time the interior mechanism of the cash register automat-
ically records upon a narrow roll of paper,
called the "detail strip," the amount of
the sale or payment together with the
initial of the salesman and the kind of
sale or payment. Cash Sales, Cash Re-
ceived on Account, C. 0. D. Sales, C. 0. D.
Cash Returns, C. 0. D. Goods Returned,
Goods Returned on Account, Charge Sales
and Cash Sales, are all recorded on the
detail strip in the ordei of their occurrence,
and each kind indicated by a special
abbreviation or sign. The machine con-
stantly shows the number and the totals
of each of the different kinds of transac-
tions recorded. The cash register has one
button marked "No sale" which can be cash register

SINGLE ENTRY

VI 1

pressed when the cashier wishes to open the register without recording a receipt or
sale, as when it might be desired to accommodate some one by changing a bill.

Whenever any sale or payment is recorded, the cashier inserts in the machine the
duplicate of the order slip or other voucher used, and the machine automatically stamps
upon it the record of the transaction. Some machines issue little cardboard tickets prop-
erly stamped, instead of printing the record directly upon the voucher. These stamped
records, whether they be printed upon the vouchers or upon separate tickets, constitute
a check upon the accuracy and honesty of the cashier and show the customer that the
proper records of transactions are being made.

Cash Register Sheets

As it is not practicable for each student to have a cash register, there are provided
for each outfit several sheets of paper (Cash Register Sheets) ruled with columns to repre-
sent the different kinds of transactions for which the cash register shows separate totals.
Instead of actually pushing the buttons of a cash register and thus making the records
on the detail strip, you will make pen and ink records in the columns of the specially ruled
sheets provided.

Cash Register Sheet

Cash Sales

Cash

Rec'd on

Acct.

C. O. D.

Sales

C. 0. D.

Cash
Returns

C. O. D.

Goods

Return'd

Goods
Return'd
on Acct.

Charge
Sales

Cash Paid
Out

Change

in register Oct. 1, 19 —

*
*
*

**
**
**
**
**
**
**
**
**
**
**
**

** **

* **

** **

* **

** **

* **

0.00

** **

File

Accompanying your outfit you will find a file containing three sections. This file is
for your convenience in disposing of papers that you make out. In the first section
C. O. D. sales slips are placed temporarily while the orders are being delivered. In the
second section are placed the cash slips, the paid order slips (which are in effect the same
a? cash slips), the C. 0. D. paid slips, and the customers' receipts. In the third section
are placed the charge sale slips and also the goods returned slips. It is assumed that
whenever any slip of any kind is issued one copy goes in our files and one copy goes to
the customer. Note that the papers in the Cash Sales and Cash Receipts section of
the file will exactly check with the total cash receipts as shown by the Cash Register
Sheev.

Viii SINGLE ENTRY

YOUB, DUTIES STJMMAKIZED

(1) Fill out the order slips, cash slips, and customer's receipts as these are required.

(2) Make pen and ink records on the Cash Register Sheets of amounts which would
ordinarily be recorded in the cash register.

(3) Make the bookkeeping entries.

Following is a list of the different kinds of transactions and the procedure in each
case, except as to the filing, directions for which will be given in connection with specific
transactions.

(a) Cash sale, taken. Fill out a cash slip and record the amount received on the
Cash Register Sheet.

(b) Cash Sale, delivered. Fill out an order slip and record the amount received
on the Cash Register Sheet.

(c) Cash received on account. Fill out a customers' receipt, make a record on the
Cash Register Sheet, and make an entry in the day book.

(d) C. O. D. Sale. Fill out an order slip and make a record on the Cash Register Sheet.

(e) C. O. D. Cash Returns. Make a record on the Cash Register Sheet.

(f) C. 0. D. Goods Returned. Make a record on the Cash Register Sheet.

(g) Charge Sale. Fill out an order slip, make a record of the transaction on the
Cash Register Sheet,, and make an entry in the day book,

(h) Goods Returned on Account. Make an entry on the Cash Register Sheet, and
give the customer credit in the day book.

(i) Cash Paid Out. Make a record on the Cash Register Sheet and an entry in the
cash book. If the payment be on account, an entry in the day book is also necessary.

(j) Purchases on account are entered in the day book as they occur.

At the end of the day, or whenever it seems desirable, the Cash Sales column, the Cash
Received on Account column, and the C. 0. D. Cash Returns column of the Cash Register
Sheet are footed and added together and the grand total is entered in the cash book as
a receipt, as shall be explained in greater detail hereafter.

In entering sales on account in the day book it is not necessary to itemize them, as
we have itemized records on the order slips which are filed; nor is it necessary to itemize
goods purchased, as these items would show on the invoices which would also be filed.
Entries of purchases should show the date, the name and address of the person bought
from, the terms of purchase and the amount.

In working the following transactions, remember that there are only two things we
must keep account of in Single Entry: (1) Receipts and disbursements of cash, (2) Debits
and credits affecting personal accounts. Also remember that no entry records anything
but a single debit or a single credit.

Before beginning the work of the set, see to it that the charge slips are numbered consecutively from
1 to 30, that the cash slips and their corresponding stubs are numbered from 1 to 20, and that the custom-
ers' receipts are numbered from 1 to 10.

