Wfrglits OOK-KEEEJING SIMPLIFIED Wall Street Edition LIBRARY OF ALLEN KNIGHT CERTIFIED PUBLIC ACCOUNTANT 502 CALIFORNIA STREET SAN FRANCISCO. CALIFORNIA gffi A* * J^-f^ (JOA M9N '33B|d *|J9ABM ZC saa-nasxooa PUB saBHsnand '03 BNIHSIignd AONViNnODOV 13 Copyrighted 1885, 1888, 1890, 1891, 1896, 1901 by ALL RIGHTS RESERVED. a* * . 380310 I know there are to-day one thousand college graduates some of them having graduated with honor at German universities who are walking the stony streets of New York, and know not how to earn a living. HORACE GREELEY. If one tenth of the time consumed in the useless pursuit of the dead languages had been devoted to learning the simple science of double-entry bookkeeping, the great journalist would have been spared the regret it must have caused him to make such a declaration. A few dollars expended in acquiring a business education will pay a larger annual dividend than one hundred times the amount otherwise invested. ~No man's education is complete without a knowledge of bookkeeping, hence it behooves every one to qualify in double-entry, acquiring a profession available through life. THE PLAN OF THE WORK. THE PLAN OF THE WORK is purely original with the author, peculiar to himself, and his experience being the sum and substance of what he has passed through as a business man, and hence knows it to be useful, and not what he has read or learned from hearsay. The main feature is dispensing with the old-fashioned daybook and old-fogy journal- izing something unknown in business, therefore nonsense extra- ordinary. Another popular and redeeming feature, that must commend it to the esteem of everybody interested in accounts, is THE APPENDIX, containing over 500 questions, directing the reader's attention to points that should be remembered, and serving as a leader to guide him in pursuing the study without a teacher. The last few pages are devoted to the Appendix, which will make it a suitable text- book for schools. On the right of each question are small figures indicating the page in the book on which can be found the answer thereto in substance, but not in so many words. Every question that can be asked on this subject has been anticipated and answered in the pages of this book. If the book is read thoroughly and compre- hensively it will be an easy matter to frame correct answers to all the questions, and those who can do so may consider themselves thoroughly conversant with the principles of modern double-entry bookkeeping, and the business method of applying them. OEDEE OF EEADING-. 1. Learn the definitions on pages, 17, 18, 19, 20, 21. 2. Commit to memory the EIGHT SHORT RULES on page 29. Thus, Jj^ebit^whoever owes us, Debit whatever we receive. Debit Percentage we lose ; then reverse the order and say, Whoever owes us we debit, Whatever we receive we debit, Percentage we lose we debit. Head the credit rules both ways also, 3. Familiarize yourself with the CLASSIFICATION OF ACCOUNTS (pages 28 and 29), both by their names and nature. The nature of a personal account is somebody whom we owe or somebody who owes us. The nature of a representative account is some- 6 THE PLAN OF THE WOKK. thing that really exists and that can be received or given out. The nature of a speculative account is an imaginary amount which we make or lose, but cannot receive or give out. Mdse. is both a representative and a speculative account, as it is both real and imaginary. For instance, we buy $100 worth of goods, which we receive and is therefore real to that extent we neither gain nor lose. We sell that $100 worth of goods, and therefore give it out, and that much is also real ; but we sell it for $125, or whatever percentage we add as our profit, hence the $25, or the profit, is only an imaginary increase on the real $100. 4. Read thoroughly and comprehensively pages 31, 32, 33, 34, 35, and learn the four forms of Journal entries, that is, learn how many Debtor accounts and how many Creditor accounts are re- quired in each form, also how to read each : 1st reads, BLANK Debtor, on one line, to BLANK Creditor, on the next line 2d reads, BLANK Debtor to Sundries, all on one line / 3d reads, Sundries Debtor to BLANK, all on one line 4th reads, Sundries Debtor to Sundries, all on one line. In writing it on the books, instead of " Blank " you substitute a name in every instance. The lines are read as Blank. 5. Read slowly and studiously, not hurriedly and superficially, the description of all the books, noticing the peculiarities of each as to ruling, spaces, columns, etc., beginning with CASH-BOOK Pages 51, 52 Two CASH-BOOKS UNNECESSARY SALES-BOOK JOURNAL LEDGER RULING THE LEDGER CHECK-BOOK BILLS PAYABLE BOOK BILLS RECEIVABLE BOOK. . 53 54 54, 55 55, 56 56, 57 57 60 61 6. Study LEDGER ACCOUNTS ELUCIDATED, pages 105 to 113, learning what the debit side of each accounts means or represents, what the credit side represents, and what the difference between the two shows. 7. Take each question in the Appendix and find the answer thereto, according to the pages indicating where the answer can be found ; also familiarise yourself with the forms of commercial paper, etc. This will necessarily give you a review of the entire contents of the book. PREFACE. THERE are already a sufficient number of works on book- keeping, from a fine theoretical standpoint, before the public, to demonstrate clearly that theories alone are inadequate to its wants, and that no one can see in the application of these finely-drawn theories to the imaginary transactions therein given, many of which are far-fetched and stated in an unbusinesslike manner, anything touching upon or even approximating their own busi- ness experience. Common to all the works we have seen on the subject is the great stress placed upon, and the importance attached to, the principles of Journalizing, to illustrate which all such works are necessarily encumbered with Day-Book writing an old-fogyism entirely peculiar to themselves. While the literal meaning of journalizing is entering in a Journal, it is commonly perverted to mean transferring entries from original books into a Journal under Ledger titles. In the latter sense of the word we condemn it as a nonsensical operation, fast becoming obsolete. Day-Book writing is something unheard- of in business, and journalizing of this kind is already a thing of the past at least with modern bookkeepers, who keep abreast with the improvements of a progressive age. We maintain that our books are all journals that is, eacn is a Journal of the particular kind of transactions recorded therein, S PREFACE. and of course the moment the entry is made it is to all intents and purposes Journalized. The old school of bookkeeping makes the Journal a general receptacle for everything, or a special vehicle for conveying everything into the Ledger, thereby clogging the wheels of rapid progress, while in business it is used as an independent record, standing on a level with Sales Book and Cash Book, having no intimate connection with either. It will readily be seen, therefore, that by avoiding the cir- cuitous route of the Journal, and posting directly from the original entry we obviate writing the same matter twice, accom- plishing the desired result in a much more satisfactory manner, and in half the time. They give you many logical arguments from which to deduce your own conclusion, where in this book you are presented with conclusions already reached. It is the province of this manual to combine the science and art of modern double-entry bookkeeping as practised in business. As a science it advances all the theories and principles of double-entry, thereby laying the solid ground- work upon which is constructed, in artistic style, a full miniature set of books, in which the principles are applied and exemplified, showing the opening of a set of books, many current entries in great variety, the monthly and final closing, also reopening, etc. It was originally designed for exclusive use in connection with the author's PRIVATE COURSE OF PRACTICAL INSTRUCTION IN DOUBLE-ENTRY BOOKKEEPING, but as there are many who do not feel able to incur the expense of such a course, and many others who find it impracticable to do so, it is offered to all who desire to take the initiative step in mastering the theories and principles of double-entry, without which it is impossible to ever become proficient bookkeepers. If we learn the principles ', we have laid the theoretical corner- stone upon which to build successfully a super structural practice. It will doubtless prove to be the desideratum of those having some knowledge of the subject desiring further information on the special points herein elucidated, while its simplicity will make it specially adapted to the wants of those having their first lesson in bookkeeping yet to learn. PREFACE. 9 To learn book-keeping properly, one must keep books, and to meet that requirement, there are two extra sets introduced for the student's practice. It is a well-understood principle with experienced accountants, that a routine in double entry, once ' established, would be simply a matter of repetition ever after- wards, during the continuance of the business ; and for that reason, in creating an imaginary business and suggesting such transactions as are necessary to produce a set of books that would be in every way businesslike, there will be unavoidable repetition of many words and phrases necessary to explain them, which would be condemned as unpardonable tautology by scientific writers who carry a large stock of synonyms in which to express and embellish their ideas. We are rich in experience in the art of book-keeping, but our inexperience as a writer accounts for the impoverished condition of our voca- bulary, and the plain matter-of-fact way we have of telling what we know ; which could be made to seem more erudite, if clothed in the rich verbiage and measured by the beautifully rounded periods of those whose business it is to write accord- ing to the strict rules of rhetoric. We hope to render a per- manent service to those who seek to learn that which they do not already know, and we feel assured that those who are in any way interested in that which has been our life's work book- keeping will read and practise these pages with a fascinating interest they never experienced in the perusal of any other book, and therefore commend it to them as being worthy of a place in their curriculum of studies. In submitting this little volume for the kind consideration .and patronage of a discriminating public, it is hoped they will " Not view it with a critic's eye, But pass its imperfections by," as it is not compiled from more voluminous works, like many others that are constantly springing into existence with the spontaneity of mushroom growth ; nor is it the result of deep research and study of the text, but the spontaneous outgrowth of many years' experience and assiduous toil at a book-keeper's desk by THE AUTHOR MISCELL A N EOUS. 11 SYNOPSIS. PLAN of the work Abbreviations and signs used in business Model private counting-room illustration Nomenclature of bookkeeping Press -ropy- ing Origin of double entry Necessity, the mother of inventions Book- keeping in its simplest sense A question in which all have a personal in- terestBookkeeping as a profession The most essential qualifications of a good bookkeeper A poem, not a drudgery Business men Importance of bookkeeping estimated Practical hints to bookkeepers A good motto Duty as successor Fallacious methods exposed Classification of accounts Firm name conspicuous in its absence The great principle underlying double entry Eight short rules, the finest in the land Six supplementary rules affecting personal accounts Other signs of debit and credit THE SIMPLE VERSUS THE INTRICATE Journalizing made easy Four forms Eight infallible principles First part and counter-part of an entry explained A feature peculiar to all journal entries Debtor and creditor made plain by impersonating accounts Books necessary to com- plete a set Rule for opening books Absurdity of a " Stock " account Rules for closing books Rules for reopening books How to refer to ac- counts in the ledger without using index Difference between single entry and double entry Fourteen simple rules governing experts in ad- justing books that have been kept by single entry Changing single en- try into double entry Trial balance, when and how often made Its two- fold object How to proceed in making it Four-column trial balance explained; its advantages over ordinary kind How we know what the footing of trial balance will be in advance, that is before drawing it off Rules by which any error nviy be detected in a trial balance Rules for making' a balance sheet When red ink should be used Cash-book de- scribed The right and the wrong way of managing discount column in cash-book Two cash-books unnecessary Sales-book, also journal described The ledger, the finest description ever given of this important book A season, what it means Ruling the ledger, how it should be done The time for ruling it Few rule at the proper time Check-book how managed Work usually done on check-book that is superfluous Love's labor lost Lost checks How to restore certified checks if not used The bank-book (or pass-book) how to balance it The most com- plete explanation ever given which alone is worth the price of this book Receipt-book, bills payable, bills receivable, invoice and accounts receiva- ble books all fully described Filing papers, the right way and wrong way shown in pictures Assistant bookkeeper's duties defined A full miniature set of books, showing all the entries from the opening to final closing Office routine When special columns would be used in the journal, how to arrange them; a false method by a pseudo author Terms, what it means and how stated Dating ahead Matters not entrusted to a bookkeeper Transcript, when such a book is used The original form of ledger continued in its pristine simplicity How to collect notes due at a dis- tanceSuperfluous columns in ready made bill-books Ledger accounts elucidated; more information on this subject than is contained in all other publications combined Department accounts, how managed A sys- tem of checking long ledger accounts when differences arise in settle- mentsTrial balance book described, and why not recommended Order book and memoranda book described Commercial correspondence; many forms given of high toned dignified business letters Commercial papers; various kinds shown Mercantile calculations covering percentage Short multiplication, cancellation Foreign money: Francs, Marks and Ster- ling how reduced to currency Averaging accounts Mathematical won- ders. These many topics are woven into the most fascinating and in- structive story you ever read. ADDENDUM. \ BBREVIATIONS 22 A Bookkeeper's Prerogatives 270 Another So-Called" System" 279 A Hint in Writing Letters 284 A Misused Abbreviation 278 Branch Houses 292 Contingent Liability 274 Discipline 285 " Dr," " Cr," " To," and " By " Must Not Be Omitted 282 Erasures 276 Examination for Bookkeeper's Position 290 Expert Accountants 292 Fraud How Detected How Prevented 287 In Liquidation 248 Imperfect Articulation 274 Method 271 Mathematical Paradox 281 No Single-Entry Trial Balance 247 Not Infallible 247 Sales Sheets 283 Stand A loof 286 Three Days of Grace 279 Two Pen Pictures 288 The Best Way to Subtract 282 Uniformity 272 Up-End Down 273 Wright's Protege 289 WALL STREET METHODS. . 295 to 345 CONTENTS. A Common-sense View of Bookkeeping .................... ....... 23, 24 cceptance ...................................................... 137 Accommodation Paper (Fourth Afterthought) ....................... 227 Account Sales ....................... ............ .............. 235 Accounts Receivable Book .......................................... 130 Appendix. . . ................................................... 346 to 368 Advantage of Double Entry (Eighth Afterthought) .................. 245 Assistant Bookkeeper's Duties .............................. ......... 123 Averaging Accounts ....... , ..................................... ... 145 B Balance Sheet, Single Entry ...................................... 131 alance Sheet (Artistic and Ordinary) ........ . ................... 116, 117 Bank Book ............ . .......................................... 58 Bill or Invoice ........................................ . ............ 139 Bills Payable Book. ......... . .................................... 60 Bills Receivable Book ........... . ............................. . ____ 61 Bookkeepers ...................................................... 24 Bookkeeping as a Profession ........................................ 24 Bookkeeping Phraseology ........ ................................. 17 to 21 Books necessary to complete a Set ........................... ........ 41 Business Men ...................... . ........................ . ..... . 25 /^ash Book ............... 7 . 7777 ........................... . ...... 51 VJertificate of Deposit ...................................... .... 138 Chartered Accountant ..... . ........................... . ............ 91 Changing Single Entry into Double Entry ....... . ................ , . . . 46 Check Book .................................... . ................. 57 Classification of accounts ............................................ 