fin Printing Concerns BY WflhX3ER JOBSOnJE? Digitized by the Internet Archive in 2007 with funding from Microsoft Corporation http://www.archive.org/details/accountingsystemOOjobsrich n Accounting System to r Printing Concerns By Walter Jolso • • • • ••• • * ■ Louisville, Kentucky Press of Jokson Printin(f Company «vt31 COPYRIGHT, 191 2, BY WAWBR P. JOBSON, JR. An Accounting System for Printing Concerns By AValter JoI>»on INTRODUCTION: The bet- ter business methods now com- ing into general use among the printing trade have created an interest in accounting as well as costs. One is as important as the other. The cost system shows the price at which printing may be sold at a profit, while the accounting system serves as a check on the cost system and furnishes infor- mation without which an accurate cost system is impossible. 248568 » • • . • flfjF^ An Accounting System The accounting system should show: Amounts due from customers. Amounts due creditors. Sales of Paper Stock, Ink and other ma- terials, and amounts paid for them. Sales of Printing separate from above items. All the expenses of the business, such as Pay Roll, Office Expense, General Expense and Department Expense, subdivided so that the amount paid for any item can be easily located. Profits and Losses, both as shown by the sales each month, and as an actual net result at the time of the annual Balance Sheet. The system described here has been in prac- tical operation for some time and will furnish all the above facts, while every method of mak- ing entries is used that will save clerical labor. The subdivisions of the expense items are arranged especially for those concerns using a Cost System based on the chargeable hour method, in order to give the information needed for filHng out the "Monthly Summary of Cost;'* but the information derived from these accounts will be valuable whether the cost system is in use or not. No attempt is made to explain the elemen- tary principles of the double entry system of bookkeeping, as they are the same in all lines of business, but we will take up more particu- larly the points in which this business differs For Printing Concerns from others, and the forms introduced for the purpose of saving labor. According to usual custom, the left hand column, hereafter, will be referred to as the debit column, and the right hand column as the credit column. Loose Leaf Methods: Several years' ex- perience with both ways has convinced me that, with a few exceptions, the loose leaf method is by far the best. By this method, only live sheets or accounts need be kept in the current binders, all dead material being filed away in the transfer binder, while any old sheets which become "live" again can readily be put back in the current binder. The sheets can be filed in alphabetical order, or any other way desired for ready reference, doing away with the index, and with turning over the leaves. Also, different styles of ruled sheets for different classes of accounts can be used in the same binder just as needed. For these reasons, loose leaf forms are described through- out. Books of Original Entry: We will start out by assuming that the set of books that we are working on has been closed up on the 31st of December, and that we are starting out with a clean slate on the 1st of January. The first books to be used will be the ones in which the IH m- 6 An Accounting System transactions are recorded before posting to the ledger, called books of Original Entry, and the first of these will be the Sales Book. The Sales Book: This, in its usual form consists of a book in which a memorandum is made of each sale for the purpose of making the charge to the customer's account. How- ever, in the Printing business the transaction does not consist simply in taking an article off the shelf and billing it right out ; any time from several hours to several months may elapse between the time the order is received until the goods are delivered to the customer; also it is necessary, in this business, to have other totals beside the total amount of sales, for the purposes of accounting. A Sales Book for the Printing business should have the columns ruled as shown below and on page 7. 1 SALES BOOK DATK TAKEN DATK BILLED CUSTOMER JOB JOB NO. I I I 5 5 5 3 John H. Dunlap Diamond Mfg. Co. lom Bill Heads 2 Halftones 50 sh. Blotting Paper 3m Letter Heads 8983 8984 For Printing Concerns B The Order Number: At the time each order is received, it should be given a number, which should appear on the Job Ticket, Sales Book and on workmen's time tickets. Many firms follow the practice of printing the order number in small type on jobs which are likely to be duplicated so as to save time in looking up the records when a duplicate order is re- ceived. Each order is entered when received as illustrated; the date received, name of cus- tomer, description of order, order number and price, if same has been quoted in advance, are all filled in in the proper columns. In due course of time the order is finished, delivered to the customer and the bill made out. Then the "Date Billed" is filled in. This column distinguishes between the "live'* orders and the completed ones upon glancing down the page. For January, 1913 1 PHICE MDSE. XNK PRIXTXNG PROFIT LOSS lo 50 5 00 985 3 59 4 50 96 338 TC 10 10 )TALS VOR M 496 3 43 OHTH'S SALE 1 85 50 19 2 94 s 3,48608 242 50 804 60 Transferr 37 95 ed to Febr 2.043 37 uary. 384 76 27 10 27 10 3.243 58 35766 □ An Accounting System Next comes the filling in of the other col- umns representing the cost of the job. The merchandise column shows the cost of the stock, which should be the price at which it was purchased, plus a percentage to cover the cost of handling and storage. The method of figuring this item will be taken up fully, later on. Outside work, such as ruling, binding, en- graving or electrotyping when not done in the shop are charged to the merchandise account and should be included in the amount in the merchandise column. The next column includes the cost of ink used on a job ; on many jobs the quantity used is too small to be definitely determined. Rules for figuring this item will also be taken up later. The printing column includes the cost of composition, presswork, stock cutting, bindery work and all other work done in the shop on this