SINGLE ENTRY ix

TRANSACTIONS

October 1, 19 — . F. P. Nissen is engaged in the retail grocery business at 105 Oak
Park Ave., Oak Park, 111. His assets at this time are as follows:

Cash in bank* $500 . 00

Cash in cash register 67.60

Stock of groceries on hand valued at 5432 . 69

Horse and wagon valued at 275.00

Furniture and fixtures valued at 450.00
Customers owe him as follows:

Mrs. Wm. Conant, 110 S. East Ave. $13.56

Mrs. Chas. P. French, 157 S. East Ave. 23.47

Mrs. Edwin C. Hedrick, Jr., 124 N. Kenilworth Ave. 5.89

Mrs. Louis N. Mellick, 364 S. Euclid Ave. 27 . 56

Mrs. Ward. N. Seabury, 175 Forest Ave. 16-37

Mrs. N. N. Richards, 154 Circle Ave., Forest Park 4.23

Mrs. Wm. Beye, 264 Wisconsin Ave. 12 . 50

Mrs. Phillip Furbeck, 1110 South Boulevard ' 6.78
His liabilities are as follows:

National Biscuit Co., 110 N. Morgan St., Chicago |27.60

The American Cereal Co., 9 Jackson Boul., Chicago 8.Q^

H. J. Heinz Company, 1814 S. Clark St., Chicago 23.42

Armour & Co., 239 S. Water St., Chicago 17.75

Washburn-Crosby Co., 145 Van Buren St., Chicago 124.68

Steps necessary to open the single entry books

1. Enter in the cash book the amount of cash on hand.

2. Open accounts in the ledger with the proprietor, all customers, and all creditors,
in the order named, allowing one-third of a page for each account. Enter in the cus-
tomers' and creditors' accounts the balances shown by the opening statement.

3. Make a day book entry crediting the proprietor with the total of the assets of the
business, listing the items at the bottom of the entry. Make another entry debiting the
proprietor with the total of the liabilities of the business, listing the items below. Post
both of these entries to the proprietor's account on page 1 of the ledger.

After opening the books as above, enter the amount of change on hand ($67.60) on
one of the Cash Register Sheets, at the top of the left-hand column, with the explanation
"Change on hand Oct. 1, 19—." Give the sheet the number 1. You are now ready
for business.

OOTOBEB 1. 19—

Transaction No. 1. Paid rent for October by check, $100.00.

Enter this in the cash book only. As the payment was by check, the transaction is not recorded on
the Cash Register Sheet.

Transaction No. 2. Sold for cash 2 loaves bread, at 5^; 1 lb. bacon, 28^; 1 doz.
eggs, 260.

Make out a cash slip. Record the amount received on the Cash Register Sheet, in the left-hand column.
File the cash slip in the section of the file marked Cash Sales and Cash Receipts.

* The student is not required to keep a bank pass book, but whenever necessary he will be told what
the bank balance is.

X SINGLE ENTRY

Transaction No. 3. Sold to Mrs. Wm. Conant, 110 S. East Ave., on account, 1 leg
of spring lamb, 5 lbs. at 20^; 2 cans French peas, at 15^; 2 heads lettuce, at 120; 1 bottle
olive oil, 300; 1 lb butter, 380.

Make out an order slip, writing the word Charge or the abbreviation Chg. at the bottom of the shp
Then record the amount of the sale in the Charge Sales column of the Cash Register Sheet, and make the
day book entry charging Mrs. Wm. Conant. When this has been done file the order slip in the section
of the file marked Charge Sales.

Transaction No. 4. Sold for cash 1 can lobster, 250.

Proceed exactly as described in the note of explanation under Transaction No. 2.

Transaction No. 5. Sold to Mrs. Chas. P. French, 157 S East Ave-, on account,
2 boxes soda crackers, at 100; 1 can French peas, 150; 1 box Coleman's mustard, 150;
2 heads cabbage, at 100; 1 sack salt, 100; 1 can salmon, 150; 3 loaves bread, at 50, 1 lb.
imported Swiss cheese, 400.

Proceed exactly as described in the note of explanation under Transaction No 3

OCTOBER 2

Transaction No. 6. Sold to Jas H. Greenman, 231 Woodward Terrace, for cash,
to be delivered, 2^ lbs. hahbut steak, at 180; ^ do?. Florida oranges, at 500; 2 cans Tele-
phone peas, at 12^0; 2 cans Cupid fancy tomatoes, at 12^0; 1 8-lb. box prunes, 850.

Make out an order slip, writing the word Paid at the bottom. Record the amount of the sale in the
left-hand column of the Cash Register Sheet. Place the order slip in the section of the file marked Cash
Sales and Cash Receipts.

Transaction No. 7. Sold for cash 1 jar Southwell's imported marmalade, 230; 1 lb.
creamery butter, 360; 2 boxes soda crackers, at 100.

Follow the instructions given in the note under Transaction No. 2, and in future always follow this
procedure when a sale for cash is made which is not to be delivered.

Transaction No. 8. Sold on account to Mrs. Edwin C. Hedrick, Jr., 124 N. Kenil-
worth Ave., 3 lbs. Star ham, sliced, at 280; 1 box Coleman's mustard, 150; 3 loaves bread,
at 50; 1 lb. creamery butter, 360; ^ lb. imported Swiss cheese, at 400; 2 pkgs. Uneeda
biscuit, at 50; 2 cans Heinz baked beans and tomato sauce, at 150.

Follow the instructions given under Transaction No. 3, and in future always follow this procedure
when a sale on account is made.

Transaction No. 9. Sold to Mrs. Paul Peters, 740 Chicago Ave., for cash, to be
delivered, 2 pkgs. Saratoga flakes, at 150; 2 pkgs. Quaker oats, at 100; 3 cans Monarch
canned corn, at 150; 3 cans Monarch canned peas, at 150; 1 broom, 400; 1 bottle bluing,
100; 3 bars Naphtha soap, at 50.