28 13 14 CONTENTS. Closing Books 43 Commercial Correspondence 132 to 136 Commission Business 233 to 237 Course of Practice 149 to 227 D Debtor and Creditor 36 epartment Accounts 112 Detecting Errors in Trial Balance 49 Double Entry 29 Draft , 137 Due Bill 138 Duty as Successor 27 E Eight Short Rules 29 ight Infallible Principles in Journalizing 33 Eighth Afterthought 245 F Filing papers 129 inn Name 29 First Afterthought 226 Fifth Afterthought 227 Forms of Commercial Paper , 137 Fourth Afterthought. 227 Foreign Exchange Rules 143 Fourteen Rules in Single Entry , 46, 47 G /^ eneral Debtors (see Chartered Account). 91 H ow to refer to Accounts without the Index ........>< ^6 ow to check Long Ledger Accounts.......... o.oo.. ....oo. c.o. . 113 I H Importing Business 268 mportance of Bookkeeping. . 25 Interest Rules 144, 145 CONTENTS, Invoice Book 62 I. O. U 138 J joint Stock Accounts . 249 to 268 d ournalizing made Easy 31 Journal 54,77,78 K K ey to Puzzling Rules 121 L L edger 55, 92 edger Accounts elucidated 105 to 113 M Manufacturing Business. . . . , .- 229 to 233 emorandum Book . 128 Mercantile Calculations 140 to 14? Miniature Set of Books : Accounts Receivable Book 130 Bank Book 124, 125 Balance Sheet ... 116, 117, 131 Bill Books. ...... f ......... 126, 127 Cash Book .. .64, 65, 66, 67,68, 69 Check Book .,..118 to 121 Journal . . <> 79, 80, 81, 82 Ledger 00 93 to 104 Sales Book. .........,. ,86, 87, 88, 89 Trial Balance 00 ....oo.c ... ....... .114 115. 201 O Office Routineo.co.co O ..c. , 76 ffice Routine illustrated 241 to 244 Opening Books, .....<,.. . ,., 42 and 155 Order Book. ... ., 128 Order of Reading. . ; 5 Other Signs of Debit and Credit. 30 Outstanding Accounts (Seventh Afterthought) g45 16 CONTENTS. Petit Accounts 110, lit ersonal Accounts 28 Plan of the Work 5 Practical Hints to Bookkeepers 2ft Preface 7 to 9 Press Copying 149 Profit and Loss. , Ill R Receipt Book 60 ed Ink, Use of 50 Reducing Foreign Exchange to U. S. Currency 14& Reopening Books 45 Representative Accounts 28 Ruling the Ledger 56 S Sales Book 54, 83, 84, 85 ,_ cientific Terminology .... 17 to 21 Second Afterthought 226 Seventh Afterthought 245 Sixth Afterthought 228 Shipping Ticket 240 Speculative Accounts 28 Stock 43 Statements 139, 228 Synopsis of Contents 12, 151 to 154 T Trial Balance Book 122 rial Balance explained 90, 91, 247 Trial Balance (Four Column and Ordinary) 114, 115, 201 Transcript Book 85 Two Single Entry Propositions 150 Two Cash Books unnecessary , 53 The Simple versus the Intricate 63 Third Afterthought 226 W w hen Personal Accounts are debited or credited 30 onders of Mathematics 147, 230- BOOKKEEPING PHRASEOLOGY OR SCIENTIFIC TERMINOLOGY USED IN ACCOUNTING. The black words on the left are those by which we express ourselves in bookkeeping sense, the ordinary matter on the right is the conversational expression of the same ideas. ACCOUNT. The name of any person, place, or thing repre- senting a collection of certain amounts affecting the same name, either debit or credit, or both. Every account has two sides debit and credit. ACCEPTANCE. A draft across the face of which has been written, usually in red ink, the following matter, viz. : " Accepted - [give date of acceptance] ; payable at [state whether at office or bank] ; '' [sign firm-name on whom it was drawn]. ACCOUNTS PAYABLE. Parties we owe in open account on the Ledger. ACCOUNTS RECEIVABLE. Parties owing us in open ac- count on the Ledger, and the contra of Accounts Payable. ACCOUNT CURRENT. A running account ; that is, a state- ment of a running account, usually rendered at the end of each month, showing date and amount of each item of debit and credit for the current month, and the balance. ACCOUNT SALES. A statement of sales made for account of 2 18 BOOKKEEPING SIMPLIFIED. others, giving all the particulars of the sale, also showing the ex- pense incurred from the time goods were received until sold, in- cluding our fee for selling them, which is called Commission, and the remainder, after deducting all charges, which is called Net Proceeds. AUDITING ACCOUNTS. A general examination, comparing ^charges with vouchers, passing upon their correctness or incor- rectness. ASSETS. See RESOURCES. AVERAGING ACCOUNTS. Fixing a date upon which a num- ber of amounts occurring on different dates, and having different time to run, would amount to the same thing as if the total of all the amounts had occurred on one date. BALANCE. Difference between the debit and the credit side of any account. The remainder, after deducting the smaller from the greater amount. BALANCE SHEET. An annual or semi-annual statement ; a final exhibit at the end of a season, showing gains or losses, re- sources and liabilities, net worth or insolvency. BILL. Statement of items, showing date and amount of ob- ligation Invoice. BILL CLERK. One who makes out bills, or copies on bill- heads the entries on Sales Book. BILLS PAYABLE. Our note or acceptance; that is, our written promise to pay. BILLS RECEIVABLE. Another individual or firm's note or acceptance ; that is, their written promise to pay. CALL CLERK. One who " calls off " the goods to be charged ; that is, describes the goods by name, number of pieces, number of yards per piece and price sold at ; if not sold by piece, state other facts corresponding in effect thereto. CASH. Ready money, including checks, due bills, etc., con- vertible into ready money on presentation to the proper party at the proper place. CERTIFICATE OP DEPOSIT. Form of commercial paper issued by banks to parties who do not have a bank account. CHARGE. Synonymous with Debit which see. CHECK. An order on a Bank. NOMENCLATURE OF BOOKKEEPING. 19 CLOSING AN ACCOUNT. Drawing red lines under the amount on both debit and credit side, always ruling first on the side on which the entries extend farthest down the page, and making the other side agree by ruling on same lines. See remarks on ruling Ledger Accounts. CREDIT. Entering an obligation in favor of another. CREDITOR. One who is owed, or to whom another is under obligation. " CREDIT BY." A phrase used in ledgerizing or posting on the credit side. DEBIT. Entering an obligation against a debtor CHARGE the former being used in posting, and the latter in making entry on original book. DEBTOR. One who owes, or who is under obligation to another. "DEBTOR TO." A phrase used in posting on debit side of an account. DISCOUNT. A certain percentage deducted from any amount due at some stated time in the future to reduce it to cash value. In discounting commercial paper it is a certain per cent per annum; but in discounting open accounts it is a certain per cent of the face of the amount according to the terms specified when the indebtedness was contracted. DOUBLE ENTRY. An entry affecting two or more accounts, part debtors and part creditors, but equal in amounts. DRAFT. An order on a second party to pay to a third a specified sum of money at a stated time. There are three parties to a draft : the drawer^ who signs his name in the lower right- hand corner ; thepayor, on whom the draft is drawn, and whose name and address are written in the lower left-hand corner ; and the payee, whose name is written in the body of the draft, and in whose favor the draft is drawn. The peculiar location of the names and the wording, as to time, is what characterizes it as a draft. ENDORSE. To write name across the back of any class of commercial paper. ENTERING GOODS. Making a record on Sales Book. ENTRY. A record of a business transaction. ENTRY CLERK. One who records a sale. 20 BOOKKEEPING SIMPLIFIED. EXCHANGE. A peculiar form of commercial paper used by banks in transmitting money from one to another ; also a fee, charged by banks for collecting drafts or " out of town" checks that is, checks on banks in other towns foreign to the place of their location. EXPENSE. That which requires an outlay of money for which we get no direct returns. Consumed in carrying on the business. INVENTORY. A statement showing all the goods on hand, in detail, at cost price. INTEREST. A certain percentage per annum added to any amount after maturity, for usage of same during the time for which the interest is added. INSOLVENT. Without capital. JOURNALIZING. Arranging accounts in books of original entry under Ledger titles. LEDGER ACCOUNTS. An account (which see) transferred to the Ledger, usually at top of the page, and occupying the most prominent space between Dr. and Or. A place for concentrating all amounts affecting any account appearing from time to time throughout all books of original entry. LIABILITIES. Indebtedness. What we are liable for as payors. MDSE. The commodity in which we are dealing ; that is, buying to sell again. NOTE. A written promise to pay. OFFICE FURNITURE. Common name given to all articles of furniture in the office. ON ACCOUNT. Part of an account meaning that there is a Ledger Account already existing, or that one is to be opened. OPENING AN ACCOUNT. Writing it for the first time in any book of original entry in a relative position to other accounts, from which it is transferred to the Ledger, and not writing it in the Ledger for the first time as is erroneously claimed by some. Writing it in the Ledger is of course opening the Ledger Account ; but inasmuch as no entry is made in the Ledger until first made in some book of original entry, the account must be first opened apart from the Ledger. NOMENCLATURE OF BOOKKEEPING. 21 POSTING. Transferring dates, names, and amounts from original entries into the Ledger. Ledgerizing. PROCEEDS. What is left after deducting all charge&jorjex- penses in any transaction. PER CENT. On or by the hundred, applied not only to money, but any operation in which reference is made to 100 as a unit of comparison. RATE PER CENT. The number of hundredths under con- sideration. RESOURCES. Persons owing us, and what we possess. Our effects. Assets. RECEIVING CLERK. One who receives goods, checks each item on Invoice, " O. K.'s" it, and signs his initials, after which he turns it into the office for the bookkeeper's attention. SOLVENT. Able to pay indebtedness. SUNDRIES. In common parlance, Sundries means various articles ; but in bookkeeping phraseology it refers to accounts only meaning two or more are under consideration. O SHIPPING CLERK. One who attends to packing goods, marking the cases, and getting receipt from transportation com- pany. SUSPENSE. An account representing doubtful assets or long standing accounts, which for any reason are held in suspense awaiting final adjustment. TAKING STOCK. Preparing inventory ; that is, finding out how many articles of merchandise we have on hand of each kind at the cost price. " TEAM." Entry clerk, call clerk, and bill clerk constitute a team. TRIAL BALANCE. A monthly statement containing every unbalanced account in the Ledger, showing balance, either debit or credit, in each. "TO BALANCE ACCOUNT." Place a sufficient amount on the smaller side to make it equal to the greater. WITHOUT RECOURSE. Not liable as pay or of any paper on which our name appears as endorser. BOOKKEEPING SIMPLIFIED. ABBREVIATIONS AND SIGNS USED IN BUSINESS. Acct. or a/c. Account Ad.. Advertisement Am't Amount Av Average Bal Balance Bk Bank Bo't Bought B.P Bills Payable Bro't Brought Bro Brother Bros Brothers B.R Bills Receivable Cash'r Cashier C. B Cash Book C. & C Case and Cartage Chg'd Charged Ck Check C. O. D Collect on delivery Co Company Coll Collect Col Column Cr Credit Ctge Cartage Da's Days Dep Deposited Df t Draft Disct'd Discounted Dis Discount Del'd Delivered Do Ditto Doz Dozen Dr Debit or Debtor Ea Each Ent Entered E. & O. E. . .Errors and Omissions Excepted Exch Exchange Exp Expense Expr Express Fol Folio Forw'd Forward Frt Freight Fur't Furniture Ins Insurance Inst Instant, present time Int Interest Inv Invoice Jo Journal Mdse Merchandise Memo . . . .Memorandum M'f'g Manufacturing Mo Month Nat'l National No Number O. B Order Book O.L Old Ledger O. K "Oil Korrect, " right Pay Payable Pay't Payment P. C Postal Card PC'S Pieces Pd Paid Pkg Package P. &L Profit & Loss Pp Prepaid Pro Proceeds Prox Proximo, next month Pt Pint Pr Pair Qt Quart Rec Receivable Rec'd Received Ret Return Ret'd Returned R. R Rail Road S. B Sales Book Sec Secretary S/d Sight Draft St Sight Stm't Statement Sunds. ..... .Sundries Supt Superintendent T. B Trial Balance Trans 'd Transferred Trans Transfer Ult Ultimo, last month Wk Week @ At the rate of % Percent =j}= Number " Ditto /vw Nothing omitted y Check mark ^f., Double check -f- Addition Subtraction X Multiplication = Equal to &.. ..And COMMON-SENSE VIEW OF BOOK-KEEPING PROM A BUSINESS STANDPOINT. It is the universal custom of thinking minds pursuing any voca- tion in life to make a memorandum of everything they do, see, or hear, worthy of note, which they desire to remember. In commercial pursuits especially a memorandum is kept of such facts as have a pecuniary connection with the business, to which we can revert and refresh our memory, and the inspection of which at any time will reveal the true state of our business and property. The multiplicity and recurring frequency of these memoranda require they should be kept systematically, to enable us to find them readily and place them at our command. This being a necessity, the first bookkeeper probably invoked the prolific mother of inventions for assistance, and was presented with a beautiful system of accounts, called by common consent Double Entry. Bookkeeping, therefore, in its simplest sense is nothing more than making a memorandum of important facts, keeping in chronological order a record of everything transpiring in our business, whereby our interest is affected, either favorably or adversely. Bookkeepers are supposed to be informed of every transaction that takes place, which they will never entirely forget during their connection with the business ; but to remember the dates, amounts involved, and important particulars in so many instances would be an impossibility ; hence bookkeeping was instituted to assist their memory. 24 BOOKKEEPING SIMPLIFIED. It is a duty every one owes himself before starting in life undertaking to carve out his own fortune in the great stone quarry of the world to acquire a thorough knowledge of accounts. How to acquire this knowledge, therefore, in the shortest time and at the least expense is a question in which every one should have a personal interest. The answer to this great question can be summed up as follows : The best way to learn bookkeeping is in the counting-room of some large mercantile establishment, which of course would require opportunity and a long term of unremunerative service. The next best way is to enter as a student the private count- ing-room of an experienced accountant, who knows what a book- keeper's duties are, and how to define and point them out to others with clearness and intelligibility. The reader has adopted the next best way as an ultimatum, by reading "BOOKKEEPING SIMPLIFIED, OK JOURNALIZING MADE EASY." BOOKKEEPING AS A PROFESSION. Generally speaking, everything is prized according to the amount of labor and expense required in obtaining it ; hence the modest profession of bookkeeping is not so highly esteemed as the proud professions of law and medicine, but equally honorable and respectable > and if pursued with fidelity leads to high positions of honor and trust. It has suffered more, however, through the defence of incompetent friends than it could have suffered through a persistent onslaught of adverse critics. BOOKKEEPERS. A bookkeeper is not a mere automaton, capable of performing the machine work in bookkeeping, as it were perfunctorily, but in a higher and stricter sense of the word he is one whose quick per- ception enables him to comprehend the situation at a glance, and A COMMON-SENSE VIEW OF BOOKKEEPING. 