order. The last column should show the net profit, free of all expenses, provided the preceding columns have been correctly filled in. The or- der is now ready to be posted to the customer's account in the ledger. Totaling the Month's Sales: At the end of the month the orders not yet finished should For Printing Concerns be transferred to the page for the succeeding month and the column totaled as shown. The first column, showing the total sales, represents amounts posted to the customer's accounts on the debit side of the ledger. In accordance with the principles of the double entry system of book-keeping, these must be balanced by corresponding amounts on the credit side, represented by the totals of the other columns. So, when the five columns have been totaled, the total of the Loss column should be subtracted from the total of the Profit column, the four totals added together and compared with the total of the Price col- umn, for if the two totals are not the same, the books will not balance. For example : Price, $3,243.58— Merchandise $804 60 Ink 37 95 Printing 2,043 37 Profit $384 76 Loss 27 10 Net Profit 357 66 $3,243.58 $3,243 58 If the totals are not the same, it will be necessary to check over the addition of the columns and, if the addition is correct, to check the division of the separate orders into four amounts (Merchandise, Ink, Printing and Profit) to find the one that has not been di- vided correctly. □ □ 10 An Accounting System When the four columns balance the first, the totals should be posted to the credit side of the Merchandise, Ink, Printing and Loss and Gain accounts. The manner of posting to these and to the customer's accounts will be taken up in detail under the subject of post- ing to the Ledger. An important step that has not been fully explained is that of dividing a completed order into the items representing the cost. In print- ing offices having a cost system, this is kept track of by the "Individual Job Record," or "Job Memorandum and Tracer" as it is often called — a blank on which the items of Stock, Engraving, Electrotyping, Bindery Material, Ink, are entered, the time put in on the job is posted each day directly from the workmen's daily time tickets, and the total time in each department is figured, according to the charge- able hour method, at a rate per hour which covers Cost of Labor, both productive and non-productive, and all Office and General ex- penses. This is the only method that will show the cost of a job accurately. I illustrate this form herewith and will show how it can be made to take the place of the Sales Book. Individual Job Record: There are several styles of this blank now in use. They all con- sist, essentially, of columns for each depart- For Printing Concerns 11 ment for posting the time from the daily Time Tickets, and a column for a summary of all the items entering into the cost of the job. To those who are already using a form for this purpose, I would say that the only material difference in the blank illustrated on the next page is in the grouping of the items of the "Summary of Cost" into four groups in order to show the totals needed for accounting. The blank illustrated on the next page is Sy2 X 11, printed on heavy ledger stock, punched with three holes in the left hand margin. When the order is received the name and address of customer, description of job, description of stock (providing the stock has already been selected) and price, if same has been quoted in advance, are all entered and the sheet is filed numerically in a binder labeled "Unfinished Orders." For this purpose we use a binder with split rings similar to that used for the loose-leaf price books. Its great ad- vantage lies in the fact that it is perfectly flat opening and a sheet can be quickly removed from any place without disturbing the others. Experience has shown the numerical arrange- ment best for uncompleted orders, as the job while in the shop is always referred to by num- ber, but it has the disadvantage that when this binder has a good many sheets in it, it is dif- ficult to refer to the record for a given job in s <0 o <0 Ho ^vr ^j ! Crv ^ iN. "d k> O) > >a ^ ^ <^^i I- r>» rJ/Ov \ i|^ For Printing Concerns 13 case the customer's name, but not the number is known. This is overcome by keeping a sheet filled out in the office showing the name, num- ber and description of each unfinished job. This should be kept up-to-date by crossing off the completed orders each day and adding on the new ones. This then can be used as an index for the "Unfinished Orders" binder. By adding a space for "Date Promised,'' this blank is also valuable as a reminder. The first thing done each morning is to col- lect the time tickets for the preceding day's work, which are checked over, entered in the Time Rook and then posted to the job records in the "Unfinished Orders" binder. On the blank shown, the first column under each de- partment is for the date; second, employe's initials or number, and in the third, each figure stands for an operation — as 1 for Hand Compo- sition and 16 for Lock-up. The figures in the next column showing the time are expressed in hours and tenths of an hour instead of hours and minutes. Thus the .7 under hand compo- sition stands for 7x6 minutes, or 42 minutes. This method has been found a great time saver as a long column of figures can be added much quicker where it is not necessary to add the first two columns and divide by 60, as is necessary where the time is expressed in hours and minutes. This also applies to the multipli- IE BJ 14 An Accounting System cation of amounts under "Summary of Cost." A great many mistakes are avoided, as anyone figuring both time in sixtieths and dollars in decimals will be bound to make mistakes. When the job is completed and all the time has been posted, this sheet is removed from the unfinished order binder, the time columns totaled, the "Summary of Cost" column filled in and totaled, profit added, bill made out and date billed filled in, and then the sheet is filed alphapetically in a binder labeled "Completed Orders," ready to be posted to the customer's account. The completed orders are filed alpha- betically for convenience in referring to them, and also for convenience in posting as will be shown when we take up the subject of posting to the ledger. Posting direct from the job record takes care of the charge to the customer's account, but another form is now necessary in order to give us the totals for the month's business. Monthly Summary of Business: This form is printed on both sides of an 8J^ x 14 sheet and kept in a sectional post key lock binder. The job records for the month's business should be posted to this form in numerical order and missing numbers checked by the sheets in the "Unfinished Order" binder to make sure that a sheet has not been lost or JNJ «^ >s ft) •^^O^^N ^ 0^ N ^ Q -^^ ^ra* <> *^ V. <. £lj:i •»)£ 0^ ^ ^\^f^ K.i:6 '^ — '^■^ ^ o ■^5 ■o"^ Q ^ -^ TTTT ^ >< »^ 09 >>« to ^ vii W) fsj rr^ O '^i TT .1 0^ ^ (Jv 0^ 0^ 0^\)vvO^ ^ 0^ U^ 0^ y>^ ^^ (h.^ Ov J^ N ^ N > ^V^r^^^n^ > or) N© <0 N -N ^ S ^ ih- <» >^ >a w g )!J^rt)4 N ^ U» <*) Or) >. ^ 'N. y^ (/^ N vyva ^A '^N J ^ N t^ c^ >a '0 ->. tf) ^. o» ^ •T)>4ov^KC)o(sQ .v^ r^^ /««- ^ (^ Ai^ ^l^k. (>«^ tj^^^^ /^/3 3b A. :ti, ^^ h.Z^.uU^o^^^t...'^^ /9/3 "^-^x^^^y^ .<>-vc^^^ / 9/3 Sb.c.^^<^,}-rA^i^ f9f3 QSa.*-C.»*V/Vvl-*T-My C^*^-*-*- /9/3 ^^>..^....4r^^ >>i^'H'c^^cL^^>^f / y / J D For Printing Concerns 71^ show the name, date and job numbers on the one-half inch strip. Job records for several customers with only one or two sheets under each name, should be filed in a folder marked "Miscellaneous," while customers who have a great many job records filed under their name should have two or more folders, subdivided by date and job numbers. The cut, showing the division of the folders under one letter will explain the system of fihng. This system is very elastic and can be made as large or small as is required. Another Method of Looking Up Duplicate Orders. While the method shown above has been used with entire success and any previous order can be quickly found by taking a folder out of the file and running over the top lines of the sheets in it, it might prove troublesome in cases where some accounts have a vast num- ber of small jobs, making it necessary to run through a great many sheets to find an old order. So here is another method which, while it requires a little extra work, makes the old orders much easier to refer to. The individual job records are filed by number, preferably with the job ticket, and the jobs are entered on filing cards as shown on pp. 18, which are filed alpha- betically. At the start, one of these cards is made out for each job, with the date, quantity Ef 18 An Accounting System and job number on it, and these items are en- tered each time the job is gotten out. So that, when Brown & Co. call up and say, "Please duplicate our last order for Letter Heads," the cards in the file for Brown & Co. are looked through until the one for their letter head is found. On this card is the number of the last order, and upon referring to this number in the job ticket file is found the job ticket and job record. Another advantage of this card index Job Bii^lHead 3/^3t7 For JOHN H. DUNLAP, JVilUamsport, Ky. DATB QUANTITY JOB NO. DATE QUANTITY JOB NO. I9IO Jan. 17 July 23 5,000 5,000 5847 6283 1911 Feb. 1 7 5,000 6920 Aug. I Dec. 12 5,000 5,000 7126 7642 1912 May 17 10,000 80II 1913 Jan. 5 10,000 8983 is that after three or more entries have been made on a card, it is possible by noting the time that has elapsed between the entries to tell when a job is due to be gotten out again. Of course, if Brown & Co. have a great many different jobs, and none of them gotten out oftener than once or twice a year, there would For Printing Concerns 19 be just about as many cards to look through as there would be job tracers by the first method and all the time spent in filHng out the cards would be wasted. On the other hand, if Brown & Co. had a number of jobs which they were re-ordering every month or so, the number of sheets to look through would be much less. So I give both these methods without recom- mending either, and you can select the one best suited to your shop. Sales Not Entered on Job Records. In some offices, part of the sales may consist of goods printed in advance, put in stock and sold from stock; or electrotypes, or blank paper stock and envelopes, for w^hich it is not desired to make out Job Records. In case such sales are very numerous, it is a good plan to keep a sales book to be used only for these entries, or a loose leaf sheet may be used with the same rulings as shown for the Sales Book, and the sheet for each month's sales filed in the same binder as the "Monthly Summary of Business." The Cash Book: This book, second in im- portance only to the Sales Book, shows all money received and from whom received on the debit side; and all money paid out and for what paid on the credit side. A hard point to understand for anyone not familiar with □ 0f 20 An Accounting System double entry book-keeping is that an amount appearing on the debit of the cash book is posted to the credit side of the ledger and one appearing on the credit side to the debit side of the ledger. Here is how the transactions would be en- tered in case no Cash Book was used: Jan. 31 31 Received of Brown & Co. on account, the sum of Five Dollars. (Debit) Cash $5 00 (Credit) Brown & Co $5 00 Paid Jones & Co. on account, the sum of Three Dollars. Jones & Co 3 00 Cash 3 00 DEBIT Jan. 31 Brown & Co. (Ledger Account) CASH CREDIT $5 00 Jan. 31 Jones & Co., $3 00 So the cash book can be compared to an account in the ledger, and the effect is the same as if we had posted an entry to the debit side Dr. CASH BOOK Jan. Amount forward John H. Dunlap, in full 3.453 77 27 00 3.480 77 3.480 77 For Printing Concerns 21 IS of this account for the cash received and to the credit side of the account of the customer from whom received. For this reason the balance of cash on hand belongs in the trial balance just the same as a ledger account. The entries on the debit side of the cash book consist almost entirely of customer's names and amounts received from them, and many of the entries on the credit side consist of creditor's names and amounts paid them. On the credit side also appear the amounts paid for Pay Roll and small items of expense from day to day, such as stamps, carfare and other incidentals. When we take up the ledger ac- counts, we will enumerate the items which should be charged to each account, and the rules laid down there should be followed as Cr. For January, 1913 Jan. Amount forward Car Fare— 10- 10-10 Pay Roll — for week Office Expense— Pay Roll Stock Handling— Pay Roll Am. Type Fdrs. Co., in full Advertising — StampvS Stat'y & Postage— Stamps Mch. Comp. Ex.