Follow the instructions given in the note under Transaction No. 6, and in future always follow this
procedure when a sale is made for cash to be delivered.

Transaction No. 10. Received of Mrs. Chas. P. French $10.00 on account.

Fill out a customer's receipt. Enter the amount received on the Cash Register Sheet, in the column
headed Cash Received on Account. Make a day book entry crediting the customer. Place the customer's
receipt in the section of the file marked Cash Sales and Cash Receipts.

These slips are usually kept on a spindle until the cashier can find time to enter them, and the same
thing is done with charge orders, receipts for or memorandums of cash paid out, etc., but the student
will make all day book entries and cash credit entries as the transactions occur.

SINGLE ENTRY XI

OCTOBEB 3

Transaction No. 11. Sold to Mrs. C. V. Clark, 789 Lake St., C. O. D., the follow-
ing groceries: 25 lbs. W. C. Superlative flour, at 50; 2 pecks apples, at 600; 3 lbs. Star
bacon, sliced, at 280.

Fill out an order slip, writing C. O. D. at the bottom of it. Enter the amount of the sale on the Cash
Register Sheet, in the column headed C. O. D. Sales, and place the order slip temporarily in the section
of the file marked C. O. D. Sales.

Transaction No. 12. Sold for cash 2 pecks Irish potatoes, at 200; two cans Monarch
canned corn, at 150; two cans Monarch canned peas, at 150.

Transaction No. 13. The delivery boy returns with $3.29, as returns on the C. O. D.
sale to Mrs. C. V. Clark.

If this is the correct amount, enter it on the Cash Register Sheet in the column headed C. O. D. Cash
Returns. Take the C. O. D. slip from the section of the file marked C. O. D. Sales, write on it the word
Paid, and place it in the section marked Cash Sales and Cash Receipts.

OCTOBER 4

Transaction No. 14. Bought of H. J. Heinz Company, 1814 S. Clark St., Chicago,
111., on 30 days' time, the following bill of groceries:

3 doz. Med. Baked Beans and Sauce, at $1.40 $4.20

1 doz. 10-oz. Royal Select Queen Olives, for 2.75

2 doz. 8-oz. Octagon Ketchup, at 1 . 35 2 . 70 $9 . 65

Make an entry in the day book, crediting H. J. Heinz Company. This entry should contain the
explanation "Terms, 30 days." No further instruction will be given as to the procedure in handling
an entry of this kind.

Transaction No. 15. Sold for cash 2 cans Heinz medium baked beans and tomato
sauce, at 150; 1 bottle Royal select queen olives, 250; 2 cans Monarch canned corn, at 150.

Transaction No. 16. Sold to Mrs. Wm. Conant, 110 S. East Ave., on account, 1
doz. eggs, 360; 1 leg of spring lamb, 4^ lbs. at 200; 2 cans French peas, at 150; 1 peck
Irish potatoes, 200.

OCTOBER 6

Transaction No. 17. Sold to W. J. Frazer, 767 W. Madison St., for cash, to be
deUvered, 1 can lobster, 250; 1 bottle Queen Olives, 250; 2 loaves Quaker bread, at 50.
Transaction No. 18. Received $5.00 from Mrs. Edwin C. Hedrick, Jr., on account.
Follow the instructions in the note under Transaction No. 10.

Transaction No. 19. Paid The American Cereal Co., 9 Jackson Boul., Chicago,
$8.95, the amount of their account against us, from the Cash Register.

Record this in the Cash Paid Out column of the Cash Register Sheet. Make a cash book entry at
this time, and make an entry in the day book debiting The American Cereal Co.

Transaction No. 20. Sold for cash 6 cans Heinz baked beans and tomato sauce,
at 150; 2 bottles Heinz tomato catsup, at 150; 5^ lbs. Star ham, sliced, at 280; 6 lbs. Star
ham, butts, at 120; 6 lbs. Star bacon, sliced, at 280.

Transaction No. 21. Sold to Mrs. Ward N. Seabury, 175 Forest Ave., on account,
3^ lbs. shoulder lamb chops, at 140; 3 cans French peas, at 150; 3 heads lettuce, at 120;
50 lbs. W. C. Superlative flour, at 50.

SINGLE ENTRY

Transaction No. 22. Sold to Mrs. Louis N. Mellick, 364 Euclid Ave., on account,
one spring chicken, 4| lbs- at 20^; 2 lbs. creamery butter, at 36^; 2 loaves bread, at 5^;
3 cans salmon, at 150; 1 broom, 400; 1 bottle bluing, 100; 3 bars Naphtha soap, at 50.

Transaction No. 23. Received of Mrs. Wm. Conant, 110 S. East Ave., cash in full
of account, $17.54,

Transaction No. 24. Sold to Jas. W. Wilson, 317 Clinton Ave., for cash, to be
delivered, 4 grape fruit, at 200; 3J lbs. Malaga grapes, at 200; 3 pkgs. Cottage cheese,
at 150; 6 cans assorted soups, at 300; 1 lb. Young Hyson tea, 800; 2 qts. Baltimore oysters,
at 350; 6 pkgs. Saratoga flakes, at 150.

Transaction No. 26. Sold for cash 3 lbs. Finnan haddie, at 150; 2 lbs. creamery
butter, at 360; 3 loaves rye bread at 100; 1 sack salt, 100; 3 heads cabbage at 100; 1 box
Coleman's mustard, 150.

Transaction No. 26. Received from Mrs. Edwin C. Hedrick, Jr., 124 N. Kenil-
worth Ave., cash to balance her account, $2.99.

Transaction No. 27. Paid the salary of the bookkeeper and cashier (yourself) for
the week, $12.50, from the Cash Register.

Record the payment on the Cash Register Sheet, in the column headed Cash Paid OvU. Make the
proper entry and explanation in the cash book.

Post to the ledger all day book entries that have not yet been posted; rule and foot
all accounts that are paid in -full. Close the Cash Register Sheet as illustrated and
described below.

ILLUSTRATION OF CLOSING OF CASH REGISTER SHEET

Footings

**
**

** **

* **

0.00
* **

0.00

** **

•

0.00

** **

Deduct change

Entered

in cash

book, p

**
**
**

* ♦*

Spot cash sales

** **
* **

Net Chg. Sales

C. 0. D. cash returns
Cash Rec'd. on Acct.

age — .

Cash Sales
C. 0. D. Sales

Total cash Rec'd.
Cash Pd. out

**
**

** **

Total Sales

Excess of receipts
Change on hand

**
**

Cash in register
Deposit Oct. 6, 19—

***
**

Change in register Oct. 8, 19 —

Rule a single line across the eight columns of the Cash Register Sheet, underneath
the last item in the longest column, and add all columns. Then proceed as follows: (1)
Deduct the amount of the change on hand Oct. 1 from the total of the first column. The
result will be the total of cash sales. (2) Reconcile the three C. 0. D. columns (i.e., deter-
mine whether the C. 0. D. Cash Returns and the C. 0. D. Goods Returned added equal
the C. 0. D. Sales Rule these columns as shown in the model form and write the amount
of the C. 0. D. Cash Returns in the left-hand column of the Cash Register Sheet, beneath
the total of spot cash sales. (3) Write in the left-hand column the amount of the cash
received on account and rule a double line across the Cash Received on Account column.
(4) Add the three totals now shown in the left-hand column. The result is the total of
cash received. (5) Write beneath this the total of the cash paid out, and deduct it. The
result is the excess of receipts over disbursements for the week. (6) Add the amount

SINGLE ENTRY

of the change on hand, $67.60, which will give you the total of cash in the cash register.
(7) Deposit $50.00, keeping $**.** for change. Deduct the amount of the deposit, rule,
and carry forward the amount of change on hand, all as shown in the model. (8) The
only columns not yet ruled up are the Charge Sales and Goods Returned on Account columns.
Deduct the total of the latter column from the total of the former. The result is the
net chaise sales. Add the total of cash sales and the total of C. 0. D. paid sales to the
net charge sales, to show the total of all kinds of sales for the week. (9) The total of
cash received during the week must be entered in the cash book and a notation to the
effect that this has been done should be made on the Cash Register Sheet, as shown. The
cash payments, it will be observed, have alr^idy been entered in the cash book, these
entries having been made separately as the transactions occurred.

In business, this closing of the cash register is usually done daily. The report on business done, as
shown on your Cash Register Sheet between the two lines extending entirely across the form, is usually
prepared on a special daily report blank, and summaries of these daily reports are prepared weekly or
monthly.

When your Cash Register Sheet has been approved by your teacher, write the amount
of change on hand at the top of another Cash Register Sheet, giving it the number 2, and
enter the transactions for the week beginning Oct. 8.

OCTOBER 8

Transaction No. 28. Sold for cash 5 packages Saratoga Flakes, at 15^; 3 packages
Quaker oats, at 10^; 4 cans Heinz baked beans and tomato sauce, at 150; 2 bottles Queen
olives, at 250; 5 loaves bread, at 50.

Transaction No. 29. Bought for cash, from the Heissler & Junge Co., 301 W 39th
St., Chicago, 100 loaves Quaker bread, at 40, paying the money from the cash register.

Transaction No. 30. Sold on account to Mrs. Wm. Beye, 264 Wisconsin Ave , 2
bottles Heinz tomato catsup, at 15^; 1 whole Star ham, 15 lbs. at 260; 3 lbs. Star bacon,
sliced, at 280; 4 cans Monarch canned corn, at 150; 3 loaves bread, at 50; 3 bars Ivory
soap, at 50.

Transaction No. 31. Paid $3.00 from the cash register for one year's subscription
to the Grocers' Guide and Holly Journal, the subscription to begin with the November issue.

Transaction No. 32. Sold on account to Mrs. Ward N. Seabury, 175 Forest Ave.,
3 cans Monarch canned peas, at 150; 2 pks. Northern Spy apples, at 600; 4 pks. Irish
potatoes, at 200 a peck; 25 lbs. W. C. Superlative flour, at 50; 1 bottle bluing, 100; 2 lbs.
Oswego starch, at 50; 2 doz clothespins, 50.

Transaction No. 33. Bought on account of Reid, Murdock & Co., cor. Lake and
Market Sts., Chicago, the following invoice (the explanations in parenthesis do not appear
on the face of the bill):

5 cs. (cases) Monarch #2 com (in tins, 2 dz. ea.)

2 " " #2 E. J. (early June) peas (in tins,

2 dz. ea.)
2 " " #1 Tall salmon (in tins, 4 dz. ea.)

6 " " #3 Tomatoes (in tins, 2 dz. ea.)

Doz.