25 whose tact renders him capable of readily adapting himself to it ; one who is thoroughly enlisted in the cause of his employer, and duly impressed with the importance of his position to whom bookkeeping is a poem, not a drudgery. In the former sense Bookkeeper is a misnomer, worn thread- bare by frequent use, and to a certain extent has brought the pro. fession into disrepute. The most essential qualification in a good bookkeeper is a still tongue and strong decision of character, incapable of becoming too intimate with the principals of other departments, or too com- municative to outsiders, whereby he might divulge secrets of the business known to him through and by virtue of his confidential position. BUSINESS MEN. Every man in business for himself should understand book- keeping, in order to understand how to properly direct the man- agement of his own accounts: those who do not are liable to become victims of dishonest employes, who may practise a system of false entries, entailing serious loss in fact, ultimate financial ruin. IMPORTANCE OF BOOKKEEPING. The importance of bookkeeping cannot be overestimated: it -will be more fully appreciated when contemplated in connection with the fact that it is estimated but three men out of every hundred end their business career financially successful, who can to a certain extent attribute their ultimate success to a skilful management of their accounts. On the other hand, the great majority who fail enter business without duly considering the importance of this prerequisite to success, and sooner or later discover to their sorrow that natural 26 BOOKKEEPING SIMPLIFIED. abilities will not supply the deficiency or preserve the intricacies of business matters from inextricable confusion, culminating in a financial wreck. PRACTICAL HINTS TO BOOKKEEPERS. It is a bookkeeper's duty to record, not to make, transactions, Never put on record anything that comes to you verbally, but require a memorandum of the facts from the proper party to the transaction, which to file as a voucher for its authenticity and a means of self -protection. File all memorandums, even of the most trivial nature, for re- ference. Always require receipt for payments in currency or by check made payable to bearer. See remarks on RECEIPT BOOK. Never sign receipt for money received by others without see- ing it properly entered on Cash Book for obvious reasons. Never credit an Invoice until it has been properly checked and O. K.'d by the receiving clerk, and you have satisfied yourself that the prices and extensions are correct. Never use the abbreviation " do" or the sign ( " ) for figures, as it is quite as easy to make figures as the substitutes ; besides, the sign ( " ) is often used w^hen an amount is purposely omitted, and therefore means nothing. Always insert ciphers in amounts without cents; if they are omitted, it looks like an unfinished amount. Never use the abbreviation "No" in connection with figures; as figures themselves are the numbers referred to, and to nse both would be the same thing as drawing a picture of a donkey and then writing " This is a donkey." Although the words might re- fer to the picture, they might also be construed as referring to the artist (?). When the figures are to appear as a subsequent consideration, it is proper to use "No" to indicate where they are to be located. Always begin a new month on a new page; on all books of ori- A COMMON-SENSE VIEW OF BOOKKEEPING. ginal entry never begin on part of an unfinished page of pre- ceding month. Speak the truth at every call ; A good motto forget it not : By its results either stand or fall ; Both abuse and praise it hath begot. DUTY AS SUCCESSOR. First thing in assuming charge of a set of books kept by another is to see if the cash is straight ; that is, see if the difference be- tween the Debit and Credit side of Cash Book agrees with the ac- tual amount of cash on hand. If not, report the discrepancy at once to the proper authority, who will have it properly adjusted. Begin on a new page with the actual balance on hand. Then look carefully through your Ledger to see what accounts have been opened and remain open, familiarizing yourself with them as soon as possible. It is better to learn them from the Led- ger than from the index, as the latter may contain accounts that have been discontinued that is, closed, not to be reopened. It is by no means necessary to make a Trial Balance, as claimed by a modern writer evidently of limited experience, as the books are assumed to be correct if cash is in proper shape. If, however, you have an error in your first Trial Balance, it is then time enough to locate it and all others that may have existed prior to your stewardship. If such error is not found in the work of the current month it will be necessary to get your predecessor's Trial Balance for the previous month and prove its correctness. If found to be incor- rect, report it at headquarters, and it will then become the work of an expert to trace the error to its origin, ferreting out all other& that may have existed possibly from the beginning of your prede- cessor's term of service. You would not be expected to assume the duties of an expert in connection with your own that is, keeping up the current work. 28 BOOKKEEPING SIMPLIFIED. The science of Double Entry is the same throughout the busi- ness world, but few bookkeepers follow the same routine. If you are required to adopt the routine already established, it will be an easy matter, provided you thoroughly understand your business, having a precedent to guide you in the work of the retiring official. CLASSIFICATION OF ACCOUNTS. We have already seen that every Ledger account has both a debit and credit side, the different natures of which will be easily under- stood when it is known that all accounts can be classified under two principal headings called PERSONAL and REPRESENTATIVE, the debit balance in each meaning either an asset or a loss, and the credit balance meaning either a liability or a gain. For a full ex- planation of the subject, see article on Ledger Accounts Eluci- dated, on another page. The REPRESENTATIVE accounts are divided into two classes those having a tangible existence in the values named, and those of -a fictitious nature that is, having only a nominal existence. The latter we will call SPECULATIVE accounts, the chief of which is Profit and Loss : all others of that nature being branches thereof, or tributaries thereto. The Speculative class, therefore, will in- clude all the accounts that represent either a profit or a loss, and all others will represent either assets or liabilities. There are a few of the Representative class that have a dual nature ; that is, they may first show either a profit or a loss, after which they show part of the assets, such as Merchandise, Real' Es- tate, and all those in which there appears an Inventory. In order to formulate a rule for handling or referring to ac- counts intelligibly, it is necessary therefore to classify them under the following names : PERSONAL. SPECULATIVE. REPRESENTATIVE. PERSONAL accounts will refer to those with individuals, firms, or corporations. A COMMON SENSE VIEW OF BOOKKEEPING. 29* SPECULATIVE will refer to all accounts representing a gain or loss, such as Mdse., Expense, Interest, Discount, Commission, Exchange, Insurance, etc. See subdivisions of EXPENSE, page 106. REPRESENTATIVE will include all others, such as Cash, Bills Receivable, Bills Payable, Office Furniture, or any account representing certain values. THE FIRM-NAME. Our firm-name never appears on the books as a firm, but in its constituent members and component parts. By component parts is meant in this connection accounts that represent the firm. See REPRESENTATIVE and SPECULATIVE accounts. When we say Cash is debtor to whomsoever pays us, we mean our firm is debtor to that party ; but when we say Cash is debtor to Mdse.,we mean the same thing as if we had taken a certain sum from one pocket and put it into another. DOUBLE ENTRY. Recording a transaction so as to affect two or more accounts, trie- amount of debits being equal to the amount of credits. The first law of Double Entry is every debit amount, in one ac- count must have a corresponding credit amount in some other account, and vice versa. The great principle underlying the beautiful system of Double Entry bookkeeping is, whoever or whatever owes is a debtor, and whoever or whatever is owed is a creditor. Applying this principle to our books, every charge or debit and credit we make is governed by the following : EIGHT SHORT RULES. DEBIT. CREDIT. Whoever owes us. < PERSONAL. > Whoever we owe. Whatever OWeS US. | REPRESENTA j Whatever we ^ ve OUt. Whatever we receive, f ( Whatever produces value.. Percentage we lose. < SPECULATIVE. > Percentage we make. (Read NINTH AFTERTHOUGHT, on pajre 294.) 30 BOOKKEEPING SIMPLIFIED. WHEN PERSONAL ACCOUNTS ARE DEBITED OR CREDITED. In addition to the eight short rules for debits and credits it will be well to remember that there are four conditions under which we debit personal accounts, and four similar conditions under which they are credited, viz. : DEBITED. 1. When we sell a party goods on account. 2. When we pay them. 3. When they made us an allowance of discounts, or for dam- ages, or otherwise. The first two rules might be more comprehensive under the statement, When we deliver a party anything, they are charged with whatsoever it might be. 4. When we render a service. CREDITED, 1. When we buy goods from them on account. 2. When they pay us or when they deliver anything to us. 3. When we make them an allowance of discount or for dama- ges, goods returned, or in any way reduce their indebtedness. 4. When a service is rendered us. OTHER SIGNS OF DEBIT AND CREDIT. All accounts preceding the abbreviation Dr., and preceded by the capitalized By, are to be debited in posting. All accounts preceded by the word To are to be credited in posting. The left-hand column or side is for debits, and the right-hand column or side is for credits, throughout all the books. A COMMON-SENSE VIEW OF BOOKKEEPING. 31 JOURNALIZING MADE EASY. Journalizing is conceded to be the most difficult part of btK>k- keeping. By following the suggestions herewith givea, any per- son having a common -school education can Journalize any trans- action if put in possession of all the facts connected therewith, showing what accounts are affected, from which it is easy to con- clude, correctly, how they are affected by the application of the eight short rules for debits and credits to be found on page 29. The principles of Journalizing consist in the proper arrange- ment of accounts in original entries under Ledger titles, according to the system of Double Entry. Every transaction necessarily affects two or more accounts, otherwise it cannot be a double entry ; it must contain at least one debtor and one creditor ; possibly one debtor and two or more creditors ; two or more debtors, and one creditor ; or two or more debtors, and two or more creditors. It will readily be understood, therefore, that there are four propositions necessitating four forms of Journal entries, in mak- ing which there are three contingencies to be considered. 1st. How many accounts will be affected by the transaction to be/ recorded. We determine how many accounts there will be in our Journal n try by the number of amounts we have under consideration, as each aniQunL must have &name, by which it is identified or under- stood, and the name with the n,mmi,nt\ what is meant by account. Every transaction necessarily gives rise to certain lines of figures, called amounts, arid the figures have names indicative of what thpy are or represent. When there are three (or more) lines pf fig- y inventory, crediting partners with gain or charging them with loss. Books should be kept neatly and artistically as well as correctly. There is nothing more enhancing to the beauty of a set of books than proper distribution of red ink ; while there are many book- keepers who do not use it at all, there are others who use it too profusely : in neither case will their books compare in beauty with those governed by the foregoing rules. A single red line separates things that are related ; a double red line separates things not related, and indicates they go no further. CASH BOOK. If one book be of more importance than another, the Cash Book should have the precedence, being not only a record in detail of all money handled by the firm, but also a Ledger account of the Cash, as it were. This book has a special ruling peculiar to itself, with spaces and columns designed to show certain facts. THE DEBIT SIDE shows amount of Cash received, date of receipt, who received from, and what received for ; the first column on the left being for date, first space after date being for Ledger accounts which are to be credited by Cash ; the next space is for explanations or particulars of the transaction, which should never extend beyond the bounds on either side. The columns for amounts should each be headed with the name of accounts they represent, or show the purpose for which each is designed. THE CREDIT SIDE shows the amount of cash paid out, to whom or for what account, and for what purpose it was paid ; also date of payment, with spaces same as on debit side. In posting from the Cash Book we post only the amounts found in the Sundries columns, and 52 BOOKKEEPING SIMPLIFIED. the footings of the Special columns. Cash Debtor (or Dr. Cash) being written at the top of page on left-hand side is read or under- stood in connection with every name appearing on that side in the space for Ledger accounts. We then say, Cash being debtor to , whatever account follows, the Contra is, that account in the Led- ger must be credited according to the law of Double Entry (page 29). Cash being posted, as it were, in the Cash Book, which re- presents the Ledger Cash account, we consider only half the entry or the credit account in posting. On the other side, Cash Or. being written at the top of the page is read or understood in connection with every name ap- pearing on that side in the space designed for Ledger accounts that are to be debited in posting, and which alone are considered in posting, Cash Or, being already posted, as it were, in the Cash Book representing, as we have seen, the Ledger account of Cash. In posting from the Cash Book, therefore, we post only half the entry on either side, observing the date of entry and amounts, studiously avoiding the explanations, thereby preventing confu- sion. * SPECIAL COLUMNS. The object of Special columns is to economize time and labor in posting ; the more Special columns we have the less posting will have to be done. The number of such columns will be deter- mined by the number of very active accounts. A Merchandise column is introduced in our miniature Cash Book (page 64), because we are supposed to be making cash sales daily, the amount of which if carried into the Sundries column would necessitate posting one item daily in the Merchandise ac- count, but by entering it in a special column we are enabled to post many items in one amount in the footing of that column. The Expense column is introduced on the credit side for the same reason and managed in the same way. The Discount column on debit side of miniature Cash Book represents all discounts allowed by our firm for money received before maturity of the amount, and is posted in connection with the cash item on the cre- dit side of the account in the Ledger; the footing of the column at the end of the month is posted on the debit side of Discount A COMMON-SENSE VIEW G^ BOOKKEEPING. 53 in the Ledger, thereby constituting the double entry. We also have a Discount column on the credit side representing discounts allowed us for prepayment of accounts, and each item is posted in con- nection with the cash item opposite to the debit side of the account in the Ledger, the footing being posted at the end of the month on the credit side of Discount in the Ledger, thereby constitut- ing the double entry for the various debits of discount during the month. The Discount columns on either side of Cash Book do not repre- sent any part of the cash, and therefore do not enter into the operation of balancing the cash either daily or monthly. TWO CASH BOOKS UNNECESSARY. It is a custom in many houses to keep two Cash Books, one called Petty Cash, representing all money received and paid out daily, including amount deposited in bank. This book is balanced and closed every evening, the balance representing the amount of money in the safe or cash-drawer. The bookkeeper at his leisure transcribes the matter from daily Cash Book, omitting money deposited, into a larger book called GENERAL CASH BOOK, usually with more regard for neatness than is bestowed on Petty Cash Book, which is balanced and closed only at the end of the month, the balance representing the amount of money in the bank, including the amount in cash-drawer. The object of the monthly closing is to get the monthly results for the purpose of transferring them to the Ledger. The Petty Cash Book is superfluous, and can easily be dispensed with by ruling two extra columns, one on each side of the GENERAL CASH BOOK, into which the result of each day's transactions are extended, the extra columns only being balanced and closed, leaving the main columns, representing monthly cash, open, to be closed at the end of the month. By combining the two books in one, we obviate writing the same matter twice, saving time and labor and the expense of an extra book. It will not be necessary to close the extra columns 54 BOOKKEEPING SIMPLIFIED. daily, unless a sufficient number of transactions have taken place to justify the operation. Where there are but few entries on either side, closing every other day, or even once a wee*k, will be sufficient. The casli should be proven daily, however. SALES BOOK. This book should contain a record of all goods sold on credit, or on account, first giving the name of customer, terms of sale, and address, followed by an itemized account of the sale. The outside column is footed up daily on each page of the Sales Book, and the amount carried forward to the next page ; and so on to the end of the month, when the final footing, representing total sales for the month, will be posted on the credit side of the Mer- chandise account in the Ledger, thereby constituting the double entry for all the debits that have been made during the month in the several customers' accounts. This book is kept by the entry- clerk, and making the charges thereon is called entering goods. The bills we render must be exact duplicates of the entry on Sales Book. No bill should be made out first and copied on Sales Book, but entered on Sales Book first. All entries on the Sales Book are charges or debits in the indi- vidual amounts, and a credit for the same amounts collectively at the end of the month. In making our entries on Sales Book, we begin by writing the customer's name, not by saying " We have this day sold to the following goods, to wit," as the very fact of the entry being made on this book is evidence that " we have this day sold," etc. ; introductory remarks of this kind being peculiar to the old-fashion Day Book. JOURNAL. A book of original entry containing a record of all transactions that cannot properly be entered in Cash Book or Sales Book, such as purchases on account, allowances for damages or goods re- turned, settlements by note, loss by failure or otherwise, interest A COMMON-SENSE VIEW OF BOOKKEEPING. 