— Gas Bill Haul'g & Car Fare, for mo. Balance on hand 22 50 30 1,801 84 211 75 3 50 276 50 5 00 2 00 356 22 80 2.344 45 136 32 3.480 77 0J 22 An Accounting System closely as possible in making the entries for cash paid out. On pages 20 and 21 we give an example showing a few Cash Book entries. Monthly Distribution of Current Bills: This form is used for the purpose of entering the invoices for the month, charging Merchandise, Ink, Investment or Expense with amount of goods purchased, and crediting the accounts of those whom we owe. When an invoice is re- ceived, it should first be checked by the one who received the goods as to whether the quantity called for by the invoice was received, and as to whether received in good order. Then some one in the office should see that the prices, ex- tensions and totals are correct; make a note on the invoice of the account it is to be charged to ; and file it alphabetically. While all the bills of an ink concern are usually charged to ink, and those of a paper house to merchandise, there are many others which are not so easily classified, so it is the best rule to mark to what it is to be charged on the invoice at the time it is O. K'd. At the end of the month, each firm's monthly statement should be checked by the bills in the file, and the total, if found cor- rect, entered opposite that firm's name in the first column of the "Monthly Distribution of Current Bills" form. The blank which we illus- trate is Syi x 14 inches, punched just like the «5) i- T ni o =3 11 **) '0 fn s> — ». V> ^ p- OO U) O lo) :s N "^ -^ ' o ED 24 An Accounting System "Monthly Summary of Business," so that it can be filed in the same binder. Offices using the Cost System can also file their ''Monthly Sum- mary of Cost" in this binder. When the total amount due a concern has been entered in the first column, the bills should be separated according to the accounts to which they are to be charged, these amounts added together to see that they balance with the total, and then they should be put down in the columns where they belong. There are so many different accounts to which the monthly bills can be charged, that to print headings for every one would make a very long blank, so it has been found to be the best plan to print the headings only for the columns that are used every month, such as Merchandise, Ink, etc., and leave the headings of the others blank, to be filled in as needed. When all the bills have been entered, the columns all should be totaled, and the sum of the totals of all the other col- umns compared with the total of the first col- umn to prove the work, just as is done with the ''Monthly Summary of Business." Then the amount due each firm should be posted to the credit side of their account in the ledger, and the totals of the columns posted to the debit side of the ledger account, the title of which is written at the heading of the column. In each month's bills will usually be found ID For Printing Concerns 25 several bills for small amounts from firms with which it is not deemed worth while to open accomits. In this case, it is just as well not to enter these bills on the monthly sheet, but to charge them to the account to which they be- long in the Cash Book when paid. This prac- tice, however, should never be carried to such an extent as to make any great difference in the amount of the Accounts Payable. The Journal: The entries in this book con- sist of all the entries that are not taken care of by the other books. Each entry consists of a memorandum of a transaction, with entries showing the debits and credits arising from that transaction for posting to the Ledger. In teaching double entry bookkeeping at the Commercial Schools, the student is first taught to keep three books ; the Day Book, the Journal and the I^edger. The first book contains a memorandum of each transaction as it occurs, as follows: DAY BOOK Jan. 3 Sold to John H. Diinlap, Williamsport, Ky., 10,000 Bill Heads $10 50 5 Received of Brown & Co., in full of acct 5 00 6 Bought of National Paper Co., one ream of paper 6 25 In the second book, called the Journal, the transactions in the Day Book are analyzed, and Bf 26 An Accounting System the debits and credits arising from them en- tered for posting into the Ledger, as follows : JOURNAL Jan. 3 John H. Dunlap $10 50 Merchandise $3 59 Ink 10 Printing 4 96 Loss and Gain 1 85 5 Cash 5 00 Brown & Co 5 00 6 Merchandise 6 25 National Paper Co 6 25 The Student is next taught how, by group- ing all transactions of one kind together, as in the Sales Book, Cash Book, and Distribution of Current Bills, the number of entries and amount of work required is greatly reduced. In the Sales Book and Distribution of Current Bills the credits for a number of transactions are all posted at one time, while in the Cash Book, the entry is the same as a Ledger entry, and the debit or credit is posted directly from it. But there still remain some transactions not taken care of by the other books and forms, and these have to be entered in a manner simi- lar to that described above. However, only one book is necessary, the Journal, which will carry the debits and credits, and a brief memo- randum of the transaction. For Printing Concerns 27 It differs from the other books in that each entry is complete in itself, and the book does not require footing and posting of totals, but each entry must balance or it will put the ledger out of balance. Here are some of the transactions which are entered in the Journal, and the manner of entering them: A note received or given in settlement of an account. Merchandise (other than printing, ink, pa- per stock, or the items which are entered in the Sales Book) sold on account. Merchandise received on account, other than current purchases. JOURNAL, January^ 19/j 3 Bills Receivable Diamond Mfg, Co. Received their uote at go days in full of account. 8 Barnhart Bros. & Spindler Comp. Room (investment) Received credit memo for shipment of old type, etc. 12 Metal Investment Smith Printing Co. Linotype metal returned. 14 AmericaH Type Founders Co. Bdy B Expense 3t empty sp>ools returned 31 National Paper Co. Bills Payable Our note at 90 days in full of account. 351 25 1869 3268 3 10 '2^9 76 C-r 351 25 18 69 3268 3 to 1219 76 El 28 An Accounting System The Ledger: In this book the various entries, showing amounts owing, amounts owed, expense and all other information in regard to the financial side of the business are taken from various books in which they orig- inate as shown on the preceding pages and classified under various headings called ac- counts. In this book cash received and paid out is balanced against amounts owing and amounts owed. From it are taken statements showing amounts due from customers, trial balances in order to discover errors in book- keeping, and annual or semi-annual balance sheets, showing Profits and Losses and the condition of the business. We will divide the accounts in the ledger into three classes. Accounts Receivable, Ac- counts Payable and Financial Accounts (show- ing investments, expenses, profits and losses). Each class of accounts will be taken up sepa- rately and the manner of making entries (called posting) explained. Chart illustrating a set of books for the Print- ing Business — showing how the various entries comprising a month's business are posted into a ledger and there classified under various accounts, for the purpose of showing resources and liabiHties, losses For Printing Concerns 29 and gains, and the items entering into the cost of doing business : Job Rkcords and MowTHLY Summary. Debit. Charge customers with amount due for work done. Credit. Paper, ink and printing accounts with amount of sales, loss and gain, with profit.s. Thb Cash Book. Monthly Distribu- tion OF Current Bills. Debit. Cash received and credit account of customers from whom received. Credit. Cash paid out and debit accounts of creditors to whom paid, or expense. Debit. Invest- ment, paper . ink or expense, with amount of purchases Credit. Accounts of creditors, with amounts due. The Journal. (Various unclassified entries, each complete in itself.) THE LEDOCR. AccoaivTS AND Bills Receivable. (Accounts with debtors.) Debit. Showing amount due. Credit. Showing cash received on account. ACCOUNTS AND BZLI4> PAYABLK. (Accounts with creditors.) DeMt. Showing cash paid on account. Credit. Showing amount owed. Expense. PAY ROLL— Debit— s)xovnnz amount paid for wages. GENERAL EXPENSE— Subdivided into Office Ex- pense, Insurance and Taxes, Advertising and Selling.Sta- tionery and Postage, Haul- ing and Carfare, Heat and Water, I on one year's business. So, in this event, the value of the unearned premi- um should be figured out and put down for the insurance inventory. 0[ 56 An Accounting System The next step is the filHng in of the Loss and Gain column. The credit side of the Mer- chandise account represents the amount of the total sales for the year. To this should be added the inventory representing the value of the stock on hand and from the sum subtract the total of the debit side, representing the amount paid for stock. The difference is the profit on stock, which should be put down in the gain column. If the debit side is larger, the difference should be put down in the loss column. In figuring the cost of stock on job records, a percentage is added to cover cost of handling and stacking, interest, taxes and in- surance on stock, and rent of space used. So that, while the Merchandise account may show a gain, it usually is just about enough to offset these items. The profit or loss on ink should be figured up in just the same manner as explained above for Merchandise and the amount entered in the Loss or Gain column. The printing amount should be carried to the "Gain" side of the Loss and Gain column ; this amount, if all job records have been figured correctly, should be enough to offset the amounts of Pay Roll, Department Ex- pense, General Expense and Depreciation. To the Pay Roll amount should be added the inventory representing wages due on De- For Printing Concerns 57 cember 31st, and the sum carried to the "Loss" column. The Interest and Discount should be balanced and the balance carried to the "Loss" or "Gain" column, according to whether the debit or credit sides are larger. The Loss and Gain account should be balanced and the bal- ance carried to the "Gain" column (we certain- ly hope it will not have to be carried to the "Loss" column). "Undivided Profits," "Capital Stock" and "Cash" do not figure in the Loss and Gain col- umn at all. Department Expense, which is listed in one amount, though kept in separate accounts for each department in the ledger, should be car- ried to the Loss column. In the Investment accounts the Inventory should be subtracted from the total, which represents the inventory at the beginning of the year plus the amounts purchased during the year, and difference, representing the de- preciation, should be placed in the Loss column. The accounts coming under the heading "General Expense" should be entered on the Loss side. When all of these balances have been carried to the right column, the two col- umns should be totaled and the difference found. This (if a profit) is to be entered in red ink on the Loss side, and the column ruled off and footed. However, for the present, it is m BALANCE SHEET Ledger Accounts Cash Merchandise Ink Printing Pay Roll Interest and Discount .... Loss and Gain Undivided Profits Capital Stock General Expense : Office Expense Insurance and Taxes .... Advertising and Selling . Stationery and Postage , . Hauling and Car Fare . . . Heat and Water Light and Power Spoiled Work Stock Handling Department Expense Investment : Bindery A Bindery B Bindery C Comp. Room — Type, etc. Comp. Machine Comp. Machine — Metal . Electrotypes Office Pressroom— Cylinder. . .'. Pressroom —Platen . . . Real Estate Stock Room Acc'ts and Bills Receivable Acc'ts and Bills Payable . . Trial Balance 3.235 79 17.238 76 905 41 9 53 9.085 25 81 82 99 62 1,900 00 5.475 15 1,353 86 651 05 262 56 234 25 201 37 387 50 118 87 68 25 67893 3.093 61 1,965 29 300 00 3.855 30 3.064 30 337 20 118 II 499 09 7,882 97 796 32 8,844 05 242 60 3.878 62 699 61 12,214 35 591 50 20,954 08 427 52 3.981 77 17,404 43 20,000 00 91 40 75 52 69 9 00 6 90 5 00 12 00 16 00 27 9^ 177 02 1.592 65 77.565 04 Firm 'si Net Gain 77,565 04 Inventory 5.518 08 315 35 692 53 345 20 2.608 61 1,713 29 270 oc 3.339 30 2.609 30 275 50 106 30 449 09 6,727 97 681 32 8,544 05 218 34 Decembbr 3i» 1913- Loss and Gain Net Capital Resources and Liabilities 3,235 79 493 67 5,518 08 I 44 315 35 21,637 08 692 53 9.085 25 345 70 3,882 15 15,504 43 20,000 00 5,383 75 1,008 66 345 20 651 05 262 56 233 50 148 68 387 50 109 87 68 25 672 03 480 00 2,608 61 240 00 1.713 29 30 00 270 00 500 00 3.339 30 455 00 2,609 30 33 72 275 50 II 81 106 30 50 00 449 09 1,155 00 6,727 97 115 00 681 32 300 00 8,544 05 24 26 218 34 3,701 60 89304 4,954 15 40,458 58 4.954 15 26,360 04 26,360 04 Net Caj » ital 40,458 58 40,458 58 40,458 58 41,351 62 41.351 62 □ 60 An Accounting System best that the final putting down of the balance and ruling off be left until the last column has been filled out, as, if there is any mistake, the last column will not balance and the work will have to be checked over to find the error. The amount of the gain should be carried, in black ink, to the credit side of the column entitled "Net Capital," as the firm should be that much better off than they were at the beginning of the year. The "Capital Stock" and Undivided Profits accounts should be carried to the credit side under the Net Capital heading and the total of the three amounts should show just what the firm is worth. The balancing of this column with red ink and ruling it off should also be postponed until the work has been proved. The next column, entitled "Resources and Liabilities," is intended to show, item by item, just what goes to make up the Net Capital, as shown in the preceding column. The inven- tories of Merchandise, Ink and Printing are resources and should appear in the Resource column. The inventory of the Pay Roll ac- count shows wages due, which is a liability, so that amount goes in the Liability column. In the balance sheet illustrated, no wages were due, so this item does not appear. Interest and Discount and the Loss and Gain account have been closed into the Loss and Gain column, so □ For Printing Concerns 61 they go no further. Undivided Profits and Capital Stock also do not appear in the Re- sources and Liabihties columns, as they have been closed into the Net Capital column. Next we have Cash, the best of all Resources, for, if the business should be wound up, the ma- chinery and stock might be hard to dispose of, the accounts receivable slow to collect, but the cash is always available at full face value. The Inventories of the Investment accounts are all resources. The Expense accounts do not appear in these columns at all, unless the insurance account should have an inventory, as previously explained, in which case it should be carried to the Resource column. The differ- ence between the two totals of Accounts Re- ceivable is a resource and the Accounts Pay- able a liability. Now comes the "proof of the pudding." If all the work has been done cor- rectly, the "Net Capital" amount carried to the Liability column should make the two columns balance. If it does not do so, you will have to hunt the mistake. Check the carrying across of each amount, see that no mistakes have been made in addition and subtraction in figuring losses and gains, that you have not neglected to carry an amount to the last column, and that no amount is put on the wrong side of the Loss and Gain column. When the Net Capital makes the Resources and Liabilities column Bf 62 An Accounting System balance, the balance sheet is complete. The Loss and Gain column should have the amount of the gain filled in in red ink, entitled the "Firm^s net gain" and the column should be ruled off and footings put down. The putting down of an amount in red ink is intended to show that the total of the other column is just that much more than the total of the one in which the red ink entry appears and that the amount really belongs on the other side; and so when the amount of the red ink entry (or balance) is carried forward in black ink, it is naturally put on the side where it be- longs. So the amount of the net gain is carried forward to the Net Capital column in black ink on the credit side. Then the amount of the Net Capital column is filled in in red ink, and carried to the Liability column in black ink, the four last columns ruled off and footed and the balance sheet is complete. Analysis of Results: The balance sheet shows in concise form the expenses for the year, the results of the year's business and just where the firm stands at the beginning of the New Year. The Net Capital Column shows what the firm is worth and the Resources and Liabilities column shows just what this total is represented by. The sales of Printing, exclusive of Paper For Printing Concerns 63 Stock, etc., were $21,637.08. What was the cost of this item? What was the net profit on stock? What relation does the Pay Roll bear to the other expenses? These questions can be answered by taking a pencil and paper and jotting down the items that belong to each account, as shown on pages 68 and 69. Thus we see that the Profit on Merchandise of $493.67 dwindles to $120.71 when Stock Handling, Insurance, Taxes, etc., are charged to this account, and when we would deduct Building depreciation and Interest for the floor space occupied by stock, even this would dis- appear. In the Printing account, the cost, in- cluding all expenses, is $21,042.46, of which amount the Pay Roll is $9,085.25, or less than half. The Business is worth $40,458.58, of which $3,235.79 is in cash, $2,808.56 is balance of accounts receivable over accounts payable, $6,525.96 in merchandise, ink and unfinished work, $8,544.05 in real estate, and $18,999.02 in machinery, type and other equipment. As the last item represents a first cost of $30,- 947.90, it ought to be conservative, and the business ought to bring that much or more as a going concern. Closing of Accounts: The next step is the 0J 64 An Accounting System closing of the accounts in the Ledger in accord- ance with the results of the balance sheet so as to start the new year with a clean slate. Taking the Merchandise account first, the amount of the inventory should be put down on the credit side in red ink. If this makes the credit side largest (as it does in the example shown), the account shows a gain. This amount is put down on the debit side in red ink, and the account ruled off and footed. Now, as we have explained before, the putting down of an amount in red ink shows that the other side of the account is larger and the books will not balance unless this amount is carried for- ward in black ink on the side of the ledger where it belongs. So, after ruling the account off, the inventory is put down in black ink on the debit side, while the profit is carried to the Loss and Gain account in black ink on the credit side. 1913 MERCHANDISE Dec. 31 31 Am't forward Loss and Gain Inventory 17,238 76 493 67 Dec. 31 31 Am't forward Inventory ia.214 35 5,518 oS 17.732 43 17,732 43 1914 Jan. I .5,518 08 For Printing Concerns 05 IB Now the account is ready for the entries for the next year. The Ink account is closed with two entries — one for Inventory and one for Loss and Gain, just as shown above. Printing is also closed in the same manner. In the balance sheet shown, Pay Roll is closed with only one entry — the Loss and Gain entry; but in case this account has an inventory, it should appear in red ink on the debit side and in black ink on the credit side after the account has been ruled off. In- terest and Discount is closed by only one en- try — the loss and Gain entry, and is ruled off and no balance brought down. The closing of the Loss and Gain and Undivided Profits accounts is the very last step, and will be ex- plained later. The Department Expense accounts are closed by a Loss and Gain entry, and all are ruled off clear. The Investment accounts are closed with CYLINDER PRESSROOM 1913 Inveiiment Jan. Feb. I 5 5 Inventory Michlie, 26 x 40 Motor, 3 h. p. Inventory 5.091 77 2,650 00 135 00 Dec. 31 31 Inventory Depreciation 6,427 97 1.455 00 7,882 97 7.882 97 1914 Jan. I 1 6,427 97 If 66 An Accounting System two entries, both on the credit side, as shown on pp. 65. As the Loss and Gain entry repre- sents depreciation, it is permissible to use that term, instead of Loss and Gain. Also, if desired, in order to save space and extra entries in the Loss and Gain account, these amounts repre- senting depreciation may be brought forward in one amount, entitled "Depreciation." Closing of Loss and Gain account : As each account has been ruled off, the Loss and Gain entry should have been carried to the Loss and Gain account in black ink on the opposite side of the ledger from where it appears in red ink in the account. When the two columns are footed up, the balance should be the same as that shown by the Loss and Gain column in I9I3 LOSS AND GAIN Dec. 31 Amt. forward 99 62 Dec. 31 Am't forward 3.981 77 31 Pay Roll 9.085 25 31 Ink I 44 31 Office & Gen. Exp. 5,383 75 31 Int.andEisct, 345 70 31 Ins. and Taxes 1,008 66 31 Merchandise 493 67 31 Adv. and Selling 651 05 31 Printing 21,637 08 31 Stat'y and Postage 262 56 31 Hauling and Carfr. 233 50 31 31 31 31 31 31 ^^ 1 Heat and Water Light and Power Spoiled Work Stock Handling Dept. Expense Depreciation Undivided Profits 148 68 387 50 109 87 68 25 672 03 3.394 79 4,954 15 26,459 66 26,459 66 For Printing Concerns 67 the balance sheet, in this case $4,954.15. This should be put down on the debit side in red ink and the account ruled off. Another Method of Closing Loss and Gain: This consists in dividing the Loss and Gain entries from the expense accounts between the Merchandise, Printing, and Loss and Gain ac- counts, so that the Merchandise and Printing accounts will show net results on these items instead of the gross amounts being carried to Loss and Gain and one general result being struck off there. To the Merchandise account will be carried the amount "Stock Handling and Storage." This is shown on the balance sheet as a sepa- rate account, but these entries could be just as well charged direct to the Merchandise ac- count where they amount to so little. Now the amount "Taxes and Insurance" will have to be separated and part of it carried to the Merchandise and part to the Printing account. The Merchandise account should be charged with the direct taxes and insurance paid on stock. Also, as in this case the building is owned, part of the taxes and insurance are on the building and the Merchandise account should bear its proportion according to the floor space used for stock storage. This ac- count would be divided as shown on the next page. II El 68 An Accounting System 1913 INSURANCE AND TAXES. Dec. 31 1914 Jan. Am't forward Inventory i»353 86 Dec. 31 31 31 i»353 86 345 20 Inventory Merchandise Printing 345 20 280 45 728 21 1,353 86 The Merchandise account would then be closed as follows : 1913 MERCHANDISE Dec. 1914 Jan. Am't forward Ins. and Taxes Stock Handling Depreciation Loss and Gain Inventory X.7238 76 Dec. 31 280 45 31 68 25 24 26 I20 71 17.732 43 5,518 08 Am't forward Inventory 12.214 35 5,518 08 17,732 43 Next the Printing account is closed by bringing to it the proper amounts as follows: For Printing Concern 69 1913 PRINTING Dec. ^i Am't forward 9 53 Dec. 31 Am't forward 20,954 08 31 Pay Roll 9.085 25 31 Inventory 692 53 31 Office & Gen. Exp. 5.383 75 31 Ins. and Taxes 728 21 31 Adv. and Selling 651 05 31 Stafy and Postage| 262 56 31 Hauling and c. f. 233 50: 31 Heat and Water 148 68' 31 Light and Power 38750 31 Spoiled Work 109 87 3» Dept. Expenses 672 03 31 Depreciation 3,370 53 31 I-,oss and Gain 604 15 1 i t 1 i 21.646 6r 21,646 61 1914 1 Jan. I Inventory 692 53 1 1 The Loss and Gain account would then b; closed as follows : 1913 LOSS AND GAIN Dec. Am't forward Undivided Profits 9962 i Dec. 31 4,954 15 1 1 31 31 31 31 : 5.053 77 r^ 1 Am't forward Ink Int. and Disct. Merchandise Printing While this seems a more roundabout way of achieving the same result, it shows the direct net result in the principal accounts instead of El 70 An Accounting System one general result and affords a basis for figur- ing costs. When the Loss and Gain account has been ruled off, the gain should be carried in black ink to the credit side of the Undivided Profits account. And when dividends are paid, the cash book entry should be posted to the debit side of this account. 1913 UNDIVIDED PROFITS Dec. 31 31 Am't forward Balance Dividend No. 17 1,900 00 20,458 58 Dec. 31 31 Am't forward Loss and Gain Balance 17404 43 4,954 15 22.358 58 22,358 58 1914 Jan. I • 3,000 00 Jan. I 20,458 58 After closing the books it is a good idea to take a trial balance again to make sure that all accounts have been ruled off and correct balances brought down. When this has been done we are ready to start another year's busi- ness " with a clean slate.'' A System for Keeping Account of Stock: While it does not come directly under the head- For Printing Concerns 71 ing of "Accounting/' I believe a brief descrip- tion of a good system for keeping track of stock would not be out of the way. After trial of books, both bound and loose-leaf, the card index was decided upon as the best. The cards are kept in a fire-proof cabinet so as to be avail- able as an inventory in case of fire. The card used is 55^4 x 9, and has the columns running the long way of the card while the description, etc., runs the other way. This gives a long column for posting, while the information as to kind, size, color, location, etc., are where they can be most readily seen when running through the file. The price, and from whom bought are entered when the card is first made out ; however, if some grade of goods may be purchased from different firms, and at varying prices, so in the column "from" the firm name and price are entered on subsequent lots if different from the first. The spaces marked location are filled in, the first space with W for Warehouse or S for Stockroom, while each bin is numbered and each shelf is numbered. Now we will suppose a ream of, say for in- stance, colored bond, is bought for a certain job, 126 sheets are used on the job and the balance put away. In eight months the job comes in again, the regular stockman who knows where that particular kind of stock is kept is away, and the man who is to get out □ BJ 72 An Accounting System the stock doesn't know where to find it. He phones into the office, the card is looked up and he is told S-4-9 — meaning Stockroom, bin 4, shelf 9. The first column on the card is for the stock received, the second for stock used, and the third for entering balances or inventories. Posting to Stock Cards: When a bill for stock has been O. K.'d, it is entered in the first column and the bill stamped "Posted." When the job ticket is made out, there is also made out a slip containing an order for the stockman to get out so many sheets of a certain size, weight, color and grade of stock, which is gotten out and held until proof is O. K.'d, when it is cut according to instructions on the job ticket. After the job is completed, and the ticket re- turned to the office, the stock that has been used is posted in the second column of the stock card, giving date, job number and number of sheets used. Theoretically, the stock should be charged off just as soon as the ticket is made out, but in practice it has been found that, owing to many changes between time job ticket is made out and proof O. K.'d, due to change in size, quantity, heavier weight, or different quality wanted, or grade selected being found unsuitable, the best plan is to post the stock used after the job has been gotten out. Also the stockman should be given strict RECEIVED QUANTITY USED JOB NO. QUANTITY w O a o H *^ r o •jj ptf u 74 An Accounting System instructions to mark any such changes on the ticket ; also any extra sheets gotten out owing to short count, spoilage or mistakes in cutting. We keep all high-grade stock, such as writ- ing paper, envelopes, cards, etc., locked up; no one but the stockman has the key and he is held responsible for it. On the card shown, the amounts of the two columns are footed up in pencil and balanced when it is desired to know amount on hand. Some favor carrying out the balance each time an entry is made and this can be done, using the form shown herewith, but do not think it advisable. The plan first described is the same method that is used in book-keeping, while the totals of the columns will make it easy to tell the quantity used during a certain period as a guide to placing an order. The second method requires much more time, as it is neces- sary to make a subtraction every time an entry is made, with endless chances for errors which would be hard to locate. For scrap or cut stock, a form similar to the previous one is used, except that it is printed on an envelope and a piece of the stock kept inside for comparison. Also, instead of "Size'' and "Weight'' blanks, as shown, it has blank spaces for size and original size and weight, so that the heading when filled in would read as follows : Enamel book, white, size 10 x 25, For Printing Concerns 75 original size and weight 25 x 38-80. The stock- cutter is instructed, every time he cuts a lot of stock which leaves a usable strip of waste, to turn in a sample of the strip to the office, marked with the quantity on hand. Then one of these envelopes is filled out ; the sample put inside, and filed. If this file is looked at every time a job ticket is made out to see if there isn't something which can be used, a good many dollars can be saved in a year. For in- stance, in our shop we haven't cut up a sheet of cardboard in several years for the small jobs of tickets that come in, always getting them out of scrap. Guide Cards: These stock account cards and envelopes will require guide cards so that they can be referred to quickly. No rule can be laid down for indexing them as the stock varies in diflPerent shops, but the best plan is to separate the cards for the different grades of stock and then subdivide the cards for each grade by size or weight until you have from six to a dozen cards in each division. Keeping Track of Cuts and Electrotypes: The bins, shelves and cabinets in which they are stored should be numbered somewhat as described for the stock. When cuts are put away, a proof should be taken of them, marked ■m ^A^^^^Md^M^t^iibate 0J 76 A n A c c o un ti n g System with the place they are to be found, as Cabinet 6, Drawer 10. If these proofs are taken on sheets 83^ x 11, or sheets which will fold to that size, they can be filed in tagboard folders, such as are used in vertical letter files, keeping proofs of each customer's cuts in their folder, or subdividing them as found convenient. UNIVERSITY OF CALIFORNIA LIBRARY BERKELEY Return to desk from which borrowed. This book is DUE on the last date stamped below. 2tlVov'55PlV •^'^*^.38, N0V2 1 1955 m 20Feb'62JW REC'D LD . FEB 6 1962 ■ "^'Mim j m LD 21-100m-ll,'49(B714e 1 ;sl6)476