Price

$1.20

1.75
2.10
1.35

30 Days

$16.80

60 Days

$12.00

7.00

13.50
$32.50

Total

$49.30

Xiv SINGLE ENTRY

Transaction No. 34. Bought of The American Cereal Co., Chicago, 111., on account
30 days,

4 cases Quaker oats, at 3.00 $12.00

1 brl. Oatmeal 5.50 $17.50

Transaction No. 35. Sold for cash 1 leg of spring lamb, 4| lbs. at 200; 2 cans tall
salmon, at 27^0; 3 cans E J Peas, at 20^; 2 heads lettuce, at 120; 3 loaves bread, at 50;
2 boxes B & C matches, at 50.

Transaction No. 36. Sold to Mrs. Louis N. Mellick, 364 Euclid Ave., on account,
2 cans lobster, at 250; 3 boxes soda crackers, at 100; 1 bottle olive oil, 300; 2 lbs. creamery
butter, at 360; 1 loaf bread, 50; 1 sack salt, 100.

Transaction No. 37. Received of Mrs. Chas. P. French, 157 S. East Ave., cash
in full of account.

Find the balance due as shown by the ledger. Note the date of the last purchase, and look through
the day book, from that date on, to find whether there are any debits and credits to be posted to her account.

Transaction No. 38. Sold on account to Mrs, Wm. Conant, 110 S. East Ave., 2 lbs.
creamery butter, at 360; 2 doz. eggs, at 360; 1 spring chicken, 5^ lbs. at 200; 6 grape fruit,
at 200; 2J lbs. Malaga grapes, at 200; 3 lbs. cottage cheese, at 150; 2 bottles Queen olives,
at 250; 3 loaves bread, at 50.

OCTOBER 10

Transaction No. 39. Sold for cash, 5^ lbs. shoulder of lamb, at 120; 2 lbs. creamery
butter, at 360; 3 cans E. J. peas, at 200; 1 sack salt, 100; 25 lbs. W. C. Superlative flour,
at 50; 1 lb. India Ceylon tea, 600.

Transaction No. 40. Sold C. 0. D. to Mrs. C. V. Clark, 789 Lake St., 4 lbs. smelts,
at 140; 1 bottle Queen olives, 250; 1 lb. butter, 300; 3 loaves rye bread, at 50.

Transaction No. 41. Mrs. Louis N. Mellick, 364 Euclid Ave., returned 2 cans of
lobster purchased Oct. 8, claiming both cans were spoiled.

Enter this amount in the Goods Returned on Account column of the Cash Register Sheet. Give Mrs.
Mellick credit in the day book. Make out a credit memorandum as follows: "Oct. 10, 1910. Credit
Memorandum. Mrs Louis N. Mellick, 364 Euclid Ave. We credit your account 500 for 2 cans lobster

returned. F. P. Nissen by ." Assuming that you have given Mrs. Mellick one copy of this,

place the credit memo in the file with the Charge Sales.

Note: Many retail grocers keep the customers' charge tickets filed alphabetically under the customers'
names. This makes reference easy in case of dispute. Some firms keep no ledger, but rely entirely upon
the slips. This is not a very reliable plan, however, unless the balances are carried forward from one
slip to the next, as in the system known as the McCaskey continuous account system. When this system
is followed any payment made is deducted from the balance shown by the last order slip, so that the last slip
made out always shows the balance due. The slips are filed alphabetically under the customers' names.

One system that is sometimes used by grocers who have a comparatively small number of customers
is as follows: One charge order book with numbered pages is kept for each customer who has an account.
When a charge order is to be made out, the clerk secures the customer's individual book and writes the
order in it direct, or else he hands the cashier a memorandum of the filled order and the cashier writes
in the customer's book. One copy of the charge slip goes with the goods, while the other copy stays in
the book. The balance is carried forward from slip to slip, as in the system described in the last paragraph.

Transaction No. 42. Sold on account to Mrs. Chas. P. French, 157 S. East Ave.,
1 doz. eggs, 300; 2 lbs. Clover Leaf creamery butter, at 360; IJ lbs. Wisconsin cream cheese,
at 260; 2 cans Queen Maud sardines, at 250; 1 doz. oranges, 250; 8 qts. new Bermuda
potatoes, at 90.

SINGLE ENTRY XV

Transaction No. 43. Purchased on 30 days' credit from Armour & Co., 239 S,

Water St., Chicago,

12 Star Hams, 180 lbs. at 15^ $27.00

16 pes. Star Bacon, 120 lbs. at 22^ 26.40 $53.40

Transaction No. 44. Sold to Mrs. Phillip Furbeck, 1110 S. Boulevard, C. O. D.,
one Star ham, 15 lbs. at 25^.

Transaction No. 45. Sold for cash 3 lbs. chopped beef, at 16^; 1 doz. eggs, 300;

2 lbs. creamery butter, at 360; 25 lbs. W. C. Superlative flour, at 50.

Transaction No. 46. Sold on account to Mrs. N. N. Richards, 154 Circle Ave., Forest
Park, 6^ lbs. Star ham butts, at 80; 1 can Monarch canned corn, 150; 3 loaves bread, at
50; ^ lb. butter,' at 300; 2 lbs. sausage meat, at 200; 3 bars Naphtha soap, at 50.

Transaction No. 47. Mrs. N. N. Richards, 154 Circle Ave., Forest Park, paid $1.00
on account.

Transaction No. 48. Sold for cash 3 lbs. smoked halibut, at 250; 2 lbs. imported
Swiss cheese, at 400; 1 lb. creamery butter, 360; 3 loaves bread, at 50.

Transaction No. 49. The delivery boy returned with the correct amount of cash
in payment of the C. 0. D. order sold to Mrs. C. V. Clark, 789 Lake St.

(See the note under Transaction No. 13.)

Transaction No. 50. The delivery boy reported that no one was at home when he
called at the residence of Mrs. Phillip Furbeck to deliver the C. O. D. order He there-
fore brought the goods back.

Enter the amount of the order on the Cash Register Sheet in the column headed C. O. D. Goods Returned.
In business the delivery boy would bring back the duplicate order slip with the goods. This would be
marked "Goods Returned" and filed. You may make a memorandum of the goods returned (virtually
a «!opy of the order slip) mark it "Goods Returned," and place it in the section of the file marked C. O. D
Goods Returned.

OCTOBER 12

Transaction No. 51. Sold to J. N. Ward, 679 Chicago Ave., for cash, to be delivered,

3 grape fruit, at 200; 1 doz. oranges, 400; 1 doz. eggs, 300; 2 lbs. creamery butter, at 360;
2^ lbs. Star bacon, sliced, at 280; 3 pkgs. Uneeda biscuit, at 50; 2 loaves bread, at 50.

Transaction No. 52. Sold to Mrs. C. V. Clark, 789 Lake St., C. O. D., 2 cans Pride
of Chicago tall salmon, at 180; 3 loaves bread, at 50; 1 8-lb. box prunes, 850; 1 lb. India
Ceylon tea, 600.

Transaction No. 53. Sold for cash 2 pks. Northern Spy apples, at 600; 3 pks. Irish
potatoes, at 200; 25 lbs. W. C. Superlative flour, at 50.

Transaction No. 5'i. Sold to Mrs. Wm. Conant, 110 S. East Ave., on account, 1 leg
of spring lamb, 4^ lbs. at 200; 4 lbs. Star bacon, sliced, at 280; 3 heads lettuce, at 120;
3 cans E. J. peas, at 200.

OCTOBER 18

Transaction No. 55. Sold for cash 1 lb. India Ceylon tea, 600; 10 lbs. sugar, at 50;
3 pkgs Nabisco, at 100; 3 pkgs. Uneeda biscuit, at 50.

Transaction No. 56. Sold to Mrs. Chas. P. French, 157 S. East Ave., to be charged,
3 grape fruit, at 200; 20 lbs. sugar, at 50; 2^ lbs. Malaga grapes, at 200; 4 pkgs. Nabisco,
at 100.

XVI SINGLE ENTRY

Transaction No. 67. Mrs. Ward N. Seabury, 175 iPores^ Ave., paid her account
in full.

Read the note under Transaction No. 37 for directions for determining the amount of the balance due.

Transaction No. 68. Sold to Mrs. Edwin C. Hedrick, Jr , 124 N. Kenil worth, on
account, to be delivered, 3^ lbs. smoked halibut, at 16^, 1 whole Star harn, 15 lbs. at 27^0;
1 bottle Heinz tomato catsup, 15^; 1 bottle Queen olives, 25^; 10 lbs. granulated sugar,
at 5^; 1 lb. butter, 30^; 3 loaves bread, at 50.

Transaction No. 69. Bought of Reid, Murdock & Co., on thirty days' credit:
3 half-chests Young Hyson tea, 194# at 350 $67.90

2 cases Monarch coffee, 2# cans, 96 lbs. at 270 25.92

2 cases " #2 E. J. peas, 4 doz. at $1.75 7.00

3 cases " #10 peaches, 6 doz. cans at $2.50 15.00 $115.82

Transaction No. 60. Sold for cash 3^ lbs. porterhouse steak, at 220; 2 lbs. creamery
butter, at 360; 20 lbs. sugar, at 50; 3 loaves bread, at 50.

Transaction No. 61. Took from the cash register enough money to pay the National

Biscuit Company's account in full.

This payment is recorded on the Cash Register Sheet and entries are made iti the cash book and in
the day book, as explained in connection with previous similar transactions.

Transaction No. 62. Sold on account to Mrs. Ward N. Seabury, 175 Forest Ave.,
4^ lbs. rib lamb chops, at 220; 1 bottle mint sauce, 250; 2 cans E. J. peas, at 200; 3 loaves
bread, at 50; 10 lbs. granulated sugar, at 50; 25 lbs. W. C. Superlative flour, at 5^. ,

Transaction No. 63. Bought of H. J. Heinz Company, on account:

4 doz. cans apple butter, at $1.50 $6.00
3 " " peach " at 1.50 4.50

6 " small crocks strawberry preserves, at $1 . 35 8.10 $18.60

Transaction No. 64. Sold for cash 3 qts. Baltimore oysters, at 350; 4 lbs. oyster
crackers, at 90; 2 bottles Heinz tomato catsup, at 150; 10 lbs. granulated sugar, at 50;
25 lbs. W. C. Superlative flour, at 50.

Transaction No. 65. Sold on account to Mrs. Phillip Purbeck, 1110 S. Boulevard,

1 doz. eggs, 300; 2 lbs. creamery butter, at 360; 1^ lbs. imported Swiss cheese, at 400;

2 loaves rye bread, at 50; 3J lbs. Star bacon, sliced, at 280.

Transaction No. 66. Mrs. Ward N. Seabury, 175 Forest Ave., returned 1 bottle
mint sauce purchased today.

See Transaction No. 41 for instructions.

Transaction No. 67 Paid the scrub-woman $1.50 for her work today.

Transaction No. 68. Paid the bookkeeper's salary, $12.50.

Post the entries in the day book, rule up any ledger accounts that balance, foot
and close the Cash Register Sheet, and enter on the cash book the amount of sash
received, as you did on Oct 6. Deposit $50.00. Close the cash book.

Single Entry Statement

As has been previously explained, it is impossible to show the separate losses and gains in single entry.
A loss and gain statement can not be made out. A financial statement can be made. The single entry
statement sets forth the assets and liabilities of the business. The assets are listed and added. Beneath
these the liabilities are listed and added. The difference between the total assets and the total liabiHties
is the net capital or present worth of the business. If the net capital at some previous time be known,
the gain or loss of the business since that time can be determined by comparing the net capital today with
what it was at that time.

SINGLE ENTRY

XVll

Mr. Nissen asks you to prepare a single entry statement as of October 15. He tells you that the cash
in the bank is $500.00. You know how much money there is in the cash register. Mr. Nissen values
his stock of groceries on hand at $5817.36, his horse and wagon at $270.00, and the furniture and fixtures
in the store at $450.00. The balances of all accounts receivable and payable can be determinad from
the ledger. Prepare a statement in the following form:

F. P. Nissen's Single Entry Statement, October 15, 19 —

Assets
Cash in bank
Cash in cash register
Stock of groceries on hand valued at
Horse and wagon valued at
Furniture and fixtures valued at
Mrs. Wm. Conant, 110 S. East Ave
Mrs. Chas. P. French, 157 S. East Ave.

Total Assets

Liabilities
Na'tional Biscuit Co., 110 N Morgan St., Chicago
The American Cereal Co., 9 Jackson Blvd., Chicago

Total Liabilities

Net capital or present worth
Assets October 1 j**** *♦

Liabilities October 1 *** . **

$500.00
** **

5817.36

270.00

450.00

**_ **

*» **

jj**** **

Net Capital October 1 **** . **

Net gain $** . **

In order that the proprietor's account in the ledger shall show what he is worth at all times it will
be necessary to credit him with the amount of the net gain as shown by the foregoing statement. There-
fore you will make a day book entry crediting the proprietor for the amount of his net gain. Post this
immediately to the account of the proprietor in the ledger and close the account with a bailance as of
October 15.

Changing from Single Entry to Double Entry

The process is very simple. Open a double entry journal and let your first entry be a journal entry
crediting the proprietor for his total assets and debiting each one of the items listed in the statement as
assets. This will necessitate opening accounts with Merchandise, Horse and Wagon and Furniture and
Fixtures. Make another journal entry debiting the proprietor for the total of his liabihties and crediting
the accounts of the different creditor firms. Next open a double entry ledger and post the two journal
entries. It will be observed that your double entry ledger balances will correspond in detail with the
single entry ledger balances except that in the double entry ledger there will be added accounts with Mer-
chandise, Horse and Wagon and Furniture and Fixtures. Take loose sheets of journal and ledger paper.
Make the journal entries necessary to change F. P. Nissen's books from single to double entry on Oct,
15, Post. Take a trial balance.

In order to see even more clearly how single and double entry compare, rewrite F. P. Nissen's business
in double entry form, proceeding as follows: (1) Journalize all entries appearmg in the single entry day
book except the last. It will not be necessary to perform the computations again, and explanatory matter
may be omitted. (2) Journalize all entries appearing in the single entry cash book except the first, third,
and eighth entries, which you have already journalized, as they appear in both day book and cash book.
(3) Post all journal entries to regular double entry ledger sheets (center ruled). (4) Take a trial balance.
(5) Make statements, using the inventories of Oct. 15 as given at the end of the single entry set. (6) Close
the double entry ledger. (7) Now compare the double entry statement with the single entry statement.
The single entry ledger should agree with the double entry ledger as far as it goes. Accounts of what
class do not appear in the single entry ledger? Name them in detail.

INDEX

PAGE

Abbreviations used in Dry Goods Business 156

Accounts Classified 5, 63

Account, defined 5

Advertising 117

Advertising account 153

Ascertaining Gain, two ways 124

Assets, defined 63

Auxiliary Books, defined 35

Bad Debts, Reserve for 207

Balancing an Account 8

Balance of Balances 74

Bank Draft 119

Bank Proof 74

Bank Statement 74, 89

Bill Books 82, 83

Bill Book Proof 91

Billing 51

Bill of Lading, "Order" 163

Bill of Lading, "Straight" 115, 158

Bookkeeping, defined 5

Bookkeeping, Principles of 138, 148

Bookkeeping Problems, Supplementary

6, 10, 14, 16, 19, 22, 25, 27, 31, 33, 64, 66, 70,
91, 93, 124, 126, 135, 176, 178, 182, 192, 199

Book Values and Actual Values 210

Boot and Shoe Business 150, 176

Borrowing Money 209

"Briefing" a document 50

Canceling a Note 62

Cash Account 7

Cash Book 95

Cash Book, Three Column 150

Cash Discount 144

Cash Discount account 153

Cashier 44

Cash Proof 57

Charges to Expense and to Capital 210

Check Book Stub 47, 49

Check, Endorsement of 54

Check, Illustration of 48

Checking Debits against Credits 211

Checking the Trial Balance 43, 60

Check to Currency 89

Classification of Accounts 5, 63

Classification of Books 34

Closing the Ledger 71, 91, 123

C. O. D. account 153

C. O. D. Express 170

C. O. D. Freight 163

Collecting by Draft 131

Comparative Statements 212

Compromise with a Debtor 129

Computing Interest 84

Condensed Statements 201

Controlling Accounts 205

Correcting Errors 179

Corrections and Adjustments 202

Cost of Goods Sold 207

Costs and Expenses Subdivided 200

Dating Bills Ahead 154

Day Book, described 45

Debit and Credit sides of an account 8

Debiting and Crediting accounts. Rule for 35

Debiting and Crediting Rules, in detail 137

Depositing 45

Discounts 144, 181

Discount, Cash 144

Discount, Trade 108, 118, 144

Discount for Use of Money 145

Discount on Exchange 145

Discounting a Note at Bank 159

Double Entry, defined 35

Drafts 86, 131, 143

Drafts, Exercise on 146

Drafts, Rules for Journahzing 144

Drawer and Drawee 131

Drawing on a Slow Customer 131

Dry Goods Business 180, 198

Duplicating an Order 160

Endorsee 10

Endorsement of Check 54

Endorsement, defined 10

Endorsements, Kinds of 54, 55

Endorser 10

Errors in Trial Balance 43, 179, 215

Exchange 157

Exchange, Foreign 182

Exercise on Drafts 146

Expense account 25

Expense Bill 108

Explanatory Journal 44

Filing 45

Final Entry, Book of 34

Financial Accounts 63

Financial Accounts, Condensed 201

Financial Statement 63, 121

Finding Errors 215

Fire Insurance Policy 106

F. O. B 115

Forwarding Footings 86

Freight account 153, 182

Freight Bill 108

Gains, defined 69

Gain, How to Determine 69, 124

Goodwill 203

Importing 182

Income or Revenue Statements 212

Indexing the Ledger 66

Insolvency and Bankruptcy 177

Insurance Policy, Fire 106

Interest account 28

Interest and Discount account 152

Interest, Computing 84

Inventories 18, 20, 23, 26, 91, 103, 206

Investment account 152

XVlll

INDEX

XIX

PAGE

Investments 210

Invoices, How made out 51

Jom-nal 35

Journalizing Exercises, Supplementary . 76, 141, 168
Journalizing Rules 137

Lease 49

Ledger accounts. Posting to 38

Ledger, defined 6

Letter of Recommendation 102

Liabilities, defined 63

Liability Inventories 91

Loss and Gain account 31

Losses, defined 69

Loss or Gain accounts 63

Loss and Gain Statement 65, 122, 167

Maker of a note 10

Merchandise account 23

Merchandise Account Subdivided 199

Monthly Statements 135

Notes 10

Notes Payable account 14

Notes Payable Book, See Bill Book.
Notes Receivable Book, See Bill Book.

Notes Receivable account 11

Notice of Freight Received 108

Opening a Set of Books 102

Opening the Ledger 40

"Order" Bill of Lading 115, 163

Order or Draft 87

Original Entry, Books of 34

Partnership 135, 202

Parties to a Note 10

Parties to a Draft 131

Part Payments 128, 133

Pass-Book 46

Payee of a Note 10

Payee of a Draft 131

Paying by Check 48

Payrolls 208

Percentage of Profit 207

Personal accounts 17

Petty Cash Sales 129

Posting 38

Posting from Sales Book 79

Posting, Order of 109

Principles of Bookkeeping 138, 148

Private Ledger 204

Problems, Supplementary

6, 10, 14, 16, 19, 22, 25, 27, 31, 33, 64, 66, 70,

91, 93, 124, 126, 135, 176, 178, 182, 192, 199

Promissory Notes 10

PAGE

Proof of Statements 69

Proprietor's Account 33

Proprietors' Private Accounts 203

Purchase Book 180

Real Estate account 19

Recapitulation and Summary of Definitions. . . 138

Receipt 50, 62

Receipting an invoice 58

Reconcihation 209

Reserve for Bad Debts 207

Review 137

Review Questions. 43, 76, 93, 126, 140, 216

Rules for Journalizing 137

Rules for Journahzing Drafts 144

Sales Book 77

Sale Tickets, How Used 107

Schedules 200

Shipping 115, 158

Shipping C. O. D. by Express 170

Shipping C. O. D. by Freight 163

Statements, Comparative 212

Statements, Condensed 201

Statements, Financial 63

Statements, Income or Revenue 212

Statements, Loss & Gain 65, 167

Statements, Monthly to Customers 135

Statute of Limitations 101

Stock Record 75, 123

"Straight" BiU of Lading 115, 158

Student's Weekly Reports , 57

Sundry Debtors account 153, 166

Supplementary Journahzing 76, 141, 168

Supplementary Problems

6, 10, 14, 16, 19, 22, 25, 27, 31, 33, 64, 66, 70,

91, 93, 124,. 126, 135, 176, 178, |182, 192, 199

Suspense account 211

Tax Receipt 155

Telegrams 1 14

Terms of Sale 47, 156

Three-Column Cash Book 150

Trade Discount 108, 118, 144

Transaction, defined 35

Tracer 113

Trial Balance 42

Transferring Accounts to New Ledger 103

TripUcate Bill of Lading 115, 158, 163

Variable Price Lists, Furniture Business Ill

Variable Price Lists, Boot & Shoe Business.. . . 158
Variable Price Lists, Dry Goods Business. . 185, 198

Voucher Bookkeeping 133

Voucher, Special Form of 132

Weekly Payrolls 208

/ 7 (^S^

VD 11432

..-'^' '

L-

^ 54 1

ii42

UNIVERSITY OF CAUFORNIA LIBRARY