55 charges and credits, transferring from one account to another, et ccetera. If we should receive invoices daily from any concern,~~we would keep them on file until the end of each week, and enter them in one amount instead of entering them daily. We would enter date and amount of each in the Journal within the space for descriptive matter, but extend the total amount only into the Credit column, whereby we would have but one amount to post each week instead of six amounts. Another way is to rule special columns in the Journal for the most active accounts, and post only the footing, which would be still greater saving of time and labor in posting. LEDGER. The Ledger is a book of final entry and general reference in fact, the BOOK OF BOOKS in every business ; it is the general re- ceptacle for the main facts connected with each entry through- out all books of original entry, and contains nothing but matter supplied through the channel of posting. It would be decidedly irregular, and probably fatal to a bal- ance, the proof of Double Entry, to make an entry in the Led- ger before it had been previously recorded in one of the books of original entry. If we desire to know how mucli any one owes us, how much we owe any one, or the general standing of any account, we first refer to the account in the Ledger, take the dif- ference between the debit and credit side, then look carefully through all books of original entry for items that may have been entered since posting, and consider them as if posted. The Ledger is closed annually or semi-annually, or as often as we de- sire to know if we have made or lost, or how we stand. If a new partner is admitted into the firm the Ledger will have to be closed, and the profits or losses up to that time adjusted ibe<- tween the former members of the firm. ,". The period of time between each closing of the Ledger is called a season. A Ledger account should never be closed by 56 BOOKKEEPING SIMPLIFIED. underlining during the season, unless it be discontinued not even when it balances by a concurrence of regular entries, as claimed by some theorists ; nor at bottom of the page, when it becomes necessary to transfer it to another page, as claimed by many others : in the latter case, both debit and credit side should be footed up, and the amount of each, not the difference between the two, transferred to the new page. We can then see at a glance what amount of business is represented by any account during the season a fact often necessary to know in settling with sales- men who sell on commission, or in paying a rebate or drawback to a customer. RULING THE LEDGER. The peculiar form of the Ledger gives it three distinct sets or groups of perpendicular red lines. On the extreme left of each page there are two spaces and two lines for date of debit entries, followed by a wider space for descriptive matter. In the middle of the page there are live spaces and six lines which constitute the main group : the first space is for folio of book of original entry, next two spaces are for amount of debit in dollars and cents, the next two spaces are for the month and day on which the credit entries are made. On the extreme right of each page there are three spaces and three lines : first space is for folio of books of original entry, the remaining two spaces are for amount of credit in dollars and cents. It requires two columns, always, for dates and two for amounts ; the difference between the two is, amounts are enclosed by double red lines and dates by single red lines. In ruling Ledger accounts we always begin on that side on which the entries extend farthest down the page. Draw a single red line across amount column, close to the figures on that side, also across amount column on same line on the opposite side, and if there is the space of half a dozen lines or more on the oppo- site side, not used, we also draw on same line a single red line across the column for days on that side, as a basis from which to rule an oblique red line terminating, on last line used, at the folio A COMMON-SENSE VIEW OF BOOKKEEPING. 57 column on that side the object of the oblique line being to prevent the insertion of other amounts and to give the book a neat, business-like finish. We then draw a single red line across each group on the next line, doubling it, by drawing an extra short line, under the amounts only. The oblique line should never terminate, on this line, as is customary with nine tenths of bookkeepers, as it makes the angle too acute to look well. Never rule on a line where there is writing, nor write be- tween lines interline when it can be avoided by use of the next line. CHECK BOOK. All transactions with the Bank are recorded in the Check Book which has no connection with the Ledger. Money deposited in Bank is not paid out, but is regarded as money on hand, the Bank representing another department of our cash-drawer, as it were. No entry is made in the Cash Book of deposits in Bank, but on the stub of Check Book we enter date of deposit, items composing it, and amount. It is not neces- sary to enter on stub of Check Book the name of the party from whom the check was received, as the Cash Book shows that fact; it is strange that nine bookkeepers out of ten enter the name of every check on Check Book, thereby giving themselves twice the work without accomplishing any object whatever. We add the amount of each deposit to the last balance in Bank at time of making it, and deduct amount of each check immediately after drawing it not wait until all the checks on that page are drawn, and deduct the total. We can then see at a glance what our balance is in bank subject to draft. The stub of Check Book from which each check is detached should show to whom the check was given, for what account, amount, number and date of check, and should be filled in with these facts before drawing check. If a check is made payable to a personal order, that person will have to be identified at the Bank before he can draw the money ; he can negotiate it, however, by endorsing it. If made 58 BOOKKEEPING SIMPLIFIED. payable to Bearer, Currency, or Cash, anybody presenting it would receive the money thereon. If such a check be lost, therefore, the payment can be stopped by reporting the facts to the paying teller at Bank, provided you make the discovery in time to get to the Bank before the check has been presented and paid. When a check is certified, it is charged to account of the party who draws it, and the amount held by the Bank until the certified check is presented. If the party decide not to use the check after having it certi- fied, the amount will be restored to their credit in the form of a deposit, the certified check being returned to the Bank for can- cellation. The Bank Book described below is an exact counterpart of Check Book, the latter being our version and the former Bank's statement of the same facts. BANK BOOK. This is a small pass-book handed in to the receiving teller at the Bank with each deposit, and returned to us by him after he enters therein the date and amount of deposit, also his initial, thereby constituting our receipt against the Bank for that amount of money. This book should be left with the Bank on the last day of each month to be balanced, when returned to us, we make a recapitulation in red ink on stub of our Check Book, accounting for the difference that always exists between our balance as indi- cated on stub of Check Book and the Bank balance as per pass- book ; the latter, as a rule, always being the greater, inasmuch as we have likely drawn and deducted from our balance many checks that have never been presented at the bank, and therefore not paid and charged to our account. If the amount of checks thus shown to be outstanding will not equal the difference be- tween our account and Bank account, the difference must be fer- reted out and the two accounts made to agree. The first step in that direction is to arrange in numerical order A COMMON-SENSE VIEW OF BOOKKEEPING. 59 tke vouchers (checks paid and cancelled) returned to us. When there is one missing we refer to the number on stub of Check Book corresponding to the missing number, and if not marked" void, we make a memorandum on a piece of paper, which will be called correction sheet for reference hereafter, showing the number of check and amount opposite ; proceed in the same way until all the vouchers have been thus gone through, which will show all the checks outstanding and deducted from our balance up to the last deposit by which the Bankers gave us credit before reaching their balance. 2. Then go over the vouchers again, comparing the amount of each with the amount on Check Book according to number, check- ing the latter amount with colored pencil (blue or red) until all the vouchers have been thus examined ; any discrepancy arising between the vouchers and stub will be noted (added or sub- tracted) on correction sheet. 3. Go through the vouchers again, and check on Pass Book any amount corresponding with amount on each voucher until all the vouchers are exhausted a second time ; then look carefully through Pass Book to see if any amount remains unchecked : if so, all such amounts are noted on correction sheet. 4. Compare entries of deposit on left-hand side of Pass Book to our entry of the same deposit on stub of Check Book : any dif- ference arising between the two amounts will also be noted on correction sheet. 5. Examine each operation of addition and subtraction on stub of Check Book, noting on correction sheet any errors discov- ered by this examination. The result of net difference on correc- tion sheet added to our balance will agree with the Bank balance. Our Recapitulation on Check Book will consist of checks out- standing, and all errors discovered according to correction sheet, which will be added to or deducted from our last balance as the case may be and entered on Cash Book so as not to interfere with balancing the cash or the next balance of the Bank account, at which time many of the checks shown to be outstanding by recapitulation will come in with next vouchers ; those still out- standing will appear in the next recapitulation. 6. If, in the first place, our difference should be $50, $100, 60 BOOKKEEPING SIMPLIFIED. or any even amount that has occurred frequently during the month, we might locate the error without checking in the manner indicated, by counting the number of such items charged on Pass Book; also the number of vouchers of equal amounts: if more items of any amount are found on Pass Book than we have vouch, ers for, it will probably locate the difference at once. We require a voucher for the missing item, or for any item not checked according to 3d rule. If, however, we find a voucher for every item, we then count the same kind of items on stub of Check Book ; and if there are more items found on Check Book than are found on Pass Book we will also find the excess of items not checked with colored pencil on stub of Check Book which would be another way of readily locating our difference. RECEIPT BOOK. It is customary to take a receipt in this book for all payments ; it is only necessary, however, to require a receipt for payments made in currency, or by checks payable to bearer, as all checks to order of those we desire to pay must be indorsed by the party before negotiating them, and when thus indorsed and paid by our Bank they are returned to us as vouchers, constituting the party's receipt for the money also. BILLS PAYABLE BOOK. This is an important auxiliary or extra memorandum, peculiarly ruled to show certain facts connected with notes we have given, such as Date of note. In whose favor, Where payable, Time to run, When due, Amounts, and Remarks ; any other facts, such as Number of note and For what account, usually found on ready-made books, being superfluous, as we never have occasion to refer to the number of a note or for what account it was given. After giving out our note we charge the proper account through the Journal, then enter it in Bills Payable Book, according to the facts indicated bv the headings of the several columns. A COMMON-SENSE VIEW OF BOOKKEEPING. 61 The difference between the debit and credit side of Bills Paya- ble account in the Ledger must agree with the total amount o^all items on Bills Payable Book against which there are no remarks. BILLS RECEIVABLE BOOK. This Is also an important auxiliary, kept according to no par- ticular system, nor having any connection with any other book, being designed to show Date of note, By whom drawn, Where payable, Time to run, When due, Amounts and Remarks j differ- ing from Bills Payable only in having By whom drawn substi- tuted for In whose favor : the same superfluous columns are com- mon to both books. Upon receipt of another party's note we pass it to their credit through the Journal, then enter it in Bills Receivable Book according to the headings of the several col- umns, and whenever negotiated or paid we make a note of it in the Remark column. The difference between the debit and credit side of Bills Receivable account in the Ledger must agree with the total of all items against which there are no remarks on the Bills Receivable Book. ACCOUNTS RECEIVABLE BOOK. This very simple but highly important book in every business seems to have been wholly unknown to all other writers on the subject, many of whom evidently never had any business experi- ence in keeping books, but who write altogether from a theoreti- cal standpoint, rehashing what they have read about bookkeeping with slight change and variation. Nowhere throughout the copious pages that have been written on the science of Double Entry bookkeeping, which have passed under the writer's observation, has any reference ever been made to a Book of Accounts Receivable. Next to Bills Receivable and Bills Payable, this is the most important auxiliary. The financier or managing partner of every business has more 62 BOOKKEEPING SIMPLIFIED. frequent recourse to this book than to any other. It enables him to anticipate his dues with mathematical precision for every day during the month, or for every indebtedness that has been con- tracted. He can see at a glance what accounts are also past due and how far past due, and to a certain extent govern his credits thereby ; that is to say, any customer who has not paid promptly will not be entitled to the same line of credit without a satisfac- tory explanation or settlement of past-due bills. The Accounts Receivable Book is of diary form, half a page or more being set apart for each day, the entries therein being made under date of maturity and copied from the Sales Book daily. When a settlement has been made and entered in the proper book it is marked off this book by drawing a red line through the amount, or by writing opposite the amount paid, giving date of payment. See miniature Accounts Receivable Book, page 130. INVOICE BOOK. Formerly this book, in form and ruling like the Sales Book, was regarded as a book of original entry, into which was copied all invoices of goods bought ; latterly it has degenerated into a large-size scrap-book of manilla paper, without ruling, into which is pasted the original invoice serving the same purpose and obviat- ing all possibility of erring in an unnecessary transfer. In fact, the Invoice Book is more cumbersome than useful, and should be thrown aside as rubbish, except in a large business where goods are bought from many firms, in which case it might be regarded as a convenient method of filing invoices for ready refer- ence if supplied with an index. If we buy goods from but few houses we pass their invoices to their credit through the Journal, then fold them in uniform size, and write across one end the name, date, and amount of each, which is called "filing," then put them away in a pigeon-hole in the desk or cabinet made for that purpose : they are then said to be " on file" or " pigeon-holed." If deemed necessary and expedient to use the Invoice Book, treat it as the counterpart of the Sales Book, posting the amount of each bill on the credit side of the account, and the final footing on the debit side of the Mdse. account. A COMMON SENSE VIEW OF BOOKKEEPING. 63 THE SIMPLE VERSUS THE INTRICATE. The object of debiting and crediting accounts is the same now as it was with the origin of double entry, but the manner of doing it is different, and the reason assigned for so doing is as much more lucid now than the old fogy ism of half a century ago as the brightness of the noonday sun is more resplendent than the mild effulgence of lunar light. The burden of the legendary song then was " Journalize every- thing," a rule more honored in the breach than the observance. This old humdrum tune is fast dying out, however, and will soon be as echoless as footfalls upon the boundaries of another world. This book sounds the key-note to a new school-lullaby, as it were, Journalize nothing, sweet cadence of a new anthem resonant with common sense. After learning our classification of accounts on page 28, the sim- plicity of our eight short rules on page 29 must be apparent to all when compared with the following unique but intricate rules copied from a stray leaf from an old work on bookkeeping, which we give verbatim et exem.plum, and which are better calculated to confuse and bewilder than they are to enlighten and make easy: When property of any description enters || goes out it is first carried to the Debit || Credit of the account which represents it. If the person who gives value || receives value has not received, || given, or is not to receive || give hereafter, an equivalent for it, this person cannot be credited || debited since he does not remain a creditor; || debtor; but in double entry it is necessary to oppose to the debtor || creditor item in every account, a creditor; || debtor; we therefore substitute a nominal or impersonal creditor, || debtor, which takes the title most proper to point out the nature and origin of the transaction. 64 Dr. BOOKKEEPING SIMPLIFIED. CASH. Folio. Discount. Mdse. Sunds. Ami. 1885. Jan 1 1 To P. A. Wright. .. Amount invested $1 000 00 1 " T P. Noble . 1000 00 $2000 00 -"" 2,000 ~00~ 2 To Balance 1,718 75 * Mdse Retail sales $25 00 3 6 " Miller Bros " Mdse Bill Jan. 1, $134.85 Retail sales $8 09 37 50 126 76 126 62 76 50 1,908 ~oT 5 R To Balance 1,399 26 " Bills receivable. Discounted at 1st National Bank, @ 6*, the fol- lowing notes: J. C. B. & Co., $131.76; W.C.B. & Co., $195.85- $327.61. Dis. un- expired time. . . 4 15 323 46 323 46 " Mdse Retail sales 42 00 42 00 1,764 72 6 To Balance 1,267 87 44 Mdse Retail sales ... . 45 00 7 8 " Bills payable... Discounted at 1st National Bank, our note of this date at 45 days, $500, at 6# 8 75 496 95 496 95 Mdse Retail sales 47 50 92 50 1 8 1.856 62 To Balance 808 17 14 Mdse Retail sales... 37 50 37 50 9 R "JO Brown &Co Bill this date 13 00 13 00 Amounts carrie i forward 47 15 99 234 50 2.959 858 67 A COMMON-SENSE VIEW OF BOOKKEEPING. 65 CASH. Folio, Discount. Expense. Sunds. Or. Amt. 1885. Jan. 1 2 3 5 6 7 8 2 By office furniture. " Expense .... Safe, $15ty desk, $37.50; chairs, $12; clock, $13; letter - press, $7.50; stove and fixtures, $25... One set of books. Letter-heads w 7 3 00 50 50 25 $245 00 $245 36 1,718 00 25 75 " Balance Bill-heads Pens, $1.50; Ink, $1.25; pencils, 50c Bank, $1,500; drawer, $218.75. 500 00 2,000 00 4 By E. H. E. Wright & Co On a/c ck 500 8 1,399 00 75 9lfi " Expense. Ton of coal 5 3 25 50 00 " Balance Labor housing coal Postage Bank, $1,000; ck., $126.76; draw- er, $272.50 $30 00 "i '66' 25 470 25 00 00 1,908 01 5 10 ByEarlington&Co " Expense " J. Edw. Forth.. " Expense " Balance Bill, Jan. 1, $500. Postal Cards Telegram . . 495 1 1,267 00 85 87 72 On a/c Car fare Expressage .... 20 40 Bank, $980.22; drawer, $287.65. 00 00 '66' 00 00 00 75 50 10 1,000 ' ' 12 20 1,764 10 4 1 '1 By Expense " J.Virgil Wright. " E. H. E. Wright &Co Expressage, pp. . 6 1,042 808 45 00 17 Telegram to Chi- caero On a/c Ck. on a/c, $500; Thos. Jackson, $300; K.C.Wil- son, $200 " Expense " P.A.Wright.... " T. P. Noble " Balance Car fare 4 20 50 50 Freight fromCin. Scrubbing ...... J C bill on file To self Bank, $476.47; drawer. $331.70. 50' 25 100 2,382 1,856 62 3 ByMdse " Expense J. K. P., bill on file 100 00 75 1 doz pencils Amounts carrie Mucilage d forward 30 00 54 05 100 75 6 Dr. BOOKKEEPING SIMPLIFIED. CASH. Folio. Discount. Mdse. Sunds. Amis. 1885. Jan. 9 10 31 1/31 To Amts. brought Mdse forward $15 99 $234 42 50 50 $2,959 47 $858 42 67 50 Retail sales ^ 901 17 6 r 499 100 63 22 40 25 " Miller Bros " W. C. Browning &Co Bill, 5th inst., $76.80; less ex- change 25c . . 76 23 55 85 Bill, 5th inst., $24; less exchange, l.'c " Mdse Retail sales 63 25 662 87 7 11 11 To Balance 578 88 45 87 66 00 ~53~ " Davis & Co " Wm. French.. . . " James Elston.. " Mdse Bill, 5th inst., $57.90 Bill 30th inst 2 89 55 18 15 01 25 40 25 " 30th " Retail sales 45 00 25 385 712 9 3 2 Disct. Dr. to Sunds. Cash " Mdse . Cash " Sunds. Total cash disct.. " retail sales. " receipts 18 88 3,533 sTsli" 78 ^8~ 385 3,533 78 A COMMON-SENSE VIEW OF BOOKKEEPING. 67 Folio. CASH. Cr. Discount. Expense. Sunds. Amis. 1885. Jan. 9 10 31 1/31 4 By Amounts broug " E. H. E. Wright &Co ht forward On a/c $30 00 $54 05 $2,382 300 00 00 $100 300 1 499 75 00 20 22 " Expense " Balance Blotters 25 75 20 1 qt ink Car fare Bank, $476.47; drawer, $22.75.. 3 1 00 50 47 23 00 50 901 17 =^ 50 50 87 11 11 11 10 10 9 3 2 By Johnson & Co. . " Lindsay & Co.. " Expense " Balance Bill, 2d inst. ; $50. " " $25. Porter, one week Office boy. one week . . 70 13 578 10 3 00 50 Bank, $576.87; drawer, $2 9 10 1 00 120 15 20 90 00 00 662 87 90 00 63 53 15 63 By Martin & Brown " Expense Bill, 29th inst., $130; less 1% prompt cash. . . Ad. for boy, in Herald 155 29 527 " J. Edw. Forth.. " J.Virgil Wright " Expense " Balance On a/c Porter, one week Office boy, one week 10 3 9 4 00 50 75 50 25 Expressage, pp. Cartage bill on file Gas bill Bank, $455.97; drawer, $71.66.. 43 97 75 97 75 712 Sunds. Dr. to Disc.. Expense " Cash. Sunds. " Cash. Balance Total cash dis.. . Total cash ex- pense 60 3,006 527 Total disburse ments 3,006 15 Carried to Feb. 2. 3,533 78 68 Dr. BOOKKEEPING SIMPLIFIED. CASH. Folio. Discount. Mdse. Sunds. Ami*. 1885. Feb To Balance from Jan. 31 $527 fit 8 " Bills receivable. " Mdse Discounted at 1st National Bank Davis & Co.'s note, due May 16, $376.20, @, 6& 103 days.... Retail sales $6 45 37 $369 75 3 42 00 4 14 it 4( 44 45 00 5 tt 44 41 44 47 50 7 6 " Miller & Bros. *' Mdse Bill, Jan. 29, $190.40 Retail sales 11 42 35 00 178 98 548 207 00 1,283 36 9 To Balance 76 91 8 " Bills payable... Discounted at 1st National Bank our note, 30 days, $500, @ 2 50 497 50 " Mdse Retail sales 45 00 " Bills receivable. Miller Bros. 'note, due 13th, de- 77 30 14 " Mdse 47 50 92 50 28 6 " Miller & Bros . . Compromised at 50* $78 80 39 40 8 " Bills receivable. Received from W. C. B. & Co., to be applied in payment of their note, due May 4 , for $211 22 100 00 714 20 ^ 882 91 1/28 9 p Disct. Dr. to Sunds. Cash " Mdse Total cash Disct. " retail sales 20 37 299 50 299 50 2 , 44 Q , 1 562 43 1 562 43 Jan 31 527 63 2.090 06 A COMMON-SENSE VIEW OF BOOKKEEPING. 69 Folio. CASH. Or. Discount. Expense. Sunds. Amts. 1885. Feb. 2 3 4 5 6 7 9 14 21 28 1/28 3 10 8 11 10 8 By Mdse J. K. P., bill on file $50 25 500 95 15 500 00 00 00 00 00 00 $22 1,185 76 15 00 21 " Expense " J. Ed w. Forth.. " Expense " Bills payable... " Expense " J. K. Ross Dispatch to Cine. Car fare On a/c 25 15 Expressage 50 Our note due this day Freight from Chicago $3 3 "'i' 50 00 '66* 25 Postage '66' Bill, Jan. 2, $100.. Postal cards $5 " J. Virgil Wright " Expense " Bills payable... ' ' Balance Charity On a/c Office boy, one week 3 10 50 00 Porter Our note due 8th. Bank, $4.70; drawer, $71.51.. 5 3 10 13 75 50 00 50 78 200 50 180 80 00 00 00 1,283 36 6 8 1 8 By Expense " Miller &Bros.. " Expense " Bills payable... " Expense Coal, $5.25, la- bor 50c 508 46 327 80 25 86 TT Note due 13th, $77.30; protest- ed fees, $1.50. Office boy, one week .... Porter, one week. Note due to-day.. Porter, $10; office boy, $3.50.. ... :: " P. A. Wright... " Bills payable... " Expense " Balance Paid T. C D. & Son on our note due May 5, for $480 Porter, $10; office boy, $3.50 Bank, $122.20; drawer, $105.66; check, $100 .... 13 50 68 lb~ 68 40 882 9 3 2 Sunds. Dr. to Dis.. Expense " Cash. Sunds. ' Cash. Balance carried Total Cash Disct. " "Expense " Dis- bursements.... 5 00 1,762 327 20 86 ^T 1,762 20 to March 2. .. . 2,090 1 I 70 BOOKKEEPING SIMPLIFIED. CASH ENTRIES ELUCIDATED. DEBIT. January 1, 1885. First two entries show the amount of cash in checks invested in business by P. A. Wright and T. P. Noble, who have formed a copartnership, under the firm-name and style of P. A. Wright & Co., for the purpose of carrying on a whole- sale and retail mercantile business, each to receive one half the gains or sustain one half the losses, according to copartnership agreement, filed with the private papers of each partner, no record of which is made on the books. The amounts are entered first in the Sundries column, from which they are posted at the partners' credit in the Ledger. Upon closing the cash for the day the amount of receipts are extended into the outside column representing the daily cash. See remarks on Two Cash Books, page 53. January 2. The balance shows amount of cash on hand at the beginning of the second day. Next entry is for retail sales repre- senting the total amount of cash received during the day from all the retail salesmen, according to memorandums of sale turned in by each whenever a sale was made, and kept on file or in a pigeon- hole until the close of the day, when they are all added together and entered in one amount to the credit of Merchandise in the Merchandise column, the footing of which at the end of the month will be posted on the credit side of Merchandise account in the Ledger. January 3. Miller Bros, pay by check their bill of January 1, less 6 per cent discount. The net amount of cash is extended into the Sundries column and the discount in the special column for discounts, both amounts being posted at the same time in separate items on the credit side of the customer's account in the Ledger. Next entry is for retail sales, as before explained. We now close the Cash Book for the two days, not having sufficient number of entries on the second day to justify the operation. We add each column separately and extend the amount into the outside A COMMON-SENSE VIEW OF BOOKKEEPING. 71 column, on the last line used in each column. As there is but one amount in the Sundries column we extend it alone. January 5. The balance is brought down as usual. First money received was for two notes discounted at our Bank, the net amount of cash and discount being disposed of as in the case of Miller Bros., and a memorandum made on the Check Book charging the Bank with the cash. All checks received from any source are also charged to the Bank daily on Check Book (page 118). Enter retail sales and close as before. January 6. Enter retail sales. January 7. "We borrow $500 from our Bank on our note for that amount for 45 days, receiving only $196.25 in cash, the dis- count being $3.75. January 8. Only receipts being for retail sales. January 9. J. C. Brown & Co. give check on the spot for bill of same date without discount. This day's transactions being re- corded on part of two pages, we extend the receipts into the out- side column on first page, just as if the day's cash was to be closed. "We now rule across all the columns and carry the footing of each forward to next page in its respective column. January 10. "We have received returns in a check for draft made on Miller Bros, for net bill which they paid in full, but the Bank through which we drew deducted 25c. exchange as their fee for collecting it. "W. C. Browning & Co. paid sight draft also, and the Bank de- ducted 15c. exchange. The two items of exchange are charged to an Exchange account through the Journal, from which they are posted on the credit side of the respective accounts on which they occurred. January 31. Davis & Co. pay in currency their bill of 5th inst., less 5 per cent discount. William French and James Elstort also pay in currency their bills of previous day net. "We are now at the end of the month and close all the columns. Rule a single red line across Discount column only. Cashiers as a unit rule across all the columns on this line and make all their additions on same line ; then by an irregular process recapitulate the footings in order to get them under one an- other. The superiority of this method of closing the Cash 72 BOOKKEEPING SIMPLIFIED. Book, with a system of columns, over the usual way will be appre- ciated when seen, and adopted without argument. Add the column, and explain the footing in form of Journal entry on the left. On the next line we rule a single red line across Merchandise column, bring down the total footing, and extend it into the Sun- dries column; it then becomes an item of Sundries, and is posted as we have before stated. On the next line we rule a single red line across Sundries column, the footing of which represents CASH, that is, the total amount of money received during the month. We extend this item into the outside column, balance and close it for the month by drawing double red lines across the entire page from Date column. By this ingenious and scientific way of dropping one line for each column we can explain each footing, which explanation will refer to all the figures on that line, and give the book a business- like finish, pretty to be seen. CREDIT SIDE. January 1. On entering into business it becomes necessary to lay in a supply of furniture for the office. We buy for cash such articles as are enumerated in first entry on this side of Cash Book, and charge them to OFFICE FURNITURE account. We then buy for cash a set of books and necessary articles of desk ware, all of which we charge to expense by entering the amounts in the Expense column. See remarks on Special Columns, page 52. We kept the various items of office furniture all with- in the space for descriptive matter until we arrived at the total before extending it : the reason for this is we have to post every item found in the Sundries column, therefore consolidate as many items as possible into one amount. With the Expense column we post only the footing, hence we extend each line of items separately. Being at the end of the day, we prove the cash, close in red ink, and balance the outside column only, leaving the main columns open to close at the end of the month. The proof of the cash will be finding enough money to equal the balance between the debit and credit side by counting the money in the drawer and adding the amount to the balance in A COMMON-SENSE VIEW OF BOOKKEEPING. 73 bank as per Check Book, making a memorandum of each in con- nection with the closing entry on Cash Book to show at a glance just what shape the cash is in. January 2. We pay E. H. E. Wright '& Co. $500 on account by check. Buy a ton of coal for cash, pay for housing it, buy postage, and charge all to Expense. Close as before, always mak- ing a memorandum showing amount in Bank, also in drawer. January 5. We pay by check Earlington & Co. their bill 1st instant, less 6 per cent discount. Extending net amount of cash into the Sundries column and the amount of discount in its special col- umn, both of which are posted in separate items, but in one amount on the debit side of Earlington & Co.'s account in the Ledger. Buy postal-cards, pay car-fare and expressage, all of which charge to expense. Give J. Edward Forth, salesman, $25 on a/c. January 6. J. Virgil Wright, bookkeeper, takes $10 on a/c, and charges himself. Pay and charge expense items. January 7. We send E. H. E. Wright & Co. check for $500 on a/c, also pay by check for their a/c T. Jackson $300, K. C. Wilson $200. Enter each item separately within the space for explanatory matter and extend total into Sundries column, so as to have one item to post instead of three by charging each separately. Pay little items of expense. Hand the partners whatever they require, charging the amount to their respective accounts. January 8. Buy job lot of collars from J. K. Pyne and give him currency therefor, as we have no account with him, charge the amount to Merchandise. January 9. E. H. E. Wright & Co. having drawn on us at sight for $300, we give check to the party presenting draft and charge the amount to a/c E. H. E. W. & Co. January 10. Pay Lindsay & Co., also Johnson & Co., in cur- rency the amount of their bills of 3d instant, less 6 per cent dis- count. Pay porter and office-boy one week's wages and charge to expense. See remarks on accounts with employees J. V. Wright and J. Edward Forth, page 110. 74 BOOKKEEPING SIMPLIFIED. January 31. Pay by check Martin & Brown's bill 29th in- stant, less 7 per cent for spot cash. Advertise for boy, pay cartman's bill for cartage during the month, also pay monthly gas-bill, porter and office-boy one week's wages, and charge all to Expense. Being the last day of the month we close all the special and main columns, on the same principle as explained in connection with, the debit side, explaining each footing. SECOND MONTH. DEBIT. February 2. We begin on new page, bringing forward balance- from last month, entering it in the outside column, being money on hand and not received this month, and the main columns being designed for money received during the month only. We discount at our bank Davis & Co.'s note, $376.20. Enter retail sales on each day during the week. Assume that Miller Bros, pay by check their bill 29th ultimo, $190.40, less 6 per cent. This month we close the cash weekly instead of daily to avoid repetition of the same principle. The main principle to be ex- emplified is the second monthly closing. February 9. Borrow $500 from our Bank on our note. Deposit for collection Miller Bros.' note due on the 13th.* Assuming it will be paid, we enter it as cash received, and charge the bank with the amount on Check Book. February 28. Assume that Miller Bros, fail, and pay 50# of their indebtedness. Assume that W. C. Browning & Co. remit $100, to be applied toward payment of their note due May 4. Being at the end of the month, we close the several columns same as last month, to get monthly results, extend the total into * The amount being small, we will collect through our Bank instead of for- eign Bank. A COMMON-SENSE VIEW OF BOOKKEEPING. 75 outside column and bring down the balance, in red ink, that was brought from January 31st, which added to the total receipts will show the total amount of cash handled during the month. CREDIT. February 2. Buy another job lot of collars from J. K. Pyne for cash. February 3. Hand J. Edward Forth $25 on a/c. February 4. Pay note due to-day, and charge the amount to Bills Payable. Deduct from Bank account, it being paid by our Bank. February 6. Pay J. K. Ross's bill 2d ultimo, less 5 per cent discount. February 7. J. Yirgil Wright takes $15, and charges same to his a/c. (Pay porter, office-boy, weekly ; also various items of expense daily.) Pay note due to-day, deduct the amount from Bank account on Check Book and charge it to Bills Payable. February 9. Buy coal, etc. February 14. Charge Miller & Bros, amount of their note, $77.- 30, previously entered as cash, with additional item of $1.50 for protest fees, as it was returned protested. Deduct $77.30 from Bank account, the $1.50 being paid out of the drawer and the only actual money that passed hands. February 21. Pay note due to-day, deduct from Bank a/c, and charge Bills Payable, as before. Give P. A. Wright $50, and charge his combined capital and personal accounts. February 28. Remit check for $180 to T. C. Davis & Co., to be applied toward payment of our note held by them, due May 5, for $480. Being at the end of the month, close same as last month. 76 BOOKKEEPING SIMPLIFIED. OFFICE ROUTINE. Each day's work begins upon opening the morning mail. The Manager or Proprietor examines his correspondence, and puts the machinery in motion by distributing the work among the clerks. The letters containing orders are turned over to the Order-clerk, who copies them in the Order-book, numbering each with a colored pencil, which should always be kept on every clerk's desk, then files them away temporarily, for convenient reference. The Order-book is then turned over to the Stock-clerk, who selects from the goods in Stock those called for, and has them carried to the Entry or Packing-room, where they are charged up on the Sales-book, then packed in cases for shipment. The bills are then made from the entry on Sales-book, after which it is returned to the Book- keeper's desk. The letters containing remittances of cash or checks, are turned over to the Book-keeper, who compares the amount of remittances to his Ledger accounts; and, if correct, he so en- dorses them, and passes them to the Cashier, who en- ters them in the C. B., then files them temporarily for reference. All papers are filed permanently at the end of the month, by the office boy. The Cash-book is also returned to the Book- keeper's desk. The letters containing notes or complaints are attended to by the Book-keeper, who also attends to that part of the corre- spondence relating to settlements, sends receipts for all re- mittances, and statements explaining any discrepancy that may arise, wherein his account does not agree with that of the cus- tomer. The Proprietor or Manager attends to the general corre- spondence relating to orders, new contracts, opening accounts with new customers, looking up their reference, investigating their financial rating, directing travelling salesmen in their routes, and seeing that they are kept supplied with proper line of samples, etc. See OFFICE ROUTINE ILLUSTRATED, on pages 241 and 242; also Chart 243 and 244. A COMMON-SENSE VIEW OF BOOKKEEPING. 77 IT is not the peculiarities in the arrangement of the matter contained in this book that designates it as a JOURNAL, as that is the name of any blank-book similarly ruled. The Cash- book is also a Journal, but of the casli transactions only. The Sales-book is a journal of the sales only, and being special jour- nals they are called by the name indicative of the special purpose for which each is used. The book we call JOURNAL, being used! as a general record, cannot be designated by any special name ; hence it is not otherwise named. It is usually ruled with two double columns on the right-hand side of the page, one being for debit amounts and the other for credit amounts, both of which are understood to be Sundries columns. There is also a double column on the left-hand side of the page for dates (months and days). When there are more than two double columns used for amounts they are introduced for special purposes, as will be indi- cated by the headings of each. In our Journal will be found two special columns, Mdse. Dr., and E. II. E. W. & Co., Cr. The former will contain all items of Mdse., received from any source. The latter will contain the amount of each bill bought of E. IL E. Wright & Co. only, who are supposed to be our principal creditors and from whom we would receive more goods than from any other firm, and for that reason we give them a special column. The various amounts found in the special columns will not be posted but passed and checked thus ( \/ ), showing they were passed purposely and will be reconsidered at the end of the month, in the final footing of each column which will be posted. We would have as many special columns, therefore, as we have very active accounts, and if we have more such accounts than the space in the Journal would admit of special columns we would give the most active the special columns and enter the others in the Sundries column. 78 BOOKKEEPING SIMPLIFIED. The limited number of items found in our special columns would not be enough to justify their use, but they serve to illus- trate the idea as to how they are used and demonstrate their great advantage in a large business. Many years ago we met with a four-column journal, in a large business, the peculiarity of which was that the debit columns were on the left of the page and the credit columns were on the right, the accounts intervening. It seemed to be an ingenious arrange- ment of the matter, but if not altogether impracticable it was de- cidedly awkward, to say the least, in closing them at the end of the month, and for that reason we discontinued the book and in- troduced a Journal properly ruled with the columns all on the right. Several years afterwards a publication on bookkeeping appeared in which the pseudo-author introduced the four-column Journal of the kind above alluded to, that is, the debits on the left and the credits on the right, claiming originality of the idea, when in fact it had been conceived, materialized, and abandoned by some- body else many years before, and met with and repudiated by us also long before it appeared in the publication alluded to in which that is made the leading feature. The dates of entries on our Journal appear in the middle of the page, and the Ledger folios on the left, in the column originally designed for dates. Every Journal entry explains itself ; that is, after each appears a recital of the facts as they occurred, thereby constituting what may be termed the Day-book entry. It would be impracticable to post from that arrangement of matter ; hence it must be resolved into the foregoing form, or in other words journalized. In busi- ness methods of book-keeping, therefore, the Journal entry is made first, followed by the day-book entry, combining the two into one. All Journal entries could be made according to our FIRST FORM. The object of the other three forms is to combine as many items as possible into one, and thereby save posting. The arrangement of blank lines in our FOURTH FORM would admit of four different combinations like the FIRST FORM, which would make eight amounts to be posted instead of four. A COMMON-SENSE VIEW OF BOOKKEEPING. 79 JOURNAL FOR JANUARY, 1885. Mdse. Dr. E. H. E. W. & Co. Cr. Dr. Sunds. Cr Mdse Dr To Sunds $2,000 00 *> To E. H. E. Wright & Co " Earlington & Co $1,000 00 $500 00 5 " Sandiford & Co As per bill on file, Which carries with it the idea that the goods have been purchased, otherwise the bills would not be filed, but thrown away. 2. 50C 00 8 7 '7 Bills Receivable. Dr. To Sunds To J. C. Brown & Co Received their note dated 1st inst., at 60 days, in settlement of bill same date. $137.25, less 4% dis- count, $5.49 = $131.76. To W. C. Browning & Co Received their note dated 1st inst.. at 90 days, in settlement of bill same date, $201 90, less 3% discount, $6.05 = $195 85. We have made a separate entry for the discount (see below), although *il might have been incorporated in this entry, which would have made it " Sundries Dr. To Sundries." i $327 61 131 195 76 85 ^ 7 Discount. Dr. To Sunds To J C Brown & Co 11 54 g 40 Allowed them 4% discount on bill Jany 1st . $137 25 7 To W. C. Browning & Co. ... Allowed them 3$ discount on billJany. 1st $201 90 6 05 2 11 Mdse. Dr. To Sunds To J. K. ROSS& Co " Johnson & Co 675 00 100 50 00 00 " T. C. Davis & Son. 500 00 " Lindsay & Co 25 00 As per bills of this date on file. 8 ^ Sundries. Dr. To Bills Payable Sandiford & Co 500 00 980 00 4 Gave them our note at 30 days, from 1st inst., to balance a/c. T. C. Davis & Son Gave them our note at 4 mos. from 2d inst.. in settlement of bill, $500 less 4fc dis. $20 = $480. r 480 00 4 T. C. Davies& Son. Dr 9 To Discount. 20 00 Allowed us 4% dis. on bill Jany. 2, $500 = $20. 20 00 9 6 Exchange. Dr. To Sunds To Miller Bros 40 25 7 " W. C. Browning & Co. ... Allowed them exchange on collec- tions by draft. See C. B., folio 2. 15 Amounts carried forward $2.675 00 $1,000 00 $1,339 55 $3,014 f>5 80 BOOKKEEPING SIMPLIFIED. JOURNAL FOR JANUARY, 1885 Continued. Mdse. Dr. E. H. E. W. & Co. Or. Dr. Sunds. Cr. 10 Amounts brought forward Mdse Dr $2,675 R/V> 00 $1,000 00 $1,339 55 $3,014 55- To E. H. E. Wright & Co As per bill on file. 500 00 8 Bills Receivable. Dr To Miller Bros 77 30 77 30. G Received their note at 30 days for net, bill of this date. 23 X. Sunds Dr To Sunds ... Bills Receivable 657 24 Discount H 71 To Davis & Co . . . 376 20 Received their note at 4 mos. from Jany. 15th; average date of bills Jany. 1st and 19th, in settlement of those bills. To J. C. Brown & Co Received their note at 60 days from Jany. 19th; average date of bills Jany. 9th and 23d, $292.75, to set- tle the same, less 4% disc. $11.71 = $281.04. In posting Davis & Co.'s credit we say " By Sunds," which would indicate they were credited by two accounts, when, in fact, they are credited by " Bills Rec'd " only. It is necessary to say " By Sunds." to enable us to retrace the matter from the Ledger to this entry. oo 292 75 4 E. H. E. Wright & Co. Dr To Bills Receivable 281 04 281 04 Transferred to them on a/c J. C. Brown & Co.'s note due Mar. 23d. 23 Mdse Dr To Sunds 1 500 00 5 To E. H. E. Wright & Co. ... " Sandiford & Co 1,000 00 1 RAA 00 As per bills of this date on file. 20 4 8 E. H. E. Wright & Co. Dr.. . To Bills Payable Their draft on us at 20 days 1 sight, which we this day accepted on a/c. OA 200 00 200 00 Mdse Dr to Sunds 225 00 j1 To W F Saxe & Co . . 95 00 tl ' ' Martin & Brown 130 00 As per bills on file this date. Amounts carried forward . . . $4,900 00 $2,500 00 ! $2,566 00 $4,966 84 A COMMON-SENSE VIEW OF BOOKKEEPING. JOURNAL FOR JANUARY, 81 Mdse. Dr. E. H. E. W. & Co. Cr. Dr. Sunds. Cr. Amount brought forward .. . j $4,900 00 $2,500 00 $2,5G6 8*1 $4,966 84 5 Mdse. Dr To Sunds ToE H. E. Wright & Co.... Earlingion & Co... . Jany. 23d $400 25th 200 1,750 00 1,000 00 750 00 " 30th 150 $750 Goods purchased on a/c as per bills on file. The three bills from I arlington & Co. are all supposed to have come lo our atten- tion at i he same time ; the date and amount of each must appear in the Journal entry, but only the total in the Ledger. Ol 7 g Sunds. Dr. To W. C. Browning & Co. Bills Receivable 211 22 217 75 i) Discount 6 53 Our draft on them at 90 days 1 sight, which they this day accepted in payment of bill 28th inst $217 75 Less '&% discount . . 6 53 31 3 10 10 Expense. Dr. To Sundries.. To J . Edward Forth " J. Virgil Wright 400 00 125 jot 00 no 10 For services in Jany. as per agree- ment. To A. J. Sheldon Rent of store in Jany. as per lease.. 150 00 Mdse. Dr. To Sunds. (total purch's). E. H. E. W. & Co., Cr. by Mdse. (total amount bought of them).. $6,650 00 $3,500 ~00~ 6,650 00 $3,500 00 1 $9,834 59 $9,834 59i JOURNAL FOR FEBRUARY, 1885. Mdse. Dr To Bills Payable i Our note at 30 days, in favor of J. K. Pane, to settle his bill on file 14 Miller&Bros. Dr To Interest j 6# interest for 30 days on renewal of their note protested for non-payment, $77.30; including protest fees, $1.50 -14 Bills Receivable. Dr To Miller & Bros Received their note this date at 30 days, in renewal of note pro- tested, $77.30, including protest fees, $1 50, and 30 days in- terest @, 6$ = .40, for time new note has to run $250 79 00 40 $250 79 00> 40 BOOKKEEPING SIMPLIFIED. JOURNAL FOR FEBRUARY, Continued. Bills Payable Dr 1 9H 3 To Interest . . . 1 98 6$ interest on $180 (ain't paid on our note due May 5th, for $480) for 66 days unexpired time. no 6 Miller & Bros Dr 79 SO & To Bills Receivable 79 20 Returned to them their note due March 19th, $79.20, the ain't having been included in their settlement at 40 cents on the dollar. OQ % Interest Dr 2 81 To E H E Wright & Co 2 81 Allowed them 6$ int. for unexpired time, 60 days, on J. C. Brown & Co.'s note, $281.04, due Mar. 24, which we transferred to them on a/c, Jany. 23. OQ >o 1 08 O To Bills Receivable 1 08 Allowed W. C. Browning Qf on $100 paid by them on their note due May 4, for $211.22, 65 days before maturity. 00 tfl $39 80 6 To Miller & Bros $39 80 50$ of their account, $79.20, lost by their failure. 8 q Mdse Dr 26 00 To Davis & Co 26 00 2 doz. No. 4 Shirts returned by them, not being equal to sample. 28 fi Expense Dr To Sunds 400 00 ~lft To J Edward Forth ... 125 00 10 " J Virgil Wright 125 00 For services in Febv as per agreement 1ft To A J Sheldon 150 00 Rent of store for Feby as per lease A COMMON-SENSE VIEW OF BOOKKEEPING. 83 This book is peculiar to the mercantile business and is some- times called the Day-book ; it is by no means the kind of day- book used in our so-called business colleges, or as used in the old style of bookkeeping of long ago, which contained a history of all business transactions, and which necessitated the intermedi- ate book called JOURNAL, into which the matter was rearranged under ledger titles, a process then known as journalizing, and which is still the usual acceptation of the meaning, but not ours, as will appear in our preface. It will be observed that the Sales- book is the principal book of charges against our customers. Any other kind of business may also have a principal book of charges, the name of which would be suggested by the nature of the business, or possibly be called THE BLOTTER, and would be managed the same as the SALES-BOOK, from which the amount of each charge is posted directly into the Ledger to the debit side of the customer's account, and the totals of all the amounts at the end of the month posted on the credit side of whatever account represented the business. The figures on the left-hand side of the page in our Sales-book indicate the Ledger pages to which the matter has been transferred and are, therefore, our post-mark or the evidence that we have posted. If there is a great deal of posting to be done, and we are not familiar with the exact loca- tion of the account on the Ledger, we first place opposite each name on the SALES-BOOK the Ledger-page, which is ascertained from the Ledger-index before making any transfers ; then, after transfering each or posting, it becomes necessary to check each account thus |/, showing it has been posted : those not checked will, of course, be understood as still to be posted, and indicate which we are to begin with upon resuming that operation, which for any reason may have been discontinued before finishing. The 84 BOOKKEEPING SIMPLIFIED. figures in the middle of the page dividing the line that is drawn between each entry are the dates of entry. The customer's name and the terms of sale alone should be written on the first line, and the address on the next line, begin- ning about the middle of the page. This would prevent unneces- sary crowding of the matter, at the same time adding to the neat- -rtess of the manuscript. By the terms is meant the conditions of the sale in relation to time of payment and discount, which are usually stated thus : 6$ 10 days, 5$ 30 days, 4$ 60 days, 3^90 days, or 4 mos. net, meaning that the customer sold on 5$ 30 days will be required to pay the bill at the expiration of the 30 days, less 5^ of the amount, which would be an inducement to make him pay promptly. The penalty for not paying would be forfeiture of the discount. The customer sold on 4:% 60 days has the advantage in time over the 30-days cus- tomer, but no advantage in discount being allowed only 4^, but required to pay in the time specified 60 days he can pay at the expiration of 30 days if he prefers, and thereby avail himself of the 30-day discount of 5% ; and so on with the other customers. Any customer sold on 4 mos. net would have great advantage in time, but would be entitled to no discount if he took full time. The time- would be determined by the customer's financial rating; the more capital he has, the longer time would be given him, and, as a rule, the quicker he would pay, availing himself of the greatest discount. Any one paying within 10 days would be en- titled to $% discount. If, by oversight or otherwise, a 30-days customer's account is permitted to run 60 days he would be en- titled to 4^ discount, same as a regular 60-days customer, forfeit- ing \% for each 30 days until 4 mos., when his account would be- come net, that is, subject to no discount. After 4 mos., any ac- count would begin to draw interest at % per annum until settled. A few days past maturity would make no difference in the discount until after 15 days, when one half of one per cent would be forfeited. With a good customer, however, we could not af- ford to be particular, and if he deducted full discount 20 days after his account was due it would not be questioned ; in fact, any small claim made by a good customer would be allowed and credited in his account, rather than incur the risk of offending A COMMON-SENSE VIEW OF BOOKKEEPING. 85 him, and thereby losing his trade. Such matters as these are not left to the bookkeeper, but would be adjusted by the financier &r managing partner, except when, in the bookkeeper's judgment, they seem to be just, in which case they are not brought to the attention of the financier. It requires sound judgment, there- fore, to be a good bookkeeper and know how to deal with cus- tomers without giving offence. When bills are dated ahead the discount is reckoned from the future date, which would appear in connection with the terms and therefore be part of the terms. For instance, goods delivered 1st with the bill dated 30 days ahead, the terms would be stated, 5$ 30 days, Aug. 1^, which would mean the bill would be payable Sept. 1st, less 5$, and so on with the various other terms as before explained. It would virtually be 5$ off at the expiration of 60 days from regular date of bill, or the date the delivery was made. The object of dating bills ahead is to induce buyers to place their order for goods during the dull season, or before their regular time for laying in their supply of seasonable goods, giving them the advantage of time between the two dates in which to dispose of their wares. TRANSCRIPT. In a large business where there are many entry-clerks, two Sales- books are required for each, which are used on alternate days, and which, of course, would necessitate many Sales-books. It would not be convenient to post from so many books ; therefore a Trans- script of the dates, names, addresses, terms, and amounts are made from each Sales-book into a book called Transcript, which is spec- ially ruled with columns to show those facts, also columns for amount of sales for each department, and from which the sales are posted. The object of having two Sales-books for each entrv- clerk is, that while one is being used for entering goods the other, which was used on the previous day, can be used for making tke transcript. ^ 86 BOOKKEEPING SIMPLIFIED. THURSDAY, JAN. ist, 1885. 6 Miller Bros., 5#, 30 d. St. Louis, Mo. 3 Doz. No. 1 Shirts $10 00 30 00 3 "2 " " 11 00 33 00 2 "3 " " 12 00 24 00 1 " 4 " 13 00 12 Collars " 1 60 19 20 4 Cuffs " 3 60 14 40 Case and cartage. . . . 1 25 $134 85 6 J. C. Brown & Co. . 4& 60 d. Chicago, 111. 2| Doz. No 1 Shirts @ $10 00 25 00 3 " 2 " 11 00 33 00 2 " 3 " 1200 24 00 1 "4 " 13 00 $ " 5 " 1400 7 00 10 Collars 160 16 00 5 , Cuffs . 3 60 18 00 Case and cartage 1 25 137 25 7 W. C. Browning & Co., 3#, 90 d. Detroit. 4 Doz. No 1 Shirts . . $10 00 40 00 4 "2 " ' 11 00 44 00 2 " 3 " ' 1200 24 00 2 " 4 " .... '1300 26 00 2 "5 " ' 14 00 28 00 15 Collars ' 160 24 00 4 Cuffs ' 3 60 14 40 Case and cartage 1 50 201 90 7 Davis & Co., 4 m. net. Cincinnati. 31- Doz. No. 1 Shirts @ $10 00 35 00 3 "2 " 11 00 33 00 2 " 3 " 1200 24 00 2 " 4 " ... 1300 26 00 2 " 5 " 1400 28 00 12 Collars 1 60 19 ?,0 Case and cartage 1 25 166 45. 7 W. C. Browning & Co., Net, 30 d. Detroit. 24 00 24 00 7 Davis & Co., 4 m. net. Cincinnati, 3 Doz No 6 Shirts @ $14 50 43 50 4 " Cuffs " 360 14 40 57 90 Amount carried forward 722 35 A COMMON-SENSE VIEW OF BOOKKEEPING. 8T 7 WEDNESDAY, JAN. 7th, 1885. Amount brought forward $722 35 6 Miller Bros., 5#, 30 d. St. Louis. 2 Doz. No. 5 Shirts @ $14 00 $28 00 2 " " 6 " .... " 1450 29 00 5 " Collars.. " 160 8 00 3 " Cuffs " 3.60 10 HO Case and cartage Q 1 00 76 80> 7 Davis & Co., Net, 30 d. Cincinnati. 1 Doz Al Shirts to order 24 00 " " " @ $26 00 13 00 37 00 6 J. C. Brown & Co., Net, 30 d. Chicago. i Doz.- Shirts to order @ $26 00 13 oo 13 00 6 J. C. Brown & Co., 4#, 60 d. Chicago. 3 Doz No 6 Shirts @ $14 50 43 50 2 " "7 " " 1500 RO 00 4 " Cuffs " 350 14 00 Case and cartage in 75 88 2fr 6 Miller Bros., Net, 30 d. St. Louis. 1 Doz Al Shirts to order 24 00 1 A2 " " $2300 34 50 ^ " "2600 1Q 00 1 " Collars I 00 1 Cuffs 3 90 77 Ort., 10 7 Davis & Co. , 4 mos. Cincinnati. 5 Doz No 1 Shirts ... $10 00 Kft no 5 "2 " " 11 00 KK 00 5 "3 " " 1200 fiO 00 15 " Collars " 150 22 50 6 " Cuffs " 350 21 00 Case and cartage 03 1 25 209 75.- 6 J. C. Brown & Co., 4%, 60 d. Chicago. 6 Doz No 1 Shirts @ $10 00 60 00 4 " 2 " " 11 00 44 00 5 " " 3 " " 12 00 60 00 3 " 4 " " 1300 39 00 Case and cartage. . . . 1 50 204 50 Amount carried forward 1 428 Qtf 38 BOOKKEEPING SIMPLIFIED. WEDNESDAY, JAN. 28th, 1885. Amount brought forward . . $1 428 95 7 W. C. Browning & Co., 3, 90 d. Detroit. 5Doz. No 1 Shirts $10 00 $50 00 5 " " 3 " ... " 1200 60 00 4 " " 5 " " 14 00 56 00 15 " Collars " 150 22 50 8 " Cuffs . " 3 50 28 00 Case and cartage M 1 25 217 75 '6 Miller Bros., 5%, 30 d. St. Louis. 5 Doz No 1 Shirts @ $10 00 50 00 5 "4 " 13 00 65 00 3 " "6 " " 14 50 43 50 10 " Collars " 1.60 16 00 4 ' Cuffs " 3.60 14 40 Case and cartage. . . . 1 50 190 40 11 Wm. French, Net, 30 d. City. | Doz Shirts to order $25 00 12 50 1 " Collars 1 75 1 " Cuffs 4 00 18 915 6 J. C. Brown & Co., 4g, 60 d. Chicago. 5 Doz No 1 Shirts $1000 55 00 4 ' "2 " " 11 00 44 00 4 " "3 " .... . " 12 00 48 00 12 " Collars " 160 19 9,0 6 " Cuffs " 3 60 21 60 Case and cartage 1 50 189 30 11 Wm. Ward, Net, 30 d. Jersey City. \ Doz Shirts to order . . . @ $25 00 12 50 1 " Collars 1 75 1 " Cuffs 3 90 18 15 11 James Elston, Net, 30 d. Brooklyn. \ Doz Shirts to order @ $27 00 13 50 1 " Collars 1 90 15 40 31 11 L. Powell, Net, 30 d. City. 26 00 1 " Collars 1 90 1 " Cuffs 3 90 31 80 Amount carried forward 2 110 00 A COMMON-SENSE VIEW OF BOOKKEEPING. 89 SATURDAY, JAN. 3ist, 1885. Amount brought forward $2 110 00 7 W. C. Browning & Co., 3#, 90 d. Detroit. 5 Doz No 2 Shirts $11.00 $55 00 5 " "4 " \ " 1200 60 00 5 " 6 " " 13 00 65 00 12 " Collars " 1.60 19 9,0 4 " Cuffs " 3.60 14 40 Case and cartage 1 50 215 10 3 Total sales in Jan $2,325 10 MONDAY, FEBRUARY 2d, 1885. 7 W. C. Browning & Co., 3/90. Detroit. 4 Doz No 1 Shirts $10 00 $40 00 4 2 11.00 44 00 4 " 3 12.00 48 00 3 " 4 1300 39 00 12 Collars 1.60 19 20 4 Cuffs 3.60 14 40 Case and cartage 1 50 $206 10 7 Davis & Co., 4 m. Cincinnati. 5 Doz No 1 Shirts @ $10.00 50 00 5 2 11.00 55 00 4 " 3 " .... 1200 48 00 2 4 13 00 26 00 10 Collars 1.60 16 00 5 Cuffs 3 60 18 00 Case and cartage op 1 50 214 50 6 J. C. Brown & Co., 4/60. Chicago. 3 Doz No 1 Shirts $1000 30 00 3 " "2 " " 11 00 33 00 2 " "3 " " 1200 24 00 12 " Collars " 160 19 90 6 " Cuffs " 3.60 21 60 8 Case and cartage Total sales in February 1 50 129 $549 30 90 1 90 BOOKKEEPING SIMPLIFIED. TRIAL BALANCE. - "We draw off a Trial Balance the last day of every month, or as soon thereafter as possible, before any posting is done for the new month. The twofold object is to prove our posting and en- able us to see at a glance the actual condition of each account. The usual form of a Trial Balance consists of a sheet of Journal paper having two columns on the extreme right, on which we transfer every unbalanced account in the Ledger, beginning with the partners' stock accounts, adding each side of every account on, the Ledger in small pencil figures close to the last amount, so- not to be obscured by the next entry posted. We take the difference, placing it in small pencil figures on the greater side near the folio column for reference ; also transferring it to the Trial Balance in right-hand column if credit side is the greater, and in the left-hand column if the debit side be greater. If our posting is correct and no error is made making out the Trial Balance, the footing of the two columns will be equal. If the Trial Balance is correct the pencil footings on the Ledger are also correct, and the work up to that point will not have to be gone over again on making Trial Balance for the next month ; Alienee the pencil footings are never erased. (Kead page 247.) Another form of Trial Balance consists of a sheet with four columns, two on the left and two on the right of the names ; the two innermost, or those next to the names, being for the total amount of business represented by each account during the current month both on the debit and credit side. The two- outside columns, one on the extreme right and one on the ex- treme left, will show the balance same as in first form of Trial Balance alluded to. The two columns representing total amounts must agree in their footing ; also agree with the total footing of debit and credit side of Cash Book, footing of Sales Book and Journal, including the footings of the two discount columns in Cash Book. If neither of them agree with the total footings of all the books, we prove one side at a time by going over the Ledger again, examining that side only in each account, and if necessary check the postings on that side. After proving both columns in A COMMON-SENSE VIEW OF BOOKKEEPING. 91 this manner, which can be done with less mental strain than is re- quired in proving i\\Q difference in the first form of Trial Balairee,- inasmuch as we are contemplating but one thing at a time in- stead of three things at the same time, we then prove the balance or outside columns from the Trial Balance alone, laying aside the Ledger altogether. We keep the Trial Balance for the previous month before us : if the balance therein is a credit, we add it to the amount in column representing total credits in new Trial Balance, and take the difference beeween the result thus obtained and the amount in the column representing total debits in new Trial Balance, placing it in the outside column on whichever side is greater. If no mistake is made in the operation, the difference thus obtained will be the correct balance for the new Trial Bal- ance to an absolute certainty. For better understanding of the process see Trial Balance for February on page 115. The four-column Trial Balance requires a trifle more work and many more figures in the beginning, but in the long-run will prove to be a great economizer of time and diminish the anxiety every bookkeeper experiences when he has an error in his Trial Balance, to say nothing of the monotony and annoyance occasioned by going over the Ledger time and again with the same fruitless result. See SIXTH AFTERTHOUGHT, page 228. CHARTERED ACCOUNTANT. This is a species of bookkeeper peculiarly indigenous to Eng- land and Scotland and a rare exotic in this country. To become a Chartered Accountant one must have served a five years'" apprenticeship, same as a poor shoemaker who aspires to become a full-fledged cobbler. It is absurd for any one capable of reason- ing from cause to effect to waste five years mastering this simple science. The Charter is a kind of combination certificate of proficiency in accounting and a license to practise it. We had occasion once to examine a set of books that had been started and kept according to a plan laid out by a so-called Chartered Accountant, and we were amused to find on the main Ledger an account called General Debtors^ which was a summary of debit and credit results, the details of which had been posted 92 BOOKKEEPING SIMPLIFIED. on the Customers' Ledger, the balance agreeing with the net balance in all the accounts in that Ledger. Its object seemed to be to have the main Ledger balance within itself, which is not at all necessary, and to require a seemingly but not actually shorter Trial Balance. The Customers' accounts must each be reduced to a balance any way, hence it is better to begin the Trial Balance with the accounts on the main Ledger and continue it with the names from the Customers' Ledger, proving both Ledgers with one Trial Balance, and dispensing with the superfluous or meaning- less General Debtors' account. THE LEDGER. According to old fogy methods every transaction was first recorded in the Day-book or Memorial in a manner more remark- able for its verbosity than for either its faultless syntax or perspicuity ; it was then rearranged iutbe Journal, a process called journalizing, thence posted, thus making three entries, first, intermediate, and final. According to modern methods the intermediate entry is dis- pensed with, also the desuete Day-book, the first entry being made in books specially designed, and the final entry in the Ledger, the design of which is continued in its primitive sim- plicity. The original design being so near perfect that but few innova- tions have been suggested, none of which have ever successfully superseded it in popular usage. The most noteworthy was interchanging the positions of credit dates and credit amounts, that is, placing the dates on the extreme right of the page, and the amounts in the middle of the page next to the debit amounts. The balance column, that some use in the Ledger, is wholly super- fluous, and is love's labor lost, except in Banks where the balance must be shown after each entry is made to guard against over- draft of depositors. The disarrangement of dates in the Ledger has no significance further than to show that posting had rui? behindhand. A COMMON-SENSE VIEW OF BOOKKEEPING. 93 Dr. P. A. WRIGHT. Or. 1885. 1885. . . 7 To Cash 1 $12 no Jan 1 By Cash 1 $1 000 00 Feb 1 3 50 00 Feb "8 ' ' Profit and Loss 1" 225 23 "8 " Balance 19 1,163 93 1,225 23 1,225 23 1885. Mar. 1 By Bal. br'ght down.. 1,163 23 Dr. T. P. NOBLE. 1885. 1885. Jan 7 To Cash . ... 1 $20 00 Jan. 1 By Cash 1 $1 000 00 Feb. 98 " Balance 12 1 205 93 Feb 98 >k Profit and Loss 1 225 9S 1,225 23 1,225 23 1855. Mar. 1 By Bal. br'ght down.. 1,205 23 94 Dr. BOOKKEEPING SIMPLIFIED. OFFICE FURNITURE. Or. 1885. 1885. Jan 1 To Cash 1 $245 00 Feb. 98 By Balance 19 $245 00 1885. Mar. 1 To Bal. br'ght down. 245 00 Dr. CASH. Cr. 1885. 1885. Jan 1/31 To Sundries 9 $3 533 78 Jan 1/S1 By Sundries 9 $3006 15 Feb 1/98 3 1 562 43 Feb. 1/'8 3 1 762 90 98 " Balance 19 327 86 5,096 21 5,096 21 1885. Mar. 1 To Bal. br'ght down . 327 86 A COMMON-SENSE VIEW OF BOOKKEEPING. 95 Dr. MERCHANDISE. Or. H885. 8 To Cash 1 $100 00 1885. Jan. 1 /31 By Cash ? $385 25 1/31 6 050 OC 1/31 " Sunds. 4 2 325 10 Teb g " Bills Payable 4 250 00 Feb 1A>8 " Cash 3 299 50 28 28 " Cash " Davis & Co " Profit and Loss. 3 5 12 50 26 1,458 00 00 75 28 28 " Sunds " Inventory 5 6 549 4,975 90 00 8,534 75 8,534 75 Mar. 1 To Bal. (Inventory) brought down. .. 4,975 00 Dr. EXPENSE. Cr. i885. Jan. Feb. 1/31 31 1/28 28 To Cash 2 3 3 5 $97 400 68 400 75 00 40 00 1885. Feb. 28 By Profit and Loss.. 12 $966 15 " Sunds " Cash " Sunds 906 15 $966 15 Dr. INTEREST. Or. 1885. 1885. Feb. 28 To E. H. E. Wright Feb. 14 By Miller Bros 4 40 & Co 4 $2 81 W " Bills Payable 4 $1 98 28 " Bills Receivable.. 5 1 08 28 " Profit and Loss. .. 12 1 51 3 89 3 89 96 Dr. BOOKKEEPING SIMPLIFIED. E. H. E. WRIGHT & CO. Or. 1885. 1885. Jan 9 To Cash 1 $500 00 Jan 1/81 By Mdse, n/30 1 $3 500 00 7 1 1,000 00 9 41 it 300 00 Feb 98 " Interest \ 2 81 23 " Bills Receivable.. 2 281 04 29 " Bills Payable 2 200 00 S^ Feb 98 " Balance 1 1,221 77 ;T .X^^ 3,502 81 3,502 81 1885. Mar. 1 By Bal. br'ght down. 1,221 77. Dr. T. C. DAVIS & SON. Or. 1885. 1885. Jan. 5 To Bills Payable 1 $480 00 Jan. 2 ByMdse.,4*,4/m.... 1 $500 00 5 '* Discount 1 20 00 p 500 00 500 00 Dr. A COMMON-SENSE VIEW OF BOOKKEEPING. 97 EARLINGTON & CO. Or. 1885. 1885. Jan. 5 To Cash, $470; disct., $30 1 $500 00 Jan 1 By Mdse, 5/30 .. .. 1 $500 00 Feb. 28 To Balance 12 750 00 23 " " 5/30 2 750 00 1,250 00 1,250 00 1885. Mar. 1 By Bal. br'ght down. 750 00 Dr. SANDIFORD & CO. Or. 1885. 1885. Jan. 2 To Bills Pay 1 $500 00 Jan. 1 By Mdse. n/30 1 $500 00 Feb. 28 " Balance 12 500 00 23 " " n/30 2 500 00 1,000 00 1.000 00 1885. Mar. 7 By Bal. br'ght down. 500 00 98 BOOKKEEPING SIMPLIFIED. Dr. MILLER & BROTHERS, St. Louis. Or. 1885. Jan 1 To Mdse 5/30 1 $134 85 1885. Jan. 3 By Cash, $126.76; dis- 5 tt ti n 2 76 80 count, $8.09 1 $134 85 10 " " n/30 9, 77 30 10 By Cash g 76 55 Feb 29 14 lv " 5/30 " Cash 3 8 190 78 40 80 10 10 " Exchange " Bills Rec 2 8 77 25 30 15 9 " Cash 1 13 00 9,3 " " 4/60 | 204 50 93 " Sunds 9, 292 75 80 " " 4/60 4 189 30 Feb 98 " Balance 19 318 60 Feb 98 " " 4/60 5 129 SO 761 60 761 60 1885. Mar. 1 To Bal. br'ght down. 318 60 Dr. A COMMON-SENSE VIEW OF BOOKKEEPING. 99 W. C. BROWNING & CO., Detroit. Or. 1885. Jan 1 ToMdse., 3/90 1 $201 90 1885. Jan. 9, By Bills Receivable . 1 $195 85 5 " " n/30 9, 24 00 9, " Discount 1 6 05 98 " u 3/90 8 217 75 10 " Cash 23 85 31 " 3/90 4 215 10 10 " Exchange 2 15 Feb. 2 " 3/90 5 206 10 31 " Sunds 3 217 75 Feb 98 1 ' Balance V? 421 90 864 85 864 85 1885. Mar. 1 To Bal. br'ght down. 421 20 Dr. DAVIS & CO. Cincinnati. Or. 1885. 1885. Jan. 1 ToMdse,4/m 1 $166 45 Jnn 9,3 By Sunds 9, $376 90 5 " " 4/m 8 57 90 31 " Cash $5501- dis- 8 " n/30 2 37 00 count, $2.89 2 57 90 19 ". " 4/m a 209 75 Feb 98 " Mdse 5 26 00 Feb 9 " " 4/m 5 214 50 8 " Balance 1 225 50 685 60 685 60 1885. Mar. 1 To Bal. br'ght down. 225 50 100 BOOKKEEPING SIMPLIFIED. Dr. BILLS RECEIVABLE. Or. 1885. Jan. 1 To Sunds 1 $327 61 1885. Jan 5 By Cash $323 46- dis- 10 0^ " Miller & Bros ... " Sunds 2 1 7 657 30 24 ? count, $4.15 " E H E "W & Co 1 $327 281 61 04 Feh 31 14 " W C. B. &Co.... " Miller Bros. . . 3 4 211 79 22 00 Feb. 2 " Cash, $369.75; dis- count $6 45 s 376 oo q " Cash 8 77 30 / 0,8 " Miller Bros 4 79 / ?,8 " Cash 8 100 00 / 28 " Interest 5 1 08 / 28 " Balance 12 110 14 1,352 57 1,352 57 1885. Mar. 1 To Bal. br'ght down. 110 14 Dr. BILLS PAYABLE. Or. 1885. 1885. Feb. 3 To Cash 3 $500 00 Jan. 5 By Sunds 1 $980 00 23 u n 3 500 00 7 " Cash, $496.25; dis- 9 1 3 200 00 count $3 75 1 500 00 28 ' " 3 180 00 29 " E. H. E. W. &Co.. 2 200 00 0,8 ' ' Interest 4 1 98 Feh o, " Merchandise 4 250 00 28 " Balance 12 1,048 02 9 " Cash, $497.50; dis- count, $2.50 3 ! 500 00 2,430 00 2,430 00 1885. Mar. 1 By Bal. br'ght down. 1,048 02 A COMMON-SENSE VIEW OF BOOKKEEPING. 101 Dr. DISCOUNT. Or. 1885. Jan. Feb. 1 23 1/31 31 1/28 To Sunds . . 1 2 2 3 3 $11 11 18 6 20 54 71 88 53 37 1885. Jan. Feb. 5 1/31 1/28 28 By T. C. D. & Co " Sunds . . 1 2 3 12 $20 43 5 00 60 00 43 u tt u " W. C. B. &Co.... ' ' Sunds " Profit and Loss.. 69 03 69 03 Dr. EXCHANGE. Cr. Jan. 10 To Sunds 40 1885. Jan. By Profit and Loss. . 40 102 BOOKKEEPING SIMPLIFIED. Dr. J. VIRGIL WRIGHT (Bookkeeper). O. 1885. Jan 6 To Cash . . 9 $10 00 1885. Jan. 31 By Expense 3 $125 00 31 9, 20 00 Ffb 98 5 125 00 Feb 7 u 4t 8 15 00 98 " Balance 19 205 00 250 00 250 ~w 1885. Mar. 1 By Bal. br'ght down. 205 00 Dr. J. EDWARD FORTH (Salesman). Cr. 1885. Jan 5 To Cash 1 $25 00 1885. Jan 81 By Expense S $125 00 SI 15 00 Feb 98 S " Interest 3 1 *>1 8 " Discount q -13 28 28 28 " Exchange " P.A.Wright.. . " T. P. Noble 9 1 1 225 225 40 23 23 1,458 75 1,458 75 Dr. BALANCE. Cr. Liabilities. 1885. Feb. 28 98 Office Furniture Cash 2 9, $245 327 00 86 1885. Feb. 28 98 E. H.E. Wright & Co. Earlington & Co 4 5 $1,221 750 77 00 98 Inventory 8 4,975 00 98 Sandford & Co 5 500 00 Q 8 J C B & Co 6 318 60 98 Bills Pay ft 1 048 00 98 W C B & Co 7 421 90 98 J E Forth 10 185 00 98 Davis & Co 225 50 98 J. Virgil Wright 10 205 00 Oft Bills Rec 8 110 14 8 A Sheldon 10 300 00 "8 Win Ward 11 18 1*> 8 W F Saxe 11 95 00 98 L Powell 11 31 80 07 P A Wright. ... 1 1,16S 93 T P Noble 1 1 205 ? 6,673 25 6,673 25 | A COMMON-SENSE VIEW OF BOOKKEEPING. 105 LEDGER ACCOUNTS ELUCIDATED. The two accounts on the first page of miniature Ledger are the partners' Stock accounts, and their Personal accounts under the same headings. They are usually kept separately ; that is, the Per- sonal accounts are kept on another page. This, however, is abso- lutely unnecessary, as both can be combined under one heading: Capital account representing money paid in, and therefore a credit; the Personal account representing money drawn out, and therefore always a debit. Hence it will be seen that even under the same heading they can in no wise conflict. Furthermore, when the Personal account is kept on a separate page, it is finally closed into the Capital account at the end of the season. See Rule for dos- ing books, page 43. OFFICE FURNITURE. This is a Representative account, showing the amount we have invested in various articles of furniture in the office. The first entry in this account is always a debit ; in fact, the only credit likely to occur is after several years' use, when we charge a small percentage to Profit and Loss, and credit Office Furniture thereby. The difference between the two sides will represent present valua- tion, and part of our assets. CASH. This account could, with all due propriety, be omitted from the Ledger, as the Cash Book is the only cash account ever examined and shows all the facts of the Ledger Cash account ; that is, the total receipts and total disbursements each month, and the bal- ance. The debit side, of course, must always be the greater if there is any difference, and is the most desirable kind of assets. 106 BOOKKEEPING SIMPLIFIED. MERCHANDISE. The debit side of this account shows the amount of all goods received, either purchased or returned, the cost price of the for- mer, and the selling price of the latter. The credit side represents the sales ; the difference between the two sides will represent no definite amount, because each side re- presents a different value of the same thing. By adding the amount of Inventory to the credit side, and deducting therefrom the amount of debit side, the difference if in favor of credit side will represent the profit on merchandise sold ; this difference, de- ducted from the amount of Inventory, will agree with the first difference in the Merchandise account before the Inventory is considered. The Inventory being placed on the credit side by Single Entry must be brought down on the debit side, thereby constituting the Double Entry, and is called the balance of Merchandise, which represents part of our resources. EXPENSE. There is rarely, if ever a credit in the Expense account, as it re- presents money invested in things that are consumed, or for which we get no direct returns. This is one of the principal divisions of the Profit and Loss account, and is often subdivided into many other accounts, according to the requirements of the business, such as Travelling Expense, Salaries or Wages, Postage and Print- ing, Advertising, Petty Items, etc. INTEREST. The debit side shows how much we have paid for use of money, and the credit side shows how much we have received for use of A COMMON-SENSE VIEW OF BOOKKEEPING. 107 money due us. If debit side is the greater it shows a loss, and if credit side is the greater it will show a gain. THE NEXT FOUR ACCOUNTS represent our creditors parties from whom we buy, the credit side of each account showing how much we have bought, and the debit side how much we have paid each ; the Balance indicates how much we still owe them, and is part of our Liabilities. If the debit side had been the greater, it would have shown that we had overpaid them and that they owed us. THE NEXT FOUR ACCOUNTS represent our customers parties to whom we sell. The debit side of their accounts represents the amount of goods sold to each ; the credit side, the amount that has been satisfactorily settled for; and the balance shows the amount each one owes us, and is part of our resources. If the credit side had been the greater, it would have shown that they had overpaid us ; hence we would owe them. BILLS RECEIVABLE. The debit side of this account shows the amount of other par- ties' notes received by our iirm ; the credit side shows the amount that has been paid or negotiated ; the balance shows the amount of other parties' notes on hand. (See Bills Receivable Book, page 126.) This balance represents part of our Resources. The first entry in this account is always a debit, because our rule is to debit whatever we receive ; and we must receive another party's note, thereby charging Bills Receivable account before we can possibly return it whereby Bills Receivable would be credited, and for the same potent reason the debit side of this account must be the greater if there is a difference. It is customary to hold all notes of this kind until enough have accumulated to make a respectable offering for discount. We 108 BOOKKEEPING SIMPLIFIED. then make out a list showing name of makers, where payable, when due, and amount of each, also total amount of offering, attach the notes thereto, and submit them to our Bank for dis- count and credit of our account, less discount for unexpired time. If, however, we hold a note until maturity we save the dis- count, and if the note is payable at the office or Bank of the party who drew it, we send it forward for collection in time to reach the place of payment on or before maturity ; this is neces- sary in order to bind all endorsers to the note, which would have to be presented on the day of maturity, and if not paid be pro- tested. If not duly protested the endorsers would be exempt from all obligation. In collecting a note at a distance, we send it to the cashier of some Bank located in the town or place where the note is pay- able, endorsing it in his favor, adding "for collection;" by this method we get returns more promptly than by sending it through our own Bank for collection, as the latter method would require the difference in time consumed in the correspondence between our Bankers and their correspondents, which is often done peri- odically and not daily. If any note previously discounted at our Bank be protested, it is returned to us by our Bankers, to whom we give a check for the face of note, including protest fees, the total amount of which we charge to the party from whom we received it in the first place, thereby throwing their obligation into an open account again. If they can render satisfactory explanation as to why the note was permitted to go to protest, we accept a new note for the same amount, including protest fees and interest for the time new note has to run, giving the party credit by amount of new note, and charging their account with the interest. All entries on our books embodying notes should specify date of notes, time to run, amount, where payable ; and in whose favor they are given. If we desire to transfer a note payable to our own order, without being liable as endorser, we endorse it " without re- course." If a note or bill is transferred as security, or even as payment A COMMON-SENSE VIEW OF BOOKKEEPING. 109 of a pre-existing debt, the debt revives if the bill or note be dis- honored. "Yalue received" is usually written in a note and should be, but is not absolutely necessary to the validity of the note. If not written, it is presumed by the law, or may be supplied by proof. An oral agreement must be proved by evidence, whereas a written agreement proves itself. The difference between Bills Receivable and Accounts Receivable is, the former is a written agreement and the latter an oral. one. and as the law prefers writ- ten to oral evidence because of its precision, it is to our advantage to have open accounts closed by note if not due. It sometimes supervenes that we desire to withdraw notes pre- viously discounted in bank and substitute others of equal amount but possibly unequal time to run. In such a case we submit the substitutes as a new offering for discount, the proceeds of which we use in paying withdrawn notes less interest for unexpired time. BILLS PAYABLE. The credit side of this account shows the amount for which our note has been given, the debit side the amount we have paid or taken up, and the balance represents the amount of our notes still afloat, constituting part of our liabilities, and will agree with the Bills Payable Book. The credit side of this account will always be the greater when there is a difference, the reason being the reverse of that given in relation to Bills Receivable. DISCOUNT. The debit side of this account represents the amount we have lost in discounting, the credit side the amount gained through the same operation ; and the difference, if a debit, will show net loss, if a credit, it will show net gain in discounting. 110 BOOKKEEPING SIMPLIFIED. EXCHANGE. The object of keeping this account is to be able to find out how much we have paid during the year or season for collecting notes, drafts, and out-of-town checks. It represents a loss. J. VIRGIL WRIGHT AND J. EDWARD FORTH. Two instances in which we keep an open account with em- ployees, the debit side showing how much they have drawn, and the credit side the amount they are entitled to, by agreement ; the Balance, if a credit, will show how much we still owe them, being part of our Liabilities, or if debit side is the greater, it would show how much they had overdrawn, and represent part of our assets. We require employees who are engaged by the week to accept their dues every Saturday night, so as not to necessitate keeping an open account with them, the amount being charged direct to ex- pense through the Expense column in the Cash Book. ARTHUR JOHN SHELDON. This is an account with our Landlord, whom we pay quarterly We credit his account monthly, however, in order to have our books show correctly every month, upon taking of Trial Balance, how much we owe ; the balance is part of our Liabilities. PETIT ACCOUNTS RECEIVABLE. Under this heading we keep the account of all parties not like- ly to buy a second time, and therefore not entitled to more than a single line in our Ledger. A COMMON-SENSE VIEW OP BOOKKEEPING. Ill The manner of dealing with small accounts of this kind is some- what irregular or different to regular Ledger accounts, inasmuch as they are not closed By Balance at the end of the year, but left in statu quo until paid or finally adjusted. They are considered individually in making out Trial Balance, also indexed as though each occupied a full page. In case of partial payment, enter the amount within the space for descriptive matter, and the gap in the amount column will indicate the account is still open. PETIT ACCOUNTS PAYABLE. Under this heading we keep the account of all parties we owe small amounts, and from whom we are not likely to buy a second time. Such accounts are managed in the same way as Petit Ac- counts Receivable, and represent Liabilities. PROFIT AND LOSS. This account is a final recapitulation of total gains and total losses ; the various accounts representing profits or losses through- out the Ledger being closed or merged into this account at the end of each season. The debit side representing total losses, and the credit side total gains, the difference total net gain if credit side be the greater, and total net loss if the debit side be the greater. It is closed into the several partners' Stock accounts, in red ink, by crediting each with his pro rata of net gain, or charging each with his pro rata of net loss. See Rules for dosing looks, page 43. BALANCE. This is not a regular Ledger account, but is introduced in the miniature Ledger to illustrate the idea of Eesources and Liabilities, 112 BOOKKEEPING SIMPLIFIED. and prove the correctness of our conclusion ; that is, we must have Resources enough to pay off all our Liabilities, and be able to draw out of the business, if we desire to discontinue, the amount of net capital indicated by our Capital account. The impracticability of such an account in the Ledger will be seen when it is taken into consideration that we may have several thousand open accounts on our Ledger, and to transfer the bal- ance from each would be no small job, to say nothing of the many valuable Ledger pages that would be uselessly consumed by the operation. Our final Balance Sheet takes the place of this account. DEPARTMENT ACCOUNTS. Department accounts are required when it is desired to know how much we make on each branch of our business. For exam- ple, we assume that we keep a general store, that is, Dry Goods, Groceries, Boots and Shoes, Hats and Caps, etc., and we desire to know at the end of the season which has yielded the greatest pro- fit. We open an account with Dry Goods Department, Grocery Department, etc., and charge each with cost of all goods supplied therewith. We also have a Sales Book for each department, or a special column in a general Sales Book, representing each depart- ment, the footing of which that is, the Special column or Special Sales Book at the end of the month would be carried to the credit side of its respective department account. We would also keep a separate Expense account for each department, charging it with all items of expense, known to have been incurred exclusively in the interest of that department. We would also keep a General Expense account for such items of expense as were common to all the departments, such as office help, incidental office expenses, etc. Upon closing the books, the General Expense account would be divided among all the Department Expense accounts in propor- tion to the amount of capital invested in each department, that is, as the total amount of capital in all the departments is to the A COMMON-SENSE VIEW OF BOOKKEEPING. 113 amount of capital in each department, so is the total amount of General Expense to each department's expense. We would close the Department Expense account into its respec- tive department account, which would then show the gain or loss thereon, after crediting the department by its Inventory. Each department account would then be closed into the general Profit and Loss account, in the same manner as a regular Merchandise account. HOW TO DETERMINE WHAT BILLS ARE UN- SETTLED. In a business of great magnitude there are often unsettled ac- counts, each amounting to many thousands of dollars, composed of a great number of small amounts, occurring on different dates, having unequal time to run. There are also frequent payments, from time to time, covering certain bills, but not in the same or- der of dates on which they are charged ; hence it becomes neces- sary to have a system by which to identify every item of debit and credit that enters into each settlement, in order that we may be able to tell at a glance what bills remain unpaid. Without such a system it would be next to impossible to render a correct statement of an account of this kind after it had run for years, as they often do without a full settlement. To overcome this diffi- culty, we classify first payment as letter " a " or figure " 1," and enter in red ink within amount column, next to folio line, oppo- site each item of credit, entering into the settlement "a" or "1," whichever is adopted, also the same mark of identification oppo- site each item of debit covered thereby. In the second payment we mark every item of debit and credit it covers as "b" or "2," and so on with each settlement alpha- betically or numerically to the closing of the account. After us^ ing all the letters in the alphabet, we begin with capitals, using all again ; then adopt numbers. 114 BOOKKEEPING SIMPLIFIED. FOUR-COLUMN TRIAL BALANCE, JAN. 31sT, 1885. 1 $12 00 P. A. Wright $1,000 00 $988 00 1 20 00 T P Noble 1 000 00 980 00 2 9, $245 527 00 68 245 3 533 00 78 Office Furniture. . . Cash 5006 15 3 4039 65 6 750 00 Merchandise 2 710 85 8 497 75 497 75 Expense 4 4 5 5 Q 190 40 2,281 500 500 500 479 04 00 00 00 35 E. H.E. Wright & Co T. C. Davis & Co. . Earlington & Co. Sandiford & Co. . . . Miller Bros 8,500 500 1,250 1,000 288 00 00 00 00 95 1,218 750 500 96 00 00 6 7 7 189 215 37 30 10 00 632 658 471 30 75 10 J. C. Brown & