THE ARTHUR YOUNG ACCOUNTING COLLECTION Graduate School of Business Administration Library of the University of California Los Angeles Library Graduate School of Business Administrate University of California Los Angeles 24, California 01 CALiKUKIMl* AT LOS ANGELES TWENTY TWENTY-MINUTE LESSONS IN BOOKKEEPING By FRANK LOOMIS BEACH, B.S., C.P.A. Cashier of the Hibernia Commercial and Savings Bank, Portland, Oregon; Instructor in Accounting (Evening Classes), Oregon Institute of Technology THE RONALD PRESS COMPANY NEW YORK 149798 Copyright, 1921, by THE RONALD PRESS COMPANY Library HF 535 -fc PREFACE c This little volume is designed as a short course \ for the busy man or woman who wishes to get an understanding of accounts. Lengthy rules and theories have been omitted, and emphasis has been placed on the important points. Short as the lessons are, none of the essentials of bookkeeping are omitted. When the reader has . completed the twenty lessons he should be able to read intelligently a financial statement. He should also have the foundation for acquiring an under- standing of any system of books. i While there will still be much to learn before C he can master the details of higher accountancy, ~ nevertheless the completing of the lessons will mark one of the most important steps in that -* direction. FRANK LOOMIS BEACH ? Portland, Oregon, November i, 1921 CONTENTS PAGE INTRODUCTION i The Language of Business Bookkeeping Mode of Procedure Lessons Mode of Procedure Problems LESSON i. THE JOURNAL . Making Entries Form of Journal 2. THE LEDGER. Classification of Items The Ledger Account 3. TRIAL BALANCE 13 Balance of Accounts Proving the Ledger 4. DEBIT AND CREDIT 16 Terms Defined Merchandise Transactions 5. EXPENSE AND INCOME 19 Recording Expenses Profits Force Accounts vii viu CONTENTS LESSON PAGE 6. MERCHANDISE INVENTORY 23 Merchandise Profit Taking Inventory Recording Inventory 7. PROFIT AND Loss ACCOUNT 28 Net Profit Profit and Loss Closing into Profit and Loss 8. BALANCE SHEET AND PROFIT AND Loss STATE- MENT 34 Trial Balance After Closing Balance Sheet Profit and Loss Statement 9. ACCOUNTS PAYABLE AND RECEIVABLE ... 38 Buying on Account Selling on Account 10. REVIEW PROBLEM 41 11. NOTES PAYABLE AND RECEIVABLE .... 43 Notes Payable Account Payment of Note Notes Receivable 12. CASH DISCOUNT 47 Purchase Terms Discount Income Discount Expense Bank Discount 13. CASH BOOK 51 Entry of Cash Transactions Debiting Cash Account Crediting Cash Account CONTENTS ix LESSON PAGE 14. INDIVIDUAL EXPENSE AND PROFIT ACCOUNTS 55 Classifying Expenses Closing of the Accounts 15. PARTNERSHIP ACCOUNTS 58 Division of Profits Distribution of Losses 16. CORPORATION ACCOUNTS 62 Capital Stock Surplus Account Deficit Account 17. DEPRECIATION EXPENSE 66 Charging Off for Depreciation Rates of Depreciation 1 8. ACCRUALS AND PREPAYMENTS 69 Accrued Interest Payable Entry at Closing of Books Prepaid Insurance Adjustment at End of Year 19. GENERAL REVIEW PROBLEM 75 20. GENERAL REVIEW PROBLEM (Continued) . . 77 APPENDIX A TWENTY "POINTERS" ON BOOK- KEEPING 79 B DEFINITIONS OF BOOKKEEPING TERMS 82 C ANSWERS TO PROBLEMS .... 86 D BIBLIOGRAPHY OF SELECTED AC- COUNTING BOOKS 123 Twenty Twenty-Minute Lessons in Bookkeeping INTRODUCTION The Language of Business The student of bookkeeping is learning to read and write the language of business. The growth or decline of a commercial enterprise is written in figures, and the man who hopes to win in the busi- ness game must learn to understand its language. Even if you never expect to be a bookkeeper, you must still understand the records kept by book- keepers. In some form or another everyone must keep track of money, and the more intelligently he can do so, the more money will he probably have to keep track of. Bookkeeping As a profession, accountancy is becoming more and more attractive. The income tax, the increase in the size of corporations, the force of competition between business concerns all these factors have created a demand for men with an understanding of accounts. TWENTY LESSONS IN BOOKKEEPING Bookkeeping is the first step in accountancy. The principles set forth in this volume are those upon which all modern accounting systems are built. Bookkeeping is not difficult. You merely write down what takes place in your store or factory. Modern bookkeeping is based on the fact that in business you are trading articles of value for other articles of value. When, for instance, you buy flour, you pay out, say, $50 in gold and receive in return $50 in mer- chandise. When you sell the flour, you give out so many dollars of the merchandise and receive back an equal number of dollars hi gold, or some other form of money. The idea is the same when you give out money for salaries. You pay out $20 in cash and receive back $20 in services. Every time you give out either gold or mer- chandise in a trade you receive back something of value. Otherwise, you would not make the trade. So it follows that in keeping books the record of every transaction is divided into two entries, one showing the merchandise or services coming into the business and the other showing the money, or other articles of value, going out. These opposing entries must of necessity be always for equal amounts. INTRODUCTION 3 Mode of Procedure Lessons Do not try at first to connect the illustrations given in these lessons with the books of the business with which you happen to be familiar. The con- nection will be plain enough after you have com- pleted the course. You will understand the company's books much better when you have learned the principles explained, which are at the foundation of all accounting systems. In studying the twenty lessons you should work with pencil in hand. When, for instance, you come to the first illustration, showing that $10 has been borrowed with which to start business, take your pencil and copy the entry on a sheet of paper. Do the same with the other illustrations. Even if at first the reasons for putting the facts in the form shown are not entirely clear, you will find this practice of copying the illustrations a wonderful assistance. Follow this practice in all cases and you will have no difficulty in completing the lessons. When you come to the problem at the end of each lesson, write down the facts given there in exactly the form you used when copying the ex- ample in the text. Use your pencil. By so doing you will find that you can pass from lesson to lesson with surprising ease, and in a short time you will have completed the course. 4 TWENTY LESSONS IN BOOKKEEPING Mode of Procedure Problems Answers to the problems are given in the back of the book. However, do not look up an answer until you have completed the problem. Some of the problems given may seem so simple that you may be tempted to omit them. Do not yield to the temptation. The most important thing in the course is the working of each problem as it comes up. Lesson i THE JOURNAL Making Entries Bookkeeping, as the term is commonly used, is merely a short method of writing down the daily happenings of your business, such as the paying of rent, the selling of merchandise, etc. Suppose you start business on January i by borrowing $10 from John Smith, writing down this transaction in the brief form used in bookkeeping: Jan. I Cash John Smith Borrowed to start business. This entry shows that your cashier has received $10 in cash and your business has gone into debt to John Smith for $10. (Write down the above transaction on a sheet of paper, copying it exactly as it appears. Follow this procedure with every illustration given. You will find that the mere act of copying helps to make the transaction clearer.) As you see in the illustration, there are two 6 TWENTY LESSONS IN BOOKKEEPING columns on the one side of the page. When $10 is put in the left-hand column, $10 is also put in the right-hand column. The number of dollars in the left-hand column always equals the number of dollars in the right-hand column. You next buy, on January 2, 5 sacks of flour for $i a sack in cash: Jan. 2 Merchandise. Cash. 5 sacks flour purchased. $5 $5 This entry shows that your storeman has re- ceived $5 in merchandise and your cashier has paid out $5 in cash. (Be sure to copy this illustration.) The $5 worth of merchandise, having been pur- chased, comes into the business and the $5 cash goes out. Form of Journal The amounts coming in are shown in the left- hand column, as the $10 cash and the $5 mer- chandise. The amounts going out are shown in the right-hand column, as the $10 debt and the $5 cash. This method of listing the amounts coming in and going out is used to save time. THE JOURNAL One way of remembering that you use the left- hand column to show the amounts coming into the business, is to think of driving an automobile: the machines coming toward you are on the left-hand side. Following this method of writing what comes into the business in the left-hand column and what goes out in the right-hand column, you record a sale as follows: Jan. 3 Cash Merchandise Sale 3 sacks of flour. By this entry you can see at a glance that the cashier has taken in $3 in cash and that the store- man has given out $3 in merchandise. The entries are all written in a blank book as they occur, one below another, thus: Jan. i Cash John Smith Borrowed to start business. Jan. 2 Merchandise Cash 5 sacks flour purchased. $10 $10 TWENTY LESSONS IN BOOKKEEPING Jan. 3 Cash i Merchandise a Sale 3 sacks of flour. The blank book in which transactions are so written is called a "journal." Problem i Prepare a journal page showing the transactions given below of a business just starting. In working this problem, first try to write down the transactions in bookkeeping style without referring to the illustrations, then compare your work with the illustrations. Remember that you write down an amount in the left- hand column for what comes in, and then an equal amount in the right-hand column on the line below for what goes out. If you keep this point in mind, you will have no difficulty. Jan. 7. The business borrows $5 cash from Harry Smith. It pays $3 cash for 6 boxes of soap. It sells 2 boxes of soap for $i. It borrows $10 more from Harry Smith. It buys 4 brooms for $2. It sells i broom for 50 cents. Lesson 2 THE LEDGER Classification of Items In the first lesson you learned how to keep a journal. Transactions are written in the journal as they occur, one after another, without regard to whether they refer to merchandise, cash, or people. It is evident that in a business of any size it would not be practical to go back through the journal and pick out the cash items whenever you wished to know how much money there was in the till. So you use a second book in which you group, by rewriting on one page, all the items that concern cash, and on another page all the items that concern merchandise, etc. A page on which the cash items are so rewritten appears as follows: CASH Jan. 2. J Jan. i J $10 Jan. 3 J 3 (Copy the above illustration before going further with the lesson.) 10 TWENTY LESSONS IN BOOKKEEPING The cash that has come in is shown on the left- hand side, and the cash that has gone out is shown on the right-hand side, the same as in the columns of the journal. The first line on the left-hand side of the cash page, for example, shows that on January i, $10 cash came into the business, and the letter J shows that the details of this transaction are in the journal. The Ledger Account It is not necessary to go into further details with regard to the transaction in this second book, as you have already written a full account of it in the journal. The first line on the right-hand side shows that $5 cash has gone out of the business and that the details are explained in the journal under January 2. The second line on the left-hand side shows that $3 more cash has come into the business. It is evident that if you add the amounts on the left-hand side, $13, you will have the total cash that has come in. If from this amount you subtract the cash that has gone out, amounting to $5, as shown on the right-hand side, you will have the amount still remaining in the till, or $8. Thus, by grouping the journal entries in this second book, it becomes possible to check up easily the amount of cash that should be on hand. THE LEDGER II A similar grouping of the merchandise entries in Lesson i follows : MERCHANDISE Jan. 2 J $5 Jan. 3 J $3 The business has received $5 in merchandise and given out $3 in merchandise. In the case of John Smith, the business has given out its promise to pay $10, and hence the entry in the second book is: JOHN SMITH Jan. I J $10 When, on January 7, you pay $5 back to John Smith on this promise, the journal entry is : John Smith Cash Payment on $10 debt. The $5 shown in the left-hand column opposite "John Smith" is written on the left-hand side of the page devoted to John Smith in the second book. The $5 shown in the right-hand column opposite 12 TWENTY LESSONS IN BOOKKEEPING "Cash" is written on the right-hand side of the cash sheet in the second book. The account in the second book with John Smith then appears: JOHN SMITH Tan. 7 J. $5 Tan. i T.. $10 Taking the difference between the right- and the left-hand sides, you find that you still owe $5. A book in which transactions are thus grouped is called a "ledger." One of the groups, such as Cash, Merchandise, or John Smith, is known as a ledger account. Problem 2 Prepare a ledger showing accounts with Harry Smith, Merchandise, and Cash, taking the items from the journal prepared in Problem i. The problem is simple if you remember that each item in the left-hand column of the journal goes on the left- hand side of the ledger page, and each item in the right- hand column goes on the right-hand side of the ledger page. Check the amounts in the journal as you write them in the ledger, to see that you do not overlook trans- ferring any item. Every item in the journal must go into the ledger. Lesson 3 TRIAL BALANCE Balance of Accounts You will remember that in Lesson i every time you wrote $10 in the left-hand column of the journal you also wrote $10 in the right-hand column. The journal entry was : Cash. John Smith . Borrowed to start business. $10 The total of the left-hand column must, there- fore, equal the total of the right-hand column. The books of a business may be considered as a weight scale. Every time you add $5 to the left- hand side you also add $5 to the right-hand side, and thus keep the sides balanced. $5 % A The scale will continue to balance if you add $10 more to the left-hand side and $10 more to the right-hand side. 13 14 TWENTY LESSONS IN BOOKKEEPING Proving the Ledger You saw that every entry in the left-hand column of the journal is also posted to the left-hand side of some ledger account, and that every entry in the right-hand column of the journal is posted to the right-hand side of some ledger account. As the amounts in the two columns of the journal are equal, the total of all entries on the left-hand side of the ledger accounts must equal the total of all the entries on the right-hand side. Suppose you wish to see if your ledger is correct. To do this take a sheet of paper and write down your ledger accounts thus: . Cash Debit $13 Credit Sio Merchandise C 'I Tohn Smith . . <; IO Opposite the name of each account write, first, the total of the entries on the left-hand side; and in the next column the total of the entries on the right-hand side. In your ledger account with cash you have two entries on the left-hand side, one for '$10 and one for $3, making a total of $13. This $13 is shown above. On the right-hand side of your Cash ac- count you have two $5 entries, or a total of $10. TRIAL BALANCE 15 which is shown in the right-hand column above. In the same way the sheet shows the totals of your Merchandise and John Smith accounts. As there has been an entry on the right-hand side for every entry on the left-hand side, both for the same amount, the totals of the two columns must be equal, as shown in the foregoing example. Testing a ledger in this fashion is called "taking a trial balance." When the totals of both the debit and the credit sides are equal the books are said to be in balance. Problem 3 Prepare a journal, ledger, and trial balance, covering the following: Feb. i. John Jones invests $10 cash in a candy business. " 2. The business buys 50 pounds of sugar at 10 cents a pound, paying cash. " 3. The business sells for cash 40 pounds of sugar at 10 cents a pound. In preparing the journal, remember that we show the amount coming into the business in the left-hand column, and the amount going out in the right-hand column. The amount coming in is always written one line above the amount going out. Finish the journal before starting the ledger. Lesson 4 DEBIT AND CREDIT Terms Defined You have learned how to keep a journal and a ledger, and how to prepare a trial balance. Consider now the Cash account as found in the ledger: CASH Tan. i J.. $10 Jan. 2 j.. $= The $10 on the left-hand side shows that you have turned $10 over to the cashier, who, of course, is now responsible to the business for that amount. Thus the entries on the left-hand side show the amount the cashier owes the business. The left- hand side is called the "debit" side, the word debit coming from the same Latin word as debt. If the cashier pays out $5 for the good of the business, you give him credit for that amount by putting it down on the right-hand side of his ac- count. The right-hand side is therefore called the "credit" side. If the debit side shows $10 and the credit side $5, the cashier is responsible to the business for the difference, or $5. 16 DEBIT AND CREDIT 17 Merchandise Transactions Consider the Merchandise account from the same standpoint. You turn over $5 worth of flour to the storeman. He is now responsible to the business for this amount, and so you show $5 on the debit side of the Merchandise account. You should remember that these entries are first made in the journal, and from there posted to the ledger. Entries are always made through the journal ; never directly to the ledger. Turn back to Lesson i and note the journal entry. MERCHANDISE Jan. 2 J. When a $3 sale is made, the storeman delivers this amount from his stock and you relieve him of responsibility for $3 by entering the amount on the credit side of the Merchandise account. MERCHANDISE Jan. 2 J $5 Jan. 3 J $3 The storeman is now responsible to the business for the difference, or $2. The debit side (left-hand) shows debt or re- sponsibility to the business. The credit side (right- hand) shows debt or responsibility of the business. 1 8 TWENTY LESSONS IN BOOKKEEPING Bookkeeping is merely a short method of show- ing these facts. Problem 4 Prepare a journal, ledger, and trial balance. Mar. 5. B. Jones starts business by investing $20. On the same day he buys $10 worth of flour. " 6. He sells $5 worth of flour. The same day he buys another $12 worth of merchandise. " 7. He sells $8 worth of merchandise and invests another $5 in the business. What is the total of the debit side of the Cash ac- count? Of the credit side? How much is the cashier now responsible to the business for? Lesson 5 EXPENSE AND INCOME Recording Expenses You have seen that when money is spent for merchandise, you debit Merchandise and credit Cash: Jan. 2 Merchandise Cash 5 sacks flour purchased at $1 a sack. Merchandise is coming into the business and cash is going out. But merchandise is not the only thing that is responsible for your expenditure of money. It is also necessary to meet various expenses, such as rent, salaries, etc. These expenditures are entered in the journal in exactly the same way as expendi- tures for merchandise : Feb. 5 Rent Expense Cash Rent for February. $10 $10 20 TWENTY LESSONS IN BOOKKEEPING Salary Expense Cash Salaries for week ending Feb. 5. $20 $20 Ledger accounts are opened with the various items of expense, and the journal entries are posted to these accounts. All that is required to open a new ledger account is to write the name of the account at the top of a new sheet. RENT EXPENSE Feb. 5 J- $10 SALARY EXPENSE Feb. 5 J $20 When the trial balance is taken these accounts are shown the same as any other accounts. Profits Furthermore, there are causes other than the sale of merchandise which bring money into the business. Suppose the business has $100 loaned out which is bringing in $6 interest a year. When this $6 comes in, we must debit Cash, for the cashier is now responsible for this amount, and we must EXPENSE AND INCOME 21 credit Interest Income, for that is the force which has caused the money to come in: Feb. 10 Cash. $6 Interest Income Interest received for I year on loan of $100 to Tom Ely. Force Accounts Factors such as expense and interest are forces which cause money either to come in or to go out of the business, and we may refer to the accounts as force accounts. r Merchandise and Cash accounts, on the other hand, represent real property actually on hand and are known as real accounts. The distinction between force and real accounts is important. Force accounts merely point out where money has come from or where it has gone. Force ac- counts deal with the past. For example, we have the account with Salary Expense, which shows that $20 of our money has gone for salaries. This $20 has been entirely used up; we cannot sell our Salary account and get back the money which we have spent. 1 These accounts are also known as nominal accounts. 22 TWENTY LESSONS IN BOOKKEEPING Real accounts, however, represent how much we now have on hand and how much we now ac- tually owe. Thus, Merchandise is a real account; we can sell the merchandise and get back the money which has been put into it. John Smith, in the first lesson, is a real account, as it represents a debt which the business owes. When the force is one which causes money to come into the business, we consider the force as creditable and we credit the account, as we did the Interest account. When the force, like rent expense, causes us to pay out money, it is considered discreditable (be- ginning with the same letter as debit) and we debit the force account. Problem 6 Prepare a journal, ledger, and trial balance. Apr. 2. Johnson starts business by investing $30. On the same day he pays out $10 for rent expense for April and also buys $12 worth of merchandise. " 3. He sells $5 worth of merchandise and collects $4 rent for the front of the store. " 4. He pays out $8 in wages. Which of your ledger accounts represent actual prop- erty or actual debts? Which represent forces? Lesson 6 MERCHANDISE INVENTORY Merchandise Profit It is evident that if we sold our merchandise for the same price as we paid for it, there would be no object in staying in business. We buy 6 sacks of flour at $i a sack: May 5 Merchandise Cash $6 6 sacks of flour bought at $i a sack. We sell 4 sacks of this flour at $1.25 a sack: May 6 Cash $5 Merchandise $5 4 sacks of flour sold at $1.25. After posting these journal entries to the ledger, the Merchandise account appears as follows: MERCHANDISE May 5 J $6 May 6 J $5 24 TWENTY LESSONS IN BOOKKEEPING (Remember to study these lessons with a pencil in hand and to copy each of the illustrations. Do not try to shorten the work by omitting the copy- ing.) In this case it is easy to tell how much was paid for the merchandise which has been sold (4 sacks costing $i each, a total of $4). Knowing that the merchandise which has been sold has cost us $4 and that we have received $5, it is easy to figure the profit. The profit, of course, is $i. Taking Inventory But in a business of any size, handling many different articles and buying and selling every day, it is not practical to go back through the journal and figure out what articles have been sold and what their cost was. So we count how much is left on hand (take inventory) and find the cost price of this unsold merchandise. In our example we count the sacks of flour and find two sacks still in stock. This flour cost $i a sack. So the value of the inventory is 2 times $i, or $2. The ledger account shows that the merchandise we started with cost $6. We have taken inventory and found that the merchandise still on hand cost $2. The merchandise which has been sold must, therefore, have cost the difference, or $6 $2 = $4. MERCHANDISE INVENTORY 25 If we take the cost of the merchandise we have bought and subtract the cost of that which has not been sold, the difference will give us the cost of the merchandise which has been sold. We have received $5 for merchandise only cost- ing us $4. The profit, therefore, has been $i.. Recording Inventory The inventory is usually taken once a year. We consider that all the merchandise found on hand at the time the inventory is taken is turned over to a new storekeeper. The cost of the goods on hand is figured and we charge the new storekeeper with this amount. The old storekeeper is given credit. Dec. 31 Merchandise (new account) Merchandise (old account) . . Inventory taken at end of year. With this entry we debit the new storekeeper and credit the old storekeeper for the goods on hand. This entry is made when the inventory is taken at the end of the year, even though the merchan- dise is not physically turned over to a new store- keeper. 26 TWENTY LESSONS IN BOOKKEEPING A new sheet is headed up in the ledger and a new account is opened with Merchandise. The journal entry is then posted: MERCHANDISE (new account) ' Dec. 31 J $2 This new Merchandise account shows the amount for which the storeman is now actually responsible. The other half of the journal entry is posted to the former Merchandise account, which will then appear as follows : MERCHANDISE (old account) May 5 J May 6 J $5 Dec. 31 J (inv.) 2f Posting the cost of the goods on hand to the credit side of the account gives the same result as subtracting $2 from the $6 on the debit side in order to find the cost of the flour sold. The account shows that we have made a profit of $i. Problem 6 Prepare a journal and a ledger with the following accounts: Merchandise (old account); Merchandise (new account); Cash; Sam Smith, Proprietor. MERCHANDISE INVENTORY 27 Apr. 5. Sam Smith starts business investing $25 cash. He buys $20 worth of merchandise for cash. He sells $15 worth for cash. " 6. He takes inventory and finds that the merchandise still on hand cost him $10. What does the old Merchandise account show that his profit has been? Net Profit Suppose you are bookkeeper for John Smith. After taking inventory on December 31, you made a trial balance which appeared as follows: Cash Dr. $ 60 Cr. $ 55 Merchandise (new account) Merchandise (old account) John Smith, Proprietor .... Rent Expense . . 20 45 10 60 20 $135 $135 (You should copy this trial balance on your work paper.) If you will look back to Lesson 6, you will see that at the time inventory was taken all the mer- chandise found on hand was taken out of the old Merchandise account and placed in a new Mer- chandise account. The journal entry we posted had the effect of subtracting all of the goods ac- tually on hand out of the old account and adding them to the new account. Turning to the present example, you have taken all the actual merchandise out of the old account, 28 PROFIT AND LOSS ACCOUNT 29 what remains in the account must be profit. The old Merchandise account is now changed from an account measuring a real asset to an account measuring only profit. After the inventory was posted, the old Mer- chandise account became a force account, showing the profit which was earned on the sale of merchandise. The Rent Expense account shows the amount that the force, rent, has caused John Smith to pay out. The difference between the creditable force, profit, and the discreditable force, rent expense, shows the net profit. Profit has brought in $15, while rent has caused John Smith to pay out $10; his net earnings have been $5. Profit and Loss Subtraction in bookkeeping is accomplished by adding to the opposite side of the account. Thus if we have a Cash account showing $60 on hand : CASH Jan. i J. and we want to subtract $10, we add the $10 to the opposite side : 30 TWENTY LESSONS IN BOOKKEEPING CASH Jan. I J $60 Jan. 2 J $10 The Cash account now shows that we have $60 less $10, or $50, on hand. Remember that all these entries in the ledger have to be first made in the journal. Every entry is made first in the journal and from there posted to the ledger. If we can bring all the force accounts together, those with a credit balance on one side and those with a debit balance on the other, their difference will show the net profit earned, or possibly the net amount lost. We can bring these accounts together easily by opening a new ledger account called "Profit and Loss." This is done in most businesses at the end of each year. Closing into Profit and Loss There are already two force accounts in John Smith's ledger : MERCHANDISE (old account) Apr. 6 J $45 Apr. 7 J $40 Dec. 31 J (inv.) 20 PROFIT AND LOSS ACCOUNT RENT EXPENSE Apr. 7 J $10 In order to get the debit balance of $10 shown in the Rent Expense account into Profit and Loss, you make the following journal entry: Dec. 31 Profit and Loss Rent Expense Closing out Rent Expense account. $10 $10 Posting this entry, the $10 debit entry will appear on the debit side of the Profit and Loss account, and the $10 credit will appear on the credit side of the Rent Expense account, making the Rent Expense account balance; that is, it will have the same amount on both debit and credit sides. When an account thus balances it is spoken of as closed and no further attention is paid to it. In order to get the credit balance of the Mer- chandise account into Profit and Loss account, the journal entry is : Dec. 31 Merchandise (old account) , Profit and Loss profit into Profit and Loss. $15 $15 32 TWENTY LESSONS IN BOOKKEEPING Posting these two entries, the ledger accounts appear as follows : PROFIT AND LOSS Dec. 31 Rent $10 Dec. 31 Mdse $15 MERCHANDISE (old account) Apr. 6 J $45 Dec. 31 J 15 Apr. 7 J $40 Dec. 31 J 20 RENT EXPENSE Apr. 7 J $10 Dec. 31 J $10 (Do not fail to copy every one of these illus- trations.) Observe that when an account with Rent Ex- pense has $10 on the debit side, to close it $10 has to be added to the credit side in order to make the two sides equal. The $10 added has to go through the journal. When you make a credit entry you have to make an equal debit entry. The debit in this case is made to Profit and Loss. It is well to show in the Profit and Loss account where the debit entries, such as expense and rent, and where the credit entries, such as merchandise, come from. PROFIT AND LOSS ACCOUNT 33 The Profit and Loss account of John Smith now shows a credit balance of $5. Thus we see that the net results of the operation of the business have been favorable, the net earnings being $5. Jcfi Problem 7 Rule a Profit and Loss account on your work paper. From the following trial balance make the necessary jour- nal entries closing all the force accounts mto Profit and Loss, post the entries to Profit and Loss account, and show the net amount earned. Dec. 31 Dr. Cr. Cash $45 $30 Merchandise (old account) j-r- 25 35 - % i O Merchandise (new account) 20 J. Smith, Proprietor 30 >i ~ Salary Expense -r 5 $95 $95 Lesson 8 BALANCE SHEET AND PROFIT AND LOSS STATEMENT Trial Balance After Closing In the preceding lesson you closed out all the force accounts into Profit and Loss and found that the business had earned a net profit of $5. The net profit, of course, goes to the credit of John Smith, the owner of the business. Hence you make the following journal entry: Dec. 31 Profit and Loss John Smith, Proprietor Closing net profit into proprietor's account. When you have posted this entry to the ledger, all profit and loss, or force, accounts are balanced out. You now take a trial balance of the remain- ing ledger accounts, which will appear as follows: Dr. Cr. Cash $60 $55 Merchandise 20 John Smith, Proprietor. ... 25 $80 $80 34 BALANCE SHEET 35 Balance Sheet This trial balance has none but real accounts in it. That is, every account represents so much real property on hand or owed. There is $5 of cash in the till, $20 of merchandise on the shelves, and the business owes the proprietor $25. If you list the balances in these real accounts, you have a balance sheet. The balance of an account is the difference between the total of the debits and the total of the credits. A ssets Cash $ 5 Merchandise 20 $25 Liabilities John Smith, Proprietor. . . . $25 $25 At the end of the year the owner of the business wants to know what his assets and liabilities are. You give him this information in the form of the above balance sheet, made up from the real ac- counts. Profit and Loss Statement The owner also wants to know what his in- come and expenses have been for the year. This information you get from the force accounts which have been closed into Profit and Loss. The state- 36 TWENTY LESSONS IN BOOKKEEPING ment you make up showing these force accounts is called a "profit and loss statement." To prepare a profit and loss statement, it is only necessary to copy the entries from the Profit and Loss account. From the credit side of the account you get the income items, and from the debit side, the expenses. Income Merchandise Profit $10 Total Income $10 Expenses Rent Expense $ 5 Total Expenses 5 Net Profit $ 5 The balance sheet shows what the business is worth at the present time, while the profit and loss statement shows the source of the earnings and the cause of the expenses. These two statements are made up when the books are closed. Closing the books means taking an inventory, opening a new Merchandise account, closing all the force accounts into Profit and Loss (as was done in Lesson 7), and then closing the Profit and Loss account into the proprietor's account. The books are usually closed at the end of the year. BALANCE SHEET 37 Problem 8 From the following trial balance prepare a Profit an Jan.*] J J i.do J 2.00 J 10.00 J 50 Answer Problem 3 JOURNAL Feb. i Cash $10 John Jones $10 Cash invested in candy business. 88 APPENDIX Feb. 2 Merchandise $5 Cash $5 Purchased 50 Ibs. sugar at 10 cents per Ib. Feb. 3 Cash 4 Merchandise 4 Sold 40 Ibs. sugar. LEDGER CASH Feb. i J $10 Feb. 2 J $5 Feb. 3 J 4 JOHN JONES Feb. I J $10 MERCHANDISE Feb. 2 J $5 Feb. 3 J $4 TRIAL BALANCE Dr. Cr. Cash $14 $5 John Jones 10 Merchandise 5 4 $19 $19 ANSWERS TO PROBLEMS 8 9 Answer Problem 4 JOURNAL Mar. 5 Cash $20 B. Jones $20 Invested to start business. Merchandise 10 Cash 10 Purchased flour. Mar. 6 Cash Merchandise 5 Sale flour. 12 Cash 12 Purchased merchandise. Mar. 7 Cash 8 Merchandise 8 Sale merchandise. Cash 5 B. Jones 5 Additional investment. LEDGER CASH Mar. 5 J $20 6 J 5 7 J 8 J 5 Mar. 5 J. 6 J. $10 12 APPENDIX B. JONES Mar. 5 J , 7 J. $20 5 MERCHANDISE Mar. 5 J. . $10 Mar. 6 J. . $* 6 T.. 12 7 T.. 8 Cash B. Jones. . . . Merchandise TRIAL BALANCE Dr. $38 22 Cr. $22 25 13 The total of the debit side of the Cash account is $38. The total of the credit side is $22. The cashier is now responsible for the total of the debits, less the credits, or Answer Problem 5 JOURNAL Apr. 2 Cash Johnson, Proprietor Invests $30 to start business. $30 $30 ANSWERS TO PROBLEMS Rent Expense Cash Pay April rent. Merchandise Cash Purchase of merchandise. Apr. 3 Cash Merchandise Sale of merchandise. Cash Rent Income Rent received for front store. Wage Expense. Cash. . . Paid wages. Apr. 4 $10 12 $10 12 LED CA GER SH Apr. 2 J . . $30 Apr. 2 T . $10 i J 5 J-. 12 J 4 4 J-. 8 JOHNSON, PROPRIETOR Apr. 2 J. $30 9 2 APPENDIX RENT EXPENSE Apr. 2 J. $10 MERCHANDISE Apr. 2 J $12 Apr. 3 J. RENT INCOME Apr. 3 J. WAGES EXPENSE $4 Apr. 4 J. $8 TRIAL BALANCE Dr. Cr. $30 30 5 4 The following accounts represent actual property or actual debts: Cash; Johnson, Proprietor; Merchandise. The following accounts represent forces: Rent Ex- pense; Rent Income; Wages Expense. Cash $39 Johnson, Proprietor Rent Expense . . . 10 Merchandise . . . 12 Rent Income Wages Expense 8 $6^ ANSWERS TO PROBLEMS Answer Problem 6 JOURNAL 93 Apr. 5 Cash d Sam Smith $2^ Investment to start business. Merchandise 20 A i Cash ' 2d Merchandise purchased. Cash i ? Merchandise IE Sale of merchandise. Apr. 6 Merchandise (new account) 10 Merchandise (old account) IO LEDGER CASH Apr. 5 (J) $25 J f5J Apr. 5 J SAM SMITH, PROPRIETOR Apr. 5 J. $25 94 APPENDIX MERCHANDISE (old account) Aor. 5 T . $20 Apr. s T . $15 6 I.. MERCHANDISE (new account) Apr. 6 J $10 ~ The Merchandise (old) account shows that we have made a profit on sales of $5, which is the amount the $25 on the credit side exceeds the $20 on the debit side. Answer Problem 7 JOURNAL Dec. 31 Merchandise (old account) $10 Profit and Loss. $IO Closing into P. & L. Profit and Loss 5 Closing into P. & L. PROFIT AND LOSS Dec. 31 J Sal. Exp $5 Dec. 31 J Mdse $10 ANSWERS TO PROBLEMS 95 The net amount earned is the difference between the $10 on the credit side of the Profit and Loss account and the $5 on the debit side. It amounts to $5. Answer Problem 8 JOURNAL Dec. 31 Merchandise (old account) $20 Profit and Loss $20 Closing into P. & L. Profit and Loss 15 v Salary Expense 15' Closing into P. & L. Profit and Loss 5 Harry Hayes, Proprietor 5 Closing into Proprietor's account. PROFIT AND LOSS STATEMENT Income Merchandise Profit $20 Total Income $20 Expenses Salary Expense $15 Total Expenses 15 Net Profit $"5 9 6 APPENDIX LEDGER PROFIT AND LOSS Dec. 31 J Sal $15 J Prop. Acct . 5 $20 Dec. 31 J Mdse $20 PROPRIETOR'S ACCOUNT $20 Jan. I J $60 Dec. 31 J 5 BALANCE SHEET Assets Cash $40 Merchandise 25 $65 Liabilities Harry Hayes, Proprietor $65 Answer Problem 9 JOURNAL Merchandise (old account) $20 Profit and Loss $20 Closing into P. & L. Profit and Loss 15 Rent Expense 15 Closing into P. & L. ANSWERS TO PROBLEMS 97 Profit and Loss $5 T. Hart, Proprietor $5 Closing net profits to Proprietor's account. LEDGER MERCHANDISE < v new account) Dec. 31 J $25 CASH Dec. 31 J $20 Dec. 31 J $15 R. L. JACKSON Dec. 31 J $30 MERCHANDISE (old account) Dec. 31 J $35 Dec. 31 J $55 J 20 RENT EXPENSE Dec. 31 J $15 Dec. 31 J $15 JONES & CO. I Dec. 31 J. $33 98 APPENDIX T. HART, PROPRIETOR Dec. 31 J $20 JP.&L 5 PROFIT AND LOSS Deo 31 J Rent $15 JProp. Dec. 31 J Mdse $20 PROFIT AND LOSS STATEMENT Income Merchandise Profit $20 Total Income $20 Expenses Rent Expense 15 Net Profit $ 5 BALANCE SHEET December 31 Assets Cash $5 R. L. Jackson 30 Merchandise 25 $60 Liabilities Jones & Co $35 T. Hart, Proprietor 25 $60 ANSWERS TO PROBLEMS Answer Problem 10 JOURNAL 99 Mar. I Cash $100.00 Harry Smith, Proprietor $100.00 Investment in grocery business. Store Building so.oo Cash 50.00 Purchase building for cash. Mar. 2 Merchandise 20.00 % Cash 20.00 Purchase 20 sacks flour at $l a sack. Merchandise 70.00 Ross & Co 70.00 30 days' time, purchase assorted mer- chandise. Mar. 3 Cash 12.50 Merchandise I2.5O Sale 10 sacks flour at $1.25 a sack. R. E. Colt 4.0.00 Merchandise 4.O.OO Sale 30 days' terms. Mar. 4 Cash 6 OP Merchandise 2 5 6.25 Sale 5 sacks at $1.25. 100 APPENDIX Salary Expense $25.00 Cash $25.00 Salaries paid. Mar. 5 Light Expense 2.OO Cash 2.0O Pay electric bill. Mar. 6 Cash s.oo Rent Income S.OO Collect rent for part of store. Mar. 31 Merchandise (new account) 60.00 Merchandise (old account) Inventory. Merchandise (old account) 28. 7S Profit and Loss Closing into P. & L. Profit and Loss 25.00 2 -75 Closing into P. & L. Profit and Loss 2.OO 25.00 2.OO Closing into P. & L. Rent Income . S.OO Profit and Loss S.OO Closing into P. & L. Profit and Loss 6.75 Harry Smith, Proprietor 6.7S Close net profit into Proprietor's account. ANSWERS TO PROBLEMS 101 LEDGER CASH Mar. I 3 4 6 J-. $100.00 Mar. i 2 4 X J.. tso.oo J 12. SO T.. 20.00 T 6.25 T . . 25.00 T.. 5.00 T.. 2.00 HARRY SMITH, PROPRIETOR Mar. I J $100.00 31 JP.&L. 6.75 STORE BUILDING Mar. I J . $50.00 MERCHANDISE Mar. 2 J.. $20.00 Mar. 3 J.. $1250 J 70.00 J.. 4.O.OO 31 J P. & L. 28.75 4. J-. 6.25 31 J 6O.OO ROSS & CO. Mar. 2 J , $70.00 Mar. 3 J . R. E. COLT $40.00 102 APPENDIX SALARY EXPENSE Mar. 4 J $25.00 Mar. 31 J P. & L. $25.00 LIGHT EXPENSE Mar. 5 J , $2.00 Mar. 31 JP. &L. $2.00 RENT INCOME Mar. 31 JP. &L. $5.00 | Mar. 6 J $5.00 MERCHANDISE (new account) Mar. 31 J $60.00 PROFIT AND LOSS Mar. 31 J Salaries $25.00 J Lights 2.00 J Prop. Acct.. . 6.75 Mar. 31 J Mdse. . $28.75 J Rent Income 5.00 The trial balance before closing the various force ac- counts into the Profit and Loss account will appear as follows: March 31 Dr. Cr. Cash $123.75 $97-00 Harry Smith, Proprietor . . . 100.00 Store Building 50.00 ANSWERS TO PROBLEMS 103 Merchandise (old account) 90.00 118.75 Ross & Co 70.00 R. E. Colt 40.00 Salary Expense 25.00 Light Expense 2.00 Rent Income 5.00 Merchandise (new account) 60.00 $390.75 $390-75 The trial balance after closing the force accounts is given below. You will see that in this trial balance we show only the difference between the debits and *X^ t ^-^ ta -*^^s ta x-%^ % ' y ^I,^N_x^ - ^% w _X^ c; ^ " ^*--^ >^ % ^-'"~"s fc -X^V--^-^ x-g x-^_^^^^ p ^^^ credits. Dr. Cr. Cash $26.75 Harry Smith, Proprietor. . $106.75 Store Building 50.00 Ross & Co 70.00 R.E.Colt 40.00 Merchandise. 60.00 $176.75 $176.75 BALANCE SHEET March 31, 1920 Assets Cash $ 26.75 Merchandise 60.00 R.E.Colt 40.00 Store Building 50.00 $176.75 Liabilities Ross &Co $ 70.00 Harry Smith, Proprietor. . . 106.75 $i?6-75 104 APPENDIX PROFIT AND LOSS STATEMENT Income Merchandise Profit $28.75 Rent Income. 5.00 Total Income $33-75 Expenses Salaries $25.00 Lights 2.00 Total Expenses $27.00 Net Profit $ 6.75 Answer Problem n JOURNAL Jan. 5 Cash. Notes Payable Borrowed on go-day 6% note. Notes Receivable Merchandise 6o-day 6% note in payment of mer chandise. Mar. 4 Cash. Notes Receivable Interest Income Customer pays note dated Jan. 5. $40.00 30.00 30.30 $40.00 30.00 30.00 30 ANSWERS TO PROBLEMS 105 LEDGER CASH Jan. 5 J. Mar. 4 J , $40.00 30.30 NOTES PAYABLE Jan. 5 J. NOTES RECEIVABLE $40.00 Jan. 5 J $30.00 Mar. 4 J $30.00 MERCHANDISE Jan. 5 J $30.00 INTEREST INCOME I Mar. 4 J $.30 Answer Problem 12 JOURNAL Merchandise $50.00 J. Jones $50.00 Merchandise purchased on 30 days' 2% terms. io6 APPENDIX J. Tones. . $50.00 Cash $4.0.00 Discount Income I.OO Paid Jones less 2% discount. John Hall 20.00 Merchandise 20.00 Sold on terms. Cash iq.6o Discount Expense .4.0 John Hall 20.00 LEDGER MERCHANDISE J $20.00 J. JONES $50.00 CASH .. $19.60 J DISCOUNT INCOME $49.00 I' JOHN HALL $1.00 $20.00 J $20.00 ANSWERS TO PROBLEMS DISCOUNT EXPENSE 107 $.40 Dr. Answer Problem 13 CASH BOOK Cr. Jan. 8 Mdse $100 Rent Inc 30 Mrs. Jackson. 15 Jan. 8 Insurance Exp. $25 Mdse 30 LEDGER CASH ACCOUNT Jan. 8 CB $145 Jan. 8 CB. $55 MERCHANDISE ACCOUNT Jan. 8 CB $30 Jan. 8 CB . . . . $100 RENT INCOME Jan. 8 CB. MRS. JACKSON $30 Jan. 8 CB $15 io8 APPENDIX INSURANCE EXPENSE Jan. 8 CB $25 Answer Problem 14 CASH BOOK Jul. 3 Int. Inc. Jul. I Rent Exp $20 3 Salary Exp.. . . 12 7 Trucking Exp . . 7 JOURNAL Dec. 31 Profit and Loss $20 Rent Expense $2O Closing into P. & L. Profit and Loss. . . 12 Salary Expense 12 Closing into P. & L. Interest Income 6 Profit and Loss 6 Closing into P. & L. Profit and Loss 7 Trucking Expense 7 Closing into P. & L. ANSWERS TO PROBLEMS LEDGER RENT EXPENSE 109 Jul. i CB. $20 Dec. 31 J. $20 SALARY EXPENSE Jul. 3 CB $12 Dec. 31 J $12 INTEREST INCOME Dec. 31 J. Jul. 3 CB. TRUCKING EXPENSE $6 lul. 7 CB $7 CA Dec. 31 SH J.. $7 Jul. 3 CB fi Jul. i 3 7 \ND LOS CB. $20 12 7 PROFIT , CB CB ;s Dec. 31 J Rent Exp... J Sal. Exp. . . J Trucking Exp. . . $20 12 7 Dec. 31 J Int. Inc. . $6 no APPENDIX PROFIT AND LOSS STATEMENT Income Interest $6 Total Income $6 Expenses Rent Salaries . . Trucking . $20 12 7 Total Expenses 39 Net Loss $33 Answer Problem 15 JOURNAL Dec. 31 Rent Income Profit and Loss .... Closing into P. & L. Merchandise (old account) , Profit and Loss .... Closing into P. & L. Profit and Loss Insurance Expense. Closing into P. & L. Profit and Loss Salary Expense. . Closing into P. & L. $100 300 200 $100 300 50 200 ANSWERS TO PROBLEMS HI Profit and Loss $150 A's Proprietor Account $100 B's Proprietor Account 50 To distribute profit to partners. LEDGER PROFIT AND LOSS Dec. 31 J Ins $50 Dec. 31 J Rent $100 J Sal 200 J Mdse 300 J A's Prop. acct 100 J B's Prop. acct 50 A'S PROPRIETOR ACCOUNT Dec. 31 J Jioo B'S PROPRIETOR ACCOUNT Dec. 31 J $50 Answer Problem 16 JOURNAL Dec. 31 Merchandise (old account) $100 Profit and Loss Jioo Closing into P. & L. 112 APPENDIX Rent Income $40 Profit and Loss $4.0 Closing into P. & L. Profit and Loss CQ Insurance Expense so Closing into P. & L. Profit and Loss 80 Salary Expense 80 Closing into P. & L. Profit and Loss 10 Surplus IO Closing net profit into Surplus account. LEDGER PROFIT AND LOSS Dec. 31 J Ins $50 Dec. 31 J Mdse $100 J Sal. . , 80 J Rent .... 40 J Surplus . . . 10 SURPLUS ACCOUNT Jan. I Bal. , Dec. 31 J.. . BALANCE SHEET Assets Merchandise $300 Accounts Receivable . . , 200 $30 10 Jsoo ANSWERS TO PROBLEMS 113 Liabilities Accounts Payable $ 60 Capital Stock 400 Surplus 40 $500 (Note that we have increased the Surplus account to $40 by crediting it with the net profits for the period.) Answer Problem 17 JOURNAL Dec. 31 Depreciation Expense $ 4.O Building $ 40 Depreciation I year at 4%. Depreciation Expense SO Fixtures ' so Depreciation I year at 10%. Depreciation Expense 1 60 Auto 1 60 Depreciation I year at 20%. Profit and Loss 2 SO Depreciation Expense 2 SO Closing into P. & L. LEDGER BUILDING Jan. I J. a $1,000 Dec. i J , $40 APPENDIX FIXTURES Jan. i J. $500 Dec. I J . AUTO Jan. i J. $800 Dec. i J . $160 DEPRECIATION EXPENSE Dec. 31 J $40 Dec. 31 $250 J 50 J 160 PROFIT AND LOSS Dec. 31 Depr $250 Answer Problem 18 JOURNAL Dec. 31 Interest Expense $30 Accrued Interest Payable $30 Accrued interest $i ,000, 6 months at 6%. Insurance Expense 10 Prepaid Insurance 10 Insurance used November and December 2 months at $5 a month. ANSWERS TO PROBLEMS LEDGER PREPAID INSURANCE Nov. I CB $60 Dec. 31 J $10 ACCRUED INTEREST PAYABLE Dec. 31 J $30 INTEREST EXPENSE Dec. 31 J. $30 INSURANCE EXPENSE Dec. 31 J $10 Dr. Answer Problem 19 CASH BOOK Cr. Dec. I H. White, Prop.... $1,500 31 Mdse 800 Dec. I Prepaid Ins. $120 2 Mdse 300 1 1 Smith & Co. 882 31 Wage Exp. . 200 Rent Exp. . . 55 APPENDIX JOURNAL Dec. 2 Merchandise SQOO Smith & Co $QOO Merchandise purchased on 10 days' 2% terms. Dec. 3 Mrs. Brown SO Merchandise so Merchandise sold on 30 days' terms. Dec. ii Smith & Co 18 Purchase Discount 18 2% discount on $900 bill. Dec. 31 Merchandise (new account) 700 Merchandise (old account) 7OO Inventory. Insurance Expense 10 Prepaid Insurance IO One month's insurance used. LEDGER HARRY WHITE, PROPRIETOR Dec. I CB. . . $1,500 ANSWERS TO PROBLEMS PREPAID INSURANCE 117 Dec. I CB $120 Jan. I Balance... $110 Dec. 31 J. $10 MERCHANDISE Dec. 2 CB $300 Dec. ^ T . . $ ^o J. . ooo 31 CB 800 SMITH J.. 700 & CO. Dec. II CB.. $882 Dec. 2 T. . $000 J 18 MRS. BROWN Dec. 3 J.. $5O PURCHASE DISCOUNT Dec. II J, MERCHANDISE (new account) Dec. 31 J. $700 I $18 118 APPENDIX CASH Dec. 31 CB $2,300 Jan. I Balance... $743 INSURANCE EXPENSE Dec. 31 CB $1,557 Dec. 31 J, WAGE EXPENSE Dec. 31 CB $200 RENT EXPENSE Dec. 31 CB. $55 TRIAL BALANCE December 31 (Before Closing) Dr. Harry White, Proprietor Prepaid Insurance $ no Merchandise (old account) .... Mrs. Brown 50 Purchase Discount Merchandise (new account). . . . 700 Cash 743 Insurance Expense 10 Wage Expense 200 Rent Expense 55 Cr. $1,500 350 18 $1,868 $1,868 ANSWERS TO PROBLEMS Answer Problem ao JOURNAL 119 Dec. 31 Merchandise (old account) $"*> Profit and Loss Jico Closing profit on merchandise into P. &L. Purchase Discount 18 Profit and Loss y 18 Closing into P. & L. Profit and Loss 10 Insurance Expense IO Closing into P. & L Profit and Loss 200 Wage Expense 200 Closing into P. & L. ce Rent Expense ec Closing into P. & L. lot Harry White, Proprietor I (VI Crediting net profit to Proprietor. LEDGER HARRY WHITE, PROPRIETOR Dec. I CB. 31 J.. $1,500 103 Dec. 2 31 CB.. .... $ 300 Dec. 3 3i DISCOUF J $ 50 800 700 J-. .... 900 CB J-. J.. oo JT PURCHASE 1,550 Dec. 31 J-. $18 Dec. ii 2 EXPEN J. $18 INSURANC1 SE Dec. 31 J-. $10 Dec. 31 XPENSE J.. $10 WAGE E Dec. 31 CB.. $200 Dec. 31 XPENSE J $200 RENT E Dec. 31 CB.. $55 Dec. 31 ND LOSS J.. $55 PROFIT A Dec. 31 J Ins. Exp . . $ 10 J Wage Exp. 200 J Rent Exp . . 55 J. H. White, Prop 103 Dec. 31 JMdse... J Purchase Dis $350 18 $368 $368 ANSWERS TO PROBLEMS 121 TRIAL BALANCE December 31 (After Closing) Dr. Cr. Harry White, Proprietor $1,603 Prepaid Insurance $ 1 10 , Mrs. Brown 50 Merchandise 700 Cash Account 743 $1,603 $1,603 BALANCE SHEET December 31 Assets Cash $ 743 Mrs. Brown 50 Merchandise 700 Prepaid Insurance no Total Assets $1,603 Liabilities Harry White, Proprietor $1,603 Total Liabilities $1,603 PROFIT AND LOSS STATEMENT December I to December 31 Income Merchandise Profit $350 Purchase Discount 18 Total Income $368 122 APPENDIX Expense Insurance Expense $ 10 Wage Expense 200 Rent Expense 55 Total Expense 265 Net Profit $103 APPENDIX D BIBLIOGRAPHY OF SELECTED ACCOUNTING BOOKS Accountants' Handbook. New York, The Ronald Press Company. Bell, W. H. Accountants' Reports. New York, The Ronald Press Company. Bennett, R. J. Corporation Accounting. New York, The Ronald Press Company. Bliss, J. H. Management Through Accounts. New York, The Ronald Press Company. Business Accounting. Edited by Harold Dudley Greeley. 6 vol. New York, The Ronald Press Company. Cole, W. M. Accounts, Their Construction and Interpreta- tion for Business Men and Students of Affairs. New York, Houghton, Mifflin Company. Fundamentals of Accounting. New York, Houghton, Mifflin Company. Dickinson, A. L. Accounting Practice and Procedure. New York, The Ronald Press Company. Esquerre, P. J. Applied Theory of Accounts. New York, The Ronald Press Company. Practical Accounting Problems. New York, The Ronald Press Company. Finney, H. A. Principles of Accounting. New York, Pren- tice-Hall, Inc. Gilman, S. Principles of Accounting. Chicago, LaSalle Ex- tension University. 123 124 APPENDIX Greer, H. C. How to Understand Accounting. New York, The Ronald Press Company. Hatfield, H. R. Accounting, Its Principles and Problems. New York, D. Appleton & Company. Hodge, A. C., and McKinsey, J. O. Principles of Accounting. University of Chicago Press. Kester, R. B. Accounting Theory and Practice. 3 vol. Vol. 1-2, first and second year text. New York, The Ronald Press Company. Kohler, E. L., and Morrison, P. L. Principles of Accounting. Chicago, A. W. Shaw Company. Krebs, W. S. Outlines of Accounting. New York, Henry Holt and Company. Paton, W. A., and Stevenson, R. A. Principles of Accounting. New York, The Macmillan Company. Powelson, J. A. Introductory Accounting. New York, Pren- tice-Hall, Inc. Sprague, C. E., and Perrine, L. L. Accountancy of Invest- ment. New York, The Ronald Press Company. Sprague, C. E. Philosophy of Accounts. New York, The Ronald Press Company. Toner, James V. The Mathematics of Finance. New York, The Ronald Press Company. Walton, S., and Finney, H. A. Mathematics of Accounting and Finance. New York, The Ronald Press Company. Woodbridge, F. W. Elements of Accounting. New York, The Ronald Press Company. UNIVERSITY OF CALIFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. DEO 3 o 1980 Form L'J Series 444