'^' «v Digitized by the Internet Archive in 2007 with funding from IVIicrosoft Corporation http://www.archive.org/details/accoubookkeepingOdickrich Bookkeeping for Accountant Students. BY THE SAME AUTHOR. PRICE ''Advanced Accounting." (Fourth Edition) - - 21/- " Auctioneers' Accounts." (Second Edition) - 3/6 "Auditing.' (Ninth Edition) . - . - 10/6 " Bankruptcy Trustee's Estate Book." (Second Edition) - - - - - - 4/- " Bookkeeping Exercises for Accountant Students" (Second Edition) ..... 3/6 " Bookkeeping for Company Secretaries." (Fourth Edition) ...... 5/- " Depreciation, Reserves, and Reserve Funds." (Third Edition) - - - - - 3/6 '•Goodwill and its Treatment in Accounts." (Third Edition) - - - - - 5/6 " Hotel Accounts." (Second Edition) - - 3/6 " Profits available for Dividend " - - ■ 2/6 •'Solicitors' Accounts." (Second Edition) - - 3/6 " Student's Guide to Accountancy." (Second Edition) --.... 2/6 GEE (^ CO. {Publishers) Ltd., 34 Moorgate Street. London, E.C. BOOKKEEPING FOR ACCOUNTANT STUDENTS LAWRENCE R. DICKSEE. M.Com., FCA. n (o/ the firm of Sellars, Dicksee 6- Co.) F'oRMERLY Professor ok Accounting at the University of Birmingham, NOW Lectcrer at the London School of Economics and Political Science (University of London). SEVENTH EDITION. London : Gee & Co. (Publishers) Ltd., 34 Moorgate Street, EC. 1913 «f !f- b-i^ \^ \^ CONTENTS. Preface to First Edition Preface to Seventh Edition PAQK ix xi PART I. I. — General Introduction ... II. — Simple Ledger Accounts III. — Closing the Ledger I^ . — Transactions of Henry Jackson y. — The "Continental" System yi. — Closing the Ledger on the "Continental System Exercises ... 12 24 35 45 54 60 QO/IOQQ PART II. PAGE YII. — Commercial Terms, with their French and German equivalents, defined 66 VIII. — Accounts of Traders (Cash Book, Bill Books, Discounts, Partners' Capital, and Drawing Accounts) ... 73 IX. — Accounts of Traders (continued) (Goods Accounts, Purchases, Sales, Consignments) 91 X. — Transactions of Fox & Crane (Opening the Ledger, the Subsidiary Accounts) ... 102 XI. — Transactions of Fox & Crane (continued) (Trial Balance, Closing the Ledger) : Consignees' Accounts 114 XII. — Adjustment Accounts and Self-Balancing Ledgers 132 Examination Papers 144 PART III. PAGE XIII. — Accounts of Manufacturers (Wages Accounts, Stores Accounts, Cost Accounts) 158 XIV. — Transactions of a Manufacturing Company (Share Accounts, Allotments, Transfers, Debentures, &c.) 168 XV. — Transactions of a Manufacturing Company (continued) (General and Trade Ledgers) 181 XVI. — Transactions of a Manufacturing Company {continued) (Cost Accounts, Closing the Books, Dividends) 198 XVII — Forms of Accounts and Account Books (Double-Account System, Single-Account System, Ledgers, Journals, Cash Books) 210 XVIII. — Miscellaneous Questions of Account... 228 Index 236 PREFACE TO FIRST EDITION 'THE extremely unsatisfactory results which, it will be admitted, usually attend instruction in the principles of elementary Bookkeeping afford good grounds for supposing that there is some radical fault in the method of instruction generally adopted. The principle of Bookkeeping may be likened to the principle upon which an arch is constructed, where each stone rests upon every other stone for support, and of which the keystone — which is at the top of all — is the most important and the most distinctive. No one wishing to impart instruction upon the principles upon which an arch is constructed would commence with a detailed exposition upon the properties and characteristics of each separate stone ; rather would he first exhibit to the student a model of the completed arch, and then pull it to pieces for the student's edification. In Bookkeeping, however, the mode of instruction usually adopted is to weary the student with a minute description of the various parts before he is even told that they will eventually form one component and harmonious whole ; the immediate consequence being that the minute portion of his attention that is not alienated by the apparent aridity of his subject is exclusively occupied in relatively unimportant matters of detail, and when the course is linished it is found that, while perhaps more or less conversant with the letter of the theory, he has not even so much as learned whether there be a spirit. The position of such an one may be likened to that of the student of physiology who. while well acquainted with the form of some of the principal bones in the human frame, has not the remotest notion of the relative positions of such bones X. PREFACE TO FIRST EDITION. in the skeleton as a whole. Until the whole can be conceived as a whole, the most minute study of its component parts will be found singularly stale and unprofitable. In view, therefore, of the necessarily unsatisfactory result of all instruction in the science of Bookkeeping conducted upon the old lines, it is felt that no apology is necessary for the method adopted in the work now placed before the public. It may be added, however, that the Author's system has been found to work well in practice, and to secure for its disciples a thorough knowledge of the theory of Double Entry in a remarkably short space of time. It is desirable that all the exercises upon each chapter should be worked out before the next chapter is commenced, and that each Part should be properly mastered before proceeding to the subsequent Part. Although the present work is primarily intended for the use of Accountant Students, it will be found equally suitable to those preparing for the Civil Service, Society of Arts, and other similar examinations. LAWRENCE R. DICKSEE. 142;// December 1892. PREFACE TO SEVENTH EDITION. CINCE the first edition of this work was published, some twenty-one years ago, six editions (representing 10,000 copies) have been exhausted ; and the fact that each successive edition has been sold out in a shorter space of time than the previous one is, it is thought, sufficient indication that the hopes expressed in the preface to the first edition have been justified. It has not been thought desirable to make any material alterations in the general scheme of the work, as originally presented, but the opportunity has been taken to embody certain improvements in matters of detail and to correct misprints. Any attempt to make the present volume really exhaustive would have necessitated a great increase in size, and would have entirely altered the original arrangement. The Author has, however, issued a more complete work upon "Advanced Accounting," that has already reached a fourth edition, to which the reader is referred for information upon all points too advanced to be included in the scope of the present volume. It may be added that, in order to meet a wish which has been expressed in several quarters, the Author has published, in a separate form, a series of 100 questions under the title of " Bookkeeping Exercises for Accountant Students," which may be regarded as a supplement to the present work. A skeleton key is appended to these exercises, so that students may see for themselves whether their answers are correct. LAWRENCE R. DICKSEE. 48 Cop/hall Avenue. E.G.. 19/// Jitly 1913. I.— INTRODUCTIOM Bookkeeping may be defined as the science of correctly recording in books transactions involving the transfer of money or money's worth. In recording these transactions there are two objects to be aimed at : — (i) It is necessary that the record be so explicit that, at any subsequent time, the exact nature of the transacticM:i may readily be perceived without the aid of the memory. (2) It is necessary that the transactions should be so classified that at any time the combined effect of such transactions during any given period, or at any given time, may readily be ascertained. It is the necessity for combining these two fundamental principles that makes the main difficulty of practical Book- keeping ; the expression * ' practical ' ' Bookkeeping is used advisedly, for if time and labour were no object the difficulty might be got over with comparative ease. As it is, however, it is extremely rare, except in businesses of the simplest kind, to find a set of books perfect upon both points that do not involve in their keeping an amount of labour out of all proportion to the result achieved. In England it is a very general custom for bookkeepers to rely upon Copy Letter Books, Invoices, and other extraneous sources to elucidate transactions which ought to have been made plain to an outsider merely examining the books of account ^>-' <- 'V £ 2 BOOKKEEPING. themselves. In fact, many English bcM3ks on Bookkeeping totally ignore the first of the requisites just named. On the other hand, in France, Italy, and Spain (and also to a great extent Germany), the system usually adopted involves almost twice the labour on the part of the bookkeeper ; but, while it minutely records the nature of each individual transaction, it is inferior to the English method in point of classification and in other matters of convenience. Foreign bookkeepers for the most part appear to labour under the impression that busi- nesses were made for books, and not books for businesses, but surely the latter is the more correct supposition. The two principles named (viz. the explicit record of each transaction, and a ready classification of such transactions when recorded) are in reality both vital, and both equally important ; it is therefore very necessary that the reader should bear them constantly in mind, if he wishes to follow the why and the wherefore of a good system of Bookkeeping. Having now ascertained to a certain extent the nature of the records it is necessary to make, attention may be directed to the things in which the records are made : viz. the Books. It goes without saying that the same books are not always equally suitable for the record of all kinds of transactions, or, in other words, that different kinds of business each require a different set of books ; in fact, it is frequently desirable that businesses of the same kind should have their accounts kept differently, in order to meet some slight variation involved by a different class of trade. But in all cases (whether the books be those of a bank, an insurance office, a chimney-sweep, or a private gentleman) they are kept for the same purpose — the record of transactions involving the transfer of money or money's worth — and consequently vary in matters of detail only, the ruling principle being the same in all. INTRODUCTION. 3 Books, then, are divisible into two great classes : — (i) Books of Account, or Financial Books. (2) Memorandum, or Statistical Books. The first book of account ever used was probably a mere -record of transactions entered as they occurred, and conse- quently in chronological order ; being, in fact, little more than a Memorandum Book. A very few moments' consideration will show that, as soon as these transactions became either very numerous or very varied in their nature, a mere chrono- logical record would be all but useless, and that some method .of classification became absolutely necessary. This being perceived, it became the custom to sort out the various transactions into their several classes, and to re- write them in another book (the Ledger) under separate headings, keeping each class of transaction under its proper heading, and referring to such heading whenever any information was required upon that class of transaction. It may be considered that Bookkeeping itself dates from this time, for Books of Account, properly so called, hardly existed before this period; while all that has been done since has been to follow up and improve upon the lines thus indicated, and the complexity of modern Bookkeeping is due to the multiplicity of detail required by the growth of modern -commerce, rather than to any radical alteration in the principle of the original design. The two books named are, in fact, the only Books of Account in use even at the present time : the first, called the Journal, or daily register (so called because it contains a record of each day's transactions), in some form or other still retains all its ancient functions, and although in the course of .centuries it has been found convenient to divide the book into 4 BOOKKEEPING. sections, and call the various parts Sales Book or Day Book, Invoice Book or Purchase Book, &c., yet, in fact, they are' merely so many " Journals " ; and to this day in all Con- tinental houses of business, and in a few English ones, all transactions are carried through some form of Journal, although subsidiary books are often used to record the fuller details. The second book named is the Ledger, so called because in that book the entries of all the transactions are laid or stored ■up, for future reference. Most businesses have also a Cash Book ; but it will save the reader a great deal of confusion at a subsequent period if, at this early stage, he learns to regard the Cash Book as neither more nor less than an account in the Ledger, bound up separately for the sake of convenience. The Ledger, as already stated, contains a record in classified form of transactions involving the transfer of money or money's worth. Thus, if A. sold John Smith goods to the value of, say, ;£2o, there would be a page in A.'s Ledger headed '' John Smith,'' showing that he was A.'s debtor for ;£2o on account of goods sold to him. When Smith paid A., say, JP^\o on account, that ;£io used to be subtracted from the ;£2o, and JOHN SMITH. 1500 Jan. I 20 Goods sold him . . Cash paid by him i s d 20 o ©■ 10 o o /lO o o the difference showed the amount still owing by Smith to A. It was very soon found, however, that there were two weighty objections to this manner of proceeding : (i) The bookkeeper w^as always liable to add instead of subtracting, and vice versa, in which case the error would not be specially obvious; (2) INTRODUCTION. 5 without reading the whole account, it would not appear whether John Smith owed the money to A. or A. owed it to him. To meet this difficulty each Ledger Account was divided into two : — Upon one side were placed the items for which he was A.'s debtor, and upon the other side (the contra Account) those items for which he was A.'s creditor, the balance being readily ascertainable at any time by adding up the two sides and striking a balance. Dr. JOHN SM [TH. CONTRA. Cr. 1500 j Jan. I To Goods . . i s d 20 1500 Jan. 20 By Cash i s d 10 At first sight the reader may possibly have some little difficulty in seeing how, when Smith owes A. ;£20, he becomes A.'s creditor upon payment of £,\o; but in Bookkeeping, as in many other things, we must examine each transaction by itself as it arises ; the time to set one off against another being after they have been placed side by side in the Ledger. Now that the Ledger had been separated into two sides, it became necessary to distinguish in the Journal upon which side of the Ledger each transaction should appear, and thus two columns soon found their way into the Journal, one for sums to be placed on the Dr. (debtor) side of the Ledger Account, and one for the Cr. (creditor) side. JOURNAL. Dr. Cr. £ s d,, £ By this time it will be perceived that Bookkeeping had already become a matter of some little complexity, and doubt- O BOOKKEEPING. less even at that remote period the errors made by the book- keeper were a source of considerable annoyance and loss ; it was therefore but natural that men should begin to see if they could not devise some means by which such errors should become self-evident. Then, doubtless, they asked themselves what was the exact nature of the transactions they recorded in their books, and arrived at the conclusion that the trans- actions they recorded were — as stated at the outset — transfers. Let us ask ourselves. What is a transfer? A transfer is a *' conveyance of anything from one person or place to another. '^ A transfer thus (and consequently the class of transactions with which we deal in Bookkeeping) involves a twofold act — if A. pays John Smith £,20, he, receiving the cash, is A.'s debtor; but A.'s Cash Account, being so much the poorer, is (so far as that one transaction goes) his creditor. Thus A. is enabled to record this one transaction on both sides of his Ledger ; and by recording all his transactions on both sides of his Ledger, it will readily be seen that at any time, by adding up each side of his Ledger, and comparing the total amount of the Dr. side with the total of the Cr. side, a check is at once obtained ; for, if there be a mistake, it is unlikely in the extreme that the two sides will agree. At first sight, however, the advantage seems to be more than compensated by the extra labour — for frimd facie it amounts to keeping the books twice over. But notwithstand- ing this, no subsequent discovery has caused us to abandon the principle of Double Entry thus founded. More than four hundred years have now elapsed since the first treatise on Double Entry Bookkeeping was published, but although many modifications and improvements have been made since then, by means of which the amount of labour involved has been enormously reduced, the fundamental principle of Double Entry has remained unchanged. Indeed, it is only in English INTRODUCTION. 7 speaking countries that any serious attempt has been made to lessen the extra labour involved by Double Entry, and — bear- ing in mind that ' ' the whole is equal to the sum of its parts ' ' — to attempt a form of classification in the Journal by which a vast number of small entries in the Ledger may be obviated. These preliminary remarks upon books would not be com- plete without some reference to the second class of books named, viz., Memorandum, or Statistical Books. These books vary with every class of trade, and are merely used to record details that could not conveniently appear in the Books of Account, or if they do so appear are not in a form suitable for convenient reference. The Policy Books of an Insurance Office, the Ground Rent Register of a Mortgage Company, and (frequently) the Cost Book of a Contractor are examples of such books. It should, however, be carefully borne in mind that they are not Books of Account, and (from a Bookkeeping point of view) have no value except in so far as they serve to explain entries appear- ing in the Books of Account that might otherwise be obscure. It may be added that many frauds have remained undetected through want of attention to this most important point. The object of this chapter being merely to give a general (although necessarily extremely superficial) idea of the whole subject, rather than to consider any one point exhaustively, we will now return to the Ledger — which the reader need hardly be reminded is the book — and try and convey a rough idea of the principle upon which a Balance Sheet is prepared. Up to the present time Accountants have not agreed upon any precise form in which a Balance Sheet shall be drawn up, consequently specimens are to be found in several different forms. This is very confusing to the beginner, and it is not 8 BOOKKEEPING. therefore intended at the present time further to distract the reader with a discussion as to the merits of the various forms in use. It will suffice to explain what a Balance Sheet really is. A Balance Sheet is a statement showing upon one side the assets of the business in question, and on the other side the liabilities. If the assets exceed the liabilities the surplus is the capital of the business that has to be accounted for to its pro- prietors, and it appears as such on the liabilities' side, so that the totals of both sides agree. On the other hand, should the liabilities exceed the assets, the difference is called a deficiency, or capital overdrawn, and is entered on the assets' side. At first sight this may appear somewhat strange. " If I have a capital of ;£i,ooo," the reader says, " how can it appear on the liabilities' side; surely it is an asset? " True, but he must always remember to look upon the business as something quite apart from the person or persons to whom it belongs. The busi- ness has a surplus of ;£i,ooo, which belongs to its owner; therefore that owner is a creditor of the business for ;£i,ooo. It will thus appear that the business makes no distinction between its owner and any other creditor. Scottish readers, whose mercantile law recognises the existence of a firm as some- thing distinct from its individual partners, will doubtless grasp the situation more readily. Inasmuch as the Ledger contains, in a classified form, a record of all the transactions, it is obvious that, from the Ledger, we can at any time readily ascertain both the assets and the liabilities of the business. That is to say, the Ledger keeps a continuous record of the amount owing to the business, the amount owing by it, and of the property belonging to it. The excess of the assets over the liabilities is (as already stated) the capital, and if the capital at the end of any period is greater than at the commencement of that period, the INTRODUCTION. 9 difference will be the profit made during that pericxi — assuming, of course, that no fresh capital has been brought in or withdrawn during that period. Similarly, if the capital has become reduced, there will have been a loss. In taking out a Balance Sheet from the Ledger, however, nimierous accounts will be found that represent neither assets nor liabilities, but sources of expense or of income. In this connection the following rules will be found most useful : — (i) When an item is on the left-hand or Dr. side of the Ledger : (a) If the amount will eventually be received, it is an asset. (b) If the amount will not eventually be received, it is a loss. (2) When an item is on the right-hand or Cr. side of the Ledger : (a) If the amount will eventually have to be paid, it is a liability. (b) If the amount will not eventually have to be paid, it is a gain. This rule never fails; but, of course, the question as to whether an amount will eventually be received or not requires a knowledge of the facts of the particular case for its correct disposal ; and, even then, may be a point of much difficulty — in fact, this is one of the difficulties of correctly reporting upon the affairs of any business — for because A. owes B. ;£ioo it does not in the least follow that B. will ever receive his j£ioo from A. If he does eventually receive it, of course it was one of B.'s assets, but if not, B. must look upon it as a loss. lO BOOKKEEPING. P'or theoretical purposes, however, one may readily suppose the distinction made. That having been done, the losses and gains are collected into one account, usually called the Profit and Loss Account in trading concerns, and the Revenue Account in non-trading concerns. In this account the losses will appear on the Dr. side and the gains on the Cr, side, while the differ- ence between the two sides will show the total gain or loss, as the case may be. As every source of gain or loss has been included in this account, the total gain made during the period under review (as shown by this account) added to the Capital at starting (or the total loss deducted ffom the Capital at starting, as the case may be) will give the Capital at the end of the period. If there is no error in the books this will be the same thing as the Capital shown on the Balance Sheet drawn up at the end of the period, and here, again, the check of the Double Entry comes in. It is here also that the especial value of the Double Entry shows itself, for a very few moments' con- sideration will show that the question " How have I made my profit?" is in reality almost more important than the question " What profit have I made? " As, however, the point involved here belongs to Accountancy rather than to Bookkeeping, it is unnecessary to pursue it further at the present time. INTRODUCTION. 1 1 Questions on Chapter I. 1. What is Bookkeeping? 2. What are the two objects to be aimed at in every system of Bookkeeping? 3. What is a Journal? 4. Wiiat is a Ledger? 5. What is understood by the signs " Dr.," " Cr."? 6. In what respect is every transaction recorded by Book- keeping of a twofold nature? 7. What is Double Entry? 8. What is a Balance Sheet? 9. What is understood by the term " Capital "? 10. How is the Net Profit or Loss arrived at from a set of books II.— SIMPLE LEDGER ACCOUNTS. The Ledger has already been defined as a classified record of transactions. It is now proposed to deal more in detail with the various Ledger Accounts required in books of the simplest kind ; and, for the purpose of giving a more definite interest to this and the two following chapters, the accounts required to be kept by a person owning a set of chambers, let out to various tenants, will be described in detail as being, perhaps, one of the simplest sets of accounts conceivable. Ledger Accounts are usually divided into three classes : — (a) Real Accounts, dealing with actual property. (b) Personal Accounts, showing the record of transactions between tl^e owner and the various persons with whom he has business transactions. (c) Nominal Accounts, dealing with various forms of Income and Expenditure. There is no essential difference between Real and Personal Accounts. (a) Taking Real Accounts first, the various accounts required for the set of books now being considered are as follows : — SIMPLE LEDGER ACCOUNTS. 13 (i) Cash Account. — This account, as its name implies, records all transactions in cash, whether received or paid by the owner. Dr. CASH. CONTRA. Cr. 1913 £ s d 1913 £ s d Jan. I To John Smith 50 ; Jan. 16 By Bank 150 16 „ Thos. Brown . . 125 ] 31 , Do 50 21 „ Wm. Robinson.. 35 , Wages .. 3 6 8 Mar. 27 „ James Jones . . 75 Feb. 28 , Do .. .. 368 Mar. 31 , Do 3 6 8 - „ Bank .. 50 In the above example the items on the Dr. side are those which have been received by the owner from the various persons named. In Bookkeeping it is the custom to consider that the owner does nothing for himself, consequently it is assumed that when a person pays him in a sum of money it is not he who receives it, but his Cash Account, which — having received it for him — is accordingly his debtor for the amount so received. Perhaps the transaction will appear clearer to the reader if he looks upon this account as an account between the owner and his cashier, who, having received the money on his employer's behalf, is liable to account for it subsequently, and is meanwhile a debtor for the amount so received. The word "To" in front of each name on the Dr. side signifies that — so far as that one transaction is concerned — " Cash " (or the cashier) is ' ' debtor to ' ' the person from whom the amount was received. In a similar manner Cash (or the cashier) is entitled to take credit for (or " by ") the amount of the payments made from time to time out of Cash. Thus, in the example, it appears that £2^0 has been paid away to " Bank " and jQio in " Wages." The actual amount for which Cash is '' Debtor " {i.e. accountable) on the 31st March is thus, not ^285 (the total amount received), but £2^^ less £260 (the amount of the payments), which leaves £2^ for which Cash 14 BOOKKEEPING. is still Debtor. This is what is called a " Debtor Balance," which may be defined as the amount by which the Dr. side of an account exceeds the Cr. side: Hence the meaning of the word " Contra " at the head of the account. The two sides of the account represent similar, but opposite, transactions, which may be set off against each other. The method of balancing the Cash Account, as it is called, will be dealt with later, under the heading of Closing of Ledger. (2) Bank Account. — This account is, in reality, a '' Per- sonal " Account, but on account of its likeness to the Cash Account it may, perhaps, be more conveniently dealt with under this head. Dr. BANK. CONTRA. Cr 1913 f. s d 1913 Feb. 7 £ s d Jan. 16 To Cash 150 By Portland Estate 31 « Do. 50 Ground Rent 12 10 Mar. 31 » Do. .. 50 Mar. 6 „ H. Jackson (pri- vate expenses) 100 22 „ Repairs . . 17 10 In this account, as in the Cash Account (and as, also, in every other Ledger Account), the amounts received are entered on the Dr. side, and those paid on the Cr. side. It will be noticed that the " debit entries " (as receipts on the Dr. side are called) correspond with the payments into Bank recorded in the Cash Account. The '' credit entries " are for payments made by the bank upon orders signed by the owner, which are commonly known as cheques. The item of ;£ioo paid on March 6 is -for a sum withdrawn by H. Jackson (the owner) for his own private expenses. How this is dealt with we shall see at a later stage. The difference between the Dr. and Cr. sides here represents the balance at the Bank. SIMPLE LEDGER ACCOUNTS. 1 5 (3) Leasehold Premises Account. — This account will record the value of the property owned by ^Ir. Jackson, together with any transactions that may increase or decrease its value. Dr. LEASEHOLD PREMISES. CONTRA. Cr. I9I3 i s d 1913 f s d Jan. I To Balance from last account (value at this date) . . 15,000 Mar. 31 By Depreciation Lease .. of 100 The item on the Dr. side represents the value of the pro- perty on the ist January, which is said to be due to the owner from this account. If any structural alterations had been made during the quarter whereby the value of the property was increased, the amount of such increase would have been entered on the Dr. side, and so have increased the ;£i 5,000 by that amount. In the present case, however, the value of the pro- perty is supposed to have decreased, by reason of the term upon which a lease of the property is held being shortened. This decrease (or depreciation, as it is called) has been estimated at ;£ioo, and is accordingly entered to the credit of the Property Account, the value of the property on 31st March being accordingly reduced to ;£i4,9oo, the balance of the account on that date. ih) Under the heading of Personal Accounts the first to be dealt with is the (i) Capital Account. — This is the account between the owner and his business. The set of books under considera- tion do not comprise the whole of H. Jackson's affairs, but only those relating to the particular set of Chambers referred to. Whatever may be due to this business, either from debtors or investments, are called assets, and any outstanding l6 ' BOOKKEEPING. debts due by this business are called liabilities. The amount by which the assets exceed the liabilities is called the capital ; but this capital belongs not to the business itself, but to H. Jackson as owner. The business can make no profits and hold no property for itself ; both belong entirely to the owner, and, until they are drawn out of the business by the owner, he is the creditor of the business for the amount of such property and profits. The Capital Account, then, is the account showing the extent to which the business is indebted to the owner. Dr. CAPITAL ACCOUNT. CONTRA. Cr. 1913 Mar. 6 To Bank (private expenses) . . i s d 100 1913 Jan. I Mar.3J By Balance at this date . . „ Revenue Account i 8 d 15,197 10 166 5 In the above account it will be seen that, on ist January, ;£i5,i97 los. was due to H. Jackson as representing the capital of the business at that date. On the 6th March this sum was reduced by ,£100, which he drew out of the bank for his own private expenses. On the other hand, the Revenue Account prepared to the 31st March (vide p. 26) shows that a profit of ;£i66 5s. has been made during the quarter. This profit, as already explained, belongs not to the business, but to its owner, and (not having been received by him) is owing to him. His Capital Account will accordingly be credited with this amount, and the sum due to him on the 31st March then becomes ;£i5.263 iss."*^ (2) Business Debtors. — The following are the Ledger Accounts showing the indebtedness of the four tenants of Mr. Jackson's Chambers : *This latter transaction is recorded in italics in the example. Dr. SIMPLE LEDGER ACCOUNTS. JOHN SMITH. CONTRA. 17 Cr. , I9I3 f. s d 1913 f s d Jan. I To Balance at date this 50 ' Jan. I By Cash . . 50 Mar. 31 , Rent for tjnarter the 50 1 Dr. THUMAS BROWX. CONTRA. Cr. 1913 Jan. I Mar. 31 To Balance at this date , Rent for the quarter £ s d 125 i<5 Jan. 16 By Cash .. £ s d 125 WILLIAM ROBIXSOX CONTRA. 1913 Jan. I To Balance at this date Mar. 31 , Rent for the qiianer £ s d 35 1913 Jan. 21 50 Dt AMKS JOXE.^. COXTRA. Cr. ,,1913 ! Mar. 31 I To Rent for the quarter Taking John Smith's account in tiie foregoing example, it will he noticed that the account is debited with the rent due from him, and that he receives credit for the amount paid by him. At the comtnencement of the year Smith still owed for the quarter's rent due on the 31st December, but paid cash for the same on the ist January. On the 31st March another quarter's rent became due, but remained unpaid on the closing of the accounts on the 31st March. Smith, therefore, owed jQ^o on this date, which is .shown on the account by the total of the Dr. side exceeding the total of the Cr. side by that amount. ]8 BOOKKEEPING. The same remarks apply to the accounts of Thomas Brown and William Robinson; but, in the case of the latter, it will be noted that the amount of rent due for the March quarter is ,-£50, while the sum due on the ist January was ;£35 only. The explanation is that at the end of 1912 Robinson's rent was raised from ;£i40 to ;£2oo a year. It is, however, to be noted that the account, as shown, would have appeared the same had the rent for the December quarter also been £$0, provided ^£15 had been paid on account before the close of the year ; as, in that case also, the amount due on ist January would have been £35. In the case of James Jones it will be noticed that he follows the commendable practice of paying his rent a few days in advance; consequently nothing was due from him on the ist January, and nothing is due on the 31st March. (3) Business Creditors. — In the set of books now under con- sideration the only example of these accounts is the following : Z>/. PORTLAND ESTATE. CONTRA. I9I3 £ s d 1913 £ s d Feb. 7 To Bank .. 12 10 Jan. I Mar. 31 By Balance due this date . . „ Ground Rent to date 12 10 650 It will be noticed that on ist January the Portland Estate were creditors for ;£i2 los. for a half-year's ground rent, but that they received a cheque for this amount on 7th February. On the 31st March a further quarter's ground rent had accrued {jQ6 5s.), and this amount was still owdng to them when the accounts were closed. It will be noted that the* total of the entries on the Cr. side exceeds the total of the entries on the debit side by jQ6 5s. SIMPLE LEDGER ACCOUNTS. 19 (c) Nominal Accounts (or, as they are .sometimes called, Impersonal Accounts) naturally very in name according to the nature of the business recorded. In this set of hooks there is only one source of income or profit, and this is recorded in the (i) Rent Account, in which the rent is entered on the Cr. side as it becomes due. CONTRA. Cr. Dr. RENT. \ I9I3 Mar. 31 • • • By John Smith .. „ Thos. Brown.. , Wm. Robinson , Jas. Jones . . £ s d 50 125 50 75 The entries in the above example will be found to corre- spond with the amounts debited to the accounts of the various tenants. They are placed to the credit of Rent Account because they are tran^^actions in which a beneiit has been imparted by the business to other persons who have received a correspond- ing benefit. It will be remembered that, in just the same way. Bank Account parted with jQii los. to the Portland Estate, and was credited with that amount ; while the Portland Estate, having received a corresponding benefit, was debited with the amount. Returning to the Rent Account, if any rent had been allowed to a tenant, it would have been necessary to debit the Rent Account and credit the Tenant's Account with the amount .so allowed; but — fortunately for Mr. Jackson — no such transaction has to be recorded. There are four Expenses (or Loss) Accounts in this set of books, viz. : — (2) Wages Account. (3) (iround Rent Account. (4) Repairs Account. ^5) Depreciation Account. c 2 20 BOOKKEEPING. Dr. WAGES. CONTRA. Cr. £ s d 368 368 368 Dr. GROUND RENT. 1913 Mar. 31 To Portland Estate .. i s d 650 CONTRA. Cr. Dr. REPAIRS. 1913 Ma-. 22 To Bank i s d 17 ID O CONTRA. Dr. DEPRECIATION. CONTRA. 1913 £ s d Mar. 31 To Property Account. . I 100 o o The Wages Account record.s the cash payments to the attendant for looking after and cleaning the chambers. It is a benelit received by the department represented by this account, which is accordingly debited ; but, inasmuch as no future benefit will re.sult to the business from its payment, it is a business expense for the quarter, and goes towards the reduction of the profit. A similar remark applies to the Ground Rent and Repairs Account; but, with regard to the latter, it is to be noted in passing that, had there been any repairs executed but not paid for, they would be debited to SIMPLE LEDGER ACCOUNTS. 21 Repairs Account (increasing the balance of that account) and credited to a Personal Account opened in the name of the creditor, in precisely the same manner as the amount due for ground rent has been dealt with. The object of the Depreciation Account has already been explained ; when the closing of the books is further dealt with, the hnal effect of this transaction will be obvious. Before leaving the Nominal Accounts it may be added that — unlike the Personal and Real Accounts — the Nominal Accounts are closed each quarter (or at whatever other period the lx)oks are balanced) and the balance of each collected into one account, called the Revenue (or Profit and Loss) Account, the balance of which account shows at a glance the net result of the period's transactions. This point will, however, be fully explained later on. TRIAL BALANCE. Having now explained the meaning of each entry in the Ledger of Mr. Jackson, it it time to consider what is known as the balancing of the accounts. The twofold nature of each transaction in Bookkeeping — by which each benefit conferred involves a corresponding benefit received — has already been dwelt upon; and it will be noticed that this twofold aspect of the transactions (or transfers, as they really are) has been strictly maintained in the set of books with which we have been dealing. In order to test the clerical accuracy of work — a most necessary precaution where the number of entries is very numerous — it is usual to take out ■what is called a ■' Trial Balance," of which the following is a specimen : — 22 BOOKKEEPING. TRIAL BALAN'CE, 31st March 1913. Totals. Balances. Cash Bank Property.. ♦Capital .. John Smith Thomas Brown William Robinson James Jones Portland Estate Rent Wages . . Ground Rent . . Repairs .. Depreciation . . Dr. £ s d 285 o o 250 o o 15,000 o o 100 o o 100 o o 250 O 85 o o 75 o o 12 10 o 10 o o 650 17 10 o 100 o o £■16,291 5 o Cr. £ s 260 o 130 o 100 o 15,197 10 50 o 125 o 35 o 75 o 18 15 300 o £ 25 120 14,900 50 125 50 10 o o £16,291 5 o 6 17 10 100 o 5 o £15,403 15 o Cr. £ s d 15,097 10 o 650 300 o o £15,403 15 o The first column of figures in the above example represents the total amount on the Dr. side of each account, the second column the total amount on the Cr. side of each account, the third column the amount by which the Dr. column exceeds the Cr. column, and the fourth, the amount by which the Cr. column exceeds the Dr. column. If each transaction has been correctly recorded as a transfer, affecting two accounts in equal and opposite ways, it follows that the totals of the first two columns must be the same, and, consequently, that the totals of the second two columns must be the same. If, therefore, the totals do actually agree, there is good ground for supposing that the transactions are correctly recorded ; and it is the check thus afforded by the Trial Balance which forms one of the great advantages of Double Entry. Having now ascertained, by means of the Trial Balance, the accuracy of the record of the transactions, the bookkeeper may — as shown in the following chapter — proceed to '' close the books " and prepare a Revenue Account and Balance Sheet. ♦ It is to be remembered that the figures in italics on the credit side of this account do not find their way to that place until a later period than that now being considered. The Revenue Account has not yet been compiled— still less its balance ascertained and transferred to Capital. SIMPLE LEDGER ACCOUNTS. 23 Questions on Chapter II. 1. How many different classes of accounts are there? 2. Xame them. 3. Civf examples of each class. 4. State the use of each of your examples. 5. What would a Dr. balance upon each of your examples imply? 6. What would a Cr. balance imply ? 7. What is a Trial Balance? 8. What is its ol»ject, and how is it effected? III.— CLOSING THE LEDGER. The object of "closing" ihe Ledger is twofold, (i) to ascertain the net result of {i.e., the profit or loss arising from) the transactions recorded ; and (2) to place on record, in a form convenient for subsequent reference, the state of each account on the date at which the books are closed. It has already been stated that, when the books are closed, the balance of each Nominal Account (or, in other words, the total profit or loss deiived from every source) is transferred to one account — generally called, in trading concerns, the Profit and Loss Account, and, in non-trading concerns, the Revenue Account. It is now proposed to proceed to compile a Revenue Account from the transactions recorded in the last chapter. As the Revenue Account is merely a collection of the balances standing on the various Nominal Accounts, it is obvious that Dr. balances will be transferred to the Dr. side of the Revenue Account, and Cr. balances to the Cr. side of the Revenue Account. Further, it is obvious that a Dr. balance on a Nominal Account cannot, after having been transferred to the debit of Revenue Account, still remain standing to the debit of the Nominal Account ; it is therefore necessary, when a debit balance is transferred to the Revenue Account, that the Nominal Account should at the same time be credited with the same amount. In the same way, if it is desired to transfer the Cr. balance of a Nominal Account to the Cr. of the Revenue Account, it is necessary both to debit the Nominal Account and to credit the Revenue Account with the amount of such balance. CLOSING THE LEDGER. 25 The two sides of the Xominal Account will then total up to the same amount — '■ balance," as it is called — and such total is then entered on "both sides to bear witness to the fact that such account does balance, and a double line is ruled under each total to signify that the account is *' closed." Referring back to tlie Rent Account given in the last chapter, it will be perceived that there is a credit balance on this account of ;£3oo. To transfer this balance to the credit of Revenue it is necessary to debit Rent Account, and credit Revenue Account with /^300. Then add up both sides of the Rent Account, insert the total (;^3oo) on each side, rule a double line under the total, and the Rent Account is closed; but there remains, of course, a Cr. balance (of £s°o) on the Revenue Account. In the same way the four remaining Xominal Accounts are closed by crediting Wages Account with ;£io, Ground Rent Account with j£6 5s., Repairs Account with ^17 los., and Depreciation Account with ;£ioo, at the same time debiting Revenue Account with all four amounts. These four Nominal Accounts can be then added up and closed; but there is left standing to the debit of Revenue ^133 15s. — exactly the same amount as was formerly standing to the debit of the four Xominal Accounts collectively. The following examples will show these transactions clearly, the italics representing the closing entries described above : — Dr. RF.XT. (T)XTRA. Cr. Mar. 31 To Revenue At 300 s d £300 1913 Mar. 31 By John Smith , Thos. Brown , W. Robinson • Jas. Jones i s d 50 125 50 75 £300 26 BOOKKEEPING. Dr. WAGES. CONTRA. Cr. 1913 Jan. 31 Feb. 28 Mar. 31 To Cash £ s d 368 368 368 ilO 1913 Mar. 31 By Revenue A ccount. . £ s d 10 £10 o Dr. GROUND RENT CONTRA. Cr. 1913 ' £ s d ! 1913 Mar. 31 ! To Portland Estate 6501 Mar. 31 £ s d By Revenue Account 6 5 Dr. REPAIRS. CONTRA. Cr. 1913 Mar. 22 To Bank £ s d 17 10 o 1913 Mar. 31 By Revenue Account £ s d 17 10 Dr. DEPRECIATION. CONTRA. Cr. Dr. REVENUE ACCOUNT. CONTRA. I9I3 £ s d I9I3 . £ s d Mar. 31 To Wages .. 10 Mar. 31 By Rent 300 „ n Ground Rent . . 6 5 „ „ Repairs .. 17 10 " „ Depreciation . . 100 It will be noticed that where there is only one line on each side of an account (as in the Ground Rent and the two follow- ing accounts) the total is not repeated, a double line merely being inserted under the figures on each side. CLOSING THE LEDGER. 27 In order to make it quite clear to the reader that the above transactions have in no way affected the agreement of the Trial Balance, another Trial Balance is given below, as it would appear if extracted at this time — ^namely, after the Nominal Accounts have been closed : — TRIAL BALANCE, 31st March 1913. (After closing the Nominal Accounts.) Totals. Balances. Dy. Cr. Dr. Cr. £ s d £ s d £ s d £ s d Cash 285 a6o 25 Bank 250 130 120 Property 15,000 100 14,900 Capital ' . . 1 00 15,197 10 15.097 10 John Smith 100 50 50 e Thomas Brown 250 125 125 .. Wm. Robinson 85 35 50 James Jones 75 c 75 Portland Estate 12 10 18 15 6' 5 Revenue Account 133 15 300 166 5 £16,291 5 £16,291 5 £15,270 V:£ 15.270 i It will be remembered that the Revenue Account has been credited with every source of income, and debited with every source of expense or loss ; it therefore follows that the amount by which the credit side exceeds the total of the debit side is the net profit for the period over which the transactions extend. This net profit is jQt.66 5s. As already stated, this net profit does not belong to the business, but is owed by the business to its proprietor, H. Jackson. H. Jackson is thus a creditor of the business, not only for ^15,097 los. (the balance of his Capital Account) but also for this jQi66 5s. of profit. This fact is recorded by crediting the Capital Account with ^166 5s. (as shown by the italics in the Capital Account stated in Chapter II), at the same time debiting Revenue with that amount, and closing the latter account thus : — 28 Dr. BOOKKEEPING. REVENUE ACCOUNT. Cr. 1913 £ s d 1913 £ s d Mar. 31 To Wages.. 10 Mar. 31 By Rent ^. 300 „ Ground Rent. . 650 „ Repairs 17 10 ^ „ Depreciation.. 100 ' „ Capital Ale (wt profit for the quarter) 166 5 £300 £30n The Revenue Account, being merely a collection of the balances of the Nominal Account.s, i.s itself merely a Nominal Account, but now that all the Nominal Accounts are closed, and only Real and Personal Accounts left open, the bookkeeper is in a position to apply the second important check afforded by Double Entry — the agreement of the Balance Sheet. As will be remembered, Real Accounts represent Assets, and Personal Accounts either Assets or Liabilities. The credit balance of the Capital Account represents the sum by which the assets exceed the liabilities due to outside creditors (that is, creditors other than the proprietor), and such assets and liabilities are the balances of the Real and Personal Accounts (other than the Capital Account). If, therefore, the accounts are correctly stated, a Balance Sheet comprising the balances of all the accounts except the Capital will show the same l>alance as that shown by the Capital Account. The following is a Balance Sheet drawn up on these lines : BALANCE SHEET, 31st March 1913. Liabilities. £ s d Assets. £ s d Portland Estate . . 6 5 Cash Bank Property . . John Smith Thos. Brown Wm. Robinson . . 25 120 14,900 50 125 50 CLOSING THE LEDGER. 29 It will l)e seen that the assets* side of this Balance Sheet amou'.its to ;£i5,27o, while the liabilities' side is £j^ 5s. The difference is therefore ^15.263 15s., representing the Capital, and this is the amount shown as the balance of the Capital Account. To express this in another way. The business, as such, can own no property, Imt owes everything to its proprietor. It consequently follows that, if the accounts are correctly recorded, all the assets will be equal to all the liabilities (that is, all the lialiilities including the Capital Account) ; or, in other words, the total of the debit balances will always equal the total of the credit balances. To show that this is so in the present case, the Balance Sheet is here given in its complete form. Tlie items have been re-arranged in the manner in which they would usually be stated, but the reader will have no difficulty in following each Ledger Balance to its place in the Balance Sheet. BALANCE SHEET, 31st March 1913. Liabilities. Capital A aount : Balance i Jan. £15.197100 Less withdrawn 100 15,263 15 650 I Assets. Property Account : Balance i Jan. . .£15,000 Less Depreciation 100 £ s d 15,097 100 Net Proht for the quarter.. 166 5 Debtors : John Smith 50 Thos. Brown 125 Wni. Robinson . . 50 Creditors : Portland Estate Cash : At Bank . . . . 120 In hand . . . . 25 145 I £ 15,270 15,270 It may here be repeated that the great advantage of Double Entry is that it not only affords a most valuable check upon the clerical accuracy of the books, but also — by means of the 30 BOOKKEEPING. Revenue or Profit and Loss Account — it furnishes full details of the manner in which the profit, or loss, has been arrived at. It is thus possible to compare the various items of income and expenditure of different periods, and to consider whether or no certain sources of income are paying their way, and whether (and, if so, where) further economies can be effected. It is with this end in view that the various Nominal Accounts are kept, and the balance of each finally transferred to the Revenue Account. It will be obvious that the balance of the Revenue Account would have been just the same had all items of income or expenditure been posted to it direct, instead of being first posted to the various Nominal Accounts and then transferred ; but in the former case — especially if the items were numerous — the record would be too confused to afford any data for the comparison of the various details in different periods. It is, indeed, possible to go even a step further, and to say that the balance of the Capital Account would have been the same if all items of income and expenses had been posted to that account direct, without availing oneself of the analytical advantages of Nominal Accounts. The Real and Personal Accounts still remain to be dealt with ; not because the balances have to be transferre(5 to any other account, but because — as stated at the commencement of this chapter — it is desirable to place on record, in a form con- venient for subsequent reference, the state of each account on the date at which the books are closed. The following example will show, better than any mere explanation, the way in which these accounts are dealt with. The process is called '' bringing down the balances." Dr. CLOSING THE LEDGER. CASH. CONTRA. 31 1913 £ s d 1913 £ s d Jan^ 'i To John Smith .. 50 Jan. 16 By Bank .. 150 16 , Thos. Brown . . 125 31 Do 50 21 , W. Robinson . . 35 Wages .. 3 6 8 Mar. z^ , Jas. Jones 75 Feb. 28 Do 3 6 8 Mar. 31 Do 3 6 8 Bank .. 50 To Balance .. • Balance.. 25 £285 £285 G April 1 25 Dr. BANK. CONTRA. Cr. Jan. 16 31 Mar. 31 To Cash . . .Do . Do To Balance .. £ s 150 50 50 d , ' 1913 Feb. 7 Mar. 6 22 31 By Portland Estate, Ground Rent. . , H. Jackson (pri- vate expenses) , Repairs . . , Balance .. £ s d 12 10 100 17 ID 120 £250 £250 April 1 120 ' Dr. PROPERTY. CONTRA. Cr. 1913 Jan. I To Balance from last Account (value at this date) .. £ To Balance .. £ s d 15,000 1913 Mar. 31 By Depreciation of Lease .. , Balance.. £ £ s d 100 14,900 15,000 15,000 April 1 ! UfiOO 32 BOOKKEEPING. Dr. CAPITAL ACCOUNT. CONTRA. Cr. I9I3 Mar. 6 31 To Bank (private expenses „ Balance.. £ £ sd 100 }5,263 15 , 1913 Jan. I Mar. 31 April 1 By Balance at this date , Revenue A/c . . £ By Balance . . £ sd 15,197 10 166 5 15,363 15 15,363 15 15,263 15 Dr. JOHN SMITH. CONTRA. Cr. ^ I9I3 Jan. I Mar. 31 To Balance at this date . . „ Rent for the quarter To Balance .. £ s d 50 50 1913 Jan. I Mar. 31 By Cash .. „ Balance . . £ s d 50 50 £100 £100 A prill 50 Dr. THOMAS BROWN. CONTRA. Cr. 1913 Jan. I To Balance at this I date Mar. 31 „ Rent for the quarter April 1 j To Balance .. £ s d 125 125 ' 1913 Jan. 16 yar.31 £250 125 By Cash .. „ Balance . . £ s d 12=) o o 125 £-?50 Dr. JAMES JONES. CONTRA. Cr. 1913 Mar. 31 j £ s d ' 1913 To Rent for the quarter 75 o o I Mar. 27 By Cash £ s d 75 o o CLOSING THE LEDGER. Dr. WIT.LTAM ROHIXSOX. CONTRA. 33 I9I3 Jan. I Mar. 31 To Balance at this date „ Rent for the quarter To Balance £ s 35 50 d I9I3 Jan. 21 Mar 31 By Cash , Balance . . £ ^00 MOO 85 85 April 1 50 1 Dr. PORTLAND ESTATE. CONTRA. 1913 Feb. 7 I To Bank Mar. 31 I „ Balance Cr. £ s d I 1913 I £ s d 12 10 o |{ Jan. I By Balance due at this 6 5 \\ ' ' date .. . . 12 10 o I Mar. 31 „ Ground Rent to jj date . . . . 650 CIS 15 I AptHl \ By Balance £18 15 6 5 It will be observed that these balances, when brought down as shown above, are in a very convenient form for future reference (even after subsequent entries have been added) ; but that in no case do they effect any alteration in the balance standing on the account when the Balance Sheet was taken out. It is hardly to be supposed that, at this early stage, the student will have thoroughly grasped the whole of the process set forth in this and the preceding chapter ; but it is hoped he will have gathered a .sufficiently general idea of the purpose of the various Ledger Accounts to enable him intelligently to follow the progress of the transactions recorded in the next chapter, where the transactions of Henry Jackson during the succeeding quarter are fully dealt with. 34 BOOKKEEPING. Questions on Chapter III. 1. What are the objects of " closing " a Ledger? 2. What does the process consist of? 3. What account shows the net profit, and why ? 4. What is done with the balance of the Revenue, or Profit and Loss Account? 5. Why must the Revenue Account be completed before the Balance Sheet can be prepared? 6. What is the object of keeping Nominal Accounts? 7 . Wherein lies the advantage of Double Entry ? 8. What is meant by ** transferring " a balance? 9. What is meant by " bringing down " a balance? IV.— TRANSACTIONS OF HENRY JACKSON. The following are the transactions of Henry Jackson during the quarter following that which was considered in the previous chapters : — TRANSACTIONS during Quarter ending 30th June 1913. I. April 6 ; 2. „ 6 , 3- „ 10 4- „ 12 •)• „ 13 6. „ 30 7- May 12 8. » 30 9. June 15 10. " 30 II. „ 30 12 „ 30 13- „ 30 14- » 30 i")- „ 30 lb. „ 30 17- „ 30 18. „ 30 19- » 30 Received from Thomas Brown, Rent due from him Paid into Bank Received from Wm. Robinson, Rent due from him Received from John Smith, Rent due from him Paid into Bank Paid Wages Drew Cheque for private expenses . . Paid Wages Paid for various Repairs (cheque) Paid Wages Sent out the following accounts for Rent due : John Smith William Robinson Thomas Brown James Jones James Jones paid Rent due by him . . Received Henry Williams' account for Repairs Ground Rent due to Portland Estate for quarter. Depreciation to be written off Lease of Property. Drew Cheque for private expenses £ s d 125 140 50 50 100 3 6 8 100 3 6 8 12 16 3 6 8 50 50 12.-) 75 75 4 14 6 5 105 100 It will be remembered that, in Chapter I, it was stated that the original method of bookkeeping was to record all transac- tions daily, in the order of their occurrence, in a book called the Journal, and at a subsequent date to record the same trans- actions in the Ledger in a classified form. In Chapter II an endeavour was made to show the form of classification that would be adopted in a case like the present one ; and in Chapter III the object and meaning of the particular form adopted was further explained. D 2 36 BOOKKEEPING. 'J'he reason for dealing with tiie Ledger Accounts before explaining the form in which the Journal is kept has been that the form of a Journal entry is entirely dependent upon the form of the subsequent Ledger entries which have to be made from the Journal ; and accordingly it was thought best first to give the student a clear idea of the object and meaning of each Ledger entry, before endeavouring to explain the form of the Journal entry from which the Ledger entry is made. It is important to remember that the Ledger contains, in itself, a complete record of every transaction, and that, there- fore, it would be possible theoretically to dispense altogether with any other book ; but the risk of error, or omission, would be so considerable that, in all probability, no time or trouble would be saved by so doing. In the case of cash transactions, however, it has become very general to dispense with the Journal and keep the Ledger Account for " Cash "in a separate book from the other Ledger Accounts. The reason for this departure from the general rule is as follows : When every transaction is journalised, it is, of course, usual to keep the Journal written up daily, but — by reason of press of business, or from various other reasons — it frequently happens that the posting of the Journal into the Ledger is a week or more behind. Now it is, of course, of the greatest importance that the balance of the Cash Account be always readily ascertainable, and from this necessity arose the practice of keeping the cash transactions somewhat differently from the rest. Other incidental advantages doubtless exist, but this is probably the actual reason that led to the original departure. The Cash Book is ruled exactly the same as the Ledger, and in it the cash received or paid is recorded in exactly the same manner as it would J)e in a Ledger Account, except that each TRANSACTIONS OF HENRY JACKSON. 37 transaction is recorded as it occurs, instead of being recorded in the Journal first and afterwards posted. By this means the balance of the account may at any time be ascertained; but this in itself, of course, constitutes no '' Double Entry." How this is obtained the reader will, perhaps, best see by carefully following the process of writing up the Cash Book from the above transactions. It must not be forgotten, however, that Jackson commenced the quarter with a cash balance of j£2^ in hand, as shown on the Balance Sheet on page 29. The transactions involving a transfer of cash are Nos. i, 2, 3, 4, 5, 6, 8. 10, and 15, which should be recorded in the manner already explained — the receipts on the Dr. side and the payments on the Cr. side, thus : — Dr. ("ASH. CONTRA. Cr. 1913 April I 6 10 12 June 30 To Balance from £ s d 1913 , April 6 last accou. t 25 1 13 „ Thos. Brown «» 125 1 30 , W. Robinson 6 50 , May 31 „ Jno. Smith .. 4 50 June 30 » Jas. Jones . . 7 75 By Bank « L»o. » Wages « Do. » Do. £ 140 100 3 3 3 s d o o o o 6 8 6 S 6 K Xow take the remaining transactions and proceed to show the Journal entry required for each. The object of the Journal entry is to indicate clearly what account in the Ledger has to be debited, and what account credited, in order to record each transaction. The form usually adopted is first to write the name of the account to be debited, with the amount, in the first (or Dr.) money column; and then the name of the account to be credited, the amount being repeated in the second .(or Cr.) money column; a full explanation of the transaction is .then written underneath. 38 BOOKKEEPING. The form of Journal entries for transactions Nos. 7, 9, 11, 12, 13, 14, 16, 17, 18, and 19 is as follows : — JOURNAL, 1913. Dr. Cr. 7. May 12 9, June 15 30 11. June 12. „ II 13- « 14 " 16, June 30 17. June 30 18, June 30 19. June 30 Capital Account To Bank (For cheque drawn this clay for private expenses) Repairs To Bank (For cheque drawn this day in payment of various repairs.) John Smith To Rent William Robinson To Rent Thomas Brown . . To Rent James Jones To Rent (Being the amounts of accounts sent them this day for rent for the quarter now due.) Repairs To Henry Williams (Being the amount of his account for repairs ) Ground Rent To Portland Estate (Being one quarter's Ground Rent, making in all £'12 ios,^ow due, as per their half-yearly account,) Depreciation To Property Account (Being the amount written off lease for the quarter.) Capital Account To Bank (For cheque drawn this day for private expenses) 3 I 100 13 I 12 16 1 4 10 6 10 5 10 7 10 1 50 o| 50 125 75 13 9 1 4 14 oj 12 8 6 5 oi 14 2 105 3 I 100 I s d 100 o o 50 o o 50 o o 125 o o 75 o 105 o o 100 o A careful comparison of these entries with the records of the transactions themselves will serve to show the reason for the form of each entry — and it need hardly be added that, until the student can assign a reason for every entry he makes, he has made but little progress in the science of bookkeeping. TRANSACTIONS OF HENRY JACKSON. 39 It will be seen that, at this time, a record has been made somewhere for every one of the transactions shown at the com- mencement of this chapter. Those transactions involving the transfer of cash have been recorded in the Cash Book, and those transactions not recording the transfer of cash have been recorded in the Journal. The next step is to write up (or post) these records in the Ledger. It must be remembered that each transaction requires to be entered once upon each side of the Ledger. It has been further explained that the Cash Book is, in reality, a Ledger Account, but that the Journal is not. It therefore follows that those transactions that are recorded in the Cash Book have already, in point of fact, been recorded once in the Ledger ; to complete the record of these transactions, therefore, it is necessary that they should find their way once more into the Ledger upon the opposite side to that on which they are entered in the Cash Book. The Dr. side of the Cash Book must therefore be posted to the Cr. of the various accounts of the persons who have paid Jackson the money, and the Cr. side of the Cash Book to the Dr. of the various accounts upon whose behalf he has incurred the expenditure, and the record of the cash transactions is complete. The transactions recorded in the Journal, on the other hand, require to be passed into the Ledger twice, once to the Dr. and once to the Cr., and for this reason the form of the Journal entry has been adapted to facilitate this process. The amounts in the Dr. column are posted to the Dr. side of the Ledger Accounts named, and the amounts in the Cr. column of the Journal are posted to the Cr. of the various Ledger Accounts. The Ledger Accounts so posted are given below ; they should be compared carefully with the Cash Book and Journal, already given — a process that can easily be accomplished by the aid of the folio references. It will be noticed that the balances standing upon the various accounts at the date of our last Balance Sheet have been brought forward into these accounts. 4P BOOKKEEPING. Dr. 1>AXK, C(X\TRA. Cr. I9I3 1 £ s April I To Balance . . , 120 6 „ Cash .. .. 1 I 140 n „ Do I 100 d 1913 o May 12 I By Capital Account o June 15 „ Repairs o I 30 I „ Capital Account I £ s d J.I 100 o o , 12 16 O „ I 100 O O PROPERTY ACCOUNT. Cr. „ s r 1913 I I £ s d 1490000 June30 I By Depreciation ,, IJ. I I 105 o o I i Dr. 1913 May 12 To Bank June 30 „ Do. CAPITAL ACCOUNT. £ s d j 1913 J. I loo o o j April I By Balance 100 o o I Cr. £ sd 15,263 15 o Dr. JOHN SMITH. Cr. I9I3 f. s (1 1913 £ s d April I To Balance 50 April 12 By Cash .. I 50 June 30 „ Rent .. J.I 50 Dr. THOMAS IJROWN, Cr. 1913 April I June 30 To Balance „ Rent .. J.I £ s d 125 o o 125 o o I9I3 April 6 By Cash £ s d 125 o o Dr. WILLIAM ROBINSON. Cr. I9I3 £ s d 1913 c s d April I To Balance •• 1 50 April 10 Bv C. ish .. I 50 June 30 „ Rent .. .. IJ.i 1 i 50 Dr. TRANSACTIONS OF HENRY JACKSON. JAMES JONES. 1913 June 30 To Rent . .. iJ.i i s d 75 o o 1913 June 30 By Cash . . 41 Cr. i s d 75 o o Dt PORTLAND ESTATE. Cr. I i April I By Balance June30 , Ground Rent J. i 1 650 650 Dr. HENRY WILLIAMS. Cr. 1913 June 30 I By Repairs J.I r s d 4 14 o RENT. Cr. I9I3 i s d June 30 By J. Smith J.I 50 1 " „ Wni. Robinson 50 ' » , T. Brown . . * 125 „ J.Jones * 75 WAGES. Cr. 1913 , April 30 To Cash May 31 I „ Do. June 30 I „ Do. £ s d 368 368 368 42 BOOKKEEPING. Dr. GROUND RENT. Cr. 1913 June 30 To Portland Estate i £ s d J.i 6 5 o 13 Dr. REPAIRS. Cr. 1913 June 15 30 To Bank . . „ H. Williams. J.I 12 16 » 4 14 1 1 ■ 14 Dr. DEPRECIATION. 1913 June 30 To Property A/c. £ s d J. 1, 105 o o It will now be seen that every transaction has been posted twice into the Ledger — thus giving effect to the twofold nature of each transfer. Those accounts that have received benefits have been debited, and those that have imparted benefits have been credited ; and, consequently, the total debits in the Ledger will be equal to the total credits. As already explained, it is very desirable that there should be some means of ascertaining that the entries that have actually been made do really come to the same thing as those which should theoretically have been made. To test this, the book- keeper would proceed to extract a Trial Balance, in the same manner as shown in Chapter II. TRANSACTIONS OF HENRY JACKSON. 43 The following is the Trial Balance of Henry Jackson's Ledger on the 30th June :^ TRIAL BALANCE, 30th June 1913. C. I. Cash L. I. Bank 2. Property 3. Capital .. 4. John Smith 5. Thomas Brown 6. William Robinson 7. James Jones . . 8. Portland Estate 9. Henry Williams 10. Rent 11. Wages .. 12. Ground Rent 13. Repairs . . 14. Depreciation 325 360 14,900 200 100 250 100 75 s d £ s 250 o 212 16 105 O [5.263 15 50 O 125 o 50 o 75 o 12 10 414 300 o £ 75 147 14.795 50 125 50 s d 15.063 15 o 12 10 414 300 o 10 o 6 5 17 10 105 o ID O 6 5 17 10 105 o £16,448 15 o /■i6,448 15 o £15,380 19 o £15,380 19 o Before proceeding to close the books for the quarter, it will be well to say something concerning the Continental systems of Bookkeeping ; and for the purpose of more clearly showing the differences of detail between the two methods, it is pro- posed to deal with the same set of transactions as those already considered above. 44 BOOKKEEPING. Questions on Chapter IV. T. What is gained by not journalising cash transactions? 2. How are cash receipts and payments recorded? 3. What entries are necessary to record the fact that A. has become my debtor? 4. What entries are necessary to record the fact that B. has become my creditor? 5. If certain property that I hold has become less valuable, how should I record the fact? v.— THE '^CONTINENTAL" SYSTEM. It will h)e remembered that, in the first chapter, attention was drawn to the fact that the system generally adopted on the Continent is somewhat different to that in use in this country. The reason for going more deeply into the matter now is that the Continental system is theoretically more com- plete than our own, and will therefore help the student to understand more clearly the abbreviated method in general use in this country. It may, however, be mentioned that for some businesses the Continental method is the best to adopt, and that a general acquaintance with its details will, therefore, be by no means a waste of time — even to the student who thoroughly understands the Engli.sh system. The essential feature of the method which the reader is now called upon to consider is the supreme importance of the Journal. Every transaction is passed through this book in the fullest detail, while the Ledger entries are made as few and as general as possible. The Journal thus becomes the book to which the merchant constantly refers, while the use of the Ledger becomes restricted almost to the position of a mere collecting medium for the Revenue Account and Balance Sheet items. It may interest the reader to know that, in many coimtries, every trader is compelled by law to record all his transactions in a lournal. 46 BOOKKEEPING. For the purpose of showing more clearly the exact differ- ence between the two systems, it will be well to take the position of Henry Jackson upon the ist April, and his transactions for the subsequent three months, and show the method by which they would be recorded upon the Continental system. It will be noticed that the form of the Journal here given is somewhat different from the ordinary English form; the out- side column being used for both Dr. and Cr. items, and the inside one for details of the ^' Sundries." The Ledger folio of the Dr. posting is to the extreme left, while the date is placed at the head of the entry. JOURNAL, 1913. April I. Sundries to Opening Balance , For the following assets due to me at this date, viz. : — Property John Smith Thos. Brown Wm. Robinson Bank Cash Opening Balance to Sundries For the following liabilities due from me at this date, viz. : — , Capital Portland Estate April 6. Cash to Thos. Brown Being the amount received from him this day. Bank to Cash Being the amount of cash paid into bank this day. April 10. Cash to Wm. Robinson Being the amount received from him this day. Cash to John Smith Being the amount received from him this day. April 13. Bank to Cash Being the amount of cash paid into bank this day. Forward £ s d 14,900 o o 50 o o 125 o o 50 o o 120 o o 25 o o 15,263 15 6 5 £ s d 15,270 o o 15,270 o o [40 o o 50 c o 31,005 o o THE CONTINENTAL SYSTEM. Forward ; April 30. Wages to Cash ~ Being the amount paid to attendant this day, I fcr wages. ' May 12. Capital to Bank Being the anjount of a cheque drawn for private expenses this day. May 31. Wages to Cash Being the amount paid to attendant this day, for wages. June 15. Repairs to Bank Being the amount of a cheque drawn for various repairs on this day. June 30. Wages to Cash Being the amount paid to attendant this day, for wages. Sundries to Rent Being the amount due from various persons tor one quarter's rent due this date, viz. : — John Smith Wm. Robinson Thos. Brown James Jones . June 30. Cash to Jas. Jones Being the amount received from him this day. =3 15 Repairs to Henry Williams 14 Being the amount due to him for repairs, as per his account of this date. Ground Rent to Portland Estate g Being the amount due to them for one quarter's Ground Rent to this date. Depreciation to Property 2 Being the amount written oflf property at this ' date tor depreciation of lease (at 5% interest), i Capital to Bank 6 Being the amount of a cheque drawn for i private expenses this day. | 50 o o 50 o o 125 o o 75 o o 47 £ s d 31,005 o o 368 368 [2 16 O 368 300 o o 4 14 o 650 105 o o £31.718 15 o 48 BOOKKEEPING. It will be noticed that the Continental system requires Journal entries for the outstanding assets and liabilities at the commence- ment. Upon the English system — after the books have once been opened — this is not required, the balances on the books being merely carried forward. With the Continental system, on the contrary, the books are literally " closed " each time a Balance Sheet is prepared — no balances whatever being left upon the Ledger — and consequently it is necessary for them formally to be " opened " again at the commencement of the subsequent period. It will be necessary to recur to this ques- tion when coming to the closing of the Ledger, and we may therefore pass on now to the posting of the Journal. The following shows the Ledger Accounts resulting from th^ transactions already recorded : — Dr. OPENING BALANCE. Cr. 1913 April I To Sundries. . I i s d 15,270 1913 April I By Sundries. . 1 i ^ ^ I I 15,270 d 2 Dr. I'ROPERTV ACCOUNT. Cr. April I ToSundiies.. i £ s d I 1 14,900 i 191J June 30 By Sundries.. 3 105 J d 3 Dr. JOHN SxMITH. Cr. April I J line 30 To Sundries.. Do .. ' i s d 1 50 1 2 50 i 1 1913 April 10! By Sundries . 1 I 50 d 'Dr. THOMAS BROWN. Cr. i9'3 Apiil I To Sundries. June 30 „ Do. £ s d 1913 125 o o April 6 By Sundries. 12j O O £ 125 s d THE CONTINENTAL Dr. 1913 \ April I ' To Sundries.. June 30 , Do. .. Dr. BANK ACCOUNT. I9I3 I s d I9I3 i s d April I To Sundries.. I 120 May 12 By Sundries. . 2 100 o 6 Do. . . • 140 June 15 , Do. .. , 12 16 ^3 . Do. .. 2 lOO 30 , Do. .. 3 loo Dr. CASH ACCOUNT. Cr. 1913 i s d 1913 £ B d April I To Sundries.. 25 April 6 By Sundries.. I 140 6 . Do. .. 125 13 , Do. .. 2 100 10 Do. .. 50 30 , Do. .. * 368 » Do. .. 50 May 30 . Do. .. m 3 6 8 June 30 Do. .. 75 3 June 30 Do. . . m 3 6 8 Dr. CAPITAL ACCOUNT. Cr. Apnl3o June 30 To Sundries.. „ Do. . . 2 3 £ s d 100 100 1913 Apfil I 1 By Sundries.. I 15,263 15 Dr. PORTLAND ESTATE. 1913 April I June 30 By Sundries. . . Do. .. Cr. £ s d 650 650 Dr. WAGES ACCOUNT. Cr. April 30 May 31 J une >o To Sundries.. 2 Do. .. , , Do. .. , £ s d 3 6 8 3 6 8 368 50 BOOKKEEPING. Dr. REPAIRS ACCOUNT. Cr. 1913 J una 15 30 To Sundries. Do. . £ s d 12 16 o 4 14 o Dr. RENT ACCOUNT. Cr. 1913 June 30 By Sundries.. 2 £ s d 300 ^^Dr. JAMES JONES. Cr. 1913 June 30 To Sundries.. 2 £ s d 75 1 1913 jjune 30 By Sundries. . 3 £ s d 75 Dr. HENRY WILLIAMS. Cr. - 1913 June 30 By Sundries., j 3 £ s d 4 14 ^^Dr. GROUND RENT ACCOUNT. Cr. 1913 June 30 To Sundries.. 3 650 16 Dr. DEPRECIATION ACCOUNT. Cr. 1913 June 30 To Sundries.. 3 £ s d 105 It will be noticed that no explanation is added to any of the Ledger entries ; it is not, however, intended that the word '' Sundries " be used invariably; what is meant to be shown is rather that it may be used at any time (it is always used THE "continental SYSTEM. 5 1 where one credit corresponds to several debits, and vice versa), and that consequently the Journal is the only sure means of ascertaining any further particulars that may be required. It will further be noticed that, had the Ledger Account ** Opening Balance " been posted in detail, it would have corresponded exactly with the Balance Sheet on 31st March, shown in Chapter III. It is very important that the student should realise this fact quite clearly. The 'I'rial Balance is the same, in principle, as those already taken out ; but, in consequence of every entry having been passed through the Journal, it follows that the totals of the two first columns of the Trial Balance, in addition to agreeing with each other, will agree with the total of the Journal. This is a very valuable check, as it shows that every item in the Journal has been posted. It will be obvious that the fact of an entry being left entirely unposted would still leave the total debits of the Ledger equal to the total credits ; but in that case both these totals would be less than the total of the Journal by the amount of the omitted item. Further, in the event of the Dr. and Cr. columns of the Trial Balance not agreeing, it is possible — by comparison with the Journal — to ascertain which is wrong, and so localise the error, and, to a great extent, facilitate its discovery. These checks are undoubtedly very valuable, and form almost the sole advantages of the " Continental " system. B 2 52 BOOKKEEPING. The Trial Balance of the Ledger is given below : — TRIAL BALANCE, 30th June 1913. Dr. Cr. Dr. Balajice Cr. Balance £ s d £ s d £ s d £ s d I. Opening Balance . . 15,270 15.270 2. Property Account 14,900 105 14,795 i 3. John Smith 100 50 50 1 4. Thomas Brown . . 250 125 125 ° 1 5. William Robinson . ! 100 50 50 ! 6. Bank Account 360 212 16 147 4 . 7. Cash Account 325 250 75 i Ik Capital Account . . 200 15.263 15 15.063 15 » 9. Portland Estate . . 12 10 ! 12 10 ID. Wages Account . . 10 .. 10 .. II. Repairs Account .. 17 10 17 10 12. Rent Account 300 300 13. James Jones 75 75 14. Henry Williams . . 4 14 4 14 15. Ground Rent Account . 6" 5 6' 5 16. Depreciation Account . 105 105 £31,718 15 £31.718 15 £15,380 19 £15.380 19 1 THE CONTINENTAL SYSTEM. 53 Questions on Chapter V. 1. What is the peculiar characteristic of the " Continental '* system ? 2. Are there any local circumstances to account for it? 3. What is an Opening Balance Account? 4. What are the principal advantages of the " Continental " system ? 5. What are its disadvantages? ^ VI.— CLOSING THE LEDGER ON THE ^^CONTINENTAL" SYSTEM. The method of closing the Ledger upon the *' Continental "" system is very similar to that already considered ; the main difference being that every entry, as before, passes through the Journal. The Nominal Accounts are first collected into one account — the Revenue Account — and the balance of this account is- then transferred to Capital. The only accounts then left upon- the Ledger are those recording assets and liabilities — which are, of course, always equal in amount. These accounts, under the former system, formed the materials of the Balance Sheet ;. but the actual balances were always brought down on each account ready for the commencement of the next period — thus- the books were not^ in fact, ever actually closed. Under the " Continental " system the balance of every Real or Personal Account is transferred to an account called " Closing Balance " ;. the Assets, or Dr. balances, being transferred to the Dr. side of this account, and the Liabilities, or Cr. balances, to the Cr. side. The Dr. and Cr. sides of the Closing Balance will' thus be equal in amount, and, consequently, every account in the Ledger can be — and is — balanced and ruled off; the Ledger being actually and literally '^ closed " every time a Balance- Sheet is prepared. When the Ledger has thus been closed, it,- of course, becomes necessary to '' re-open " it at the commence- ment of the succeeding period. CLOSING THE LEDGER ON THE " CONTINENTAL ' SYSTEM. 55 The Journal entries necessary to close the Ledger are as follow : — JOURNAL, 1913. 12 Forward . . Rent Account to Revenue Account For Income earned during the quarter, now transferred to Revenue Account. 17 * 10 II :i 8 * 2 3 4 1 7 18 £ s d 10 17 10 650 105 14,795 50 125 50 147 ♦ 75 15,225 12 10 4 14 £ s d 31,718 15 300 17 Revenue Account to Sundries For various expenses incurred during the quarter, now transferred to Revenue Account, viz. : — Wages Repairs Ground Rent Depreciation 138 15 17 Revenue Account to Capital Account . . Being the amount by which the Income for the quarter exceeded the Expenses for the quarter— constituting the net profit of the quarter. 161 5 18 Closing Balance to Sundries As follows, viz. : — Property Account John Smith Thos. Brown William Robinson Bank Account Cash Account 15,242 4 * 8 9 14 Sundries to Closing Balance As follows, viz. :— Capital Account Portland Estate " Henry Williams 13.242 4 £62,803 3 A Trial Balance taken out after the posting of these entries would give the same total as that shown above, viz., £62,803 3S- 56 BOOKKEEPING. By this time the attentive student should experience no great difficulty in posting the above entries to their respective Ledger Accounts ; but in order to remove any possibility of misappre- hension, the Ledger Account ''Closing Balance" is given below : — Dr. CLOSING BALANCE. 1909 June 30 To Sundries. £ s d 15,242 4 o 1909 June 30 By Sundries.. Cr. £ s d 15,242 4 o It will be seen that, before any transactions for July are recorded, the books must again be " opened," so that the various accounts may record the actual state of affairs. This is accomplished by two Journal entries similar to the first two in our pro forma Journal of Chapter V; being, in fact, the closing entries reversed. It will be convenient here to consider the difference between the two methods. Under the " Continental " method, the whole of the transactions pass through the Journal into each side of the Ledger. The profit is arrived at by collecting the various Income and Expenditure {i.e.. Nominal) Accounts into one general (Revenue) Account. This profit is then carried to Capital Account, and nothing but Real and Personal Accounts remain open. In order to ascertain the actual state of affairs, these Real and Personal Accounts are then collected into one account — the Closing Balance Account — and every account in the Ledger is then ruled off. The agreement of the Closing Balance proves that the stated assets are equal to the stated liabilities and capital taken together, while any information required concerning the particulars of the various items form- ing the Closing Balance can be obtained by reference to the Journal entries. The system is very complete, but the labour involved is enormous ; it is, however, desirable that the student CLOSING THE LEDGER ON THE " CONTINENTAL SYSTEM. 57 should give some attention to the method in order that he may the more clearly understand the English method, which is really nothing but an abbreviation of the " Continental." To revert to the English method. The method of recording transactions previous to their entry in the Ledger effects a con- siderable saving upon the '' Continental " method, because cash items are not passed through the Journal : at a later period it will be seen that still further economies may be effected in the preliminary record of the transactions, but whatever the precise method adopted here, the final record in the Ledger will always be the same in essentials — each transaction being entered once on each side of the Ledger. The transfer of the balances of the Nominal Accounts to the Revenue Account must always be the same, likewise the transfer of the balance of Revenue Account to Capital Account ; it is, however, to be noted that sometimes — with the English method — these transfers are not passed through the Journal, but made direct from the one Ledger Account to the other. The complete closing of the Ledger ^i.e., the transferring of all real and personal balances to a Balance Account) and the subsequent reopening on the follow- ing morning is regarded by English bookkeepers as a needless •expenditure of time ; the system therefore adopted is to bring •each balance forward on its own account, as shown in Chapter in. A very little consideration will show that this process will produce Real and Personal Accounts exactly similar in form to those of the " Continental " system, but that, up to the present, we have not provided any summary of assets and liabilities, or Balance Sheet — a most important omission. It is, however, quite possible to make a summary of these accounts without actually transferring the balances to a Balance Account (we have already done the same sort of thing when taking out the Trial Balance), and such a summary as this is what the English bookkeeper calls his " Balance Sheet." 58 BOOKKEEPING. There are two forms of Balance Sheet in use : one follows the form of the Closing Balance, placing the assets on the Dr. side and the liabilities on the Cr. side; while the other follows the form of the Opening Balance, in which case the liabilities fall on the Dr. side, and the assets on the Cr. side. It will be remembered that when the books were first opened an Opening Balance was created, as under the '' Continental " method : it therefore appears desirable that — as the jirst Balance Sheet must take the form of the Opening Balance — all subse- quent Balance Sheets should be prepared on the same lines. This argument is now very generally conceded ; but, as some old-fashioned accounts are still kept the other way, it is necessary that both methods should be mentioned. It .is, however, to be noticed that the English form of Balance Sheet is not — after the first — a Ledger Account, and that consequently the terms '' Dr. to" and '' Cr. by " do not strictly apply, although their use in this connection is by no- means infrequent. What is considered to be the best form for a Balance Sheet on the English system has already been shown at the conclusion. of Chapter III. The student who has intelligently followed thus far should find little difficulty now in recording all ordinary transactions connected with non-trading concerns. The accounts of traders present many difficulties which have not yet been dealt with, and these will claim attention in the succeeding Part. CLOSING THE LEDGER ON THE " CONTINENTAL*' SYSTEM. 59 Questions on Chapter VI. 1. What is the difference between the " Continental " and the English method of closing the Ledger? 2. Which is the more complete? 3. What is the essential difference between the Balance Sheet prepared upon the two systems? 4. How is it that the assets are not always placed upon the same side of a Balance Sheet ? 5. Which side appears to be the most natural? EXERCISES. EXERCISE I. Write up the Cash Book for the following entries : — January i 1913, balance in hand at this date, jQ^tl ^7^- January 13, paid J. Cummings, ^£5 los. ; received from T. Jones ;£i7 5s. 3d. January 15, paid for House Expenses, /^2 14s. 6d. ; received from F. J. Smith, ;£i4 17s. 6d. ; paid for Sundry Expenses, ;£i 5s. ; paid T. Manning, j£6 3s. 6d. Balance the Cash Book and bring down the amount of Cash in hand. (Answer : Totals, ^6g 19s. 9d. ; balance, ^54 6s. 9d., Dr.) EXERCISE [I. Write up the following transactions in the Petty Cash Book (a Petty Cash Book is a secondary Cash Book used for record- ing payments of a small amount) : — March i 19 13, received from cashier for Petty Cash, ^10. March 2, paid for Cartage, i8s 6d. March 3, paid for Postage, 3s. 6d. March 5, paid Housekeeper, 2s. 6d. March 6, paid for Repairs to Clock, los. 6d. ; paid Porter's Wages, ^1 5s. ; paid Cab-hire for Mr. H., 3s. 6d. Find the balance in hand and carry down ready for next week's entries. (Answer: Totals, ;£io; balance, ^£6 i6s. 6d., Dr.) EXERCISES. 6l EXERCISE III. A\'rite up a Bank Account, recording the following transactions : — January i 1913, balance at bank on this day, ;£4,,724 los. January 3, drew cheque for Sims & Co., ;£8i. January 5, paid in ;£362 7s. 6d. January 12, paid P. Bright, £,"]o. January 15, William Wright paid into my account ;£i,347 i6s. 8d. January 16, drew cheque for J. Kerr, ;£868 IDS. January 20, paid in ;£420 17s. 5d. January 23, drew cheque for Poor Rate, ^5 3s. 4d. January 26, drew cheque for Jones &: Young, ;£6i4 15s. January 29, paid in ;£i7o. January 31, drew cheque for salaries, £,12 los. Balance the account, and bring down the balance ready for next month's entries. (Answer : Totals, ^7,025 iis. 7d. ; balance, ;£5, 3 73 13s. 3d.^ Dr.) EXERCISE IV. Write up the following Property Account : — February 10 191 2, purchased property in Cecil Street for ;£i,ooo. February 20, paid J. Milner, on account of altera- tions and improvements, jQ^So. March 17, paid J. Milner balance of his account, ^350. May 29, sold half this property to Edward Bunting for ;£6oo. On 30th June 191 2 the unsold property is valued at ^£550. Complete the account and bring down the balance. (Answer : Loss to date, ;£35o ; balance, ;£55o, Dr.) 62 BOOKKEEPING. EXERCISE V. Write up the following Bank Shares Account : — July 2 19 1 2, bought this day 100 j£io shares in the North Indian Banking Company, Lim., jQz los. per share called up, for ;£240. August 20, paid this day call of ^£2 los. per share, ,-£250. On 30th September the value of the shares stood at ^4. I OS. per share. Complete the account and bring down the balance. (Answer : Loss to date, ;£4o; balance, ;£45o, Dr.) EXERCISE VI. Write up the following Capital Account of Thomas Brown : — October i 19J2, balance of capital this day, ;£i,o67 8s. 4d. October 31, withdrew ;£5o. December 16, withdrew jQs^- December 31, net profit for the quarter, ;£i59 i6s. 2d. (Complete the account and bring down the balance. (Answer : Totals, ^£1,227 4s. 6d. ; balance, ^£1,127 4s. 6d., Cr.) EXERCISE VII. Write up the following Capital Account of James Simpson : — October i 191 2, balance of capital this day, ;£369 2s. lod. October 16, paid in the further sum of ^£250. November 30, withdrew ;£ioo. December 31, loss on business for thv. quarter, ,£587 i6s. id. Complete the account and bring down the balance. (Answer: Totals, ^687 i6s. id.; balance, j£6S 13s. 3d., Dr.) EXERCISES. 63 EXERCISE VIII. Write up the following Dividends and Interest Account : — July I 1 91 2, received the following dividends : Great British Banking Co., j£ii 5s. ; South Australian Telephone Co., ;£6 ; Central Gas Co., ;£i2 los. July 9, paid interest on Mortgage, ;£26 7s. 6d. Received : August 16, Great Western Water Co., ;£ii4 8s. August 31, Northern Water Co., ;£5o. Close the Account as on 30th September 19*2, and transfer the balance to Revenue Account. (Answer : Totals. ;£i94 3s. ; profit to date, j£i6'j 15s. 6d.) EXERCISE IX. Write up the following Expenses Account, and transfer the balance to Profit and Loss Account, as on the 31st December 1912 : — October 16 191 2, paid for Interest, ^£41 3s. 2d. October 31, paid Trade Expenses, ^£37 los. ; Salaries, ^69 14s. 2d. November 20, incurred Bad Debt for ^146 is. 9d. November 30, paid Trade Expenses, ;^3i 2s. 6d. ; Salaries, jQ6g 14s. 2d. December 12, allowed as Discount, £2 16s. 8d. December 31, wrote off Lease, for depreciation, ^£20 j paid Trade Expenses, jQz-j 15s. ; Salaries, ;£^i i6s. 8d. On 31st December a further sum of j£i2 los. was owing for Trade Expenses. (Answer : Totals, j£s^^ 4^- ^^' J transfer to Profit and Loss Account, ;£5io 4s. id.) EXERCISE X. Close the books of Henry Jackson on 30th June 19 13 (vide Chapter IV), according to the English method. 64 BOOKKEEPING. EXERCISE XL Open the same hcx)ks, as on ist July 1913, according to the " Continental " method. EXERCISE XII. Starting with the position of affairs set forth in the last exercise, record the following further transactions of Henry- Jackson, and finally close the books. [This exercise should be separately worked out according tc both the English and the " Continental " methods.] 1913- July 2 — Received from William Robinson ,, 5 — Received from Thomas Brown ... ,, 12 — Received from John Smith ,, ,, — Paid into Bank ,, 15 — Paid Portland Estate by cheque ,, 24 — Drew Cash from Bank ,, 31 — Paid Wages Aug. 10 — Let Ground- floor premises to Johnson & Co., as from the half-quarter day,, at ;£8oo per annum. ,, 19 — Paid Henry Williams 4 14 o ,, 31 — Paid Wages ... ... ... 368 £ s d 50 125 50 300 12 10 25 3 6 8 EXERCISES. Sept. 30 — Paid Wages ,, Sent out the following accounts for rent due this day : — £ s d John Smith 50 William Robinson 50 Thomas Brown ... 125 James Jones 75 Johnson & Co ... 100 Sold Property this day to Henry & Coleman for Received their cheque for same (less proportion of Ground Rent due) Henry & Coleman took over all Rent now due, and gave their cheque for same (less 5 per cent, discount) ... Paid into Bank ... 65 6 8 400 15,000 o c 14,993 15 o 380 o 15.384 I (Answer : Balance at Bank, ;£i5,793 15s. od. ; net profit to date, ;£568 15s. od. ; balance of Capital Account, i;i5.793 15s. od., Cr.) VII.— COMMERCIAL TERMS. Note. — The following are a jew of the more common commercial terms that appear to require more explanation than can conveniently be accorded to them in the text of this work. The words in italics after each term are its equivalent in French and in German — the former being given first in each case. Acceptance {Acceptation : Accept). See under Bill of Exchange. Accommodation Bill {Effet fictif : Kellerwechsel). A Bill of Exchange for which no bond ilde consideration has been rendered. The term applied to a Bill that has been either drawn, accepted, or endorsed without value having been received therefor, and for the purpose of lending the name of the drawer, acceptor, or endorser to some other person. Account Current {Compt^ cow ant: Laufende Rechnung). A running account kept open and added to from day to day. When the balance involved is of sufficient importance it is usual to charge interest upon the daily balance, an additional cash column being placed upon each side of the account for that purpose. Account Sales {Compte de Vente : Rechnung). An account rendered by an agent, furnishing particulars of sales made from consignments. Accountants {Experts Conif tables : Biicherrevisoren). Experts in the science of accounts. COMMERCIAL TERMS. 67 Actuaries {Calctdatcurs : Registrator en). Expert calcu- lators, employed in the preparation of insurance tables, etc., etc. Assets {Masse active: Activa). Property: in accounts the total of the Dr. balances of the Real and Personal Accounts. Auditors {Auditeurs des com-ptes : Auditoren). Persons appointed to examine accounts and to verify their accuracy. Balance {Solde : Saldo). The difference between the Dr. and Cr. sides of an account. Balance Sheet {Balance: Bilanz). A statement showing the outstanding balances in the books of an undertaking on a stated date. Bill of Exchange {Lettrc de change: Wechsel). An uncon- ditional undertaking to pay to a stated person, or his order, or to the bearer, a definite sum, either on demand or at some definite (or determinable) future date. The following is the usual form of a Bill of Exchange (or Acceptance) : — No. 46. £780 0. c Warrington, 2nd January 1913. Four ^'S) ■ months af^ter date pay to the Stamp I order of Mes cu S .5 srs. Sims'J &• Co. T3 i.' - "^ seven hu^fdred -^3 a and eighty ^ pounds — Value received. To Messrs. Fox &> Crane, < § SIMS &- Co. London. "2 In the above example Sims & Co. were the creditors, and Fox & Crane the debtors : Sims & Co. treated the Bill as a 68 BOOKKEEPING. '' Bills Receivable," and Fox & Crane as a " Bills Payable." The Bill was prepared by Sims & Co., who are called the ''Drawers" {iireurs : aussiellern), and addressed to Fox & Crane, who are called the "Drawees" {tires: bezogenern). The party in whose name this Bill is made pay- able is called the " Payee " {freneur : remittent); sometimes, however, a Bill is made payable to "Bearer" {porteur : inhaber). A Bill is a " negotiable instrument "; i.e., it may pass, by Negotiation {negociation : begebung), from hand to hand. It is necessary, however, that the payee should sign his name upon the back of the Bill before parting with it : this constitutes an Endorsement (endorsement : indossament) — endorsement by the payee or by any other person will render him liable for the amount of the Bill, if it be not met upon maturity. A Bill taken up before it becomes due is said to have been Retired {retire: eingelost). Bills payable thirty or more days after date are not due for repayment until three days after the expiration of their term : these days are called Days of Grace {jours de faveur: respecttage). A bill pay- able in this country requires an ad valorem stamp. Bill of Lading {Connaisement : Konnossement). A docu- ment of title by which the owner of a ship acknowledges the receipt of goods to be conveyed by the ship. Bullion {or [argent] en barres : Ungemiinztes Gold [Silberl, fremde, ungangbare Miinze). Gold (or silver) uncoined ; also sometimes applied to foreign coin. Capital {capital: kapital). {a) Excess of Assets over Liabilities, {b) The amount of shares a company is authorised to issue — called " Nominal Capital." {c) The amount of shares issued by a company — called " Subscribed Capital." {d) The amount paid up on the shares issued by a company — called " Paid-up Capital." CO*IMERCIAL TERMS. 69 Capital Expenditure. The amount expended by a com- pany in acquiring or equipping its undertaking. Expenditure for which vaUie remains, as opposed to Revenue Expenditure, which means the amount expended, or lost, in earning or seeking to earn a Revenue. Cash Book {livre de caisse : Kassenhuch). A book used for recording the receipt or payment of money. Cheque (cheque: check). A bill of exchange, drawn on a banker and payable on demand for some specified sum. A cheque requires a penny stamp. C.I.F. An abbreviation of ** Cost, Insurance, and Freight.'* Commandite, Societies en. A company in which only the directors incur unlimited liability. Consignment {consignation: Konsignation). Goods sent by one person — the consignor — {expediteur : absender) — to another who is his agent — the consignee {consignataire : Konsignatdr) — for sale on commission. Credit Note {accreditif : akkreditiv). A memorandum correcting an overcharge in an invoice, arising from an error in the quantity, price, or calculation. Dr. — Cr. — {Doit — Avoir: Soil — Haben). Abbreviations of the words "Debtor" and "Creditor" at the head of an account. Day Book {a) Sales Book (livre de ventes : verkaufsbuch). A book recording particulars of goods sold, {b) Purchases Book (livre d' achats: einkaufsbuch). A book recording particulars of goods bought. Depreciation {depreciation: abschreibung). A decrease in value arising from internal causes ; the loss arising from such decrease. yo BOOKKEEPING. Discount {escompte : rahatt). An allowance paid in con- sideration of the immediate advance of a sum of money due at a future date. To discomtt a Bill is to part with a Bill (Receivable) before it becomes due, allowing discount upon the cash received in its stead. Firm {raison sociale, maison dc commerce: -firmd). The collective name given to the proprietor or proprietors of a business. F.O.B. An abbreviation, '' Free on board (ship)." Freight {frei: fracht). The cost of forwarding goods by ship. Goodwill {association: gutwille). The benefit accruing to- a business by reason of the support accorded by its customers, which induces the supposition that that support will be continued. Insurance {assurance : versicherung). A contract either to- indemnify against a loss that may arise upon the happening of some specified event, or to pay on the happening of some event a certain sum to the person insured. The consideration paid by the insured is called the premium {prime: f ramie). Insurance may be against fire, death, accident, sickness, fraud,, or almost any conceivable contingency. Interest {interet au capital: zinsen). The premium paid by a borrower for the use of money. Invoice {facture: faktura). A memorandum containing par- ticulars as to the description, quantity, and value of goods sold. Journal {journal: journal). A book containing, in chrono- logical order, a record of transactions, so arranged as readily to admit of their being posted into the Ledger. COMMERCIAL TERMS. 7I Ledger {grand livre : hauftbuch). A book containing, in a classified form, a complete record of transactions. In practice the Ledger is frequently subdivided into several portions {see fostea). Liabilities (passif : fassivd). Engagements to pay moneys or goods to others. In accounts the total of the Cr. balances of the Real and Personal Accounts (usually) excluding the Capital Account. Limited Companies {Societes anonymes : Actien-Gesell- schaft). Associations having a corporate character in which the liability of the members is limited to a fixed amount prescribed by the Memorandum of Association. An Unlimited Company (societe en nom colleciif) is a corporation in which there is no limit to the amount of each member's liability. Partnership {association: gesellschafts-verhaltniss). "The relation which subsists between persons carrying on a business in cormnon with a view to profit." The liability of partners is unlimited. A Limited Partnership {societe en commandite : Gesellschaft mit beschrdnfter Haftung) is a registered associa- tion, the active directors of which alone incur unlimited liability. Promissory Note {seule de change: solawechsel). A plain and direct engagement in writing to pay a sum specified at the time therein named (or on demand) to a person therein named, or to his order, or to bearer. The most usual promissory note is one payable to bearer on demand, issued by a bank and called a Bank Note {billet de banque : banknote). Rebate. An allowance of any kind — often used to signify the discount upon an unmatured Bill. Reserve Fund {reserve: re serve fond). A sum set aside out of profits, either to meet future losses, to equalise dividends, or to increase working capital. The name of an account record- ing the setting aside of such a sum. 72 BOOKKEEPING. Shares {actions: aciien). Definite portions of the capital of a company, the capital of which is " divided into shares." Sinking Fund (caisse d'amortissement: das Tilgungsca-pital, der Tilgungsfond). A fund created out of periodical instal- ments set apart to accumulate, so that at the end of a certain time it may amount to the sum required to meet the purpose of its creation — e.g., the redemption of a loan, or the replenishing of a wasting asset. SPE(iiE {esfeces : gemiinztes). Coined money, as opposed to Bullion. Wages {salaire : arbeitslohn). Remuneration paid to workers. English bookkeepers distinguish between Wages (the remunera- tion of productive workers — charged against Trading Account) and Salaries (the remuneration of unproductive workers — charged against Profit and Loss Account). VIII.— ACCOUNTS OF TRADERS. It is now proposed to deal with the Accounts of Traders — i.e., those persons whose occupation consists of buying and selling goods. It will be obvious that the system of accounts described in Part 1 will require some modification to adapt it to the altered conditions now introduced, but the student must remember that the fundamental principles of bookkeeping are as unalterable as the laws of the Medes and Persians ; the various additional accounts that will now be described are therefore merely developments of the system already discussed, and their intro- duction is not a matter of vital necessity, but rather one of con- venience. Theoretically, it would be quite possible to record every class of transactions by the use of the Journal and Ledger alone ; but, in practice, such a course would be found to be extremely inconvenient, on account of the enormous amount of unnecessary labour involved. The objects, then, of the various modifications now about to be described are to economise labour, and to add to the clearness of the record of the various transactions. Cash. These accounts, it will be remembered, have hitherto been recorded in — {a) The Cash Book, which records the receipt and payment of cash by the proprietor or his cashier. (b) The Bank Account in the Ledger, which records the receipt and payment of cash by the proprietor's bankers. 74 BOOKKEEPING. It will be remembered that the entries in the Cash Book are made direct (as the transactions occur), and that the entries in the Bank Account are posted up periodically, the debit side being posted from the credit side of the Cash Book, and the credit side being posted from the Journal. When the transac- tions are numerous, there are two objections to this mode of record, both of which are of considerable importance. They are as follow : — {a) The Bank Account — not being a book of first entry — will not continuously show the balance at the bank. {b) The labour of journalising every cheque drawn is considerable. It will be remembered {cf. page 36) that these are the identical reasons that originally led to the introduction of a separate Cash Book, and the present difficulty has led to the same result : viz., the separation of the Bank Account from the remainder of the Ledger Accounts and its formation into a separate book, into which the various transactions concerning it are entered direct as they occur. Payments by cheque are thus posted direct from the credit side of the Bank Book to the debit of the various accounts chargeable with the expenditure, and the necessity for a Journal entry recording each transaction is obviated : on the other hand, the payments from the credit of Cash to the debit of Bank are referenced to and fro in exactly the same way as before. This system of keepmg separate books for Cash and Bank is frequently to be met with in practice. The following example shows the Cash Account and Bank Account of Henry Jackson {vide pp. 37 and 40) re-cast upon this principle : — ACCOUNTS OF TRADERS. 75 Dr. CASH. CONTRA. Cr. April I 6 ID 12 June 30 To Balance . . , Thos. Brown „ W.Robinson „ J. Smith ., « Jas. Jones.. To Balance . . X 5 6 4 7 £ s 25 125 50 50 75 d 1 1913 April 6 13 30 1 May 31 June 30 By Bank .Do. . Wages .. , Do. , Do. „ Balance down I II 11 II X £ s d 140 TOO 3 6 8 3 6 8 368 75 £325 £325 July I 75 Dr. BANK. 191 3 April I To Balance 6 K Cash 13 • Do. . . July To Balance X I I £ X £ s d 1913 { 120 May 12 1 140 June 15 ICO 00' 30 i 360 0|| 147 4 0' CONTRA. By Capital Account „ Repairs » Capital Account - Balance down 3 13 3 I Cr. £ s d 100 o o 12 16 O 100 O O 147 4 O 360 o o A further modification is, however, frequently thought desirable, it being found inconvenient to keep two separate books for Cash and Bank. Double money colimins are there- fore provided in one " Cash Book " for the record of both Cash and Bank transactions. Under this system, the transactions recorded in the preceding example would appear in the following form : — 76 BOOKKEEPING. •V o o o o o j a 03 in o o o ^ 8 28 i T3 O OOO 00 00 o o JS ♦? t3 O O o o o o o •s tn o O o o o ° o o ^S"^ ?.?. CO K u »2 X •" V.VO ■*VJ *^ X . . Balance Thos. Brown.. Cash .. W. Robinson p 6 c :| ■Si CD S "(3 CQ .2 = - t. Cj "2 3 "3 ACCOUNTS OF TRADERS. 77 The student should carefully compare the above example with the separate accounts of which it is composed : he will especially notice that the '* Cash " and '' Bank " columns are in every way as distinct as they were when the two accounts were kept in separate books. The letter " c " in the folio columns (standing for ^' contra ") serves as a reference of the various transfers from the Cash Account to the Bank Account ; it is also sometimes used (or the sign ** x," as shown in the example) where an account is ruled off, and the balance brought down upon the same page. Bills Receivable. The nature and object of a Bill will have been rendered familiar by the study of the preceding chapter : it now remains to consider the method of recording transactions in bills. It is not proposed, at this stage, to confuse the student with any lengthy comparison of rival methods ; suffice it for the present that the mode now to be described is one very generally in use, but that alternative methods will be described in due course. A Bill Receivable is a bill (either an acceptance or a. promissory note) payable by another, or others, that has come into our hands in the course of business. If an acceptance, it may have been drawn by us upon a customer and accepted by him. or it may be that the person from whom we receive it is the drawer, and the acceptor a third party with whom we have no immediate dealings ; or again it may be that both drawer and acceptor are strangers to us. Unless we have ourselves drawn the bill, or unless we are the payees named in the bill, it will not usually have come into our hands until endorsed by every person who has been a holder. It is usual to keep a special '' Bills Receivable Book," in which each bill is entered as received. The form of this book is a matter of the greatest uncertainty, but the following is a usual form, and one that illustrates every principle which it is now desirable to demonstrate : — 78 BOOKKEEPING. i: o - w y a JS ■OBQ 1 •AOM •JOQ •Idas •Snv Xinf aunf vCbj^ ludv en N •JBW 00 •q8d •UEf § s s s H = = e 1 Date of Bill 1 ^ •" 2 ? w w u w o o o o 0\ U-) ^ ^ ACCOUNTS OF TRADERS. 79 It will be seen frc»n the above example that, during the month of January 1913, acceptances have been received from Forbes, Ball, and Wright : it is necessary therefore to credit each of these gentlemen with the amount of his bill, which is done by posting that amount from the Bills Receivable Book to the credit of his Personal Account in the Ledger. The bills received are, however, assets, and therefore require to be placed to the debit of a Real Account in the Ledger ; as there is nothing to be gained by posting each to a separate account, it is usual to post the monthly total to the debit of Bills Receivable Account in the Ledger. The double record of each transaction is there- fore now completed : each customer being credited with the Bills Receivable which they have forwarded, and the Bills Receivable (Ledger) Account being debited with the amount of the bills so received. The entry of j£,i,^^6 to the debit of our Bills Receivable Account — standing alone — would imply that there was due to us, upon bills in hand, the sum of ^1.436. A reference to the '' Remarks " column will, however, show that Bill No. 79 is no longer in hand — it having been " negotiated " {i.e., it was endorsed and handed over to the Western Steel Co.) ; it becomes necessary, therefore, to credit Bills Receivable Account with jQ^^o, and to debit that amount to the account of the Western Steel Co.^ who have received the bill. This leaves a debit balance of ;£946 on the Bills Receivable Account on 31st January 19 13, which agrees with the items not marked off in the '' Remarks " column in the Bill Book. On the 8th March 1913, Bill Xo. 78 becomes due, and is collected by the bankers : jQg6 will then be entered in the Bank column of the Cash Book on the debit side. This will be posted to the credit of Bills Receivable Account, and marked off in the '" Remarks " colunm of the Bill Book. The balance 8o BOOKKEEPING. of the Bills Receivable Account on the 31st March is thus £S^o ; which, upon reference to the Bill Book, will be found to consist of Bill No. 80 — the only bill in hand at that date. The Ledger Account of Bills Receivable is given below, for the purpose of adding clearness to the above explanation. Dr. BILLS RECEIVABLE.* 1913 Jan. 31 Feb. I Apr. I To Sundries . . B.B. 26 £ c. c. £ sd 1,436 1913 Jan. II '. 31 Mar. 8 • 31 1 1,436 To Balance down 946 £946 To Balance . . 850 ByW. Steel Co. (No. 79) • • „ Balance down By Cash (No. 78) „ Balance down J. 72 C. 144 c. £ sd 490 o o 946 o o [,436 o o 96 o o 850 o o £946 o o It will be noticed that the entry on January nth has been passed through the Journal : it will presently be shown that such unusual transactions as the one there recorded are almost the only entries that remain for the once ubiquitous Journal to record. Bills Payable are either acceptances drawn upon a trader, or promissory notes signed by him : they are given by him in satisfaction of creditors' claims, and have to be met by him upon maturity. It will be obvious that, under ordinary circumstances, he has no means of knowing who will present his bills for payment when the time comes. When a bill payable is signed, and before it is issued, it should be entered in the Bills Payable Book of the following (or a similar) form : — * In comparing this account with that appearing on page 144, it should be noted that the discrepancy observable arises from the fact that (for the sake of simplicity) no Bills received prior to ist January 1913 are included above. ACCOUNTS OF TRADERS. 8i ffl < ■< , »n s » 3) pii » OS V s 1 oaa 1 •AON 1 : •lOQ 1 : •das 1 •3nv 1 : - II ^ 5* sn o as V 'vJ ? -a i2 m a m •o o o OT O o 2 S 1 -s -f R ■-.i 6 tL. y ' 6 o = U ^ ~ <« ^ 3 ta - o O < a T3 1 i ^ s 5 < 1 1 " ^ 1 ^ 1 "T i kC "^ 1 1 82 BOOKKEEPING. The general treatment of Bills Payable is the converse of the method just described : the amount of Bill No. 46 will be debited to the account of Sims & Co., to whom the Bill has been delivered, and the monthly total of bills issued will be posted to the credit of Bills Payable Account. The credit balance of this latter account, at any time, should correspond with the amount of Bills Payable outstanding, as shown in the Bills Payable Book. As bills mature they are presented ai the bank (if they have been made payable at our bankers, as would be the usual practice), for payment ; and when paid are entered like cheques on the credit side of the Cash Book in the bank column : thence they are posted to the debit of Bills Payable Account, reducing the balance of Bills Payable outstanding. There are various other considerations in connection with the treatment of Bills that will require to be dealt with later on. Discount. The commercial meaning of the word '* dis- count " has already been defined; it now remains to consider the most convenient manner of recording the allowance or receipt thereof. When a debtor deducts discount from the amount due, the result, from the creditor's point of view, is a loss. Thus, supposing A. Thompson stands as a debtor for ;£io and the creditor accepts jQq los. in payment thereof, the remaining los. being allowed him as discount (at 5 per cent.), then jQg los. will be the amount debited in the Cash Book and posted to the credit of Thompson's account. This leaves a debit balance of JOS. still standing on Thompson's account — which is wrong, for he owes nothing — and we shall have omitted to record the fact that, in allowing Thompson to deduct jQs per cent, discount, the creditor made a loss of los. To put this right it is neces- sarv to open a nominal account called Discounts Account ; debit that account with los., and credit Thompson's account with the same amount. ACCOUNTS OF TRADERS. 83 When discount is deducted from a creditor's account a profit is made; the process, therefore, is to debit the creditor's Ledger Account, and credit Discounts Account, with the amount so deducted. The precise means adopted to secure the entry of discounts allowed and received against the proper Ledger Accounts is a matter of detail merely : if the occasion arises but rarely, a special Journal entry in each instance will meet the case suiTiciently well ; but where, as is frequently the case, the great majority of the payments and receipts are subject to some deduction for discount, the method is obviously too cumbersome to be practicable. A special column upon each side of the Cash Book is therefore provided in which is inserfed the amount of discount that has been deducted, the cash and bank colunans containing (as before) the amount actually received or paid : at the end of each month the discount columns are totalled — the total on the debit side (which consists of discounts allowed to debtors, which have been posted lo the credit of their respective accounts) is inserted in the discount column on the credit side, and thence posted to the debit of Discounts Account. Con- versely, the total of the credit side (which consists of discounts allowed by creditors, which have been debited to their respective accounts) is inserted in the discount column on the debit side, and thence posted to the credit of the Discounts Account. The balance of the Discounts Account (like that of every other Nominal Account) is eventually transferred to Profit and Loss Account. In order that this matter of discounts may be quite clear to the student, the following example is appended to show what the effect of giving and allowing 5 per cent, discount would have been upon the transactions of Henry Jackson during the quarter ended 30th June 19 13 : — G 2 84 BOOKKEEPING. •s & -a o N o U) O ro o v^ 8 2 8 o o I -O O OOO CO 00 o (fl o ovo _o _ o o o o o Discounts (0 M ^^ ° 2 ° o i Cj U"m '^ n « "^ M « (j By Bank . . „ Do „ Wages .. „ Capita 1 Ac- count . . „ Wages . . „ Repairs.. „ Capital Ac- count . . „ Wages .. „ Discounts allowed „ Balance down. . rr^ « fO M «0 « CO Bank -OOO o (« o o o S.8 1 8, ° o o CO •OOO o o o (« O >n _ O o _ >o o ° o 5 o o R n 3 (5 73 O O O O (fl ."^.22 . « ^ 'o •^.cl -co o o O W JO o 2| si : £ :^(J»OTrjtx JO ^ To Balance ,/ Thos. Brown . . „ Cash .. „ Wni. Robinson „ .Tno. Smith „ Cash .. „ Jas. Jones „ Discounts re- ceived To Balance down. . ^-^ ^2 2«'^ < 4 s "5 ACCOUNTS OF TRADERS. 8s It will be seen that the Cash and Bank balances together amount to ;£207 i6s. lod., as against ^^222 4s. when no dis- counts were allowed or taken; the difference (;£i4 7s. 2d.) is expressed as a balance to be carried to the debit of Profit and Loss from Discount Account, which the following example shows to be the case : — >5 Dr. DISCOUNTS ACCOUNT. Ct. 1913 June 30 To Sundries . . C I i s d 15 , 1913 June 30 By Sundries . . , Profit and Loss Ac- count C I 16 £ s d 12 lO 14 7 2 £15 £15 In practice, however, it is usually considered preferable to carry the total loss on Discounts to the debit of Profit and Loss, and the total profit thereon to the credit, so that the Profit and Loss Account may show the full particulars. It is not anticipated that the student will experience any difficulty with the treatment of discounts upon Bills, but, to save misapprehension, the question will be noted as it arises. Partnership Accounts. Hitherto, for the sake of sim- plicity, only the accounts of persons carrying on business alone — i.e., without partners — have been dealt with. It is now desirable that the student should become acquainted with the modifications required in the books when the business belongs to a number of partners or a '' firm." In the previous chapter a definition of a partnership has been given. It may, therefore, be assumed that the student is acquainted with the circumstances of the case, and his atten- tion will therefore be confined to the explanation of the entries required to give effect to these altered circumstances. 96 BOOKKEEPING. First, take the case of a trader A., who takes into partner- ship B., who pays ;£i,ooo for a half -share of profits, and agrees to put another ;£i,ooo into the business. The first ;£i,ooo, of course, goes straight into A.'s pocket, and does not require any entry in the firm's books ; if, however, it is paid into the firm's banking account, it will be entered on the debit side of the Cash Book in the bank column and posted to the credit of A.^s Capital Account. The second ;£i,ooo is entered in a similar manner in the Cash Book and posted to the credit of B.'s Capital Account. It will thus be seen that a separate Capital Account is required for each partner, and it may be added that each partner's Capital Account is debited with his drawings, and that the credit balance of the Revenue or Profit and Loss Account {i.e., the Net Profit) will be posted to the credit of the partners' respective Capital Accounts in the pro- portions previously arranged, or — if no arrangement has been made — in equal shares. A debit balance of Profit and Loss Account (i.e., a Loss) must be debited to the partners' Capital Accounts in the same proportions as profits would have been divided, had any been made. In order to make these transactions quite clear the follow- ing example is given. Suppose that A.'s Balance Sheet on the 3Tst December 191 2 was as follows : — BALANCE SHEET, 31st December 1912. Liabilities. A., Capital Account Sundry Creditors £ 950 ,250 s d ;r2,200 O O Assets. £ Stock-in-hand .. .. .. 1,500 Sundry Debtors 650 Cash at Bank 50 s d o o £2,200 o and that B. joins him in partnership, as from the ist January 1 913, upon the terms named, and that A. pays into the firm's banking account the ;£i,ooo received by him for goodwill. Then the position of the firm will be as follows : — ACCOUNTS OF TRADERS. 87 BALANCE SHEET, ist January 1913. LiabilHus. A., Capital Account B., Capital Account Sundry Creditors r s d 1 ,950 o o 1,000 o o 1,250 o o £4, 200 o o Asstts. Stock-in-hand 1,500 Sundry Debtors 650 Cash at Bank 2,050 s d o o o o o o £4,200 o o There is another way of looking at this transaction : If A. is willing to take ^i.ooo for a half-share in his business, this is the same as saying that he considers the Goodwill of his business worth ^2,000, and that, if B. will contribute half the value of the Goodwill and ^£1,000 as working capital, he will admit him into partnership upon equal terms. This is the principle sometimes adopted in framing the accounts, and where it is so done the entries would be as follow : Debit Goodwill Account and credit A. Capital Account with the value of the Goodwill ; and debit Bank Account and credit B. Capital Account with th& whole amount paid by B. Where this method is adopted our two Balance Sheets will assume the following form : — BALA^^CE SHEET, 31st December 1912. Liabilities. A., Capital Account Sundry Creditors £ 2,950 £■4,200 o o Assets. £ s d Stock-in-hand 1,500 o o Goodwill Account . . . . 2,000 o o Sundry Debtors 650 o o Cash at Bank 50 o o £4,200 o o BALANCE SHEET, ist January 1913. Liabilities. A., Capital Account B., Capital Account Sundry Creditors £ s 2,950 o 2,000 o 1.250 o £6,200 o o Assets. £ s d Stock-in-hand 1,500 o o Goodwill Account . . . . 2,000 o o Sundry Debtors 650 o o Cash at Bank 2,050 o o £6,200 o 88 BOOKKEEPING. A comparison of these four Balance Sheets will he found a most profitable occupation for the student. Now, suppose it be decided to amalgamate the business of A. and B. with that of C, whose Balance Sheet (including value of Goodwill) is approved at the following figures : — BALANCE SHEET, ist January 1913. Liabilities. C, Capital Account , . Sundry Creditors Overdraft at Bank £ s d .. 2,750 .. 750 .. 500 Assets. Stock-io-hand . . Goodwill Account Sundry Debtors £ .. 1,200 .. 1,500 .. 1,300 s d O' £4,000 £4.000 The Balance Sheet of the firm A., B., and C. will then be as follows : — BALANCE SHEET, ist January 1913. Liabilities. . Assets. £ s d £ * d A., Capital Account . . . . 2,950 o o Stock-in-hand 2,700 o cy B., Capital Account . . . . 2,000 o o Goodwill Account . , . . 3,500 o o C, Capital Account .. .. 2,750 o Sundry Debtors 1,950 o o Sundry Creditors .. .. 2,000 o o , Cash at Bank 1,550 o o £9,700 o o £9.700 o o Where new books are to be started by the firm, the opening entries will be upon exactly the same lines as those indicated upon pages 46 and 47 ; separate Journal entries being made for the assets and liabilities of each partner, but only one Open- ing Balance Account (identical with the last preceding Balance Sheet) being employed. The process to be adopted where the old books are continued, and the detailed treatment of the various trade accounts, will occupy our attention at a later stage. ACCOUNTS OF TRADERS. 89 Partners' Drawings. In practice it is usually found con- venient to open a distinct account for the drawings of each partner. This account will at each periodical balancing be transferred to a " Current Account " opened in the name of the partner, which will also be credited with his share of profits, and with any interest upon capital to which he may be entitled ; whatever balance may be shown on the Current Account at the closing of the books is brought forward in the ordinary way. If. however, it is provided by the terms of the partnership that all profits in excess of a certain amount are to be left in as capital, the amount of any such surplus profit must be trans- ferred from Current Account to the credit of Capital Account ; or the Current Account may be suppressed altogether, and the balance of each partner's Drawings Account, together with his share of profits and interest on capital, may be transferred direct to his Capital Account, {cf. page ii8). 90 BOOKKEEPING. Questions on Chapter VIII. 1. What are the advantages of a double-column Cash Book? 2. Describe the mode of enteruig discounts in the Cash Book, and trace the system to both sides of the Ledger. 3. How would you record the receipt of a Bill Receivable, and its payment upon maturity? 4. How would you record the issuing of a Bill Payable, and its payment upon maturity ? 5. What do the balances of the Bills Receivable and Bills Payable Accounts in the Ledger show respectively? 6. Describe the opening entries in the books of a firm. 7 . What is the advantage of a separate Current Account ? 8. How is it kept, and what does the balance upon each side signify? IX— ACCOUNTS OF TRADERS (continued). Next comes the consideration of these accounts that specially characterise the affairs of traders — the accounts relating to the sale and purchase of goods. These accounts are focussed into one account, variously described as " Goods Account," '* Trading Account," and " Stock Account," and it will be in keeping with the general scheme of the present work to consider the nature of this account first, and then proceed to trace the various items to their respective sources. It will facilitate the student's comprehension of the Trading Account if he considers it first as an account relating to quatitities of goods only — disregarding for the moment the money value of such goods. The general scheme of the account is that it is debited with all goods received {i.e. with all pur- chases), and credited with all goods sent out {i.e. with all sales), the debit balance at any time representing the amount of goods in hand, or " Stock." It will be seen that this is exactly the same principle that governed the treatment of the Cash Account, and the student will find it a help to look upon the Trading Account as an account kept by the proprietor as a tally upon a stock-keeper in whose charge the goods are supposed to be. To take the case of an iron merchant : his stock on the ist January 19 13 may be supposed to have been 1,584 tons 12 cwt., his purchases for the month 467 tons 3 cwt. i qr., and his sales 591 tons o cwt. 2 qrs., leaving a stock on hand 92 BOOKKEEPING. of 1,460 tons 14 cwt. 3 qrs. on the 3i.st January. The Trading Account will then assume the following form : — Dr. TRADING ACCOUNT. Cr. ^ 1913 Jan. I 31 • To Stock on hand ^ Purchases for the Month . . To Stock on hand T. Cwt. Qr. 1,584 12 467 3 I 1913 Jan. 31 6 By Sales for the Month „ Stock on hand T. Cwt. Qr. 591 2 1,460 14 3 2,051 15 I 2,051 15 r Feb. I 1,460 14 3 Had any of the goods purchased been returned, they would have been placed to the credit of this account ; and, conversely, had any of the sales been returned to the merchant, he would have debited this account with the amount so received by him. In practice, such an account as the above would never quite balance, on account of waste and inaccuracies in weights ; but this consideration need not now be considered. Now, it will be obvious that this account cannot be incor- porated into the financial books without putting a money equivalent upon the various items ; for the sake of simplicity let us suppose that the merchant purchases at a uniform price of 95s. per ton, and sells at a uniform price of iocs, per ton, then — putting these sterling equivalents against the various items in our account — we arrive at the following result : — Dr TRADING ACC( 3UNT. Cr. 1913 T. Cwt.Qr. i s d 1 1 1913 T. Cwt.Qr. i s d Jan I To Stock on iJan.31 By Sales hand . . 1,584 11 7,526 17 for the 31 „ Purchases for the * month 591 2 „ Stock on 2,955 a 6 month . . 467 3 I 2,219 5 1 1 hand. . 1,460 14 3 6,938 10 It will be seen that this account shows a credit balance of ;£i47 155. id., and a little reflection will suffice to show that the reason for this discrepancy is that the sales have been extended at ^5 per ton, and the other figures at 95s. per ton— ACCOUNTS OF TRADERS. 93 the difference, viz., 591 ions o cwt. 2 qrs. at 5s. per ton amounting to ^£147 15s. id., being the amount of the credit balance. Now this amount represents the 5s. per ton profit on the month's sales ; or, in other words, the profit on the sales for the month. It being a profit, the proper course is to carry it to the credit of Profit and Loss Account. Therefore debit Trading Account and credit Profit and Loss Account with jC^41 15s- id- The Trading Account can now be balanced and the position is as follows : — Dr. TRADING ACCOUNT. Cr. I9I3 T. CwtQri £ s d 1913 T. CwtQr £ s d Jan. I To Stock on Jan.31 By Sales for the m'th hand .. 1,584 12 , 7,526 17 591 2 2,955 2 6 31 , Purchases , Stock on for the hand .. 1,460 14 3 6,938 10 month 467 3 I 2.219 5 ' » , Profit and LossA/c. (Profit on Sales for them'th) To Stock on 147 15 I I 1 1 2,051 15 I £9,893 12 6 2,051 15 I £9.893 12 6 Feb.i • hand .. 1,460 14 3 6,938 10 Dr. PROFIT AND LOSS ACCOUNT. 1913 Jan.31 By Trading Account Cr £ s d 147 13 I The reader will now notice a distinguishing feature of the Trading Account : At rest {i.e. when balanced off) the Trading Account is a Real Account, the balance representing the value of stock on hand ; but in motion {i.e. while the account is kept open for the record of further transactions) the Trading Account is a Composite Account — partly Real, and partly Nominal — the balance representing nothing definite, but being compounded of the value of the stock and the profit earned on the sales. 94 BOOKKEEPING. In such a case as the above, where the profit upon every separate sale can be actually determined, it would have been possible to credit Profit and Loss Account with the amount of such profit at once, carrying only the cost price of the articles sold to the credit of the Trading Account ; but such ideally simple cases would not be found in actual practice, and in any event the number of entries involved would be far greater than by the above method. To those who are familiar with the use of mathematical formulae, the following equations will make the position even clearer than the preceding concrete example : — Suppose S = value of stock at commencement, S^ = value of stock at close, P rvalue of purchases, C — cost price of sales, Tr= profit on sales, and V = the amount of the sales. Then y-C + T, and S + P = C+Si, therefore Sf P + T-C + S^ + T^V+Si. We therefore see that, even when C and T are unknown, their value may be deduced from the known values of S, P, V, and S^. Hence it becomes important for every trader to ascertain periodically the value of S, S^ (his stock in hand). In practice, it is frequently not feasible to arrive at this by keeping an accurate account of the stock in quantities {vide the example on page 119), on account of the number of different articles, and qualities of articles, in which the trader deals, and it therefore becomes necessary for the value of the stock to be ascertained solely by actual inspection and inventory. The total purchases and total sales will, however, always be shown bv the books. ACCOUNTS OF TRADERS. 95 Purchases. Goods purchased would ordinarily be accom- panied by an invoice (or, if not actually accompanied by an invoice, the latter would be received by post practically simultaneously), of which the following may be cited as a typical example : — 1 Excelsior Works, Warrington, Messrs. Fox <~ Crane. 2nd January 1913. To Sims & Co. T. C. Q. 100 No. 492 Angles. £S £ s d 800 \ c / Acceptance p.nclosei ! \/ [er L.&'N.W. Fy. As the goods are received they are compared with the invoice as to weight, description, and price ; and, if correct, passed on to the counting-house for entry. If incorrect, a corrected invoice is applied for and substituted for the original invoice, or a supplementary invoice or credit note is forwarded and the original invoice left to stand. A credit note is usually printed in red ink to distinguish it from an invoice. It is no part of the scheme of this work to discuss the relative methods of dealing with invoices ; let it, therefore, suffice to say that, after being entered in the Purchase Book (also called Bought Book, Invoice Book, Bought Journal, Purchase Journal), they are numbered and arranged so that they can readilv he referred to, should occasion arise. 96 BOOKKEEPING. The following is a typical form of Purchase Book. It may be entered up from day to day or at the end of the month, as is considered expedient : — PURCHASES for the Month of January zgis. Weight No. of Inv. Name ^ Total Angles Bars Fish- plates Rivets Sleep'rs T. c. y. 100 12 40 / 2 3 Stms & Co. 12 Percy Bright 22 Western Steel Co. 15 17 18 £ s d 800 13 4 300 800 £ sd £sd £sd 13 4 £sd 300 140 12 1,113 4 800 13 4 300 Fo.y 'r' Fo.8 The student who has read thus far will hardly need to be reminded that each purchase has to be debited to the Trading Account (as having been received by the storekeeper) and credited to the Personal Account of the person from whom it was bought. In the above example, therefore, it is necessary to post .£8oo to the credit of Sims & Co., ^i^ 4s. to the credit of Percy Bright, and ;£3oo to the credit of the Western Steel Company ; these several amounts will require to be debited to the Trading Account, but it will answer every purpose equally well to post the total of ;^i,ii3 4s. instead of the various items, and by so doing a considerable amount of unnecessary labour is saved. In many businesses it is thought desirable to divide the transactions into " Departments,"- so that it may be possible to ascertain the profit resulting from the sale of each different class of goods dealt in ; in the foregoing example the Purchase Book is arranged so that the transactions in "Angles," " Bars," " Fish-Plates," " Rivets," and " Sleepers," may be recorded separately. In such a case, instead of debiting one Trading ACCOUNTS OF TRADERS. 97 Account with the month's total purchases, it is necessary to open five separate Trading Accounts, one for each department, and the total of each departmental column will require to be debited to its proper Trading Account. The full working out of this system will be shown in detail in the following chapter. Sales. As with purchases, so with sales, there are many different methods of dealing with the initial record. In every case, however, a detailed invoice will have to be supplied to the debtor, of a similar nature to that which is received when goods are purchased, as shown above. Sometimes the Day Book, in which the sales are daily recorded, will contain a facsimile of the invoice sent out ; but a more convenient method seems to be to take a carbon copy of the invoice and to enter the sale in the Day Book in a summarised form. Where this is done the same book can be used for the purpose of analysing the sales into departments as follows : — SALES for the Month of January iqis- Weight No. of Inv. Name 13 14 14 12 Tota Angles B- pll!es 1 Rivets Sleep 'rs T. C. Q. 20 12 / 2 3 Henry Dale Hugh Forbes £ sd 180 96 1215 £ sd £ sd 180 £ sd 96 00 £ sd 12 15 £> - ■ 1 tt) ai. . .. .... . . .a kl i 6 ; 2: - » 28 58 S5S; ; no bookkeeping. Sales Book. See page 97. See page 96. Purchase Book, Purchase Returns Book. There is only one entry to be made in this book, namely, transaction No. 10; the form is as follows : — PURCHASE RETURNS for the month of January igis. Weight Name Total Angles Bars Fish- plates Rivets Sleep'rs T. C. Q. / 15 / 6 Sims & Co. 15 13 13 £ sd 13 13 £sd £sd £sd =Csd 1 15 £13 13 £13 13 Fo. transactions of fox and crane. Journal. The Journal will be as follows : — 1 JOURNAL, 1913. Dr. Cr. 2 Jan. 2\Sitns&Co To Discount Account Being 2^% off :heir invoice of this date against Bills payable No. 46. 8 Jan. 6 Consignment at Smyrna To Angles Account For 80 tons Angles shipped to Hy. Poole, this dav. 14 Jan. 10 I Joseph Ball To Western Steel Co For 70 tons steel rails (O: £7 per ton, sold Ball OH Comtn. i6Ja:i. 11 17 /j". 11 38 Jan. 27 45 Jan. 31 Jan. 31 Western Steel Company 18 To Bills receivable 3 For Bill No. 70, endorsed and handed j over to them this day i Western Steel Company 18 To Commission Account .. 26 For our comm. on the preceding (a 2(6 j per ton. £ s d 20 640 490 400 8 15 Hy. Fox, Capital Account To Thotnas King Being the loss experienced by his jailure, charged against Mr. Fox, who guaranteed all book debts. Depreciation of Premises and Furniture . 26 To Freehold Premises A ccount . . 20 Beiiig the amount written off for depreciation (a, (say) 3^ per cent. per annum. Travelling Expenses To Hy. Fox, Capita! .4ccotint 5 10 £1,677 10 11 £ s d 20 640 490 8 15 13 15 11 5 £1,677 10 11 It will be observed that the " closing " entries are not journalised in this example, in accordance with the usual (but perhaps not altogeihtr commendable) practice of business houses. 112 bookkeeping. Bills Receivable Book. See page 78. Bills Payable Book. See page 81. Before proceeding to the following chapter, the student is recommended to carefully study the entries in the seven sub- sidiary books (the number against each entry will be seen to refer to the number set against the respective transaction), and to master the reason for — and effect of — each entry : then independently to prepare similar books, using the transactions as his sole guide, and to post the Ledger. TRANSACTIONS OF FOX AND CRANE. 113 Questions on Chapter X. f. What are the two usual methods of opening a new Ledger ? 2. How would you deal with an overcharge upon goods purchased ? 3. How would you enter goods sold on commission? 4. What are the subsidiary books usually kept by a trader? 5. What class of transactions is usually recorded in each? 6. What is the advantage of employing any subsidiary book beyond the Journal ? XI. -TRANSACTIONS OF FOX & CRANE (continued) . Trial Balance — Closing the Ledger. The student who has taken the trouble to post up the Ledger of Fox & Crane will find that their Trial Balance on the 31st January is as follows : — TRIAL BALANCE, 31st January 1913. Dr. 0. Dr. 1 Cr. £ s d £ ^ d £ s d £ s d 1. Henry Fox, Capital- 2. Joseph Crane, do. 3. Bills Receivable . . 13 15 11 7.658 13 9 ; 7,644 17 10 3,000 i 3,000 2,140 7 6 894 7 6 1,246 4. Bills Payable 1,311 10 1,452 6 8 140 16 »• 5. Angles 1,200 9 653 13 , 546 7 6. Bars .. 1,550 1,030 520 7. Fish-plates 150 96 54 8. Rivets 39 17 6 12 15 27 2 6 9. Sleepers 1,050 1,050 10. Joseph Ball 548 19 490 58 19 II. Thos. King 275 18 4 275 IS 4 12 William Wright . . 1. 135 9 9 1,130 5 9 9 13. Henry Dale 358 10 150 208 10 14 Hugh Forbes 108 15 96 12 15 15. Sims &Co 898 14 6 885 I 6 13 13 16. Jones & Young . . 41 17 41 17 17. Percy Bright 73 4 9 73 4 18. Western Steel Co. 798 15 798 15 19. John Kerr 102 5 6 102 5 6 20. Freehold Premises 1,740 5 1,735 21. Consignment (Smyrna) .. 1,376 2 9 1,170 6 8 205 16 1 22. Discounts 49 13 49 13 o- 23. Wages 26. Profit and Loss . . 17 17 1 45 6 3 h"i5 36 II 3 ci. Cash at Bank ! 5.042 6 5,042 6 „ do. in hand 56 3 5 •■ 56 3 5 £20,074 II II £20,074 II II £10,835 7 6 ^ £10,835 7 ^ 1 In closing these books and preparing a Profit and Loss Account and Balance Sheet, attention must be first directed to the six Trading Accounts, Nos. 5, 6. 7, 8. 9, and 21. It has been already explained (page 93) that, " iii motion the Trading Account is a Composite Account — partly Real and TRANSACTIONS OF FOX AND CRANE. II5 partly Nominal — the balance . . . being compounded of the value of the stock and the profit earned on the sales." This balance is the amount now appearing in the Trial Balance, and the first step should be to separate this balance into — (a) The debit balance of the Real Account (i.e. the value of the stock), and (b) The credit balance of the Nominal Account (i.e. the profit on the sales). The value of the stock might, in the present example, be arrived at by pricing out the difference between the Dr. and Cr. weight columns at cost price; but in practice the quantity of stock in hand would always be verified by actual enumera- tion, and the pro forma example gives the amount of stock in each department. I. If the value of the stock exceed the debit balance of the Trading Account, the dift'erence is the profit on sales. II. If the value of the stock be less than the debit balance of the Trading Account, the dift'erence is the loss on sales. III. If the Trading Account shows a credit balance, the profit on sales will be the sum of such balance plus the value of the stock. Expressed in algebraical formula; these three possible con- tingencies appear as follows : — Let B represent the debit balance of Trading Account, ( — B) the credit balance thereof, V the value of the stock, P the profit on sales, and ( — P) the loss on sales. I. Then B ..: V - P .' . B + P = V .-. P = \' - B. II. Then B = \' - P .• . B - V = - P = (-P). III. Then ( - B) = V - + \' = P. - P .-. (-B) - V- - P.- , B I 2 ii6 BOOKKEEPING. In any case, therefore, the amount of the profit (or loss) on sales may be readily computed ; the next step is to debit Trading Account and credit Profit and Loss with all profits, and credit Trading Account and debit Profit and Loss with all losses. We have now eliminated the nominal element from these Trading Accounts, and the balances to their respective debits represent the value of stocks on hand. The next step is to transfer the Nominal Accounts proper to Profit and Loss, and in doing so we shall require to see that they completely record the transactions under their respective heads. Discounts. — In this account we find that the debit has not yet been taken for JP^\ los. to be allowed to Henry Dale, under transaction No. 5. This discount will not be allowed unless punctual payment be made, and it is, therefore, inexpedient to credit Dale's account with the amount; still the ;£4 los. is a charge against this month's profits, and, accordingly, we must transfer to the credit of Profit and Loss Account ^£45 3s. — not ;£49 13s. as shown in the Trial Balance. This leaves a balance of ^4 los. to the credit of Discount Account, which may be brought down on that account as a liability ; but a more scientific method is to pass a Journal entry as follows : — i s d i s d Jan. 31 Discounts Account 22 4 10 To Suspense Account 25 4 10 For Outstanding Discounts on this date, VIZ. : — Henry Dale, £4 to TRANSACTIONS OF FOX AND CRANE. 1 17 The Suspense Account, to which the reader is now introduced for the first time, is a Personal Account — the full meaning of the title being '' Sundry Debtors and Creditors for various Assets and Liabilities carried forward." Strictly speaking, almost all Nominal Accounts would, in practice, require the co-operation of the Suspense Account : thus : — {a) Wages are only paid up to the 27th January, 4 days' wages — say £2 5s. — are due, and should be debited to Wages Account and credited to Suspense Account. {b) Fire insurance, water-rate, and poor-rate have been paid in advance; Suspense Account should be debited, and these accounts respectively credited with the proportion still unexpired. {c) Other items outstanding, e.g. taxes, gas, and general rates, would also require to be brought into account by debiting the various Nominal Accounts, and crediting Suspense Account, with the proportion properly chargeable to this month. As, however, these points would illustrate no new principle, they are omitted from the pro forma accounts to avoid undue complication. All the Nominal Accounts have now been focussed into the Profit and Loss Account, which, accordingly, shows a credit balance of £2^1 8s. 2d., being a net profit on the month's trading. This sum must be divided between the two partners in the proportions mutually agreed upon, crediting each partner's Capital Account with the amount of his share. It still remains to bring down the balances of the Real and Personal Account, and prepare the Balance Sheet. The Ledger — thus completed — will then appear as follows : — ii8 Dr. bookkeeping. Messrs. Fox and Crane's Ledger."* HENRY FOX, C.'vpital Account, 1913 Jan. 27 I ToThos. King.. 31 „ Balance down i s d 13 15 II 7,830 19 1 I9I3 Jan. I 31 Feb. I 1 £7,844 14 " By Balance „ Travelling Expenses „ Profit and Loss .\/c.. By Balance I24 i I 126 Cr. £ s d 7,648 13 9 ID O O 186 I 2 £7.844 14 11 7,830 19 O Dr. JOSEPH CRANE, Caimt.\l ACCOINT. Cr. 191 3 Jan. 31 To Balance down 2 £ s d 3,045 7 I9I3 Jan. I i 31 Feb. I By Cash.. „ Profit and Loss A/c . . By Balance 1 26 2 £ s d 3,eoo 45 7 £3,045 7 £3,045 7 3,045 7 Dr. BILLS RECEIVABLE ACCOUNT. Cr. ^ I9I3 Jan. 1 31 To Balance „ Sundries . . To Balance I24 bb26 3 £ s d 704 7 6 1,436 1913 Jan. 5 8 10 31 i 1 By Cash, No. 74 „ do. No. 77 „ Western Steel Co „ Balance down 1 J 1 3 186 17 6 217 ro 490 1,246 £2,140 7 6 £2,140 . _. „ Feb. I 1,246 Dj^. 1913 Jan. 18 25 30 31 BILLS PAYABLE ACCOUNT. To Cash and Dis- count, No. 46 „ Cash and Dis- count, No. 43 „ Cash and Dis- count, No. 44 „ Balance down £ s d 780 o o 281 10 o 250 o o 140 16 8 £1,452 6 1913 Jan. 1 31 Feb.i By Balance „ Sundries By Balance Cr. I £ s d 1 24 672 6 8 i»1j 15 780 o o £1,452 6 8 140 16 *The folio references here are to the book of first entry from which the items have been posted. When (as here) certain items pass through no book of first entry the folio reference is to the Ledger Account where the contra item appears. TRANSACTIONS OF FOX AND CRANE. 119 Dr. TRADING ACCOUNT— ANGLES. Cr. To Balance „ Sundries To Balance L.24 p. I 5 1913 Jan. 6 31 J- J P.R.l L.26 5 1913 Jan. I 31 t. c. q. 50 100 400 800 By Consign- ment „ Sundries „ Profit & LossA/c Balance (Stock on hand) .. t.c. q. 80 I 15 68 5 £ s d 640 13 13 7 546 150 £1,200 150 £l,2O0 Feb. I 68 5 546 ; Dr. TRADING ACCOUNT— BARS. Cr. I9I3 Jan. I 31 To Balance , Profit & LossA/c To Balance L.24 L.26 6 t.c.q.l £ s d 200 i 1,550 100 1913 Jan. 31 By Sales . . , Balance (Stock on hand) .. S. I 6 t. c. q. 120 80 £ sd 1,030 620 200 0! £1,650 200 £1,650 Feb. I 80 620 Dr. TRADING ACCOUNT— FISH-PLATES. Cr. 1913 Jan, I 31 To Balance , Profit & Loss A /c To Balance L.24 L.26 7 t. c. q. ' 20 £ sd 150 600 1913 Jan. SI By Sundries • Balance (Stock on hand) S. I 7 t.cq. 12 800 £ sd 96 60 20 £156 20 £156 Feb. I 800 60 Dr. TRADING ACCOUNT— RIV'ETS. Cr. I9I3 Jan. I 31 To Balance „ Sundries „ Profit & Loss A/c To Balance L.24 p. I L.26 8 t.cq. I 4 I 12 £ s d 26 13 6 13 4 I 15 ! , ^913 : Jan. 31 By Sundries s. i , Balance 1 (Stock on 1 hand) ' 8 1 t. C. q. 10 I 6 I £ sd 12 15 28 17 6 I 16 I £41 12 6 I 16 I £41 12 6 Feb. I I 6 I 28 17 6 I20 BOOKKEEPING. Dr. TRADING ACCOUNT— SLEEPERS. Cr. I9I3 Jan. 31 To Balance . . „ Sundries . To Balance . . L.24 p. I 9 t. c.q. 100 c 40 £ sd 750 300 1913 Jan. 31 By Balance . . (Stock on hand) . . 9 t. c. q.| £ s d 140 1,050 140 £1,050 140 £1,050 Jan. 31 140 1,050 1 1 Dr. JOSEPH BALL. CONTRA. Cr. 1913 Jan. I 10 To Balance „ Western Steel Co To Balance I24 ji 10 i s d 38 19 490 \ 1913 Jan. 10 ' 31 I By Bills received. . , Balance down.. 1>26 10 £ s d 490 58 19 £548 19 £548 19 Feb. I 58 19 Dr. THOMAS KING. CONTRA. Cr. , I9I3 Jan. I To Balance J 24 ^ 1 ^ 275 18 4 1913 Jan 27 1 1 1 1 By C a s h (per Trustees ist and final Divi dend of 19/- in the £) . . „ H. Fox (for balance) I £ s d 262 2 5 13 15 II £275 18 4 £275 18 4 Dr. WILLIAM WRIGHT. CONTRA. Cr. 1913 ] Jan. I To Balance 19 „ Goods Feb. I To Balance 24 £ sd 285 9 9 ; 850 o o 1 £1.135 9 9 5 9 9 1913 Jan. 15 ; 19 31 By Cash . . „ Bills received. » Balance down . , b26 12 £ s d 280 9 o 850 o o 5 9 9 £1,135 9 9 TRANSACTIONS OF FOX AND CRANE. «3 Dr. HENRY DALE. CONTRA. Cr. 1913 Jan. I Feb. I To Balance „ Goods . . To Balance 124 I £ s d 178 10 o 180 o o 1913 i £ s d Jan. 25 By Cash .. ., j i ! 150 o o 31 »' Balance down I 13 | 208 10 o £358 10 9 208 ro o £35*! 10 o Dr. HUGH FORBES. CONTRA. Cr. I9I3 Jan. 5 13 To Goods , Do. To Balance 81 14 96 12 15 1913 Jan. 5 31 By Bills received » Balance down b26 14 96 .0 12 15 £108 15 £108 15 Feb. I 12 15 i 15 Dr SIMS & CO. CONTRA. Cr, I9I3 Jan. 3 6 To Cash and Dis- count , Bills Payable.. „ Discount , Goods . . To Balance I "15 J I P.r 2 15 £ s d 85 I 6 780 20 13 13 1 ; I9I3 Jan. I 2 31 By Balance . Goods.. , Balance down I24 pi 15 85 I 6 800 13 13 £898 14 6 £898 14 6 Feb. I 13 13 Dr. JONES & YOUNG. CONTRA. Cr. ^ 1913 Jan. 24 1 To Cash and Dis- count . . 1 I £ s d 41 17 1913 Jan. I 1 ! By Balance . . 1 24 £s d 41 17 BOOKKEEPING. 17 PERCY BRIGHT CONTRA. I9I3 [an. 12 To Cash and Dis- count . . I ) £ s d 73 4 1913 Jan. I 12 By Balance „ Goods I24 PI £ s d 5o 13 4 ^73 4 £73 4 Dr. westp:rn steel co. CONTRA. Cr. I9I3 Jan. 10 22 To Commission . . „ Bills received. „ Cash and Dis- count i I £ s d 8 15 490 300 1913 Jan. 10 17 22 Bv Joseph Ball .. ,; Cash .. „ Goods.. J I I P I £ s d 490 8 15 300 £798 15 £798 15 19 /;;•. JOHN KERR. CONTRA. Cr. 191 3 Jan. 16 To Cheque and Discount . . £ s d I 102 5 6 1913 Jan. I 1 i By Balance ^4 £ s d 102 5 6 ! Dr. FREEHOLD PREMISES. CONTRA. Cr. 191 3 Jan I To Ba'ance To Balance '24 20 £ s d 1,740 1913 Jan. 31 By Depreciation. . „ Balance down J 1 20 £ s d 500 1,735 £1,740 £1,740 Feb. I 1,735 TRANSACTIONS OF FOX AND CRANE. 123 Dr. CONSIGNMENT . \CCOUNT (HV. POOLE, SMYRNA) * Cr. 1915 Jan. I 6 31 To Balance , Angles , Cash (freight, &c.) . . , Profit and Loss Account To Balance I li I I26 £ £ s d 680 640 56 2 9 132 8 5 ! 1,508 II 2 1913 Jan. 15 29 31 By Cash .. » Do . Balance (Stock unsold ) I I 21 £ £ s d 750 6 8 420 338 4 6 1,508 II 2 Feb. I 21 338 4 6 Dr. DISCOUNTS. CONTRA. Cr. 1913 Jan. 31 To Suspense Ac- count , Profit and Loss Account 12 «26 £ s 4 10 45 3 d 1913 Jan. 2 31 £49 13 By Sims & Co. » Sundries £ s d 20 o o 29 13 o £49 13 o 23 Dr. WAGES. CONTRA. Cr. 1913 Jan. 6 13 20 27 To Cash .. ..I , Do .Do .Do £ s d 450 450 450 450 1913 Jan. 31 By Profit and Loss I26 £ s d 17 £17 £17 24 D, BALANCE SHEET. Cr. (The Opening Balance Sheet was shown on page 104.) 'Dr. SUSPENSE ACCOUNT. Cr. 1913 Jan. 31 By Discounts i2 / s d 4 10 o * A better method of treating Consignment Accounts is explained on page 99, but it cannot be followed here owing to want of detail in the pro forma problem. 124 BOOKKEEPING. 26 Dr. PROFIT AND LOSS ACCOUNT. Cr. I9I3 i s d 1913 £ s d Jan. 8 To Fire Insurance . . C.I 350 Jan. ID By Commission jj.i 8 15 17 „ Water Rate „ 2 12 6 31 , Bars L.6 100 23 „ Poor Rate . . 5 3 4 » , Fish-Plates 'l.7 600 30 „ Repairs „ Salaries 2 I 9 • , Rivets .. L.8 I 15 31 „ 12 10 , Consignment L.21 132 8 5 „ Petty Cash,. 4 13 8 „ „ Discounts L.22 45 3 „ „ Depreciation J.I 500 " „ Travelling Ex- penses . . „ 10 „ n Angles Account . . L.5 070 1 ^ „ Wages L.23 17 " „ Net Profits, viz. :♦ i sd Hy. Fox . . 186 I 2 \..\ J. Crane .. 45 7 L.2 , ■'J^ " ^ 1 : )f 294 I 5 £294 I 5 27 Z)r BALANCE SHEET. Cr. 1913 1 £ s d 1913 £ sd Jan.31 To Henry Fox(Capital) L.I j 7,830 19 Jan 31. By Freehold Premises L.20 1,735 „ Joseph Crane (Do.) L.2 3.045 7 „ Stock-in-Trade,viz.: „ Bills Payable L.4 [ 140 16 8 1 Angles . . £546 L.5 „ Suspense Account L.25 4 10 Bars . . 620 L.6 Fish-Plates 60 L 7 - Rivets . . 28 17 6 Sleepers 1,050 00 L.8 L.9 2,304 17 6 • „Consignmentat Smyrna . . L.2 1 338 46 ^ „ Joseph Ball , William Wright .. L.IO 58 19 w L.I2 5 9 9 » „ Henry Dale L.I3 208 10 , Hugh Forbes L.I4 12 15 , Sims & Co. L.I5 13 13 H » Bills Receivable . . L.3 1,246 » Cash at Bank C.I 5,042 6 I , Cash in hand . . ; 36 3 5 £11,021 12 8 £ll,021 12 8 I * Partners' shares of profits have been transferred to their respective Capital Accounts. See, however, page 89, It is usual for each partner to be supplied with a book con- taining copies of the Balance Sheets and Profit and Loss Accounts, signed by both partners and the auditor. The following would represent such a book in the present example, and it may be added that the forms here shown would — in practice — be those adopted in the firm's Ledger. TRANSACTIONS OF FOX AND CRANE. 125 u->0 m t>.o oooo >o z m sH'* 00 in 10 5^ TJ O O O (A O O Smith do ... 200 8. Paid for fixtures 50 ID. Bought from Robinson goods value ... 287 18. do. Brown do. ... 125 19. Sold Clarke goods value 12 10 22. do. Dodd do. 15 7 29. do. Cowley do. II 3 31- Sundry ready-money sales ... 91 7 6 Feb. 6. Sold Ward goods value 980 *This example was set at the Intermediate Examination of the Institute of Chartered Accountants in June 1884. ADJUSTMENT ACCOUNTS AND SELF-BALANCING LEDGERS. 1 35 £ s d Feb. 9. Received from Clarke on account 10 )) Sold Dodd goods value 15 6 13- Bought from Robinson goods value 95 21. Received from Dodd ■ 30 13 28. Sundry ready-money Sales "3 9 March 6. Paid Robinson . 300 ^3- Sold Ward goods value II 6 IS- Sold Richardson goods value 13 7 3 20. Received from Ward 20 31. Sundry ready-money Sales . n6 9 April 9. Paid taxes 7 4 17. Sold Richardson goods value II 3 18. Sundry ready-money Sales 43 16 3 On the i8th April 1884 Smith died. Make up the accounts of the firm to that date, the stock being taken at ;({^i67, there being ;,^i8 due for rent, and jQ^z 8s. jd. due to Jones for petty expenses paid by him. Assume that all receipts are paid into bank and all payments made by cheque. For these transactions the following books are suitable : — General Ledger, Journal, Bought Ledger, Bought Book, Sold Ledger, Day Book, and Cash Book. The Cash Book should be ruled as follows : — 136 BOOKKEEPING. £ s d 50 300 o 740 357 4 468 10 9 ! 12 rr (fl 'J- o\ •*■ 00 ft m 0\ •* Bought Ledger £ sd 300 o» ;* £ «0>- Th "^<^ X Particulars III 6 ', '. '. < ii: s^'<"s .Sort ooo Liabilities. Hans Johnson Thomas Buckley Bills Payable— No. 60, Due January 12th 1893, J. Nooks ... £ 300 300 500 S d ;^I,IOO EXAMINATION PAPERS. 1 47 Each partner's capital is to be credited with interest at the rate of 5 per cent, per annum before arriving at the balance of profit or loss. During the month of January the transactions of the firm were as follows : — £ s d Jan. I. Brice paid into Bank Account of firm his portion of capital 1,000 o o „ 2. Sold to Dowley & Son, 3 Pipes Port Wine for... 210 o o „ 3. Paid Cash for Dock Charges on 3 Pipes Port sold yesterday 8 15 o „ 5. Bought 40 Hhds. Brandy, at £/^o, from E. Lintott, and gave him a Bill at 2 months, he allowing 2^% 1,600 o o „ 8. Shipped per "Annie" on Joint Account with ourselves and Harrison & Co., Liverpool, each one-half concerned, 40 Hhds. Brandy, invoiced at ^^50 2,000 o o Received Debit Notes as below : — Insurance on Brandy 31 o o Dock Charges 25 o o Commission to Chas. Kells & Co 41 2 5 „ 12. Paid Dock Co. Charges by Cheque 25 o o Bank advise having paid Bill Xo. 60 this day... 500 o o Jan. 12. Received Cheque crossed " not negotiable," for ;i^i,ooo from Harrison & Co., being their half- share per " Annie " 1,000 o o Paid Anglo- Assurance Co., by Cheque, ;^3i Insurance on ^2,400, @ 25% on Brandy, per " Annie," for Sydney 31 o o „ 15. William Bell & Co.'s Bill, Xo. 114, for ;<'9oo, returned dishonoured 900 o o Paid Cash for noting charges 036 „ 15. Sold W. Scott, 4 Butts Sherry for 270 o o Received Cash, ;^27o, for Sherry sold to W. Scott and paid to Bank 270 o o Paid Cash, _^ii 12s., Dock Charges, on Sherry sold to W. Scott II 12 o ,, 31. Paid Trade Charges, £1^, for expenses this month ... ... ... ... ... ... 15 00 Stock on hand — Port 125 o o „ ,, Sherry ... no o o L 2 148 BOOKKEEPING. QUESTIONS TO BE ANSWERED BY STUDENTS. 1. Midwood & Brice are desired to draw a bill on John Howie dated January 7th, 2m/d, for ;£iio 4s. Required the form of the bill of acknowledgment when accepted by them ; also how is the bill to be recorded ? 2. Sheldon & Sons have given Midwood & Brice their promissory note dated February 9th, at 3m/ d, payable to Midwood & Brice's order for jQii'] 15s. Required the form^ and how it is to be recorded in Midwood & Brice's books. 3. Required the proper Journal entry for the following : — Midwood & Brice settled their account with Ben Brown, which is ;£i5o, and gave him their note at 2 months, payable to his order. 4. Draw out a promissory note at 3/md, dated at the time of writing, Aaron Black's payable to Charles Dickson for ^£320. 5. Having discounted at the banker's Gould Davis's bill for ;^2i2 6s., we paid discount ;£2 3s. 8d. ; how are we to enter this transaction in the Cash Book? 6. We paid Messrs. John Felt & Co., by cheque, their account ,£280 los., from which they allowed us a discount of ;£i4 OS. 6d. How should this transaction be entered in our books? EXAMINATION PAPERS. 149 IV. (The London School of Economics and Political Science, December 1902.) 1. Explain fully the exact difference between single-entry and double-entry bookkeeping. State what are the advantages of each. (10 marks.) 2. What is the object of preparing a Balance Sheet of an undertaking at regular intervals throughout its course? What will such a Balance Sheet show, and what are its limitations? (12 marks.) 3. A Limited Company has a branch establishment at Brighton. On 31st December 1901 the following Trial Balance of the Branch Book is forwarded to the Head Office : — TRIAL BALANCE. 3 1 ST December 1901. £ s d £ s d Head Office 2,40c Remittances 1,200 Sold Ledger 1,500 Bought Ledger 500 Stock, ist January 1901 2,000 Purchases 6,500 Sales .. 10,200 Rent 400 Salaries .. 600 Trade Expenses 500 Bank 400 ;^i3>ioo ;^I3,IOO 150 BOOKKEEPING. The Stock in hand on 31st December 1901 was jQi,^oo. You are required to incorporate those transactions in the Head Office Books, showing Branch Account and Branch Trading and Profit and Loss Accounts in the Head Office Ledger ; also Branch Balance Sheet. (18 marks.) 4. Explain fully any otie system by means of which a single Ledger may be balanced separately. (12 marks.) 5. On the ist July 1902 A. took B. into partnership. A had the following assets : — Leasehold Premises Stock-in-Trade ... Book Debts Cash at Bank 800 700 100 ;^2,ioo His liabilities (including ;£2oo on bills payable) amounted in all tO;£8oo; B. brings in ^£1,500 in cash, and it is agreed that ;£5oo of this shall be credited to A. as representing the price to be paid by B. for a half -share of the profits. Open the books of the new firm by means of Journal entries, and show the Balance Sheet at the commencement of the partnership. (12 marks.) 6. Define {a) Capital Expenditure, {b) Revenue Expenditure, (c) Fixed Assets, {d) Floating Assets. Give one typical example of each in connection with any business with which you are acquainted. (16 marks.) 7. From the following Trial Balance, prepare Departmental Trading Accounts, general Profit and Loss Account, and Balance Sheet. EXAMINATION PAPERS. 151 TRIAL BALANCE. 30TH Septem BER 1902. L s d I s a Wm. Blackley — Capital Account... ... 15,000 Do. Drawings Account ... 3,000 Sundry Debtors 1,200 Sundry Creditors 3,000 Business Premises 5,000 Furniture and Fittings 4,000 Bank 1,700 Cash 300 Stock-in-Trade 31st March 1902 — Department A 2,000 Do. B ... 4,000 Do. C ... 3,000 Purchases — Department A ... 5,800 Do. B ... 4,000 Do. C 5 ,000 Wages- Department A 1 ,000 Sales- Department A 8,000 Do. B 5,000 Do. C ... 7,000 Salaries 700 Trade Expenses 300 Rent, Rates, &c 500 Bad Debts 200 Discounts 300 ;|^40,0C)0 ;^40,000 The stock on 30th September 1902 was, Department A, ;£2,ooo; Department B, ;£6,ooo; Department C, ^£2,000. Provide for Depreciation of Furniture, ;£ioo ; Doubtful Debts,. ^100; outstanding Rent, ;£i5o. (20 marks.) 152 BOOKKEEPING. V. (University of Birmingham —First Examination for Degree of B. Com.— June 1903.) 1. Describe shortly what you understand by double-entry bookkeeping, and state in what respects it differs from book- keeping by single entry. 2. Give an example of a Cash Book having separate columns on each side for Cash and Bank transactions, and also a discount column. Insert ten typical entries and balance the account. 3. The following balances appear inter alia in a Ledger on the 31st December 1902. State what you understand to be the exact meaning of each : — {a) Cash, Dr., £^0. {h) Machinery, Dr., jQi,ooo. (c) Wages, Dr., ;£5,ooo. (d) Drawings, Dr., ;£35o. (e) Capital, Cr., ;^5,ooo. (/) Discounts, Cr., ;£ioo. (g) Bills payable, Cr., ;£i,2oo. 4. Record the following transactions of H. Smith in a Journal, and post the same to the proper Ledger Accounts : — On ist Jan. 1903 sold to W. Jones goods value £100. On the 12th Jan. received from Jones his acceptance at 3 months for ;£ioo. On January 13th discounted Jones's bill with my Bankers, they charging £1 4s. for the accommodation. EXAMINATION PAPERS. 1 53 5. Record the same transactions in Jones's books, in so far as they affect him, and show the entries necessary to record the payment of the bill on maturity. 6. Describe shortly what you understand by the difference between expenditure on Capital Account and expenditure on Revenue Account. 7. If a trader at the end of each year makes out a Balance Sheet showing his Liabilities and Assets and Capital, but does not make out Trading Accounts or Profit and Loss Accounts, how can he ascertain what profits he has made in a year? 8. Explain the difference between Gross Profit and Net Profit. 9. On the 15th February 1903 W. Jones forwarded to Messrs. Bright & Co. on consignment goods to the nominal value of ;£i, 000, the cost of freight, insurance, &c., being ;£5o. On the 15th of May he received an Account Sales showing that the goods realised ;^i,25o, subject to the Consignees' commission of 2 per cent, thereon, and expenses properly incurred by them amounting to ;£20. Show the proper entries in the books of both Consignor and Consignee. 10. Prepare a Balance Sheet, Trading Account, and Profit and Loss Account for the year 1902 from the following Trial Balance taken out at 31st December 1902 : — Dr Cr. Capital ;^48,ooo Freehold and Leasehold Land and Buildings ;^i8,975 Fixed Plant and Machinery ... 20,000 Purchases 15,000 Coal, Gas, and Water 1,000 Wages 14,000 Bad Debts 85 154 [ BOOKKEEPING. Dr. Cr. Packing 450 Rent, Rates, and Taxes 300 Insurance 50 Advertising 500 Travelling Expenses 75 Commission 60 Repairs and Renewals of Plani and Machinery 510 Salaries 400 Sales, Finished Goods 34,200 Do. Repairs 3>5oo Sales Returns "5 Stock at ist January 1902 8,000 Cash at Bank 4,000 Cash in hand 30 Debtors 5>i5o Creditors 3,000 /88,7oo ;^88,700 In preparing the accounts the following points must be taken into consideration : — The Stock at 31st December 1902 is ;£6,ooo — i.e., ;£2,ooo less than at the beginning of the year. A Depreciation at the rate of 5 per cent, per annum is to be charged on the plant and machinery. A Reserve of ;£i5o for Bad and Doubtful Debts is to be provided. In addition to the ;£i4,ooo a further sum of ;£2oo is to be charged for Wages due at the 31st December 1902, but not actually paid until after that date. EXAMINATION PAPERS. 1 55 VI. (Institute of Chartered Accountants — Intermediate Paper, June 1903.) 1. How should the following be entered in the books of a firm, who, together with a friend A., joined half each in this speculation, viz. : — Coals bought in Newcastle for ;£io,ooo including freight and all expenses per ss. " Edward " and ss. "Albert" to Norway. The coals realised ;£i5.ooo net; this sum was invested in timber, which, in London, realised on 31st January 1903 ;£i 7,000, after paying all expenses. A. managed the whole transaction and financed it by drawing six months' bills on the firm for ;£io,ooo, viz. : on ist August 1902 ;^5,ooo a/c coals per ss. " Edward," and on 12th August 1902 ;£5,ooo a/c coals per ss. ''Albert." 2. S. Coulson lent his brother William ;£i,ooo, at 5 per cent., to enable him to take a share in Silver & Co.'s business. He paid ;£5oo for goodwill and ,£500 capital. His share of the profits and interest amounted in the first year to ^£1,200. He drew ;£i5 0oo, out of which he spent ;£6oo on living, and at the end of the year paid interest on the loan and repaid jQ2^o of the principal. Write up William Coulson 's Private Ledger, and produce the " Trial Balance." 3. A. and B. bought office property for ;£5o,ooo. Each paid ;£i 0,000, and the vendor lent ;£3o,ooo on mortgage. A. and B. then each paid into their joint bank account jQi,ooo as working capital, and out of that paid ;£6oo expenses of the mortgage, &c. The arrangement was that A. should collect the rents and transact all the business, he receiving two- thirds of the ultimate profit, and B. one-third. At the end of two years the property, subject to the said mortgage, was sold for ;£32.ooo, viz., as to ;^20,6oo in cash and ;£ii,40o in fully- paid shares of the purchasing company. During the two years I5<^ BOOKKEEPING. the rents and profits were exactly sufficient to meet the mortgage interest and all expenses except the above ;£6oo. A. and B. had not drawn anything. State how the proceeds of the sale and the bank balance should be apportioned between A. and B. 4. Draft the Journal entries for the following : — Smith and Jones converted their business into Smith, Jones & Co., Lim., with nominal capital ;£ioo,ooo, viz., 100,000 ordinary shares of £1 each : 99,000 were credited with i8s. per share paid up (2s. per share to be paid in three months), and 1,000 fully-paid, allotted to S. (who was to be secretary), to be paid to Smith and Jones out of his salary. The assets were put at ;£ioo,ooo, viz., property and good- will, ;£9o,ooo; stock and book debts, £6,000; and cash, ;£4,ooo. The liabilities were ;£9,900. Smith and Jones were to have an equal number of shares each. Smith's three sons, D., T., and H., were to get an equal number of shares each, the total thereof being equal to one-half of their father's shares. Jones's two sons, John and James, were also to have shares equal to one-half their father's, but John was to have twice as many as James. 5. For purposes of preparing a statement of affairs as on 25th March 1903, how would you deal with the following account in the bankrupt's Ledger? Dr. T. Dick. Cr. 1902 April I 4 Cash Income Tax, one year £ s 19 3 5 16 d t March 25 Quarter's Rent June 24 Quarter's Rent £ ■ • 25 .. 25 s d June 30 Oct. I Cash 25 25 1903 Jan. I 25 6. - J you, as a bookkeeper, were posting the following account, or taking out the Ledger balances at 31st March 1903, EXAMINATION PAPERS. 157 what inquiries would you make, or what books would you refer to? H. Smith. Cr. 1902 Jan. I Balance Feb. 28 Goods Mar. 21 April 30 May 31 June 30 July 31 Aug. 31 Sept. 30 Nov. 30 Dec. 31 1903 Jan. 31 Feb. 28 I 1902 i Mar. 20 Cash I Discount Mar. 10 Cash April 10 „ , May 10 „ j June 10 w I July 10 I Sept. 10 „ Oct. 10 ! Nov. 10 H ' Dec. li , Jan. 10 „ Feb. 10 £ s d £iog o o 700 600 £95 o o 7. On I St July 1902, Graham, the manager of three Tea Estates, X, Y, Z, in Ceylon, drew^ a bill at three months for ;£i,ooo on the London Tea Company, Lim., and Graham sold the bill, with the shipping documents attached to it, to a bank in Ceylon. The tea realised net ;£i,2oo in London on 30th September 1902. What entries should the London Tea Company have made in its books on accepting the bill, and what further entries should have been made on 30th September 1902? 8. In a Shipping Company the stock of stores left over from voyage 12 of ss. "Alexandra," was valued at ;£i25. Describe the entries you would make in the books of the company. 9. If you, being bookkeeper, suspect that the cashier is dis- honest, what steps would you take to protect yourself against blame for negligence? 10. Frequently so-called Balance Sheets are exhibited, par- ticularly by charitable societies, whereas really they are only Cash Accounts. What further is necessary to make them complete Balance Sheets, showing the true financial position? XIII. ACCOUNTS OF MANUFACTURERS. The distinguishing feature of manufacturers' accounts is that the goods sold are of a different kind to those purchased ; that is to say, labour is put into the goods purchased before they are again sold. It is, therefore, no longer possible to trace the purchases into the stock, and thence outwards through the Sales Book; and consequently the check upon the sales and purchases described in a previous chapter {vide pages 91-93) is not applicable. If, therefore, the utmost possible benefit is to be derived from the science of bookkeeping, it becomes necessary to adapt the system of accounts to the altered condition of affairs. As a matter of fact many manufacturers are also traders — i.e.. they manufacture for stock, and make their sales from stock. The accounts of such persons will therefore combine the distinctive features of both manufacturers' and traders' accounts. As manufacturers, they purchase raw materials, which they make up and sell to themselves ; as traders, they buy from themselves and sell to their various customers. It is proposed, in this and the following chapters, to direct the reader's attention to the accounts of a '"pure" manu- facturer, i.e., one whose work consists solely of the execution of contracts ; and, with this end in view, the accounts of a builder have been selected for detailed consideration. ACCOUNTS OF MANUFACTURERS. 1 59 Two reasons have suggested this selection : — (i) The author knows of no published work that has con- sidered these accounts in detail upon a scientific basis. (2) The accounts of " mixed " manufacturers have already received very able treatment at the hands of other writers — notably ^fr. G. P. Xorton, F.C.A., in his very excellent work upon " Textile Manufacturers' Bookkeeping." Moreover, it is not anticipated that the student who has intelligently followed the earlier portion of the present work will experience any practical difficulty in combining the accounts of manufacturers and traders, where necessary. The three most important accounts that are distinctive of manufacturers' books are : — (i) Wages Account. (2) Stores Accounts. (3) Cost Accounts. The two former are really subdivisions of the last. Wages Accounts. — These comprise the record of time spent by the various workers upon each contract, together with the time occupied in the immediate supervision of such workers. Each contract is under the immediate charge of a foreman, who keeps a record of the time spent by each work- man thereon. In many cases a small jobbing trade will also be carried on, in addition to the contract work; and it is not unusual to group all such work together, under the head of " jobbing," in charge of a yard foreman. Two ends have to be served by the Wages Accounts : they serve as a voucher for the amount of wages paid, and as a record of the amount of labour expended upon each contract. l6o BOOKKEEPING. The latter may more suitably be discussed under the heading " Cost Accounts," and attention will therefore be confined for the present to the question of the payment of wages. Each foreman will be provided with a sufficient sum of money from which to make disbursements from day to day — as, for instance, when a workman is paid off before the end of the week, or when an advance (commonly known as a '' sub.") is made to the workman on account of the wages due to him. Each week the foreman sends into the office a pay- sheet, in form somewhat similar to the following : — ACCOUNTS OF MANUFACTURERS. i6i Contract No PAY-SHEET for the Week ending. Contract at .xgi. Wages : (Masons) (Bricklayers) . . (Plasterers) . . (Joiners) (Labourers) .. (Foreman) Total Total Total Total 1 Less £ sd £ sd £ sd To pay £ sd Attached to this sheet is a Siinimary as follows :- Contract No SUMMARY OF PAY-SHEET for the Week ending 191.. Contract at Masons Bricklayers Plasterers Joiners Labourers Foreman £ s d £ s d Expenses, viz. : Materials Carriage Sundries These summaries, when received at the office, are collected into the '' Wages Book," which is in the following form : — l62 BOOKKEEPING. be G -a J^ ;»&.2 a^g iisi r^ist <«♦* 1 "« -o ■t^ o tf) H «SJ en "O CO S M CL. (U T) X &c » s M O <-rt (/) TS .ij j i! (fl ] 13 j S «hJ Q 1 "C ^ 1/) . (/) 0! ^ £ d T3 i/i Ul G i ^ 1 G ■ON 1 JOFJIU 3D I ACCOUNTS OF MANUFACTURERS. 1 63 For the total of the right-hand colunm in this book a cheque is drawn and cashed, and the amount of each foreman's sum- mary forwarded to him; this amount will, of course, enable him to pay his week's wages and restore his petty cash balance to its former amount. If the contract is in another town it is usually convenient to remit a separate cheque, but this is merely a matter of detail. The amount of the weekly cheque, or cheques, is posted to the debit of " Wages Account " in the General Ledger — the detailed analysis being required only for the purposes of the Cost Accounts. Stores Accounts. — Certain kinds of goods are usually kept in stock, instead of being purchased specially for each contract, and for this reason it is necessary that Stores Accounts should be kept, recording the goods issued from store for each contract. Stores Accounts vary very much in general design. Some aim at keeping a complete record of the stores received and issued under each separate head, so that the books actually show from time to time the quantity in stock of each different article. In the case of a large and really important under- taking, this system is imperative, but with relatively small concerns it is both unnecessary and impracticable. In such cases it will suffice if stores be issued only in exchange for properly authenticated requisitions ; these requisi- tions being afterwards priced at the cost price of the goods (without deducting cash discounts), and analysed under the heads of the various contracts, upon weekly, fortnightly, or monthly sheets, similar in form to the following : — M 2 164 BOOKKEEPING. 2 ! T3 ^ nl . i- ^ u z tJ ^ So "stf " 1 •0 CZ <-»< CJ 6 Z TJ ^ M cZ ^ 6 Z cZ is o cZ o O 2 6 o ACCOUNTS OF MANUFACTURERS. 165 The column to the left of the money column is for the reference to the numbers of the requisitions, which latter are filed away in numerical order, and can always readily be referred to. A Stores Ledger is unnecessary under this system. Each -contract is debited in the Cost Ledger with the monthly total of stores issued, while the grand total of the monthly analysis is passed through the General Journal to the debit of '' Stores Issued Account " and the credit of *' Stores Account " ; as the latter account is debited with all stores purchased, through the Purchases Book, it follows that the debit balance of the '' Stores Account " in the General Ledger should represent the actual amount of stores in stock. If at any time there is a serious deficiency it may be desirable to compare the mer- chant's invoices with the requisition notes, and ascertain where the discrepancy occurs ; but, with proper management, such cases would be rare. For all ordinary purposes the above system will, therefore, be found both convenient and sufficient. Cost Accounts. — It is not desirable to give more than a general description of these accounts at the present time. The principle of the Cost Ledger is as follows : all the items of income and expenditure {i.e., the Nominal Accounts) are analysed under the headings of the various contracts from which they result ; the account of each contract thus shows the profit or loss in which it has resulted, and a tabular sum- mary of these accounts shows (horizontally) the profit or loss upon each contract, and also (vertically) the total income and expenditure under each head, agreeing with the Profit and Loss Account in the General Ledger {vide pp. 200-1). The following is a specimen page in the Cost Ledger, show- ing a convenient ruling for that book : — • i66 Contract No. 462. Dr. BOOKKEEPING. WAREHOUSE AT WEST BUCKNELL Quarter ending Wages Days 9,000 9,000 9,000 9,000 9, POO 9,000 9,000 9,000 9,000 9,000 i s d 250 o o 250 o o 250 o o 250 o o 250 o o 250 . o o 250 o o 250 o o 250 o o 250 o o 90,000 1 £^2,500 o o Materials Fo. £ s d 87 7,500 o o 92 2,500 o o Plant £ s d 500 o £■10,000 o o Stores i s d 500 o o 450 o o 500 o o £500 o o ;fi,45o o o ACCOUNTS OF MANUFACTURERS. 167 STREET. Tender No. 926. Archway, Architect, j/j/ December igi2. Cr. Petty Cash Fo 50 59 i s d 30 o o 10 10 o o £50 o o Establishment Expenses £ s d 500 o o £500 o o Contract Price 1 Stores Returned Fo. £ s d Fo. £ s d Plant Returned Fo. Dr. Summary From Folio , . Wages. . Materials Plant .. Stores . . Petty Cash . . Establishment To Folio Profit .. Total . . 2,500 10,000 500 1,450 50 500 £15,000 o o From Folio Contract Price . . Stores Returned Plant Returned To Folio 168 . . Loss Total £ s d 15,000 o o £i5,oo« o o XIV.— TRANSACTIONS OF A MANU FACTURING COMPANY. SHARE AND DEBENTURE LEDGERS, ETC. This is not the proper place to enter into any lengthy explanation concerning the constitution of joint-stock com- panies ; but it is perhaps desirable to review briefly some of their distinguishing features, so far as may be necessary for the purpose of explaining the accounts of these undertakings. It wUl be remembered that, in the case of a single individual, the amount of his capital embarked upon the venture is credited to his Capital Account, and the profits made by him are also credited to his Capital Account (as increasing the value of his interest in the undertaking, while they remain undrawn) ; and that losses and withdrawals of capital are debited to that account — thereby reducing the amount of capital remaining in the undertaking. In the case of private firms a similar course is often adopted — a separate account being kept for each partner, so that the amount of each partner's capital may at any time readily be perceived. In the case of a joint-stock company, the following conditions obtain : — (i) When the company is registered the amount of its capital, called "Nominal Capital," is fixed; and (except under special circumstances) remains unalterable. TRANSACTIONS OF A MANUFACTURING COMPAN\\ 1 69 (2) The amount of the nomiDal capital is divided into a certain number of " shares " of definite value. These shares may be of different classes {e.g., preference shares, ordinary shares, deferred shares), and it is not necessary that the shares belcMiging to different classes should be of the same face value. (3) Shares are " allotted " by the directors to such persons as may desire to become shareholders, in response to applica- tions received from such persons. The shares so allotted con- stitute the *' Capital Issued," or " Capital Subscribed." (4) Subject to the regulations of the company, the directors may call up upon the shares issued, or upc«i any class of shares issued, any sum not exceeding the nominal value of such shares. The total amount so collected constitutes the ** Paid-up Capital." (5) Shareholders whose " calls " are not paid up are liable (subject to the regulations of the ccMnpany) to have their shares forfeited by the directors. Forfeited shares may be re- issued to other persons upon such terms as the directors may impose. (6) No return of capital can be made upon shares, except under special circumstances (see " Reduction of Capital.") (7) It is competent for directors — upon the execution of a contract in the required form, which (or particulars of which) must be filed with the Registrar of Joint Stock Companies — to accept payment for certain specified shares in kind, instead of in cash ; but shares may not be issued at a discoimt. (8) Out of the profits made from time to time, the company in general meeting may declare dividends among the share- holders : shares of a like class being entitled to participate equally, different classes of shares being entitled to participate in accordance with the terms upon which such classes of shares were created. Directors may, in their discretion, declare "interim" dividends on account of current profits. lyo BOOKKEEPING. (9) Shareholders cannot be called upon to pay up their share of any loss that may be made ; except indirectly, by calling up any unpaid amount upon their shares, or by withholding divi- dends out of subsequent profits until such loss shall have been worked off. (10) A company may not purchase its own shares. (11) Subject to the regulations of the company, shareholders may sell their shares — or any portion thereof — to any person, whether a shareholder or not, upon such terms as they may think proper. Some restriction upon transfers is invariably provided in the case of " private " companies. These few brief notes will, it is thought, suffice to enable the reader to formulate the necessary accounts for the books of a joint-stock company. In the first place, it is usual to keep the shareholders' accounts in a separate Ledger (this, indeed, is required by statute), and to keep merely the corresponding Adjustment Accounts in the General Ledger. It is convenient to open a separate Adjustment Account for each class of shares. By way of exemplifying the best method of dealing with Share Accounts, we will suppose that " Bricks & Company, Lim.," has been registered for the purpose of acquiring the business of Messrs. Bricks & Mortar, builders and contractors, for the sum of ;£ioo,ooo payable half in cash and half in fully-paid shares [vide paragraph (7), page 169, ante]; that the nominal capital of the company is ;£ioo,ooo in 500 6 per cent, cumulative preference shares of ;£ioo each, and a like number of ordinary shares of *equal value ; 200 perf erence shares and 300 ordinary shares are to be allotted to the vendors, as fully paid-up : the directors invite applications for the remaining 300 preference shares and 200 ordinary shares. TRANSACTIONS OF A MANUFACTURING COMPANY. I7I accompanied by a depciit of jQio per share; jQi^ per share to be payable on allotment, ^£25 per share on the first of the following month, and the remaining ^£50 per share a month later. These applications come in in due course, and are entered in the "Applications and Allotments Book " — the ordinary and preference shares being kept separate. It is convenient to reproduce this book, -pro forma, at the present stage ; but the student will understand that — by the time the subscription list closes — only the fir-«%t seven columns will be filled in. 172 BOOKKEEPING. dn piBd \V}o± ^ ►I M m ■ 88 I in ir> ouoj paAiaoaa qsB3 oSJ p IIB3 pus O O O ir> m «n 1^ M tN. o o o U-) m >o OllOJ p9.\I9D9J qSH3 ^ J!^(5 oqoj p9Ujn;9J qsB3 i8 : 8 oiioj P9AI909J qSB3 9jBqs aad izj lU9UIJO|JV uo 9nQ o h h: >ri o m rovo " m m m a; o o a; Si -2^ .S-2 2 O p9JJOl{B S9JBqS jaaagy jo j9U9T ;o jaqiunsj ja^aq luaui^o^v JO jaquin^j ogoj I " §§ 888 9jBq5 jad oij }o jisodaa aoj p9iiddB s9jEqs jo'j9quinx 28 s 6 u q u - - J J rU) r r ri ■* vo 00 Q N s i O u B5< :8 888 I o o • uoijBOijddv }0 •O'sj I (U • • • -.-• cfl O « uZ lU '^ V 5 C C E :« 4j O a; SOUO ^Zc/5^ — J3 O O TRANSACTIONS OF A MANUFACTURING COMPANY. 1 73 A separate Cash Book, called the '' Capital Subscribed Book," is employed to record the sums received from, and returned to, applicants for shares, and shareholders ; and from this book the " Deposit of jQio per share " has been posted. Only the daily totals of the Capital Subscribed Book are entered in the " General Cash Book." If, however, the number of applica- tions be small, the deposits, &c., may be entered in the General Cash Book in an inner column and the daily totals extended. The directors then proceed to allot shares. There being more shares applied for than were offered for subscription, they make a selection of the applications, allotting some in full, some in part, and declining others altogether. Upon reference to the " Shares allotted " column it will be seen that the applications of John Able, James Cloud, and Jacob Keen are declined and the deposits returned, while a reduced number of shares is allotted to Thomas Bowen, William Deeds, Robert Eccles, and Arthur Frank ; the shares applied for by Henry Green, John Hughes, and Frederick Jones being allotted in full. The allotment being settled, distinctive numbers are assigned to the shares held by each shareholder, as shown in the column provided for that purpose. The next thing to be done is to forward " Letters of Allot- ment '' to each shareholder, intimating that so many shares have been allotted to him and that so much is due thereon. These letters make the allotment binding and bear a sixpenny stamp if they represent shares of a face value of £5 or upwards, and a penny stamp if below that amount. " Letters of Regret " are sent to those whose applications have been declined, enclosing cheques for the amounts of their respective deposits. In practice it is usual to provide a column in the Applications and Allotments Book for the serial numbers of both Allotment Letters and Letters of Regret. 174 BOOKKEEPING. It will be noted that, where a lesser number of shares have been allotted than were applied for, the excess paid upon appli- cation is not repaid to the applicant, but applied in reduction of the amount due upon allotment. As the amounts due upon allotment and in payment of calls are received, they are entered in the Capital Subscribed Book, and thence posted to the. Applications and Allotments Book, as shown in the foregoing example. In these fto forma accounts, the whole amount of shares is called up within two months of the date of allotment ; and, in such a case, it is convenient to deal with the calls through the Applications and Allotments Book, as here shown, trans- ferring the various accounts to the Share Ledger, after the shares have been fully paid up. The folio upon the extreme right in the above example records this transfer, the " Total amount paid up " in the previous column being the cross-total of the sixth, thirteenth, eighteenth, and twenty-first columns. If it ha(J been decided not to call up the whole amount of the capital subscribed for, the amounts transferred from the Applications and Allotments Book to the Share Ledger would, of course, have been the actual amounts called up, whatever they were ; the amounts received in payment of any subse- quent call being posted to the Share Ledger, instead of to the Applications and Allotments Book. It may be remarked, at this stage of the proceedings, that the allotment of fully paid shares to the vendors would also be recorded in the Applications and Allotments Book, but it is convenient to record the allotments of fully paid up shares to vendors and their nominees upon a separate page from the general applications. TRANSACTIONS OF A MANUFACTURING COMPANY. 1 75 The totals of the " Total paid up " columns are posted to an Adjustment Account (or to two Adjustment Accounts — one for ordinary and one for preference shares) in the Share Ledger, completing the double-entry of that Ledger and forming a connecting link with the General Ledger. The following example shows the account of Robert Bricks upon folio 8 of the Share Ledger. It will be seen that he is credited with 150 fully paid-up ordinary shares (posted from folio 2 in the Applications and Allotments Book), and with 100 fully paid preference shares (posted from folio 3 in the same book;. He is likewise debited with 20 and 50 ordinary shares which he has disposed of, the entry being posted from folio I in the " Register of Transfers," also shown below : — 176 BOOKKEEPING. W X < M Q Pi m o u *. 1 1 It '-fi 3o" i 1 ui < ■ 1 Z ■< 03 1 eg 1 .n « ! r^ rt 0^ .O " 1 " 01 1 i^ ■ ^ § £ ^ u-i < 4) 5, 2 a Zc^ 3 1 < S?„ H >] "-^ t .5 6 to 3 < 5^^ fe 8 •oj M G o> c5 ^ 1^ CT! <-►? § § E S. rj lo < «*- !^ i 2 c ^s u 1 0. 1 H ?! ^ D •< II 1 N c-> t. •oj 1 :: * ir> s 0^ ^ C u.. tn 1 W ( « j a: ■ en TRANSACTIONS OF A MANUFACTURING COMPANY. i77 5 g « a ? « 3 ^ C/3 w O 1 i: S'^ S"^ s t/j iWija u o {/3 C/l «£ •o g i5 H ■— 73 Z 1 1 •oj jajsiSaa O ►; u ajnuijvjoox 'V 11 ' O u^ U0UEJ3piSU03 '■-? c o N lO S 1 aoaEiBgjoj o rt JOjajSUEJXox O « dn pied •-- § § junoiny iB^oi fi «^ 0) o 2 o Jl L> 1 p N sajBqs JO ON[ 8 ?, (0 s V ^ 1 Z. - i h X •oj jajsiaan 00 I •paAiaoaj 00 a sajRoqijjao jo ©x paaa jajsuBJX JO ON O » paSpoi jajsuEjj, uaq.w ajEQ - s 178 BOOKKEEPING. New accounts have therefore to be opened in the Share Ledger for John Able and for James Cloud ; and, upon refer- ence to the pro forma Register of Transfers, it will be seen that 20 shares have been posted to Abie's credit on folio 10 in the Ledger, and 50 shares to Cloud's credit upon folio 11. Transfers of preference shares are best recorded in a separate register, but sometimes the same register is used and an addi- tional column inserted before the " No. of shares transferred," in which the class of shares is noted. Debentures. — Suppose that Messrs. Bricks & Co., Lim., have invited applications for 100 debentures of ;£5oo each. For an exact definition of the word " debenture " the student is referred to a legal text-book, but it will suffice for our present purpose if he regards debenture-holders as a sort of preferential creditor, to whom bonds are issued in much the same way as shares are issued to shareholders. For the sake of variety, it is assumed that no deposit is asked upon applications for debentures, but that the whole amount is payable upon allotment. The Applications and Allotments Book then assumes the following more simple form : — TRANSACTIONS OF A MANUFACTURING COMPANY. 179 OHOj O'lOJ US 11 « W M r- N ^SSqSS I 00000 ' ■00 000 Q Q 8^«8S8 I = 2 sSg SuoaoutK rWc/5>W J- u o « o 0-2 N 1-00 O •-• « mill llilil pajjoiiE SSSSSI 8 3)o»^ ^uainjonv JO ox •-> « ro-*>o 1 ' joj patiddB saanjuaqa'a }o .os. gS'SSS'g h uopcoiiddy jo 'Ofj N 2 l8o BOOKKEEPING. The forms of the Debenture Ledger and the Register of Transfers of Debentures do not materially differ from the forms shown above for the use of shares. Sometimes redeemable debentures are issued — i.e., deben- tures due for repayment at the end of a certain specified time, or upon a specified notice. A convenient way to deal with these redemptions is through a Register of Redemptions, some- what similar to the Register of Transfers, through which the debenture-holder's account is debited, and the Adjustment Account credited. Debentures may be issued at a discount, or at a premium. In either case the nominal amount of such debentures is the amount recorded in the Debenture Ledger ; the General Ledger entries are made as shown on pages 183, 189, and 230. XV.— TRANSACTIONS OF A MANUFACTURING COMPANY (continued). GENERAL AND TRADE LEDGERS. To turn to the trade bcx)ks. Let it be supposed that the company takes over the land, buildings, plant, machinery, stock, book debts, and contracts in progress, of the vendors ; paying therefor the sum of ;£i 00,000 : viz., ;^50,ooo in cash, ;£2o,ooo in preference shares, and ;£30,ooo in ordinary shares. The assets taken over are valued as follows : — Freehold and Leasehold Lands and Buildings Plant and Machinery Stores on hand Book Debts Contracts in progress The amount paid for Goodwill is thus ;i^20,000 15,000 10,000 5,000 25,000 25,000 ;^ 1 00,000 The whole of the share capital (;£ioo,ooo, in 500 six per cent, preference shares of ;£ioo each, and 500 ordinary shares l82 BOOKKEEPING. of ;£ioo each) has been allotted, and the whole amount called up in accordance with the terms of the prospectus. The student is invited to compare these 'transactions with the follow- ing Journal entries, which are designed to complete the opening of the General Ledger : — (>) JOURNAL 1913 Dr. Cr. I January. Shareholders' Account To Preference Shares Capital Account . , „ Ordinary „ „ „ Being the amount due upon the allotment of 300 Preference Shares and 200 Ordinary Shares @ £25 per share, allotted at Board Meeting held this day. Bricks & Mortar To Preference Shares Capital Account „ Ordinary „ „ „ Being an allotment of 200 fully-paid Preference Shares and 300 fully-paid Ordinary Shares, allotted to vendors in part payment of pur- chase-money in accordance with agreement dated ist December last, and allotted at Board Meeting held this day. Freehold and Leasehold Lands and Buildings Plants and Machinery Stores Contract Ledger (book debts) Sundry Debtors for contracts in progress Goodwill To Bricks & Mortar For sundry assets purchased by company in accordance with agreement dated ist December last, 3 adopted by the Board at their meeting this day. Carried forward £ s d 12,500 o o 50,000 o o 20,000 15,000 10,000 5,000 25,000 25,000 7.500 5,000 20,000 o 30,000 o 100,000 o o 162,500 162,500 TRANSACTIONS OF A MANUFACTURING COMPANY. 1 83 (2) JOURNAL. Dr. Cr. Brought forward Debenture-holders' Account To Debentures Account Being 100 four per cent, debentures of £500 each issued at Board Meeting held this day, and payable in full on i6th January next . . I i 3 2 3 2 3 162,500 50,000 12,500 25,000 162,500 50,000 I February. Shareholders' Account To Preference Shares Capital Account , Ordinary , , , Being a first call of £25 per share made on ist January last, and due this day 7,500 5,000 I March. Shareholders' Account To Preference Shares Capital Account , Ordinary , , , Being a second and final call of £50 per share made on ist February last, and due this day. 15,000 10,000 Carried forward 250,000 250,000 There is nothing in these various entries that calls for any detailed comment j the "Shareholders' Account" is debited with the amount from time to time called up upon shares {i.e., the amount due from shareholders), and the same account is credited with the cash received from shareholders. The daily totals only of the " Capital Subscribed Book " being entered in the General Cash Book, this does not involve a very large amount of detailed posting in the General Ledger. The Prefer- ence and Ordinary Share Capital Accounts and the Debentures 184 BOOKKEEPING. Account are the Adjustment Accounts in connection with the Share and Debenture Ledgers. The following may be taken as a copy of the General Cash Book for the quarter ending the 31st March 1913 : — (1) Dr. CASH. CONTRA. Cr. 1913 Jan. I 7 9 16 17 31 Feb. Mar. April I To Shareholders' A/c „ Ditto Ditto „ Debenture-holders' Account „ Ditto „ Contract Ledger Account „ Shareholders' A/c. To Balance down „ Shareholders' A/c. „ Contract Ledger Account „ Shareholders' A/c. To Balance down „ Shareholders' A/c. a Contract Ledger Account To Balance down i sd I9I3 5,600 Jan. 2 3,000 „ 4,300 7 14 40,000 18 10,000 21 28 15,000 31 8,000 » Feb. I ^85,900 18,700 4,500 4 12,500 18 20,000 25 28 „ " £55,700 Mar. I 24,200 5,000 4 15,800 18 25 31 „ " £45,000 8,500 By Shareholders' A/c. „ Office Cash „ Wages „ Ditto „ Bricks & Mortar. . „ Wages , Ditto „ Bought Ledger Account . . „ General Expenses , Balance down By Deposit at Bank . . „ Wages , Ditto „ Ditto „ Ditto „ Bought Ledger Account „ General Expenses „ Balance down By Deposit at Bank Wages Ditto Ditto Ditto Bought Ledger Account General Expenses Balance down i sd 400 o o 150 o o 3,000 o o 2,700 o o 50,000 o o 2,500 o o 3,200 O 4,800 o o 450 o o 18,700 o o £85,900 o o 12,500 o 3,000 o o 2,500 o o 2,400 o o 2,100 o o 8,500 o o 500 o o 24,200 o o £55,700 o o 20,000 o o 2,000 o o 1,800 o o 2,100 o o 2,300 o o 7,750 o o 550 o o 8,500 o o £45,000 o o TRANSACTIONS OF A MANUFACTURING COMPANY. 185 The General Journal may be written up either monthly or quarterly; it is compiled from the various subsidiary books, viz. : — Contract Journal. Analysis of Purchases. Analysis of Plant Issued. Analysis of Plant Returned. Analysis of Stores Issued. Analysis of Stores Returned. Petty Cash Book. Bought Ledger Cash Book. Let it be supposed that the following Journal entries correctly recapitulate the transactions recorded in these books during the quarter ended the 31st March 1913 : — JOURNAL 1913. Dr. (3) Brought forward . . 31 March Contract Ledger Account To Contracts Account Being the agreed price of contracts completed during the current quarter, as per Contract Journal. Contracts Account To Sundry Debtors for Contracts Out- standing Writing back the amount held in suspense on I January last. Sundry Debtors for Contracts Outstanding To Contracts Account Being the amount now estimated to be earned upon works in progress. Carried forward i s d 250,000 o o 60,000 o o 25,000 O 36,000 o o i s d 250,000 o o 60,000 o o 25,000 o o 36,000 o o 371,000 o o i 371,000 O 1 86 BOOKKEEPING. JOURNAL 1913. Dr. (4) Cr. Brought forward Wages Account To Sundry Creditors . . . . For current week's wages not yet paid. Stores Plant Rent, Rates, &c General Expenses Materials To Bought Ledger Account As per analysis of purchases for the quarter. Plant Issued Account To Plant Account As per analysis of plant issued for the quarter. Plant Issued Account To Plant Account Being the value of plant standing at various contracts on i January last. Stores Issued Account To Stores Account Being the value of stores standing at various contracts on i January last. Plant Account To Plant Issued Account As per analysis of plant returned for the quarter. Stores Issued Account Ditto Ditto To Stores Account. As per analysis of stores issued for the three months. Carried forward £ s d 371,000 o o 1,750 o o 9,000 O 250 o o 500 o o 750 o o 23,500 o o 5,000 o o 5,000 O 5,000 o o 4,000 o o 3,000 o o 2,000 o o 3,000 o o 433,750 o o i s d 371,000 o o 1,750 o o 34,000 o o 5,000 o o 5,000 o o 5,000 o o 4,000 o o 433.750 o o TRANSACTIONS OF A MANUFACTURING COMPANY. 1 87 (5) JOURNAL 1913. Dr. Cr. Brought forward Stores Account To Stores Issued Account As per analysis of stores returned for the quarter. Petty Cash Account 24 To OfiBce Cash Account 13 For sundry expenses, as per analysis of Petty Cash Book. Bought Ledger Account To Discount Account. . As per Bought Ledger Payments Book. Debenture Interest . . To Sundry Creditors. Being Interest due to date. Total i s d I 433.750 o o I 500 o o 500 o o £ s d 433.750 o o 100 o o 500 o o 500 £435,350 o o £435,350 o It now remains to post the General Ledger frcxn the above- shown General Journal and General Cash Book, and to extract the Trial Balance. This will be found fully dealt with in the following pages ; the closing of the Ledger is, however, post- poned for further consideration at a later period. 1 88 BOOKKEEPING. The GENERAL LEDGER of Messrs. Bricks & Co., Lim. I I Dr. PREFERENCE SHARES CAPITAL ACCOUNT. Cr. 1913 Jan. I Feb. I Mar. I By Shareholders » Bricks and Mortar „ Shareholders „ Shareholders J.I i s d 7,500 o o 20,000 o o 7,500 o o 15,000 o o Dr. ORDINARY SHARES CAPITAL ACCOUNT. Cr. 1913 I Jan. 1 By Shareholders J.I £ s d 5,000 t » Bricks and Mortar ^ 30,000 Feb. I » Shareholders 2 5,000 Mar. I ! 1 „ Shareholders * 10,000 Dr. SHAREHOLDERS' ACCOUNT. Cr. 1913 £ sd 1913 £ s d Jan. I To Sundries . . J.I 12,500 Jan. I By Cash.. 5,600 2 „ Cash ^ 400 7 • Do 3,000 Feb. I „ Sundries . . 2 12,500 9 , Do 4,300 Mar. I „ Do. „ 25,000 31 , Do 8,000 a Feb. I „ Do 4,500 28 « Do 20,000 • Mar. I „ Do 5,000 o- Dr. BRICKS & MORTAR (Vendors' Account). Cr. 1913 £ s d 1913 £ s d Jan. I To Shares Jan. I By Sundries allotted J.I 50,000 (being pur- 18 „ Cash 50,000 chase price of under- taking) . . J.I 100,000 TRANSACTIONS OF A MANUFACTURING COMPANY. 1 89 Dr. DEBENTURE-HOLDERS' ACCOUNT. I9I3 £ s d 1913 1 I sd Jan. I To Sundries . . J. 2 50,000 Jan. 16 By Cash .. I 40,000 17 Do. • 10,000 Dr. DEBENTURES ACCOUNT. Cr. 1913 Jan. I By Debenture- holders . . J.2 i Sd 50,000 o o Dr. [.AND AND BUILDINGS ACCOUNT. Cr. 1913 Jan. I To Bricks and Mortar J. i i sd 20,000 Dt PLANT AND MACHINERY ACCOUNT. Cr. I9I3 i sd I913 £ s d Jan. I To Bricks and 15,000 1 Mar. 31 By Plant issued J 4 5,000 Mortar J . I 250 ^ Do. m 5,000 Mar. 31 „ Sundries , Plant issued 4 4,000 Dr. STORES ACCOUNT. Cr. 1913 Jan. I Mar. 31 i I £ s d To Bricks and | Mortar J.i 10,000 o o Sundries . . 4 9,000 o o , Stores . . 5 500 o o Mar. 31 By Stores Issued Do. J.4 £ sd 8,000 o o 5,000 o o Dr. CONTRACT LEDGER ACCOUNT. Cr. 1913 Jan. I Mar. 31 To Bricks and Mortar , Contracts . . J.I 3 £ sd 5,000 60,000 1 1913 IJan. 31 Feb. 28 Mar. 31 By Cash , Do. . Do. I £ sd 15,000 12,500 15,800 ipo BOOKKEEPING. II II Dr. SUNDRY DEBTORS for CONTRACTS in PROGRESS. Cr. 1913 Jan. I Mar. 31 To Bricks and Mortar „ Contracts . . i s d 25,000 o o 36,000 o o 1913 Mar.31 By Contract J-S i s d 25,000 o o GOODWILL ACCOUNT. Cr. 1913 Jan. I To Bricks and Mortar J.I i sd 25,000 o 13 Dr. OFFICE CASH ACCOUNT. Cr. I9I3 i sd 1913 Jan. 2 To Cash I 150 1 Mar.31 1 By Petty Cash. . J-5 i sd 100 o o 14 Dr. BOUGHT LEDGER ACCOUNT. 14 Cr. I9I3 i s d 1913 £ s d Jan, 31 To Cash I 4,800 Mar.31 By Sundries . . 1-4 34,000 Feb. 28 .Do. „ 8,500 Mar. 31 „ Do. „ 7,750 " „ Discount .. J.5 500 15 Dr. GENERAL EXPENSES ACCOUNT. Cr. I9I3 i s d Jan. 31 To Cash I 450 Feb. 28 , Do. ^ 500 Mar. 31 , Do. „ 550 , Bought Ledger A/c J.5 750 TRANSACTIONS OF A MANUFACTURING COMPANY. 191 16 Dr. WAGES ACCOUNT. Cr. 1913 Jan. 7 To Cash i s d 3,000 i 14 - Do. 2,700 21 28 Feb. 4 Is , Do. • Do. , Do. , Do. . Do. 2,500 3,200 3,000 2,500 2,400 i 25 Mar. 4 II . Do. . Do. , Do. 2,100 2,000 1,800 18 , Do. 2,100 25 31 .Do. , Sundry Creditors J.4 2,300 1,750 17 Dr. 17 DEPOSIT AT BANK. Cr. I9I3 Feb. I Mar. I To Cash . Do. I • i s d 12,500 20,000 18 Dr. 18 CONTRACTS ACCOUNT. Cr. I9I3 I s d 1913 I s d Mar. 31 To Sundries . . J-^ 2') ,000 Mar. 31 By Sundries .. J-^ 60,000 O) :o - Do. 36,000 19 Dr. SUNDRY CREDITORS. Cr. 1913 I £ s d Mar. 31 By Wages . , J.4 | 1,750 o o , Deb. Interest J. 5 1 500 o o Dr. RENT, RATES, &c., ACCOUNT. Cr. 1913 ' Mar. 31 1 To Sundries J.4 I 500 o o I 192 BOOKKEEPING. Dr. MATERIALS ACCOUNT. Cr. Mar. 31 £ s d To Sundries .. J. 4 23,000 o o Dr. PLANT ISSUED ACCOUNT. I9I3 l s d 1913 f s d Mar. 31 To Sundries . . J. 4 5,000 Mar. 31 By Sundries . . J -4 4,000 " Do. " 5,000 23 Dr. STORES ISSUED ACCOUNT. 23 Cr. I9I3 i sd 1913 i s d Jan. 31 To Sundries . . J -4 3,000 Mar. 31 By Sundries . . J.5 500 Feb. 28 Do. 2,000 Mar. 31 Do. „ 3,000 • Do. • 5,000 1 24 Dr. PETTY CASH ACCOUNT. 24 Cr. Mar. 31 To Office Cash J. 5 I s d 100 o o 25 Dr. DISCOUNT ACCOUNT. 25 Cr. 1913 Mar. 31 i s d By Sundries .. J. 5 500 o o 26 Di DEBENTURE INTEREST. 26 Cr. Mar. 31 To Sundry Creditors J. 5 i s d 500 TRANSACTIONS OF A MANUFACTURING COMPANY. 193 TRIAL BALANCE, 31ST March 1913. 1 Preference Shares 2 Ordinary Shares . . 3 Shareholders 4 Bricks and Mortar 5 Debenture-holders 6 Debentures 7 Land and Buildings 8 Plant and Machinery 9 Stores 10 Contract Ledger . . 1 1 Sundry Debtors . . 12 Goodwill 13 Office Cash . . 14 Bought Ledger 15 General Expenses 16 Wages 17 Deposit at Bank 18 Contracts 19 Sundry Creditors . . 20 Rent, Rates, &c. .. 21 Materials 22 Plant Issued 23 Stores Issued 24 Petty Cash . . 25 Discount 26 Debenture Interest 4 Cash at Bank Dr. £ s d 50,400 o o 100,000 o o 50,000 O 20,000 o o 19,250 o o 19,500 o o 65,000 o o 61,000 o o 25,000 o o 150 o o 21,550 o o 2,250 o o 31,350 o o 32,500 o o 25,000 o o I 500 o o I 23,500 o o I 10,000 o o [ 13,000 o o 100 o o 500 o o 8,500 o o Cr. £ s d 50,000 o o 50,000 o o 50,400 o o 100,000 o o 50,000 o o 50,000 o o 10,000 o o 13,000 o o 43,300 o o 25,000 o o 100 o o 34,000 o o 96,000 o o 2 250 O O 4,000 o o 500 o o Dr. £ 20,000 o o 9,250 o o 6,500 o o 21,700 o o • 36,000 o o { 25,000 o o 50 o o 2,250 o o I 31,350 o o I 32,500 o o , 500 o o 23,500 o o 6,000 o o 12,500 o o 100 o o 500 o o 8,500 o o Cr. £ s d 50,000 o o 50,000 o o 50,000 o o 12,450 o o 71,000 o o 2,250 o o 500 o o £5791050 o o £579.050 o o \ £236,200 o o £236,200 o o TRADE LEDGERS, etc. It is now time to consider the Contract and Bought Ledgers, and the various books subsidiary thereto. Taking first the Contract Ledger (which is equivalent to the Sold Ledger of an ordinary trading concern), the Ledger itself is of the usual type, embracing the Personal Accounts of the customers, (perhaps) the Bills Receivable Account, and the General Ledger Adjustment Account. The postings are made — (i) From the Contract Journal — a simple form of Day Book, in which the amount chargeable for each contract is entered upon tlie completion thereof — to the debit of the various customers' accounts, the quarterly total being credited to the Adjustment Account. 194 BOOKKEEPING. (2) From the Contract Book {vide top of page 137, ante) — a simple form of one-sided Cash Book (or, more properly, " Journal ") in which is entered every amount received from customers, either directly or as the proceeds of Bills Receivable. The details of this book (which, if necessary, is provided with a column for disccunts) are credited to the various accounts in the Contract Ledger, and the monthly totals debited to the Adjustment Account. The total of the cash column is included upon the debit side of the General Cash Book {vide page 184, ante), and the total of the discount column (if any) forms the subject of an entry in the General Journal. (3) From the Bills Receivable Book, with the manipulation of which the reader has already been made familiar. It is very usual for payments to be made by the customer during the progress of a contract. Inasmuch as the customer is not debited with the amount of his contract until its com- pletion, it necessarily follows that credit balances in the Contract Ledger will be frequent ; these credit balances act as a set-off against the debit balances, and reduce the balance shown upon the Contract Ledger Account in the General Ledger. The amount accruing due upon contracts in progress is com- puted from the Cost Ledger, and will occupy attention in the following chapter. Where there is a jobbing trade done, it is convenient to have a " Jobbing Ledger " subsidiary to the Contract Ledger — the latter containing the aggregate of the jobbing transactions in an Adjustment Account. It will usually be found that the tabular form of Ledger makes the most convenient Jobbing I>edger : the. following ruling will be found very suitable : — TRANSACTIONS OF A MANUFACTURING COMPANY. 195 JOBBING LEDGER for the Quarter ended 31st March 1913. Name Address 1^ c c CO tfl 1- d 1 Account for Quarter d •a V cd 8 1 < rt ^ So 6 1 f sd 1 t ! 1 1 i £sd £sd £sd £sd If accounts are rendered monthly, it may be found desirable to extend the number of columns so as to allow the three months' accounts to be dealt with upon the same folio. The Bought Ledger now claims attention, and the oppor- tunity is here afforded of describing a fresh mode of dealing with purchases that may sometimes be found convenient. All invoices received from creditors are filed, or placed in a " Guard Book," in order of date. They are then entered in a *' Bought Journal," which is ruled as follows: — BOUGHT JOURNAL. 6 6 Date Is i s Description of Goods - 5 1 g = = 1 c/5 c C4 -SI a.'S 73^ £sd £sd £sd £sd £sd £sd O 2 196 BOOKKEEPING. A separate page is devoted to each creditor ; and, as the book is provided with an index, every facility is afforded for ready reference. Once a month, or once a quarter, the book is added and the totals transferred to the ''Analysis of Purchases, &c.. Book," of which the following is a specimen : — ANALYSIS OF PURCHASES, &c., FOR THE Quarter ended 31 st March 1913. If a me CQ PQ Total Stores Plant Rent Rates, &c. Other Expenses Special Materials Contract No. C. L. Fo. Abel & Sons Thomas Bowen . . Henry Green &c. &c. I 2 10 27 500 2,160 1,500 340 £ sd 2,000 250 £ sd 250 £ sd £ sd 160 1,000 340 470 , 170 „ 1 „ 471 171 i 1 £34,000 £9,000 £250 £500 £750 £23,500 ' The last column in the analysis is for goods that are ordered for special contracts, and which therefore do not come into the Stores Account : these are posted to the various contracts in the Cost Ledger, as will be shown later on. So far as the Bought Ledger is concerned, the items in the '' Total " column are credited to the various personal accounts, and the total of that column (the ^34,000) is posted to the debit of the Adjust- ment Account upon folio 500 of the Bought Ledger. It will be noticed that the totals of the various columns correspond with the entry in the General Journal shown upon page 186. TRANSACTIONS OF A MANUFACTURING COMPANY. I97 The remaining subsidiary books in connection with the Bought Ledger are the *' Bought Ledger Cash Book " and* the '' Bills Payable Book "; these books correspond to the Contract Cash Book and Bills Receivable Book of the Contract Ledger series, and thus call for no further description. XVI.— TRANSACTIONS OF A MANUFACTURING COMPANY {contimied}. COST ACCOUNTS— CLOSING THE BOOKS. Next come the Cost Ledger and its various subsidiary books. ^These subsidiary books are : — (i) Abstract of Wages, a specimen of which was given upon p. 162. (2) Analysis of Purchases, a specimen of wiiich was given upon page 196, and of which the column headed '* Special materials " is posted to the debit of the various contracts in the Cost Ledger. (3) Analysis of Stores Issued, a specimen of which was given upon page 164. (3A) Analysis of Stores Returned — a similar book recording the return of all surplus stores and materials into stock. (4) Analysis of Plant Issued — a similar book recording the issue of plant {e.g., scaffolding, &c.) for the general stock. (4A) Analysis of Plant Returned — a similar book recording the return of plant into stock. The returns are priced at a lesser amount than when issued, thus making depreciation fall upon the various contracts. TRANSACTIONS OF A MANUFACTURING COMPANY. 1 99 Sales of stores or plant will rarely occur ; but, when they do, they may be posted fropi the General Cash Book to the credit of Stores (or Plant) Issued Account, and also to the credit of the Contract in the Cost Ledger. (5) Analysis of Petty Cash — a Tabular Petty Cash Book, by means of which each contract is debited with all special expenses incurred at the office and works. (It will be remem- bered that all petty expenses incurred at the site of the contracts are included in the wages.) (6) Contract Journal, which, in addition to being posted to the Contract Ledger, is posted in detail to the credit of the various contracts in the Cost Ledger. The double-entry check of the Cost Ledger is obtained by opening a '* Contracts Account," to which all totals are posted. On account of the special ruling of the Cost Ledger, it is con- venient to depart from the usual practice in connection with Adjustment Accounts and to post these totals upon the same side of the Ledger as the items have been posted. The aggregate of the balances upon the various contracts thus agrees with the balance of the Contracts Account, and falls upon the same side of the Ledger. The totals of the various columns of the Contracts Account also agree with the corresponding totals of the periodical *' Summary of Cast Ledger," thus localising any error that may occur. The following example is supposed to represent the ** Sum- mary of Cost Ledger," in Messrs. Bricks & Co.'s, Lim., books for the quarter ended 31st March 19 13 : — 200 BOOKKEEPING. Dr. SUMMARY OF COST LEDGER FOR THE L Fo. Total to Debit from last A/c Wages 1 Petty Cash Establish- ment Expenses Total to Credit r loo's of days Amount carried forward 462 469 470 471 472 168 169 170 171 172 i 15,000 20,000 150 200 225 300 250 i 4,000 5,000 8,500 6,850 7,500 £ 500 2,000 10,000 2,000 9,000 £ ^ £ i 1,000 350 750 3,000 2,750 750 500 900 1 3,000 £ 25 50 25 £ 300 400 450 600 500 £ £35,000 •• £31,850 £23,500 £5,000 £8,000 £100 £2,250 Sundries • • £25,000 Stores . . 5,000 Plant . . 5,000 £35,000 TRANSACTIONS OF A MANUFACTURING COMPANY. 20I QUARTER ENDING 31ST MARCH 1913. Cr. Net Profit Total Total to Credit. from last A/c Contract Price II si Total to Debit carried forward i Loss Total io i 21,600 i 20,000 i 100 1,500 i i 21,600 •• 28,500 24,725 ■• 25,000 400 1,800 24.725 1,300 ! 28,500 24,725 4.950 15.700 20,925 15,000 •• 700 20,925 ! •• 1 15,700 20,925 £5,750 £i".450 £60,000 £500 £4,000 £45.650 £1,300 4,450 £111,450 N et profit for the q uarter .. £5,750 Sundries . . £36,000 Stores . . 5,750 Plant . . 3,900 £45,650 202 BOOKKEEPING. It will thus be seen that the quarter's working has resulted in a net profit of ;£4,45o, allocated as follows : — Profit on Contract No. 462 ;i^8oo » » No. 471 4,950 Less Loss on Contract No. 469 Ij3oo £\A^^ It will also be noted that Contracts Nos. 470 and 472 are carried forward at cost only, no profit being reckoned upon them while in progress. This is the safest course to pursue, but it is not always acted upon in practice. On the other hand, if a loss is anticipated upon any uncompleted contract, it should always be provided for. It remains to be added that folios 170 and 172 in the Cost Ledger (relating to the two uncompleted contracts) are now closed, the " Total to debit " being carried forward to the fresh accounts about to be opened for the following quarter. The two columns " Total to credit " will be found useful when some of the stores or plant upon a contract are sold or returned, the contract remaining uncompleted at the end of the quarter. The totals to debit and credit will then both be carried forward to the next quarter's account, instead of a balance being struck. Before leaving this question, it would be well to explain the manner of arriving at the constitution of the item '' Total to Debit, ;/^45,65o." The amount in question represents the expenditure to date upon the two uncompleted contracts Nos. 470 and 472 : a portion of this relates to stores and plant issued, and as this portion has to be shown as a balance upon TRANSACTIONS OF A MANUFACTURING COMPANY. 203 the '' Stores Issued " and " Plant Issued " Accounts in the General Ledger, the total expenditure is analysed as shown. The item " Sundries, ;£36,ooo," will be found in the General Ledger debited to " Sundry Debtors " and credited to " Contracts " (vide pages 190 and 191, ante). The apportionment of the establishment expenses is a ques- tion upon which some variety obtains in practice. The following methods are in use : — (i) A proportion varying according to the cost incurred on account of the contract. (2) A proportion varying according to the amount of wages paid on the contract. (3) A proportion varying according to the amount of time spent on the contract. If the object be to apportion to each contract its fair share of the cost of rents, supervision, office expenses, &c., it is obvious that the first method is untenable, for a contract neces- sitating expensive materials does not, therefore, involve a larger degree of supervision. For a like reason the second method is also inaccurate — although less so than the former — as it cannot seriously be argued that a contract employing masons necessarily involves heavier establishment expenses than one employing bricklayers. The third method, taking the time occupied as the basis of the calculation, appears to be the fairest, and to involve but little extra trouble, and it has accordingly been adopted here ; but it is only fair to add that the second method is in more general use. :o4 BOOKKEEPING. CLOSING THE LEDGERS. The Closing of the Cost Ledger has already been described,- and the closing of the Contract and Bought Ledgers presents no new features ; it is, therefore, proposed to pass on at once to the closing of the General Ledger. The following are the Journal entries required for this purpose : — JOURNAL 1913. (6) Dr. Brought forward 31 March — Trading Account To Wages , Materials „ Stores Issued „ Plant Issued , Petty Cash Contracts To Trading Account Trading Account Discount.. To Profit and Loss Account Profit and Loss Account To General Expenses „ Rent, Rates, &c „ Debenture Interest Profit and Loss Account To Profit and Loss Apportionment Ac- count 23 i 435.350 7,200 500 s d o o 63,800 o o 71,000 o o o o o o 3,250 o o 4,450 o o £585,550 o o 435-350 31,350 23,500 6,750 2,100 100 s d 7,700 o o 2,250 o o 500 o o 500 o o 4,450 o o £585,550 o o There are but few features in these closing entries that call for comment : the balance of net profit for the quarter (;£4,45o), is, it will be seen, transferred to the credit of a " Profit and Loss Apportionment Account " instead of being added to the capital, as would have been done in the case of a private undertaking. It may be added here that, for the sake of reducing the number of Ledger Accounts as far as possible (and so simplify- ing the example), the amount due for interest on debentures TRANSACTIONS OF A MANUFACTURING COMPANY. 205 and directors' fees has been included under the heading ot General Expenses. For a like reason the interest earned upon the deposit at the bank has been disregarded. From the above Journal entries the student will be able to close the General Ledger of Messrs. Bricks & Co., Lim., without difficulty ; but the following accounts are appended as specimens of, form, and should be carefully studied. The figures in italics refer to the folios of the different Ledger Accounts, and are added only for the convenience of the reader. 2o6 BOOKKEEPING. Dr. Dr. BRICKS & COMPANY, Statement of TRADING ACCOUNT, 16 21 &23 22 24 To Wages . . „ Materials and Stores „ Depreciation of Plant „ Sundry Expenses „ Balance carried to Profit and Loss Ac- count £ s d 31,350 30,250 2,100 100 £ s d 63,800 7,200 27 £71,000 PROFIT AND LOSS ACCOUNT, 20 26 To Rent, Rates, &c „ General Expenses, Salaries, &c „ Directors' Fees t „ Interest on Debentures „ Balance (being net Profit for the Quarter) carried to Profit and Loss Apportion- ment Account Proposed Apportionment of Profit :— Preference Shares, Dividend at 6% Ordinary Shares Do. 10% (free of income-tax) Reserve Fund Carried forward to next Account . . £ s d 500 2,000 250 500 £ s d 3,250 4,450 29 750 1,250 1,500 950 £7,700 £4,450 BALANCE SHEET, Liabilities. Nominal Capital Capital Subscribed : — 500 6% Preference Shares of £100 each, fully paid 500 Ordinary Shares of £100 each paid Debentures (100 of £500 each at 4%) Interest on ditto Tride Creditors . . Sundry Creditors . . Profit and Loss Account- as above , fully -Balance to credit, £ 100,000 s d 50,000 50,000 50,000 500 s d 100,000 o o 50,500 o o 12,450 o o 1,750 o o 4,450 o o £169,150 o o ♦ It need perhaps hardly be stated that the payment of quarterly dividends, and the t This item has been treated as passed through the Bought Ledger, in order to this would not be done. TRANSACTIONS OF A MANUFACTURING COMPANY. 207 LIMITED, Accounts. for the Quarter ended 31st March 1913. for the Quarter ended 31st March 1913. Cr. 18 By Contracts £ s d 71,000 £71,000 Cr. By Gross Profit as per Trading Account , Discounts £ s d 7,200 o o 500 o o £7,700 o 31st March 1913. 8&22 9&23 12 10&11 17 c4 13 Assets. Freehold and Leasehold Land and Build ings at cost Plant and Machinery (less Depreciation) Stores Goodwill at cost Trade Debtors Cash :'-viz., Deposit at Bank . . Current Account at Bank Cash in hand preparation of quarterly accounts are both quite unusual in practice. reduce the number ot accounts in the General Ledger, In actual practice, however. 208 BOOKKEEPING. The above is in the form in which the company's accounts would be submitted to the shareholders, but it may be added that it is not usual to publish the Trading Account. DIVIDENDS. Should the proposed apportionment of profit be approved by the shareholders, necessary entries in the books have next to be considered. The dividend is dealt with by passing a Journal entry, debiting Profit and Loss Apportionment Account, and credit- ing a new account called " Dividend Account," with ;£2,ooo. The ordinary dividend (being '' free of income-tax ") is pay- able in full, but income-tax at the current rate must be deducted from all dividends paid to preference shareholders. A Journal entry will be passed, debiting Dividend Account, and crediting " Income Tax Account " with ^£4;^ 15s., being IS. 2d. in the ;^ upon ^£750. A cheque will now be drawn for ;£i,956 5s., and posted to the debit of the Dividend Account, which will now balance; this cheque is paid into a separate banking account (Bricks & Co., Tim., Dividends Account), a list is made of the balances of the Share Ledger on 31st March, the dividend computed, and a cheque drawn upon the Divi- dends Account for the amount due to each shareholder. When all the dividends are paid there will remain no balance in the bank upon this account ; meanwhile the balance shown by the Pass Book represents the amount of unpaid dividends. A similar plan is adopted with regard to the payment of deben- ture interest, but in this case the cheque for £4^0 i6s. 8d. (viz., £soo less income-tax) is debited to folio 19 in the General Ledger, and a Journal entry is passed, debiting folio 19, and crediting Income Tax Account, with ;^29 3s. 46., being the amount of tax upon the debenture interest. TRANSACTIONS OF A MANUFACTURING COMPANY. 2O9 The Reserve Fund is dealt with by means of a Journal entry, debiting Profit and Loss Apportionment Account, and crediting a new Ledger Account called " Reserve Fund." The above entries having been posted, the balance remaining to the credit of Profit and Loss Apportionment Account will be j£95o, as shown above; this balance is carried forward to the next account, when it is increased by the net profit made during the subsequent period. It is hardly necessary to add that it is most unusual for com- panies to divide their profits quarterly, but this consideration does not affect any of the principles or methods just described. Where the number of shareholders is very small it is undesirable to open a separate banking account for dividend purposes ; in such a case it will be found more convenient to draw the cheques for dividends upon the General Banking Account, and to post these separate cheques to the debit of Profit and Loss Apportionment Account, or to the debit of a " Dividend Account " — having first debited Profit and Loss Apportionment Account and credited Dividend Account, with the total amount of the dividend by means of a Journal entry. XVII.— FORMS OF ACCOUNTS AND ACCOUNT BOOKS. thp: double-accou^^t system. Up to the present only what is known as the " Single- Account System " has been described, under which system all the assets and liabilities are focussed in a single account, or Balance Sheet. There yet remains to be considered the ** Double Account System." This latter system is of comparatively modern origin — its first statutory recognition, apparently, being in i868, when the " Regulation of Railways Act " was passed, prescribing a form of accounts designed upon the principle of the ** Double- Account." The principle of the Double-Account System is that the capital of a company is contributed by the shareholders for the definite purpose of constructing or acquiring certain works, which when constructed, or acquired, as the case may be — are to be employed for the purpose of earning an income for such shareholders. The form of account employed is calculated to show exactly (i) what capital has been raised; (2) how much of such capital has been spent in constructing (or acquiring) the undertaking ; and (3) what amount of capital remains over for the purpose of carrying on the undertaking, and so earn- ing income. In accounts kept upon this system, the amount of FORMS OF ACCOUNTS AND ACCOUNT BOOKS. 211 Expenditure (i.e. the cost price of assets) is the amount always stated ; the undertaking has to be kept in a state of working efficiency out of revenue, but all fluctuations of value are ■disregarded. As a matter of practice, it is not unusual to find, in accounts kept upon the Single- Account System, that assets are stated in the Balance Sheet at cost price, irrespective of their actual market value. This is, however, technically incorrect (where not actually misleading) ; for it is the distinctive features of the Single- Account Balance Sheet that all assets and liabilities should be so stated that the actual financial position may be made apparent. The most convenient method of disclosing the actual differ- •ence between the two systems is to show the same financial position, first in the form of a Single-Account, and then as a Double- Account. For this purpose the accounts of a mining company are selected, this especial class of accounts being chosen because they are, as a matter of fact, sometimes drawn •upon the Single-Account System, and sometimes upon the Double. P 2 212 BOOKKEEPING. SINGLE-ACCOUNT THE A. B. COLLIERY Balance Sheet, LlABILITIF.S. Nominal Capital . . ^ £200,000 o o Capital Subscribed : A shares (£10 each, £5 per share called up) . . £50,000 o o B shares (£10 each, fully paid) 100,000 o Debentures (at 5 per cent.) Reserve Fund Trade Creditors : Bills Payable £5.000 o Open Accounts 5,000 o o Profit and Loss Account ,, ,, £ s d 150,000 o 50,000 o 20,000 o o 10,000 o o 20,000 o o £250,000 o o FORMS OF ACCOUNTS AND ACCOUNT BOOKS. 213 SYSTEM. COMPANY, LIMITED. 30th June 1912. Assets. Lease of Mines, Plant, Machinery, &c. (as per last Account) £150,000 o Extension to date 20,000 o o 170,000 o o Less Depreciation 12,000 o o Stock on hand Consols (at cost) Trade Debtors Cash at Bank and in hand s d 158,000 o o 10,000 o o 20,000 o o 30,000 o o 32,000 o o £250,000 214 • BOOKKEEPING. Recast, upon the Double- Account System, this Balance Sheet DOUBLE- THE A. B. COLLIERY Dr. Capital Account for the year ' Expenditure to 30th June 1911 Expended this year Total to 30th June 1912 To Lands acquired '^' „ Sinking Shafts and opening up Pits „ Plant and Machinery above sur- face , Wagons » Office Buildings „ Workmen's Cottages i. i s d 5,000 100,000 25,000 10,000 ■ 2,500 7,500 i s d 12,500 4,500 2,500 500 i s d 5,000 112,500 29,500 12,500 2,500 8,000 „ Balance of Capital Account 150,000 20,000 170,000 30,000 £200,000 General Balance Sheet, Liabilities. Capital Account — Balance to Credit . . . . . . . . i 30,000 20,000 12,000 10,000 20,000 s d Depreciation Fund .. .. .. Trade Creditors: — Bills Payable Open Accounts £5,000 5,000 Profit and Loss Account • • . £92,000 00 FORMS OF ACCOUNTS AND ACCOUNT BOOKS. appears as follows : — 215 ACCOUNT SYSTEM. COMPANY, LIMITED. ended 3otb June 1912. By A. Shares , B. Shares » Debentures Certified Receipts to June 30 ign Received o„][?^l »« dunngyear f-^P^^^to £ s d 50,000 50,000 50,000 £ s d £ s d 50,000 50,000 100,000 i 50,000 150,000 50,000 200,000 £200,000 30th June 1912. Stock on Hand Assets. £ 8 d 10,000 Consols Trade Debtors 30,000 32,000 Cash at Bank and in Hand £92,000 2l6 BOOKKEEPING. The above example has been purposely kept as simple as possible ; but it will suffice to explain the essential difference between the two systems. The essential features of the Double- Account System are : — (i) Receipts are divided into two classes — Capital and Revenue; all amounts received from shareholders and debenture- holders are regarded as " capital receipts," and are credited to Capital Account. (2) Expenditure is divided Into two classes — Capital and Revenue ; all amounts expended in constructing, extending, or acquiring the undertaking from which the revenue is earned are regarded as " capital expenditure," and are debited to Capital Account. Expenditure upon repairs, renewals, &c., and all other current expenses are regarded as " revenue expenditure," and debited to Revenue Account. (3) No deduction is ever made from the amount to debit of Capital Account; but, if necessary, a "Depreciation Fund" is raised by debiting Revenue and crediting " Depreciation Fund Account " — the latter appearing as a liability in the General Balance Sheet. It is a very usual thing to hold special investments for the amount of the Depreciation Fund. It is, perhaps, desirable to add that, in the foregoing example, it is supposed that the ;£i 2,000 written off for depre- ciation on the 30th June 191 2 is the first amount so written off. In all cases under the Double-Account System the total to the debit of Capital Account will be the total amount of capital expenditure since the commencement, and the amount to the credit of Depreciation Fund Account will similarly be the total amount of depreciation written off since the start. FORMS OF ACCOUNTS AND ACCOUNT BOOKS. 21 7 The Double-Account System is compulsory in the case of such Railway Companies and Tramway Companies as are governed by the Regulation of Railways Act, 1868; and also in the case of all Gas Companies incorporated by special Act of Parliament adopting the Gas Works Clauses Act, 187 1. It is especially applicable to all such companies as invest the greater part of their capital in what may be styled " permanent assets " — i.e., land, buildings, machinery, &c., which are held as a means of earning income, and not for purposes of resale. The Double-Account System thus appears to be the best system to adopt for Railway Companies, Tramway Companies, Canal Companies, Shipping Companies, Gas Companies, Water Companies, Electric Light and Power Companies, Telegraph Companies, Telephone Companies, Property Companies (i.e. companies holding lands or buildings for letting purposes, but not for sale), Mining Companies, and Quarrying Companies; it is, however, less suitable for Investment Trust Companies, as these companies do not, as a rule, hold their investments permanently. It is now proposed to give a few forms of ruling for special books that will be found convenient under certain conditions. 2l8 BOOKKEEPING. LEDGERS. Form of ruling for the Depositors' Ledger of a Building Society, or in any similar case where it is desirable to readily perceive the balance from day to day. Dr. Deposits withdrawn Interest withdrawn Date Fo. Deposits paid in Interest credited i s d 50 i s d ^ 1913 January i March 3 June 30 J. 72 i s d 100 £ s d 100 It will be seen that, in this form of Ledger, each transaction occupies an entire line — the transactions, whether to credit or to debit, being in strictly chronological order. FORMS OF ACCOUNTS AND ACCOUNT BOOKS. 219 >a e< 000 * 2*2 2 N ■*« ^^-S5» n-« c 3 < ^ « r; H (1) Z JC CJ C -c ^ , 3 <4-4 m OS .^ d H u pq o« c ^ ^ 3 'i£^ V » (U w ^ u 5 s -o * » K « « k a » NO o o\ O u-1 •o o o w (O o o o §1-2 n ' VO » 2^ = ^ ^s S2 220 BOOKKEEPING. s o O Q 0!: PQ < s>tJBai9H 1 sjEaaay 13 sjajjBnC) aaquiaoaa P"e 'jaquiajdas 'aunf aqj joj sucunioo jbiiuiis 1 ■55 1 u H < a ill- i - 5 Q li << -u vo in N ^ OS .1 OS 6 8^8 II ^ ;:?2 l-i in II •o o o " 2 2 ■-*? GO Amount due at — per I.OOO ^3 rn^ o (fl O O J 1 J U •OJ jagpaq 00 vo o sjuamasjnqsiQ " 00 , -0*0 O o gc« o no . o Amou Acco ^^^'^ ! •OJ jaSpaq ro 0\ .sjuano « N S S tn M 11 "6 . &S) o^^ pa 5 Jioog Moj -«■ -<1- ssaJd ui •OJ 2 G FOSMS OF ACCOUNTS AND ACCOUNT BOOKS. 225 A word of explanation is advisable here : each client is debited in the Clients' Ledger with the amount of his account ; the total '' Disbursements " is credited to " Disbursements Ledger Adjustment Account," and the total '' Charges " is credited to '' Private Ledger Adjustment Account " — this completes the double entry of the Clients' Ledger. In the Disbursements Ledger the details of the " Disbursements " column are posted to the credit of the various clients' accounts, and the total of that column is debited to *' Clients' Ledger Adjustment Account." The detailed amounts in the ** Time Occupied " columns are credited to the various clients' accounts in the Time Ledger (closing these accounts), and the total time occupied is debited to the '' Outstanding Charges " Account in the Time Ledger. The balance of this latter account thus always shows the amount of time spent upon matters for which no account has vet been rendered. CASH BOOKS. The following form of Cash Book does away with the necessity for either Bill Books or Bill Ledgers ; it is, how^ever, deficient in detail, which doubtless accounts for its not being more ijenerallv used : — 226 BOOKKEEPING. JluBg J99p9T 9;EAUd Si J93p9T jq3noa 13 Si sina ;unoosia 73 oipd a^BQ HUEa en J93p9T 9;EAUd a9§paT PIOS 73 C/) 9iqBAl939H siiia 13 ;unoos!Q T3 OROJ M 3 U 1 ajBQ FORMS OF ACCOUNTS AND ACCOUNT BOOKS. 227 A good form of Petty Cash Book will always be found of the greatest value ; the following specimen of ruling may prove useful in this connection — the analytical headings being, of course, varied to meet the circumstances of the particular case : — i<2 " «n u C (u a, -^s V> < tic en -c = S = C Ul 0. CS X '-^J H« Ul ■c si U) og- S4 w 6 t: ac « ;/] Cfl . ->J CU i 'O u Ul :« 1 ■-^ •5 en x: !tf U) !« — !3 '^ = '■-^ '"' _^ _ c 3*2 tr. o'c3 Ec2 < '-i u lU .c . 5^ > (A u iS 3 .0 Ul ca cu « rt Q -"O TS = (U 3 > u; ■■^ •oj ao V -<-• 08 Q XVIIL— MISCELLANEOUS QUESTIONS OF ACCOUNT. In order to keep the various examples shown in this work sufficiently simple to be readily comprehended, it has been necessary to postpone the consideration of several questions relating to accounts that are too important to be neglected altogether. It is proposed to deal with these various matters in the present chapter. Bad Debts and Doubtful Debts. — Theoretically, the treatment of bad and doubtful debts presents no especial difficulty ; the situation is that the whole (or a portion) of the debit balance shown upon a Personal Account is irrecoverable ; to the extent that it is irrecoverable the balance represents a loss instead of an asset. To this extent, therefore, the balance should be the balance of a Nominal Account, not of a Personal Account. All that has to be done is to alter the books in accordance with the ascertained facts. This is done by credit- ing the debtor's (Personal) Account, and debiting the " Bad Debts " (Nominal) Account, with the amount of the ascertained loss. A practical difficulty arises from the fact that it is always desirable to make provision for probable and possible losses, as well as those that are actually known. This involves the raising of a Suspense Account called '' Reserve for Bad Debts Account," which is credited with the estimated contingent loss, the Bad Debts Account being debited as before; in the MISCELLANEOUS QUESTIONS OF ACCOUNT. 229 Balance Sheet, the credit balance of the Suspense Account is deducted from the amount of the book debts, instead bf being stated separately on the liabilities' side. Debts subsequently written off as bad are then debited to the Reserve for Bad Debts Account, instead of to the Bad Debts Account direct. It is unnecessary to consider here the best mode of ascertain- ing the proper provision to be made against loss by bad and doubtful debts, as that is a question of auditing rather than bookkeeping, and has been fully dealt with in the present author's work upon Auditing. Bills Discounted. — The best method of dealing with bills receivable discounted varies with the practice of the bankers or brokers with whom they are negotiated. The usual practice of bankers is to give credit for the face value of the bill, and to debit the customer's account with the amount of the discount ; on the other hand, some bankers deduct the discount from the face value of the bill and give credit for the net proceeds. Brokers likewise, when purchasing bills, deduct discount and pay net. In the first case, the full value of the bill will be entered on the debit side of the Cash Book in the Bank column, and posted to the credit of Bills Receivable Account, while the amount of the discount will appear on the credit side of the Cash Book (also in the Bank column) and be posted thence to the Discount Account in the Ledger. In the last two cases the amount of cash actually received will appear in the Bank column of the Cash Book on the debit side, and the amoimt of the discount allowed should be inserted in the Dr. Discount column ; the figures in both columns are posted to the credit of Bills Receivable Account. 230 BOOKKEEPING. When it is the practice to negotiate bills with creditors (i.e. to endorse them over to creditors in payments of amounts due), it will be found convenient to use the form of Cash Book set forth on page 226 — the credit entries being written in red ink in the '' Bills Payable" column. When this plan is not followed, the only possible way is to pass Journal entries, debiting the Personal Account of the endorsee and Discount Account, and crediting Bills Receivable Account. Bills Dishonoured. — When the dishonoured bill has been discounted this problem presents no difficulty ; a cheque is drawn for the amount of the bill and charges and paid over to the holder (the bill being received in exchange), and the whole amount is debited to the account of the person from whom the bill was originally received. Any further commission or interest that may be charged is debited to the customer through the Journal. If the bill has not been discounted, the amount thereof {plus noting charges) is debited to the acceptor — or other party from whom it was originally received — and credited to Bills Receivable Account through the Journal. Debentures Issued at a Discount. — As already stated on page 180, the Debenture Ledger deals only with the nominal value of debentures ; it therefore follows that the credit balance on the Debentures Account in the General Ledger is for the nominal, or face, value of the debentures likewise. Whatever is credited to Debentures Account is also debited to Debenture- holders' Account ; if, therefore, the debenture-holders have paid less than the face value for their bonds, it naturally follows that this latter account shows a debit balance equal to the amount of discount allowed up to the issue. To correct this, raise a '' Cost of Issue of Debentures Account," and debit it with the amount of the discount allowed, crediting Debenture- holders' Account with a like amount — so balancing the latter MISCELLANEOUS QUESTIONS OF ACCOUNT. 23I account. CcMnmission paid to underwriters, &c. (if not ultra vires), may also be debited to this account. The total amount debited to this account must be written off out of Revenue during the currency of the debentures, and in the meantime the (diminishing) balance must be treated as an assets in successive Balance Sheet. Debentures Issued at a Premium. — In a like manner, if the debenture-holders have paid more than the nominal value for their bonds, the Debenture-holders' Account in the General Ledger will show a credit balance. Probably the best mode of dealing with this credit balance (which represents the premium received upon the issue) is to transfer it to the credit of Reserve Fund. Debentures Redeemed. — In the Debenture Ledger open a *' Debentures Redeemed Account," and transfer all redempticwis from the holders' accounts to this account. It is convenient to set aside a few pages of the Transfer Journal for this purpose, or, if the redemptions are very numerous, a special " Redemp- tions Journal " may be preferred. In the financial books post the cash paid upon redemption to the debit of a " Debentures Redeemed Account," and transfer the balance of this account periodically to the debit of Debentures Account, thereby gradually reducing the credit balance of the latter. If the debentures- have been originally issued at a discount, it is necessary every time a portion of the issue is redeemed to write off a proportionate part of the Cost of Issue of Deben- tures Account. This is done by crediting the latter account and i debiting Profit and Loss Account. Depreciation. — Depreciation may be provided for in various ways, of which the more usual are : — •32 BOOKKEEPING. (i) As a fixed proportion of the original value of the property. {" Fixed Instalment " method.) (2) As a fixed percentage upon the diminishing value of the property. (" Reducing Instalment " method.) (3) As a fixed proportion upon the original value, less interest at a fixed rate upon the diminishing value of the property (''Annuity " method.) (4) By setting aside, and specially investing, a fixed propor- tion of the original value of the property. (" Sinking Fund " method.) If it be desired to reduce ^£200 to ;£ioo in ten years, the annual instalments would be as follows : — Time ist Method 2nd Method 3rd Method 4th Method £ s d £ s d £ s d £ s d ind of I St year 10 . 13 8 6 7 19 7 19 „ 2nd „ 10 12 10 4 870 7 19 „ 3rd „ 10 II 13 5 8 15 4 7 19 H 4th „ 10 10 17 8 9 3" 7 19 " 5th „ 10 10 2 II 9 13 4 7 19 » 6th „ 10 9 9 3 10 2 II 7 19 . 7th „ 10 8 16 6 10 13 I 7 19 « 8th „ 10 8 4 8 II 3 9 7 19 H 9th , 10 7 13 6 II 14 II 7 19 » loth „ 10 7 3 3 12 6 9 7 19 £100 £ico £■100 £79 10 It will perhaps be as well to pause a moment, and consider the practical effect of the various methods ; but, before doing so, it seems desirable to call attention to the fact that the differ- ences would have appeared greater, had instalments for a longer period been compared, or had interest been reckoned at a higher rate (5 per cent, is the rate employed in the above tables). The first three methods, it will be seen, all require the same amount to be debited to Profit and Loss Account in the course of the ten years; but while the fixed instalment principle spreads the loss equally over that period, the diminishing instal- MISCELLANEOUS QUESTIONS OF ACCOUNT. 233 merits principle throws the bulk of the loss upon the first few years, and the annuity principle upon the last few years. On the other hand, the Sinking Fund principle possesses the advan- tage of economy — although it must be added that this advantage is more apparent than real, inasmuch as the instalments — being specially invested — are not helping to earn profits, as is the case under the other systems. 'Still, there is much to be said in favour of a system that provides a tangible fund for renewals, &c. Reverting to the first three methods, the annuity sy.stem is undoubtedly the scientifically correct one, and should always be employed for long leases, &c. ; hut, inasmuch as it tends to swell the profits for the first years at the expense of later years, it is preferable to use one of the instalment principles for plant, machinery,- &c. The relative advantages of the first two methods are fully considered by the author in his work entitled Comparative Depreciation Tables. Sometimes Depreciation is credited to the account of the asset concerned and sometimes to a " Reserve for Depreciation Account " (the amount to credit of the latter being deducted from the debit of the account of the asset in the Balance Sheet). Under the first and fourth methods, this latter course is clearly the most convenient. Forfeited Shares. — In the Share Ledger, by means of the Transfer Journal, transfer these shares to the credit of " For- feited Shares Account " : when resold, transfer to the purchaser in the usual way. In the General Ledger debit " Share Capital Account " with amount called up, credit '* Forfeited Shares Account " with the amount paid up upon forfeited shares, and credit " Shareholders' Account " with the amount in arrear. 234 BOOKKEEPING. Until the shares are re-issued the balance of Forfeited Shares Account should be stated separately upon the liabilities' side of the Balance Sheet, but when the shares have again been dis- posed of the balance of the Forfeited Shares Account may — if thought fit — be credited to Reserve Fund, or to Profit and Loss Account. Directors may, however, re-issue such shares at a discount not exceeding the amount originally paid up thereon ; and when advantage is taken of this power, the amount of such discount must be made good to Share Capital Account out of Forfeited Shares Account. Partnership Losses. — It would be well to show, by means of an example, how losses are to be apportioned among partners. Suppose A., B., and C. are partners : A., with a capital of ;£5,ooo, is entitled to three-fifths of the profits; B., with ;£s,500 capital, is entitled to one-fifth of the profits; and C, with a capital of ;£i,5oo, is entitled to one-fifth likewise. Each partner is to be credited with 5 per cent, interest on his capital. The trading for the year ended 30th September 191 2 resulted in a loss of ;£i 0,000 — to which the interest on capital must be added, making the total loss of ;£i 0,500. The situation is as follows : — Capital, ist Oct. igii Interest thereon . . Loss for the year. . Capital, 30th Sept. 1912. If, therefore, the firm wound up (and assuming the result of such liquidation was that the assets exactly discharged the liabilities) A. would owe B. ;^i,o5o, and C. would owe B. A. £5.000 250 B. £'3,500 175 C. £1,500 75 1,575 2,100 Total £10,000 500 5,250 6,300 3,675 2,100 10,500 10,500 £1,050 £■1,575 £325 Nil Miscellaneous QUEstiot^s ot Accoijhit. 235 In the absence of express agreement to the contrary, part- nership losses are borne in the same proportions as partnership profits are shared, but no partner can be called upon to pay another partner's share of such losses if all outside creditors have been paid. Reduction of Company's Capital. — :In the Share Ledger the simplest and most convenient way is to procure a rubber stamp, briefly stating the effect of the reduction, and impress it upon every page. The share certificates should also be called in and similarly stamped. In the General Ledger note the reduction at the head of Share Capital Account, and if the reduction does not affect the paid-up capital, no further entry is required. If, however, the reduction has been made for the purpose of wiping-off a balance to the debit of Apportionment of Profit Account, or of writing off' balances on accounts representing unproductive assets, pass a Journal entry debiting Share Capital Account and crediting Apportionment of Profit Account, or the account (or accounts) of the assets concerned, with the total amount of such reduction of paid-up capital. Shares Issued at a Premium. — [See under '' Debentures Issued at a Premium," on page 231, reading " Shareholders' Account" for ''Debenture-holders' Account."] finis. INDEX. Abstract of Wages, Form of Account Sales, Definition of ,, ,, Pro forma Accounts of Consignees, how dealt with ... ,, ,, Pro forma „ Consignors, how dealt with ... „ ,, Pro forma ,, Manufacturers ,, Partners, Pro forma „ Traders „ Rendered Book, Form of Adjustment Accounts, Description of ,, ,, Pro forma Advantage of Double-Entry ,, Self -Balancing Ledgers Allotment of Shares 169, 1 Amalgamation of Firms, how dealt with ... Analysis of Purchases ,, Sales ... ,, Stores Issued, Form of Application of Double- Account System ... Applications and Allotments Book, Pro forma Apportionment of Partnership Losses Bad Debts, how dealt with Balance de Sortir ... .1 „ d'entrer Balance Sheet, Definition of „ „ Preparation of „ „ upon Double-Account System, Pro forma 214 ,, ,, Various forms of 7, 57, 212, 214 Bank Account, Description of 13, 74 Bill Ledger, Forms of 222 ... 162 ... 67 ... 128 ... 127 ... 130 ... III ... 123 ... 158 86, 125, 234 ... 73 ... 224 ... 134 ... 138, 139 ... 29 ... ^33 73» 182, 235 ... 86 •,87 96,98, 196 ... 96, 98 ... 164 217 ... 172, 179 ... 234 ... 228 54,55 ,57 45.48 ,57 ... 8 ... 29 ,51 23^ INDEJi. Bills discounted, how dealt with 229 dishonoured, how dealt with 230 Payable Book, form of Si, 222 ,, Description of 67, 80 ,, how dealt with 80, 82 Receivable Book, Form of 78, 222 ,, Description of 67, 77 „ how dealt with 67, 78, 229, 230 Bookkeepers, Continental, Practice of 2 „ English, Practice of 2 Bookkeeping, Definition of ... i ,, Object of I „ Practical, Main ditliculty of I Books, Two main classes of 3 Capital Account, Description of ... 15,86 ,, Expenditure ... 211, 216 „ of Companies 169 ,, ,, Company, Reduction of ... 169,235 Cash Account, Description of ••• i3> 74 ,, Book for Self-balancing Ledgers, Pro jonnd 137 ,, „ Traders, Form of 77, 84, 109 Classes of Books, Two main ... 3 Closing the Ledger, Method of 24, 54, 113 ,, Trading Account, Method of 1:3 Colliery Company, Pro formd Balance Sheet ... 212, 214 Commercial Terms, Explanation of 66 Company (Joint Stock), Constitution of 1O8 Company's Shares, Allotmei.t of ... 169, 174, 182, 234 ,, ,, Forfeit;. re of 170, 233 ,, Balance bheet. Pro joriiid ... 206, 212, 214 ,, Capital, Reduction of 169, 235 ,, Debentures, Issue of 178, 230, 231 ,, Ledger, Opening entries in 182 ,, Register of Transfers, Pro forma ... 177 „ Share Ledger, Pro formd 176 Consignees' Accounts ... 127, 130 Consignment, Definition of 69 Consignments, how dealt with 98, 111, is; 239 Consignors' Accounts f)8, iii, 123 Constitution of Joint Stock Company ... ... 169 Continental and English Systems, Relative advantages of 55 „ Bookkeepers, Practice of 2 ,, System, Closing Ledger upon the... 53 ,, ,, Description of 45 Contractors' Balance Sheet, Pro forma 206 Cost Accounts ... 164, 200 ,, Ledger, Specimen page of 166, 200 Debenture s. Issue of 178, 264, 265 Definition of Account Sales 67 Balance Sheet 8 Bookkeeping I Commercial Terms 66 Consignment 69 Discount ... 70, 82 Double- Account System 210 Double-Entry 6, 29 Nominal Accounts ... 12, 19 Partnership 71 Personal Accounts 15 Real Accounts 12 Depreciation, how provided for ... 15,231 Description of Adjustment Accounts 135 Bank Account ... 14, 74 Bills Payable . ... 67,80 )) „ Receivable ... 67, 77 »> Capital Account 15, 85, 169 )j Cash Account ... 13, 74 j» Continental System 54 jj Manufacturers' Accounts . . ... 158 j> Nominal Accounts ... IQ j> Personal Accounts ... 15 >» Profit and Loss Account . 10 »> Revenue Account 10 »9 Self-balancing Ledgers - 132, 135 240 Description of Suspense Accounts „ the Journal „ „ Ledger „ Traders' Accounts „ Trial Balance Difference between Revenue and Profit and Loss Accounts ... Different classes of Ledger Accounts Discount, Definition of „ how dealt with „ upon debentures, how dealt with Discounted bills, how dealt with Dishonoured bills, how dealt with Distinction between assets and losses „ ,, capital and revenue ,, „ liabilities and gains Dividends, Payment of Double- Account System explained jj J, 'pro forma Balance Sheet it „ when applicable Double-Entry, Advantages of „ Nature of „ Origin of Doubtful Debts, how dealt with Drawings of Partners "5 4 4, 12 73 21,51 ID 12 71,82 82, 115 230 2i-8 229 9 211, 216 9 208 210 214 217 29 6, 29 6 228 89 English Bookkeepers, Practice of 2 Expenditure, Capital and Revenue, distinguished 211, 216 Explanation of Commercial Terms ... 66 „ Double- Account System 210 „ Single- Account System 211 Firms, Amalgamation of „ {See under " Partnership.") Foreign Commercial Terms, Explanation of Forfeiture of Shares , 86 66 7o> 233 INDEX. 24r Form of Abstract of Wages Account Sales Accounts Rendered Book ... Adjustment Accounts Analysis of Stores Issued ... Balance Sheet 31, 86, 87, 88, 207 „ ,, upon Double-Account System Bill Book „ Ledger Bought Journal Cash Book for Traders Closing Balance Company's Balance Sheet ,, Profit and Loss Account „ Trading Account Consignees' Accounts Consignors' Accounts Cost Ledger Invoice Jobbing Ledger for Contractor ... Opening Balance Partnership Accounts Pay Sheet Primitive Ledger Purchases Book Returns Book Sales Book Share Ledger Summary of Cost Ledger Tabular Cash Book 77j 84 „ Journal Ledger Petty Cash Book Trader's Balance Sheet 104, 117. ,, Profit and Loss Account Trading Account 93, Transfer Register Trial Balance 21, 27 French Commercial Terms explained 162 128 224 .:. 138 139 164 ,207 212 214- ystem 214. 7>57. 212 214 ... 7 7,81 222 ... 95 195 77,84 200 ... 54,55 206, 212 214 206 20& 130 123 166, 20a 95 195 ... 4f ,4S 86, 131 161 ... 4 ... 95, 104 109 97 176 200 108, 137, 226 223 ... 205, 220 227 124, 126, 139 ... 124, 125 118, 119, 206 177 7>43 52, 112 ... 66 242 INDEX. German Commerial Terms explained Goods Account {vide " Trading Account.") Goodwill Jobbing Ledger, Form of Joint Stock Company, Constitution of Journal, Description of „ for Self -balancing Ledger „ Tabular, Form of Ledger Accounts, Different classes of ,, Description of „ Method of closing Self -balancing, Advantages of ... ,, Description of ,, Pro forma Cash Book ioi i37 „ ,, Journal for 138, 183, 185 Tabular, Form of i95> 220 „ Trade i93. ^95 Losses of Partners, how dealt with 234 66 ... 87,206 i 195 169 4 138, 183, 185 223 12 ... 4, 12 24, 54» "3 133 ... 132, 135 Manufacturers' Accounts Method of closing the Ledger J J „ on the Continental System „ „ Trading Account „ dealing with accounts of consignees ... consignors ... ,, allotments of shares 169, „ amalgamation of firms ... ^^ ,, bad and doubtful debts ... ,, „ bills accepted » discounted „ ,, dishonoured „ received ,, debentures issued at a discount jj „ debentures issued at a premium 158 24. "3 54 "3 127 99, no 74, 182, 235 86 228 80, 82 229 230 78, 79 230 230 243 Method of dealing with discounts ,, ,, forfeitures of shares . 82, 115 -- • 168, 233 ,> ,, issues of debentures 178, 230, 232 5, ,, partners' drawings ... 89 ,, „ partnership accounts ... 86, 234 ,j ,, „ losses ... 234 ,j „ purchases 94, 195 „ „ reduction of capital of company 235 „ ,, returns 98 jj „ sales 97 ,, ,, shares issued at a premium 235 „ stating goodwill in Balance Sheet ... 87, 206 Modes of providing for depreciation 231 Nature of Double-Entry Necessity for Cost Accounts ... „ Stores Accounts Nominal Accounts, Description of 6, 29 163 162 12, 20 Object of Bookkeeping... ,, Trial Balance Opening entries for company... Origin of Double-Entry I 21 182 6 Partners, Drawings of J J Pro forma Accounts of 863 Partnership Accounts, Form of „ „ how dealt with „ Definition of ,, losses, how dealt with ... Payment of dividends ,, wages Personal Accounts defined 5, Description of ... Petty Cash Book, Form of Practice of English and Continental Bookkeeper Premium upon debentures, how dealt with „ shares, how dealt with 89 125, 234 86, 125 85 > 234 71 234 208 161 12 175 19 227 2 231 235 244 Preparation of Balance Sheet 29,55 „ Revenue Account 24, 55, Primitive Ledger, Form of 4 Profit and Loss Account explained 10 Pro formd Account Sales 129. ,, Accounts of Partners 86, 125, 234 ,, ,, Rendered Book 224 ,, Adjustment Accounts 140, 141 ,, Analysis of Stores Issued 164 Wages 162 ,, Applications and Allotments Book ... 173, 179 Balance Sheet ... 29, 86, 87, 88, 206, 211, 213, „ ,, of a company 206, 211, 213 „ „ „ trader 104, 117, 124, 126, 13^ „ „ upon Double - Account System 214 Bill Book 85 ;,8^ „ Ledger 222 Cash Book for traders ... ... 76, 84, 108 Closing Balance Account SA r>55 Company's Cash Book ... 17 ,, General Ledger 18 Consignees' Accounts 130 Consignors' Accounts 123 Contractor's Balance Sheet ... 206 ,, Profit and Loss Account 206 ,, Trading Account. ... 206 Cost Ledger 166, 200- Invoice 94 Journal 37, 45, 54, 109, 138, 182, 185, 204, 223. ,, for opening Ledger of a company 182 ,, ,, Self-balancing Ledger 138, 184, 186 Ledger 31, 39, 117, 188, 218, 220 ,, of a trader 117 Opening Balance Account 46, 48. Partnership Accounts 86, 125 Pay Sheet 161 Petty Cash Book 227 Profit and Loss Account of a company 206 ,, - „ trader... 124, 125 245 Pro formd Purchases Book 95, 195 Returns Book 109 Revenue Account 28 Sales Book 97 Share Ledger 176 Summary of Cost Ledger 200 Tabular Cash Book ... 76, 92, 108, 137, 226 ,, Journal ... 223 ,, Ledger 195, 220 Trading Account ... ... 93, 118, 119, 206 „ ,, of a company 206 Transfer Register 177 Trial Balance 21, 27, 43, 50, 112 Property Account, Description of 14 Provision for bad and doubtful debts 228 ,, ,, depreciation 231 Purchases, Analysis of 96, 98, 196 ,, Book, Form of ... 95, 195 ,, how dealt with 94, 195 Real Accounts defined Reduction of company's capital Register of Transfers, Pro formd Relative advantages of English and Continental methods Reserve Fund, how created Returns Book, Form of ,, how dealt with Revenue Account explained ,, ,, Form of „ „ Preparation of „ expenditure Sales, Analysis of ,, Book, Form of ,, how dealt with , Self -balancing Ledgers, Advantages of ,j „ Description of ... 170, 235 176 al 55 209 109 98 10 28 ... 24, 54 216 ... 96, 98 97 97 133 ." 133, 136 Form of Cash Book for... 138 ,, Journal for 139, 183, 185 246 INDEX. Share Ledger, Pro forma Shares in company. Allotment of ,, ,, Forfeiture of Single- Account System explained „ „ /'r•. ^ ^BUILDING SOCIETIES' ACCOUNTS. (Vol. XXV of "The Accountants' Library" Series, q.v.) (116 pp., 8vo.) By W. Colin Grant-Smith, LL.B., Chartered Accountant. For Permanent or Terminating Building Societies, but more especially adapted for Permanent Societies. Amongst the special features of this work are included : — Subscription Shares Table — Advanced Shares Table (four alternate) — Specimen Clauses of all matter that Ii»i. must be inserted in the Rules of a Society — Extracts from the ■J*^^ Building Societies Acts relating to Accounts, Audit, &c. — Specimen Forms of Pass Book, Register of Members, Application for Shares, &c. &c. — Copies of all Memoranda and Forms (now in use) issued from time to time by the Registrar. The System here recommended is so concise that the position of the Society at any time may be ascer- tained in a few minutes. This is especially valuable where it is desired to present to the Board of Directors Monthly, Fortnightly, or even **'^ ^' Weekly Statements. 3/6 net. Post free U.K. 3/9 ; Abroad, 3/10. GEE & CO. (PUBLISHERS) LTD., ACCOUNTANCY PUBLICATIONS. 15 BUILDING SOCIETY TABLE AND LOAN CALCULA- TIONS. (18 pp., 8vo ) By George Johnson, F.S.S., F.C.I.S. A pamphlet, 1/- net. Post free U.K. and Abroad, 1/1. CHARTERED ACCOUNTANT IN SOME ADMINIS- TRATIVE CAPACITIES, THE. (20 pp., Svo.) By Andrew BInnle, F.C.A. C.A. A paper dealing mainly with the Chartered Accountant as Receiver and Manager for Debenture-holders. 6d. net. Post free U.K. and Abroad, 6^d. CHARTERED ACCOUNTANTS' CHARGES AND THE LAW RELATING THERETO. JV^A^f; (3rd Ed., 256 pp., Svo.) By F. W. PIxley, F.C.A., Barrister-at-Law. The Author states what his experience leads him to consider are the usual Charges amongst Chartered Accountants with regard to Auditing, Investigations, Liquidations, Receiverships, Administrations, Trusteeships in Bankruptcy and under Deeds of Assignment, Trustee- ships for Debenture-holders, Arbitrations, together with Tables for calculating Charges from one hour to one hundred days. The Law relating to the subject is dealt with, and a number of decided cases have been added. Net price (post free U.K.) 10/6 ; Abroad, 11/5. CHECK FIGURE SYSTEMS, ELEMENTARY TREATISE ON. ^i^AQ^OO (24 pp., Svo.) By G. H. Hay, C.A. A pamphlet. ' ^"A*!^ 6d. net. Post free U.K. and Abroad, 7d. CHECK FIGURE SYSTEMS, PRINCIPLES OF. (165 pp., Svo.) By G. H. Hay, C.A. 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Contents : — Intro- duction — General Principles — Subscriptions — Provisions — Cellar Stocks, &c. — Miscellaneous Revenue — Miscellaneous Expenditure — The Books of Account — Golf Clubs and Smaller Social Clubs — Working Men's Clubs — The Legal Position of Clubs. Appendix : — The Licensing (Consolidation) Act, 1910, Sections 91-98 — The Finance (1909-10) Act, 1910, Section 48. 5/- net. Post free U.K. and Abroad, 5/5. 34 MOORGATE STREET, LONDON, E.G. i6 GEE & CQ.'S CATALOGUE OF COLLIERY ACCOUNTS. (Vol. LI of "The Accountants' Library " Series, ^.7;.) (130pp., 8vo.) :»:;:% John Mann, Junr., M.A., C.A., and Harold G. Judd, C.A. This book is intended to assist in the modernisation and improvement of existing systems of Colliery Accounting as well as in the institution of ^ system from the beginning. The work describes first the bookkeeping ««llnli necessary to record the mining and disposal of the coal; the next sections treat of Purchases, Stores, and Costs, with special reference to Depreciation ; and a later chapter deals with several matters which are incidental, though not essential, to almost every Colliery business — '^Q^ such as the ownership of Dep6ts and Washers, Railway Wagons and Sidings, and Workmen's Houses. Special attention has been directed ft^ti ' to the question of Depreciation, and to modern methods of recording and tabulating Mining Costs. "^^i' 5/- net. Post free U.K. 5/4; Abroad, 5/7. COMPANIES ACT, 1907. (40 pp., 8vo.) By F. W. Le Blount Lean, F.C.A. A Classified Abridgment of the principal provisions affecting Directors, Secretaries, -^ and Auditors. ■^'^ 1/- net. Post free U.K. and Abroad, 1/1. COMPANIES ACTS. THE DUTIES OF AUDITORS UNDER THE. (66 pp., 8vo.) A Series of Articles reprinted from The Accountant. 1/- net. Post free U.K. and Abroad, 1/2. COMPANIES (CONSOLIDATION) ACT, 1908, A PRACTICAL INDEX TO THE. tj'." .;i (60 pp., 4to.) By A. Binnie, F.C.A., C.A. This very complete Index is a Key to the contents of the 296 Sections into which the 1908 Act is divided. The details given as to the Statutory Duties cast upon Auditors, Directors, Liquidators, Receivers, ddl no Secretaries, and others ; the Penalties incurred by neglect of same ; loi Edoi the Rights of Creditors and Members ; the Liabilities of Contribu- ,»Of:o^I tories ; the requirements as to Prospectuses ; and the many Returns eifii'f l£ to be filed with the Registrar, illustrate the practical nature of the contents. 3/6 net. Post free U.K. and Abroad, 3/8. -\8 1 Also issued bound up with a King's Printers' copy of the Act. 5/- net. Post free U.K. 5/4 ; Abroad, 5/7. COMPANY LAW. t;r (76 pp., Svo.) By W. R. Willson, Barrister-at-Law. Deals with e-iSi the Acts of 1900 and 1907 in a systematic manner. 0} 1/6 net. Post free U.K. and Abroad, 1/8. *^* New Edition in the Press. COMPANY (PRIVATE LIMITED). {See Promotion and Accounts of a Private Limited Company, ^^:^^cp. 36.) i^dMPANY (PUBLIC LIMITED). {See Promotion and Accounts of a Public Limited Company, COMPANY SECRETARIES' BOOKKEEPING. {See Bookkeeping for Company Secretaries, p. 12.) GEE & CO. (PUBLISHERS) LTD.. """ ACCOUNTANCY PUBLICATIONS. 17 COMPANY SECRETARY, THE. (6th Ed., 468 pp., foolscap folio.) By W. H. Fox. Completely re- written and revised under the Companies (Consolidation) Act, 1908. This important Work contains a full description of the Duties of a Company Secretary, together with an Appendix of 350 pages of Forms and Precedents used from the Formation of a Company to its - Winding-up. Each Form is filled in as it would be in actual use, and the result is a compendium of valuable information that entitles the book to rank as the Standard Work on Company procedure. The duties of the Company Secretary are fully explained in the letterpress portion, as also the use of the Forms in the Appendix. Every Form that can possibly be required finds a place. This Edition contains various Forms, &c., required in the Winding-up of Companies and also in connection with the Companies (Consolidation) Act, 1908. Net price (post free U.K.) 25/- ; Abroad, 26/8. COMPANY WINDING-UP TIME TABLES. {See Bankruptcy and Company Time Tables, p. 10.) COMPENDIUM, ACCOUNTANT'S. {See Accountant's Compendium, p. 4.) COMPENSATION FOR MAN AND MAID. (115 pp., 8vo.) By Oscai* M. Wihl, B.A., LL.B. A full expla- nation of the Workmen's Compensation Act, 1906, with Tables and special chapters on Industrial Diseases, Seamen, and Domestic Service, together with the text of the Act briefly annotated. 2/- net. Post free U.K. 2/3; Abroad, 2/4. CONTRACT, CHART OF THE LAW OF. Compiled by Robert W. Holland, M.Sc, LL.B., and R. C. Reynolds, A.C.I.S. 6d. net. Post free U.K. and Abroad. 7d. 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Summary of Contents : — Introduction — Direct Wages in the Cost Accounts — Wages in the General Accounts— Materials in the Cost Accounts— Materials in the General Accounts — Chargeable Expenses — The relationship between the Cost Accounts and the General Accounts — Indirect Charges and Oncost — How to Charge Oncost — Credits to Job Accounts — Completed Contracts and Sales in the General Accounts — Finished Stock in the Cost Accounts — The relationship between the Cost Accounts and the General Accounts further considered — Diagram illus- trating the Double-entry Principle of the Cost Accounts and their relationship to the corresponding portions of the General Accounts — Closing the Cost Ledger — Comparing the Cost Accounts and the General Accounts — Stores Accounts — Further consideration of Materials — Further consideration of Oncost — Patterns, Designs, Moulds, &c. — Some Special Features — The Cost Ledger and Journal (some details) — Forms and Appendix. 5/- net. Post free U.K. 5/4 ; Abroad, 5/7. 34 MOORGATE STREET, LONDON, E.G. i8 GEE & CO.'S CATALOGUE OF COST ACCOUNTS FOR SMALL MANUFACTURERS r J ,,(56 pp., 8vo.) By M. Webster Jenkinson, Chartered Accountant. ft«ot i > useful treatise containing numerous pro forma Accounts. fi.U) ?aJ 1/- net. Post free U.K. and Abroad, 1/2. COST ACCOUNTS, WITH SPECIAL REFERENCE TO « THOSE OF AN ENGINEER AND IRONFOUNDER *' (2nd Ed., 125 pp., 8vo.) By J. W. Best, F.C.A. The title denotes "specialisation," rather than '* generalisation," but as similar principles have to be applied to all " Cost " Accounts, whatever the nature of the business, the book will be found useful not only to those associated with Engineering and Ironfounding, but also to Practitioners, Students, and all who are interested in, or who may be called upon to design or carry out a system of Cost Accounts in connection with any other business. Since the ist Edition was written, Loose-Leaf Ledgers and Card Systems have proved to be useful in certain cases, and a special chapter has been added on the Card System generally and as applied to Engineering and Foundry Costs. 5/- net. Post free U.K. 6/4 ; Abroad 5/7- COST ACCOUNTS, MULTIPLE. (Vol. XLII of "The Accountants' Library " Series, ^.w.) (104 pp., 8vo.) By H. Stanley Garry, Chartered Accountant. This work illustrated with numerous fro formd Accounts and Charts, deals with the special Cost Accounts applicable to undertakings where a number of Products are involved bearing little or no apparent relation to each other in cost or selling price — such as Engineering specialities, * Cycles, Hosiery, Boots, Furniture, Agricultural Implements — in which standardisation in parts is carried to a high degree of specialisation in manufacturing. Synopsis : Introductory — Organisation — Manufacturing Account — Purchases — Wages — Indirect Expenses — Stock — Depart- mental Units — Periodical Returns — Sale Units — Factory Units — Con- clusion — Diagrams. 3/6 net. Post free U.K. 3/9 ; Abroad, 3/10. COST ACCOUNTS, PROCESS. (Vol. XLIX of *' The Accountants' Library " Series, q.v.) (170 pp., 8vo.) By H. Stanley Garry, Chartered Accountant. The System of Costing described is applicable to Chemical Industries, Food Products, &c., in which conversion of material takes place, and there are principal and by-products, such as Farmers, Fellmongers, &c., and embodies an explanation and resume of technical data which cannot fail to be of invaluable service to the Student of Process Accounting. Summary of Contents : — Division I. Technical and Process Data : Technical Data — Raw Material — Measurement of Solids — Liquids — Gases — Liquid Processes — Useful Tables. Division II. Cost Grouping. Division III. Economics of Cost : Transportation of Material — Standard of Output— Stocks and Stocktaking— Steam-Power and Coal — Deprecia- tion of Plant in Chemical Industries — Diagrams and Charts — Periodical and Statistical Returns — Index. 5/- net Post free U.K. 5/4 ; Abroad, 5/7. GEE & CO. (PUBLISHERS) LTD., ACCOUNTANCY PUBLICATIONS. COST ACCOUNTS, SINGLE. (Vol. XLVII of " The Accountants' Library " Series, q.v.) (15c pp., 8vo.) By G. A. Mitchell, Incorporated Accountant. This volume deals with undertakings possessing a natural unit of cost and measurement, such as Maltings, Breweries, Collieries, &c. The work, written on unconventional and up-to-date lines, consists of Six Sections, and includes many useful pro forma Balance Sheets, Manu- facturing Accounts (showing " volume " of Output), Trading Accounts, Cost Sheets, Estimates, &c. I. Malting Accounts and Season's Estimates or forecast fully worked out and reconciled ; Stock Checks, &c. — II. Engineering Business with a Standardised Output. — III. Brew- ing Accounts and Costings agreed with Consumption and Production records. — IV. Colliery Working Accounts and Weekly Cost Sheets adjusted. — V. Stocktaking ; Principles underlying the Correct Survey and Valuation of Stocks. — VI. Card and Loose-leaf Records compared with book-recorded data. The systems outlined, whilst retaining thoroughness and efficiency in all essentials, are practical and inexpen- sive in their introduction and day-to-day working. 5/- net. Post free U.K. 5/4 ; Abroad 5/7. COST ACCOUNTS, TERMINAL. (Vol. XLVI of " The Acccdntants' Library" Series, ^.y.) (66pp., 8vo.) By A. G. NIsbet, Chartered Accountant. This volume deals with a system of Costing suitable for undertakings where definite Contracts are entered into in which the Costing is definite and terminating, such as Constructional Engineers, Builders, Contractors, Bridge Builders, Shipbuilders, &c. Synopsis : Introduction — Proce- dure on Receipt of Orders — Method of Charging-up Labour — Shop Expenses and Establishment Charges — Cost Sheets and their relation to the Manufacturing Account — The Premium System of Remuneration to Workmen — Index. 3/6 net. Post free U.K. 3/9 ; Abroad, 3/10. COST OF PRODUCTION. (98 pp., Svo.) By John A. Wild. An Explanation of Principles, and a Guide to Practice, for the Printing and Allied Trades, with an Appendix of Thirty-eight Forms. Summary of Contents : — Introduction — The Basic Factor — Departmentalisation Essential — Stocks and Stocktaking — Ascertaining Production — The Analysis of Wages— Consumption of Stores — Ascertaining Departmental Cost — The Analysis of Expenses — Recovering Working Expenses — Ascer- taining Job Cost — Management from Cost Records — The Selling Price — Conclusion — Appendix. Net price (post free U.K.) 10/6 ; Abroad, 11/-. COSTINGS, BOOT AND SHOE. {Su Boot and Shoe Costings, p. 13) COTTON SPINNERS' ACCOUNTS. (Vol. XXXIX of "The Accountants' Library" Series, q^.v.) (150 pp., Svo.) By Wm. Moss, F.C.A. This book describes a complete system of Accounts for a Cotton Mill. It gives a list of the whole of the books, and separately describes the use of each. The statutory books of a Limited Company, the principal and subsidiary books of account, the books relating to internal management, and those relating to the Directors' supervision, are all dealt with. A complete set of pro forma Accounts is given, fully written up, with specimen entries. 5/- net. Post free U.K., 5/4 ; Abroad, 5/7. 34 MOORGATE STREET, LONDON, E.G. 20 GEE & CO.'S CATALOGUE OF _^ CURRENCY (FLUCTUATING), TREATMENT OF, IN ACCOUNTS. {See Treatment of Fluctuating Currency In Accounts, p. 41.) DAIRY ACCOUNTS. (Vol. XXXIII of "The Accountants' Library" Series, q.v.) (120 pp., 8vo.) By F. Rowland, A.C.A. The Complete System of .«!> Accounting is clearly and fully described, and facsimiles of all -i« the Books and Forms recommended are given. Synopsis: — Intro- duction — The various Books of Accounts — Stock Books — Order Book — Cash Books — Ledgers, &c.— The Accounts as applied to a Firm with Retail Shops and Branches, or to a Limited Company — be . The Books and Accounts for Small Dairymen possessing one Establish- ■^i.-i ment only — Statutory Enactments relating to Dairies— Index. -^^nc Cy Payment of Legacy or Succession Duty — Specimen Questions and Answers — The Audit of Trust Accounts — Capital and Income, amplified .T\7 .t>f j-eprint of articles written for The Accountant — Example of an Intestacy — Example of a Legacy in Trust — Acts and Rules — Pro formd Q-K-' J Accounts. Net price (post free U.K.) 6/- ; Abroad, 6/7. EXPENSES BOOK, FOR SOLICITORS, AUCTIONEERS, ACCOUNTANTS, &c. (Foolscap folio, 120 openings.) (Copyright — Registered No. 593,821.) By Edward J.Tubbs, Chartered Accountant. This book will prove useful to all professional men, whatever the size of their practice. A special feature of the Book is the introduction of the Invoice Column ; by this means all the expenses of the business, whether paid by cheque or in cash, can not only be readily classified in the one book, but also a proper check is had upon all the accounts owing by the business. This book is a combination of the Expenses Journal and Petty Cash Book, which, of course, in the case of a large firm can be easily separated if desired, but the present book is very useful for any average-sized firm. Price 8/6 net post free U.K. ; 9/8 post free Abroad. 3ii i FACTORY ACCOUNTS. (6th Ed., 300 pp., 8vo.) By E. Garcke and J. M. Fells. A Hand- book for Accountants and Manufacturers, with Appendices on the ' "' Nomenclature of Machine details; The Income Tax Acts; The Rating .f\? ,b£ of Factories; Fire and Boiler Insurance, &c., including also a Glossary of Terms and a large number of specimen rulings. In view of the continuous demand for this work, the authors have taken the opportunity presented by a further edition of adding to and re-arranging the chapters it previously contamed. The changes that have taken place in methods of production, &c., have rendered it desir- ^' able to deal in greater detail than hitherto with the apportion- ment of machinery charges. Synopsis:— Chapter i, Introductory — J Chapter 2, Labour — Chapter 3, Stores— Chapter 4, Prime Cost and ^i the Cost Ledger — Chapter 5, Indirect or Incidental Expenses and jj^,,, ,,^. their Allocation — Chapter 6, Fixed Capital and Depreciation— ;;; j,'^:J .Cliapter 7, Machinery Use— Chapter 8, Stock— Chapter 9, Surveys- Chapter 10, Subsidiary Books — Chapter 11, Methods of Remunerating «, |. ^Labour — Appendices— Glossary — Index — Table of 57 Specimen Rul- * ' ings — Diagram i, The Assimilation of Wages and Commercial Books— Diagram 2, Assimilation of Stores and Commercial Books — Diagrams 3 and 4, The Assimilation of Cost and Commercial Books — i snl*i) Diagram 5, The Assimilation of Stock and Commercial Books. ^ . .. 6/- net. Post free U.K., 6/4 ; Abroad, 6/11. GEE & CO. (PUBLISHERS) LTD., ACCOUNTANCY PUBLICATIONS. 25 FISHING INDUSTRY ACCOUNTS. (Vol. XX of "The Accountants' Library" Series, q.v.) (80 pp., 8vo.) By Charles Williamson, M.A., C.A. This Volume deals at length with the Accounts of Steam Fishing Boats, Fish Salesmen, Fish Merchants, and Fish Curers, and describes the various necessary books. The system advocated is illustrated by full pro forma rulings, and will be found complete in every way. 3/6 net. Post free U.K. 3/9 ; Abroad, 3/10. FORMS OF ACCOUNT BOOKS. (100 pp., Svo.) By J. G. Johnston, C.A. Synopsis :— Part I.— Forms of Books for Manufacturing Businesses. Part II. — Forms of Books for Retail Businesses. Part III. — Forms of Books for the use of Solicitors and Law Agents. Part IV. — Forms of Books for the use of Stockbrokers. Part V. — Forms of Housekeeping Books. Part VI.— Form of Investment Register and Calendar of Income. 2/6 net. Post free U.K. 2/9 ; Abroad, 2/10. FRAUD IN ACCOUNTS. (Vol. XXX of " The Accountants' Library " Series, q.v.) (and Ed., ico pp., Svo.) Deals with the Methods of circumventing Frauds on the part of both Employees and Directors, and shows how they may be detected at an early date — The Functions and Limitations of an Audit — Systems of Internal Check — Motives and Methods of Fraud — Specific Instances of Fraud : Misappropriations of Money — Specific Instances of Fraud not involving the Misappropriation of Money — Specific Instances of Fraud : Falsifications of Directors and Proprietors — Appendix. 3/6 net. Post free U.K. 3/9 ; Abroad, 3/10. FRIENDLY SOCIETIES' ACCOUNTS AND STATISTICS (48 pp., 8vo.) By V. Mapp, F.F.A., F.I. A. A Pamphlet. Synopsis:— Classes of Friendly Societies — Regulations as to Accounts— Audits — Public Auditors — Statistical Tables — Annual Return — Card Register — Sickness Aliment — Tabulation of Statistics — Funeral Benefits — Contri- butions — Management Expenses — Investments — Use of Cards — Journal Entries — Appendix. 1/- net. Post free U.K. and Abroad, 1/1. FRIENDLY SOCIETIES' AND TRADES UNIONS' ACCOUNTS. (Vol. XXVIII of "The Accountants* Library" Series, q.v. (160 pp., Svo.) By E. Fupnival Jones, A.C.A., A.S.A.A. A concise and practical system of Account-keeping — sufficiently comprehensive for the needs of a large centralised Association, and at the same time easily adjustable to the limited operations of the smallest Branch. Starting with the method of recording the receipt of Contributions from Members, the reader is taken step by step through the modes of paying Benefits and dealing with Investments, to the completion of the Quarterly or Yearly Accounts and Balance Sheet, and the Filing of Returns with the Chief Registrar. Many practical hints to the Auditor and Accountant are thrown out in the course of the work ; valuable suggestions are given for keeping proper Statistical Records, and the nature and importance of the Actuarial Valuation are touched upon and explained. The following may be noted, among other special features of the book : Extracts from the Acts of Parliament relative to Accounts and Audit ; Specimen Forms of Account Books and Registers, specially suited to the needs of Friendly Societies ; Copies of Forms required to be filed with the Chief Registrar of Friendly Societies from time to time. 5/- net. Post free U.K. 5/4 ; Abroad, 5/8. 34 MOORGATE STREET, LONDON, B.C. 26 GEE &, CO.'S CATALOGUE OF GAS ACCOUNTS. (Vol. VII of "The Accountants' Library" Series, q.v.) (2nd Ed., 130 pp., 8vo.) This work deals fully with the accounts of all classes of Gas undertakings. Synopsis: Introduction, dealing with the constitution of Gas Companies, &c. — Sale of Gas and Collec- tion of Gas Rates— Fittings Accounts, and Prime Cost Accounts C incidental thereto— Sale of Residual Products — General Ledger and full set of pro forma Accounts for one year — Statutory Form of Annual Accounts — Shares, Stock, and Debentures — Cost Accounts with pro forma Statement-Capital and Revenue Expenditure-Local Authorities as " Owners of Gasworks — Index. 5/-net. Post free U.K. 5/4 ; Abroad, 5/7. GAS COMPANIES' BOOKKEEPING. (240 pp., 4to.) By J. H. Brearley and B. Taylor. A practical treatise. A full description is given, with illustrations, of all the Books and Forms. The Frontispiece, a concise Chart, shows at a glance the linking together of the respective books. A complete set of transac- tions is worked out, and from these a Model Balance Sheet and ,.c Statement of Accounts is compiled. Net price (post free U.K.) 12/6 ; Abroad, 13/8. GOODWILL. (3rd Ed., 176 pp., 8vo.) By L. R. Dicksee, M.Com., F.C.A., and F. Tillyard, M.A., Barrister-at-Law. The subject of Good- will, its treatment in Accounts and the Law relating thereto, is ^1^^ fully dealt with. Synopsis: — The Connection between Goodwill •^ and Trade Names and Trade Marks — The Nature of Trade Names and their Protection — Trade Marks and their Protection — The Nature of J'iL;'? Goodwill — The Assignment of Goodwill — Partnership and Goodwill — Goodwill and Accounts — The Valuation of Goodwill — The Fluctuations of Goodwill — The Purchase of Goodwill — Goodwill in Partnership Accounts — Goodwill in Companies' Accounts — Text of the Trade Marks Act, 1905 — Common Form Clauses relating to Goodwill. Net price (post free U.K.) 5/6 ; Abroad, 6/-. GRAIN, FLOUR, HAY, AND SEED MERCHANTS* ACCOUNTS. (Vol. X of "The Accountants' Library" Series, q.v.) (112 pp., 8vo.) By G. Johnson, F.S.S., F.C.I. S. Describes a complete system of Bookkeeping for Grain, Flour, Hay, and Seed Merchants, with numerous Forms and a set of pro formd Accounts, with Specimen Entries and a Glossary of Trade Terms and Abbre- viations. 3/6 net. Post free U.K. 3/9 ; Abroad, 3/10. GROCERS' BOOKKEEPING. (48 pp., 8vo.) By M. Webster Jenkinson, Chartered Accountant. A System of Bookkeeping suitable for Grocers and other Retail Tradesmen, with specimen Forms of Accounts. 1/- net. Post free U.K. and Abroad, 1/2. 3rf; HIRE PURCHASE ACCOUNTS. ;■■ (48 pp., 8vo.) By G. Johnson, F.S.S., F.C.I. S. A short treatise on ^^' the Bookkeeping, Accounts, and Calculations relating to the Hire- ^ . Purchase "Wagon Trade and Colliery Royalties, and Wayleaves. 1/6 net. Post free U.K. and Abroad, 1/8. GEE & CO. (PUBLISHERS) LTD., ACCOUNTANCY PUBLICATIONS. 27 HISTORY OF ACCOUNTANTS AND ACCOUNTANCY, A SHORT. (254 pp., 8vo.) By Arthur H. Woolf. M.A., Barrister-at-Law. The aim of this book is to present, in a small compass, the History and Development of Accountancy from the earliest times to the present day. In the Introduction, the Author regards and treats Accountancy as an important chapter in the history of civilisation, and shows that Book- keeping and Accounting have foUoM/ed the progress and development of the human race. The book is divided into four parts. The first part deals with the " Development of Systems of Accounting." The writer describes in detail the methods employed in Egypt, Babylonia, and among other ancient nations, and also the accounting of the Greeks and Romans. The progress made in Accountancy methods during the Middle Ages is fully dealt with, and the system in vogue at the Old English Exchequer vividly described. In the second part the writer traces the history of Bookkeeping from the time of the publication of the first treatise on the subject in 1494 down to the nineteenth century. The third part treats of the origin and progress of Auditing ; while in the last section the evolution of the " Professional Accountant" through various stages is carefully traced. The book concludes with a survey of the position of the Accountant at the present day. Important features of the book are the full Bibliography of works on Bookkeeping (up to the year 1800), and the very complete Index. Net Price (Post free U.K.) 7/6 ; Abroad, 8/4. HOTEL ACCOUNTS. (Vol. XXXVII of "The AccoDNTANTs' Library " Series, j.u.) (2nd Ed. 80 pp., 8vo.) By L. R. Dicksee, M.Com., F.C.A. A complete system of Bookkeeping for Hotels of all sizes is described. Synopsis : Introduction — Preliminary Records — Ofiice — Nominal Ledger — Cellar and Bar — General Ledger — Kitchen and Stores — Internal Check and Audit — The "Simplex System" — Railway Hotels and Restaurants. There are 27 Forms, including forms of Interim Trading Account and Daily Cost Sheet. 3/6 net. Post free U.K. 3/9 ; Abroad, 3/10. INCOME-TAX, Return for Assessment, Schedules D & E. (Foolscap.) Reprints of the Official Forms. The Forms are printed on good quality account book paper, and will be of use to Accountants and others, enabling them to keep complete copies of Returns made. In ordering, state whether Schedule D or E is required. Per Copy, 3d. net. Post free U.K. and abroad, 3Jd. Per dozen, 2/- net. Post free U.K. and abroad, 2/3. INCOME-TAX ON EARNINGS. (4th Ed., 20 pp., 8vo.) By C. E. Isaacs. This is a simple Exposition of the Finance Act, 1907, so far as it relates to Income- tax on earned Income, together with the proposals for the year igog affecting the subject. A Summary of all the important Income- tax provisions of the above-mentioned Act is included, together with Hints, Instructions, and Warnings to Taxpayers, which should be eminently useful to all who wish to avoid being overcharged. 6d. net. Post free U.K. 7d. ; Abroad. 8d. 34 MOORGATE STREET, LONDON, B.C. 28 GEE & CO.'S CATALOGUE OF INCOME-TAX PRACTICE, MURRAY AND CARTER'S ' GUIDE TO. (6th Ed., 590 pp., 8vo.) By the late A. Murray and R. N. Carter, ..V Chartered Accountants. This standard work contains a Summary L;; of the principal Enactments relating to Income-Tax, with notes y of every reported case ; Instructions as to the preparation of Returns '-' for Assessment and Accounts in support of Appeals on the ground of over-assessment ; also for claiming Exemption and Abatement ; and a Concise Popular Digest of the Principal Legal Decisions on the Construction of the Acts for the use of Taxpayers. Synopsis : Table of Cases — Table of Statutes — History of the Income-Tax and Epitome of the principal Acts relating thereto — The Schedules under which Income-Tax is Charged — Schedules A, B, C, and E — Schedule D (Persons and Property Chargeable — Returns for Assessment — Appeals) — Rate of Reduction of Tax on Payment of Dividends, &c. — Exemptions and Abatements (General— Charities and Public Buildings — Relief to "Earned" Incomes) — Conclusion — Index. Net price (post free U.K.) 15/- ; Abroad, 16/-. INCOME-TAX, SIMPLEX GUIDE TO. (2nd Ed., 90 pp., 8vo.) By R. N. Carter, M.Com., F.C.A. A Hand- book for business men. Synopsis : Taxation at the Source — The Schedules under which Income-Tax is Charged — What are Profits for ,1* Income-Tax Purposes — Cash Accounts and Profit and Loss Accounts — The Application of the Principle of Taxation at the Source — Preparing the Return— Change in a Business and the " Succession " Rule — The General and Special Commissioners — Exemptions and Abatements — Claims for Repayment where the Income is derived from Investments — Claims for Repayment in respect of a Loss — New Businesses and Businesses Discontinued — Relief to " Earned " Incomes. 2/6 net. Post free U.K. and Abroad, 2/9. INSTITUTE OF CHARTERED ACCOUNTANTS EXAMINATION QUESTIONS AND ANSWERS. {See Examination Questions and Answers, p. 22.) INSTITUTE OF CHARTERED ACCOUNTANTS— LIST OF MEMBERS. (Issued yearly.) 2/- net. Post free U.K. 2/5 ; Abroad, 2/10. INSURANCE AGENTS' ACCOUNTS. (45 PP- 8vo.) By A. H. Maclean, Chartered Accountant. Every Insurance Agent should possess a copy of this work. It is indispensable to the Agent who wants to keep a grip of his business. The book is divided into Two Parts — the First Part dealing with the recording of policies, etc. ; the Second Part dealing with the recording of monetary transactions. The whole system is quite simple and can easily be grasped and put into operation even by those having but little know- ledge of bookkeeping. The number of books and the entries in them J have been kept down to the smallest possible limits. The system is Jj peculiarly suitable for solicitors, accountants, estate agents, etc., as it ^^, can be adopted irrespective of the method of bookkeeping used for the 2^,', other branches of the business, and will record many or few transactions ^j' equally well. The simplicity of the method renders information easy ^^ of access to anybody, even though they are unacquainted with the whole system. — Particularly useful in an Expanding Business. 2/6 net. Post free U.K. and Abroad, 2/9. GEE & CO. (PUBLISHERS) LTD., ACCOUNTANCY PUBLICATIONS. 29 INSURANCE COMPANIES' ACCOUNTS. (Vol. XXXVI of "The Accountants' Library" Series, q.v.) (200 pp., 8vo.) By E. A. Tyler, Incorporated Accountant. This work is the only book dealing exclusively with the subject of the Accounts of Insurance Companies as a whole. It discusses exhaustively the general principles underlying insurance accounts of every description, and treats in considerable detail of such important divisions of the business as: Life, Sickness, Fire, Accident, Burglary and Plate Glass, Employers' Liability. It shows amongst other things the proper treatment of Half-yearly and Quarterly Premiums, and outlines more than one system of dealing effectively with the many complications arising in connection with the payment of Overriding Commission. The general plan of the work is easy to follow ; the arrangement of detail is particularly clear ; and a very large number of forms, with specimen entries and a full index, make the volume by far the most complete work of reference obtainable on the subject of which it treats. Net price (post free U.K.) 10/6; Abroad, 11/2. INTEREST TABLE. (2 pp., foolscap.) By C. Roberts. A Table for calculating interest on current accounts. Its especial usefulness lies in the fact that it is all contained in a single opening, and that much turning over of pages will be saved by its users. Mounted on stiff cloth boards, or on linen. 2/- net. Post free U.K. and Abroad 2/2| (boards); 2/1 (linen). INVESTMENT AND LOAN SOCIETIES' ACCOUNTS. (108 pp., 8vo.) By D. J. A. Brown and E. Thomas. Indicates clearly the guiding principles relating to the Formation and Management and to the Compilation and Audit of the Accounts. Contains chapters on the Objects and the Formation and Management of a Society, Income and Expenditure, the Books of Account, the Branch Accounts, the Secretarial and Statistical Books, the Audit Rules, and a fully worked set of Accounts. 5/- net. Post free U.K. and Abroad, 5/6. JEWELLERS' ACCOUNTS. (Vol. XXIIl of " The Accountants' Library" Series, q.v.) (180 pp., 8vo.) By Allen Edwards, F.C.A. Describing a complete System of Bookkeeping for Manufacturing, Retail, and Wholesale Jewellers, Diamond Merchants, Silversmiths, Electro Platers, Gilders, Watch Manufacturers, &c. A leading feature of the work is the showing how Gold, Silver, and Precious Stones can be checked and accounted for, in the various processes of manufacture, together with systems for checking Stocks. The prevention of Fraud, Embezzlement, and other avoidable loss is dealt with, and chapters upon Crossed Cheques, the giving of Credit, the Renewals of Customers' Bills, Bad Debts, Appro., Income Tax, and the Conversion of Private Businesses into Limited Companies, are also included. In addition, the ordinary books usually kept in a Trader's Otfice are clearly and concisely explained, the whole book being illustrated by upwards of fifty Forms, specially drawn up for the work. 5/- net. Post free U.K. 5/4 : Abroad, 5/8. 34 MOORGATE STREET, LONDON, E.G. 30 GEE & CO.'S CATALOGUE OF JOINT TRANSACTIONS OF THE UNION OF CHARTERED ACCOUNTANT STUDENTS' ,, SOCIETIES, -3fij io {See Union, &c., p. 42.) ■ih-: LAUNDRY ACCOUNTS. (Vol. XXXVIII of "The Accountants' Library" Series, q,v.) - (124 pp., 8vo.) By F. J. Livesey, F.C.A. A complete System of Bookkeeping for Laundries. Summary of Contents : Introduction .'" — Subsidiary Books — Shorts — Hotel Work — Receiving Shops — ' Nominal and Private Ledgers — Weekly Return — Branch Accounts. '■' There are fifty-one Forms, including Profit and Loss Account and *• Balance Sheets, and Weekly Return Sheet. 'L.. t. • : . 3/6 net. Post free U.K. 3/9 ; Abroad, 3/10. LEGAL TERMS, SOME. SJ«9AT (50 pp., 7" X 4I".) By A Barristep. Introductory Lectures on Law for Accountant Students. Synopsis: — "Law" and "Equity" — *• Common Law " and " Statute Law," " Codes " and "Codification" — "Property" and "Possession" — " Privity of Con- tract " and "Privity of Estate" — "Tort," "Crime," "Felony," •• Misdemeanour," " Action," " Prosecution " — "The Courts of Law " —The Criminal Courts— The Civil Courts. 1/- net. Post free U.K. and Abroad. 1/1. LEXICON FOR TRUSTEES IN BANKRUPTCY, &c. (422 pp., 8vo.) By S. S. Dawson, M.Com., F.C.A. 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LIQUIDATORS. {See Trustees, Liquidators, and Receivers, p. 41) GEE & CO. (PUBLISHERS) LTD., ACCOUNTANCY PUBLICATIONS. LOCAL AUTHORITIES' ACCOUNTS, ORGANISATION AND AUDIT OF. (488 pp., 8vo.) By A. Collins, A.S.A.A. The only complete treatise on this important subject, incorporating the recommendations of the Departmental Committee on Municipal Accounts ; an exposition of up-to-date methods of financial control, collated from the most efficient systems in use in the leading local authorities of the Kingdom ; the whole of the present day systems of Audit reviewed, analysed, and compared. Summary of Contents: — Review of Local Authorities' Accounts and their Audit — Extent of Local Authorities' Operations— Local Authorities' Powers, Duties, and Obligations — The Position of the Chief Financial Officer — The Accounting Systems in vogue — The Internal Check in vogue — Special Considerations in : (a) County Council Accounts ; (&) County Borough Council Accounts ; {c) Non-County Borough Council Accounts ; (d) Metropolitan Borough Council Accounts ; (e) Urban District Council Accounts, &c. — Accounts Audited by the Local Government Board — Statutory Regulations — The Board's Control of Accounts and Audit — The Audit by the District Auditor — The Elective Audit — Minor Audit Provisions — The Professional Audit of Local Authorities' Accounts — Preparation for Audit — The Cash Transactions — The Revenue Transactions — The Capital Transactions — The Arith- metical Accuracy of the Books — Questions of Principle involved in the Financial Statements — Compliance with Statutory Regulations — Miscellaneous Considerations arising out of Audit — Auditors' Certifi- cate and Report — Appendix — Standardised Forms of Published Accounts — Index . Net price (post free U.K.) 12/6 ; Abroad, 13/6. LOCAL AUTHORITIES' ACCOUNTS, THE DIAGRAM- MATIC PRESENTMENT OF. (60 pp. and 19 diagrams, 4to.) By Sidney E. Allen, A.S.A.A. By the use of diagrams the author presents the principal financial and statistical facts of one of our largest cities in a clear, concise, and intelligible form. In less than 20 diagrams he gives the " cotidensed essence " of over 200 pages of published accounts, and much additional information. The practical value of the novel idea at once appeals to the reader. He sees that the diagrams show at a glance what only a laborious examination of figures would otherwise give him. The book, being written in a popular style, is easy and pleasant to read. Summary of Contents : — Preface ; I — Rates ; 11— Assets and Debts ; III — Local "National" Expenditure; IV — Trading Undertakings: (i) Waterworks, (2) Tramways, (3) Electric Supply, (4) Markets, (5) Trading under- takings compared with each other ; V — Education ; VI — General Statistics : (i) Police. (2) Fire Brigade, (3) Streets and Sewers, (4) Street Lighting, (5) Parks and Recreation Grounds, (6) Population, Births and Deaths, (7) Salaries and Wages ; VII — Conclusion ; List of Diagrams ; Index. Net price (post free U.K.) 7/6 ; Abroad, 8/2 MANUAL, ACCOUNTANTS'. {See Accountants' Manual, p. 6.) 34 MOORGATE STREET, LONDON, E.G. A 32 GEE & CO.'S CATALOGUE OF MEDICAL PRACTITIONERS' ACCOUNTS. (Vol. XVIII of "The Accountants' Library" Series, q.v.) (85 pp., 8vo.) By J. H. May, A.S.A.A. The system of Book- '->■ keeping described in this volume is designed to combine sim- plicity with economy of labour, yet enabling the medical man to summarise his total income and expenditure on any balancing date, and therefrom to have regular Profit and Loss Accounts and Balance H Sheets prepared. Full /yo /oyw^ Accounts in illustration of the forms V of Account Books are given in each case. Chapters are subsequently X{ devoted to subjects which accountants find it necessary, at one time or ^' another, to apply themselves— such as '• Medical Men's Income Tax," "The Assessment of Practice Values," "Notes on the Collection of Debts Outstanding," &c. 3/6 net. Post free U.K. 3/9 ; Abroad, 3/10. METRIC SYSTEM, THE. (40 pp., 8vo.) By The Rev. G. T. P.Streetep, B.A. A Pamphlet. [' 1/- net. Post free U.K. and Abroad, 1/1. MINERAL WATER MANUFACTURERS' ACCOUNTS. (Vol. VIII of "The Accountants' Library" Series, q.v.) (75 pp., 8vo.) By J. Lund, A.S.A.A. and G. H. Richardson, F.S.S. The system of Bookkeeping described can be safely taken as a model upon which a set of Books and Accounts should be constructed. The work describes and explains the following : Purchases Day Book — Purchases Ledger — Sales Book— Sales Ledger — Cartmen's Delivery Book— Cash Sales Book— Bottles and Boxes — General Cash Book — Petty Cash Book— Nominal Ledger — Wages— Commission — Private Ledger— Balance Sheet— Trading Account— Bottle Exchange— Stock Book — Mineral Water Associations and their Officers. Numerous pro forma Accounts with specimen entries are given. 3/6 net. Post free U.K. 3/9 ; Abroad, 3/10. MINING ACCOUNTS, COAL. {See Colliery Accounts, p. 16.) MINING COMPANIES' ACCOUNTS. {See Australian Mining Companies' Accounts (p. 9.) and West African Gold Mining Accounts (p. 43.) MONEY MARKET, AN OUTLINE OF THE. (56 pp, 8vo.) By E. E. Spicer, F.C.A. This book deals with the growth of the Money Market from the earliest times, and shows fully and clearly the working of the complex machine which our present civilisation has evolved. Banking, the Bank of England, the Bank Rate, the Foreign Exchange, and the vital question of the Gold Reserves, are dealt with in a lucid and interesting manner. 2/- net. Post free U.K. and Abroad, 2/2 . MOTOR CAB COMPANY, THE ACCOUNTS OF A (46 pp., 8vo.) Reprinted from The Accountant. This work describes in detail a system of accounting of the most up-to-date description suitable for a Motor Cab Company of ordinary dimensions. Special attention is directed to the practical aspects of the matter, e.g., Stores Records, Trial Performances, Drivers' Records, Working Costs, and the like ; while the application to these purposes of the Card System gives a wider interest to the book. The system described, which has been found 10 work smoothly in actual practice, can easily be adapted to suit the requirements of all garages where motor cars are let out on hire. 2/- net. Post free U.K. and Abroad, 2/1^. "~GEE & CO. (PUBLISHERS) LTD., ACCOUNTANCY PUBLICATIONS. 33 MULTIPLE COST ACCOUNTS. (See Cost Accounts, p. 18.) MULTIPLE SHOP ACCOUNTS. (Vol. XXIV of "The Accountants' Library" Series, q.v.) (120 pp., 8vo.) By J. Hazelip, F.C.I.S. A work describing the best method of keeping the Accounts of Multiple Shop Companies having a number of branches, and dealing in Boots and Shoes, Bread. Butter, Clothing. Drapery, Drugs, Fancy Articles, Fish, Game and Poultry, Furniture, Hats and Caps, Hosiery, Jewellery, Meat, Milk, Provisions, Tea, Tobacco. The reader is guided through the different departments of a theoretical business step by step till the final results of the year's trading are ascertained. The chapters on Organisation, Stockkeeping, and Stocktaking are of great practical value, and the following matters are also dealt with, viz. : — Contracts and Agreements ; Leases ; Assessment of Rates ; Appeals against Assessments ; Fire and Plate Glass Insurance ; Fidelity Guarantees ; Income Tax Returns ; Credit Accounts ; Collection of Bad Accounts ; Banking, &c. Summary of Contents : — Organisation — Shops : their Functions and Methods of Receiving Supplies — Central Warehouse : Purchase of Goods and Distribution to Branches — Head Office : How the Accounts are gathered together and finally dealt with — Stockkeeping and Stocktaking : Adjustment and Reconciliation — Capital and Revenue Expenditure : Renewals and Repairs — Organisa- tion into Districts, Differences in Books and Accounts explsuned — Hints on Matters of Importance. 3/6 net. Post free U.K. 3/10 ; Abroad. 3/11. MUNICIPAL ACCOUNTS. (Vol. XXI of " The Accountants' Library" Series, ^.y.) (2nd Ed., 230 pp., Svo.) By John Alicock, F.S.A.A. This work is based on the methods adopted by some of the leading Municipalities in England. The entire system of Bookkeeping and Checking of Municipal Accounts is dealt with, and facsimiles of all Books and Forms recommended are given. Synopsis : Introduction — Ordering Goods and Preliminary Measures relating to Accounts— Checking Accounts — Presentation of Accounts — Schedule of Cheques, &c. — Income and Expenditure Ledger — Cost Accounts — Estimate and Expenditure — Rates — Electricity Accounts— Corporation Stock— Registration of Stock — Private Improvement Works Accounts — Exchequer Contribution Account— Town Hall Lettings— Police Pension Fund Account — Education Accounts — Petty Cash, &c. &c. — Insurance of Workmen — Audit. Net price (post free U.K.) 10/6 ; Abroad, 11/2 MUNICIPAL ACCOUNTS. {See also Local Authorities' Accounts (p. 31.). The Diagpammatic Presentment of Local Authorities' Accounts (p. 31.), and Urban District Councils' Accounts (p. 42.) MUNICIPAL FINANCE. (44Pp.,8vo.) By R. F. Miller, F.C.A. A pamphlet dealing with some aspects of Municipal Finance and Accounts from the standpoint of a Professional Auditor. 6d. net. Post free U.K. and Abroad, 7d. MUNICIPAL FINANCE FOR STUDENTS. (70 pp., 8vo.) A short work, written by an eminent Municipal Accountant, on the most important features in Local Government Finance for Students. 2/6 net. Post free U.K. and Abroad, 2/9. 34 MOORGATE STREET, LONDON, E.G. 34 GEE & CO/S CATALOGUE OF MUNICIPAL INTERNAL AUDIT, A. (2nd Ed., 170 pp., 8vo.) By A, Collins, F.S.A.A. Not only is the Audit of the Collection of Rates and other peculiarly Municipal Revenues lucidly set out in this work, but the trade undertakings (such as Gas Works, Electricity Works, Waterworks, Tramways, Markets, &c.) receive special attention. In this Edition further sug- gestions are made for the organisation of defence against fraud, and for the improvement in the machinery and system by which revenue is most efficiently to be collected and controlled. The opinions of practising Accountants have indicated that the methods of audit advocated in this work are most useful and generally practical. 4/- net. Post free U.K. 4/3 ; Abroad, 4/6. MUNICIPAL RATING. (no pp., 8vo.) By A. James Pearce, A.C.A. A complete practical guide for Municipal Rating, showing, step by step, the duties which are necessary for the collection of Rates. The Com- parative Charts, the specially compiled Returns from other Boroughs, the Assessment Tables, and, in particular, many of the Forms which are included in the book, have never appeared before in any similar work, and have all been tested in actual practice. 5/- net. Post free U.K. 5/4 ; Abroad, 5/7 NEWSPAPER ACCOUNTS. (238 pp., 8vo.) By B. J. Norton, F.C.A., and G. T. Feasey, A.C.A. Synopsis: Introductory — Books relating to Sales — Books relating to Advertisements — Books relating to Contributions — Books relating . t f € , ' to Purchases and Expenses — Books relating to Cash — Private Books — Departmental Checks upon the Bookkeeping — Adaptation of the System to Papers of Small Circulation — Adaptation of the System f to Evening Papers — Adaptation of the System to Weekly Papers — t'l Specimen set of Books containing Entries representing Transactions ^'f for one half-year — Special Rulings of Books for Papers of Small Circulation — Special Rulings of Books for Evening Papers — Special Rulings of Books for Weekly Papers — Index. Net price (post free U.K.) 10/- ; Abroad, 10/8. PARTNERSHIP ACCOUNTS. (176 pp. Bvo.) By 18. S. Dawson, M.Com., F.C.A., and R. C. de Zouche, A.C.A. The aim of the authors has been to expound the principles underlying Partnership Accounts in accordance with the provisions of the Partnership Act, 1890, and the various legal decisions of the Courts. Summary of Contents : The Partnership Agreement — ,. The Accounts — The Balance Sheet — The Profit and Loss Account — Treatment of Goodwill in Partnership Accounts — Accounts upon a Dissolution, I, II, & III — Income Tax — Accounts of Limited Partner- ships—Index. Net price (post free U.K.) 7/6 ; Abroad, 8/2. PAWNBROKERS' ACCOUNTS. (Vol. XIII of "The Accountants' Library" Series, q.v.) (90 pp., 8vo.) By Fred Thornton and J. Henry May, A.S.A.A. This work embodies a complete System of Accounts for this peculiar and (to fH^ J, the outsider) complicated trade. The system has been perfected by 4 - ■ many years of experience in Pawnbroking circles, and is placed before Accountants as the best, not only by reason of its meeting the recognised requirements of modern accountancy, but above all because it is already in operation in a large number of Single-shop Pawnbroking Establishments, as well as in the Offices of up-to-date Is''-' ' Companies with Branches. J-2 3/6 net. Post free U.K. 3/9; Abroad, 3/10. GEE & CO. (PUBLISHERS) LTD., ACCOUNTANCY PUBLICATIONS. 35 PERSONAL AND DOMESTIC ACCOUNTS. (56 pp., 8vo.) By J. G. P. Ibotson, A.C.A. A useful hand- book, showing how to keep Personal Accounts on a proper footing. Synopsis : — Introductory — Records of Payment — Records of Receipt — The Cash Book — Classification — The Ledger — Receipts and Payments Account and Balance . Sheet — Income and Expenditure Account — Capital Accounts — Comparative Statements — Vouchers — Income Tax — Trust Accounts — Appendix — Trustee Investments. 1/- net. Post free U.K. and Abroad, 1 2. POCKET DIARY AND REFERENCE BOOK, THE ACCOUNTANT'S. {See p. 5.) POLYTECHNIC ACCOUNTS. (Vol. XI of "The Accountants' Library" Series, q.v.) (86 pp., 8vo.) By H. Caldep Marshall, F.C.A. A complete set of Book- keeping and Accounts for Polytechnic Institutions. Synopsis: Intro- ductory — System of Finance — List of Books — Organisation of Staff — Chief Books of Account — Departmental Books — Subsidiary Statistical Books — The Final Accounts — Capital Accounts — Establishment Charges — Resolutions passed at Conference of Polytechnic Auditors — Grants — Audit — Appendix. 3/6 net. Post free U.K. 3/9 ; Abroad, 3/10. PRINTERS' ACCOUNTS. (Vol. XVII of "The Accountants' Library" Series, q.v.) (80pp., 8vo.) By H. Lakin-Smith, Chartered Accountant. A thoroughly reliable handbook on Bookkeeping for Printers. Summary of Contents : Introduction — Estimating Purchases — Cash Books — Wages — Sales — Cost Accounts — Private Ledger, &c. — Balance Sheet — Depreciation — Departmental Accounts — Index. 3/6 net. Post free U.K. 3/9 ; Abroad, 3/10. PROCESS COST ACCOUNTS. {See Cost Accounts, p. 18.) PROFESSIONAL ACCOUNTANTS. (128 pp., 8vo.) By B. Worthington. An Historical Sketch. This book gives an historical survey of the Profession in this country from its early inception to the present time. It embraces, amongst other chapters, one entitled " An Accountant's Report, about 1721," which is reprinted in full in an appendix, and which should prove of undoubted interest to all Accountants. Other subjects dealt with are : The Early Progress of the Profession ; The Railway Mania and its sequel ; Auditors, past and present ; &c. &c. Throughout the book there is much didactic information bearing on the subject of Accountancy in a lucid manner. 2/6 net. Post free U.K. 2/9 ; Abroad, 2/10. 34 MOORGAT!^. STREET, LONDON, E.G. 36 GEE 86 CO.'S CATALOGUE OF PROMOTION AND ACCOUNTS OF A PRIVATE 'h:. LIMITED COMPANY, THE. l^' (88 pp . 8vo.) By M. Webster Jenklnson, F.C.A. A Paper t read before the members of various Chartered Accountants Students' ' Societies in January 191 1. Revised and Reprinted with an Index. Synopsis: Advantages and Disadvantages on the Conversion of a Business into a Private Limited Company — Definition of "Private Company " — Procedure — Memorandum of Association — Articles of Association— Copies of Memorandum and Articles — Sale Agreement — Fees Payable upon Incorporation — Incorporation of the Company — Preliminary Expenses — First Directors' Meeting — Statistical Books to be kept and Returns to be made to the Registrar — Allotment of Shares — Statutory General Meeting — Statutory Requirements — Penalties for Non-compliance with Statutory Requirements — Entries in Financial Books — Adjustments in Vendor's Accounts — Profits prior to Incorpora- tion — Share Capital Accounts— Forfeiture of Shares— Debentures — Final Accounts and Audit — Income Tax — Conclusion. Boards, 2/- net. Post free U.K. and Abroad. 2/3. Cloth, 2/6 .. „ „ 2/9; „ 2/10. ^PROMOTION AND ACCOUNTS OF A PUBLIC LIMITED COMPANY. {184 pp., 8vo.) By M. Webster Jenkinson, F.C.A. A Revised and Enlarged Reprint of a Lecture read before various Students' Societies in 1912. Synopsis : Procedure — Constitution and Memo- •<"»' ■; randum of Association — Name — Registered Office — Objects — Alteration of Memorandum of Association — Articles of Association — Inspection of Memorandum and Articles — Capital and Shares — Application and Allotment of Shares — Share Certificates — Transfer of Shares— Deben- tures— Registration — Use of Name— Underwriting — Promoter and » ' Prospectus — Advertising — Payment of Interest out of Capital — Directors ''■' — Purchase Price — Preliminary Expenses — The Preliminary Contract — Commencement of Business — Profits prior to Incorporation — Meetings and Proceedings — Statutory General Meetings— Extraordinary General - nv.f'ji Meetings — Other Meetings and Votes — Statutory Requirements — Penalties for Non-compliance with Statutory Requirements— Books to :- ' — be Kept— Register of Members — Register of Mortgages — Annual List and Summary Book — Share Capital Accounts — Final Accounts and Audit — Conclusion. Cloth bound. 5/- net. Post free U.K., 5/4 ; Abroad, 5/7. PUBLISHERS' ACCOUNTS. (128 pp., 8vo.) By C. E. Alien. A complete system of Accounts for Publishers, illustrated with numerous pro formd Accounts, and ,cJ a fully worked example of typical transactions Synopsis :— Nature zh' of the Business — Method and Organisation of the Book Trade — Books — ;?/- Routine — Nature of the Ledger Accounts — Stocktaking — Balancing — if Analysis of Subsidiary Books — Worked Example of Typical Transac- tl: tions— Copyright — Definition of Literary Property — Peculiarities of its i'- Nature — As a Monopoly— Circumstances which affect the Value of ,'f»d«JM> 2nd Ed. (Richardson.) {See p. 21.) 5/- net. Post free U.K. 5/4 ; Abroad, 5/8. XXXII.— WINE MERCHANTS' ACCOUNTS. (Sabin.) (5^^ p. 44.) 5/- net. Post free U.K. 5/4 ; Abroad, 5/8 XXXIII.— DAIRY ACCOUNTS. (Rowland.) {See p. 20.) 3/6 net. Post free U.K. 3/9 ; Abroad, 3/10. XXXIV.— BRICKMAKERS' ACCOUNTS. (Fox.) {See p. 14.) 3/6 net. 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To Subscribers to 20 or more volumes at a time these are published at the following special subscription rates : — PUBLISHED PRICE. SUBSCRIPTION PRICE. 3/6 2/6 5/- 3/9 7/6 5/- 10/6 7/6 The subscription prices, CARRIAGE PAID, are as follows :— UNITED KINGDOM. ABROAD. / S d ;^ S d Volumes I. to XX. .. .. .. 300 36 10 Volumes XXI. to LI. .. .. 5 8 3 5 19 O Volumes I. to LI. .. .. 8 8 3 9 6 Single copies of any volume may be obtained at the ordinary rates, as detailed above. .or.£ .I^v.-idA .eve .H.; ACCOUNTANCY PUBLICATIONS. f THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW AN INITIAL FINE OF 25 CENTS WILL BE ASSESSED FOR FAILURE TO RETURN THIS BOOK ON THE DATE DUE. THE PENALTY WILL INCREASE TO 50 CENTS ON THE FOURTH DAY AND TO $1.00 ON THE SEVENTH DAY OVERDUE. i i -L/iAY ^2 1937 1^0.^^''^ »^ — i^ L "^ OCT 27 19157 LD 21-100m-8,'34 \^ ^r^f^/ r 324283 hF^ UNIVERSITY OF CAUFORNIA UBRARY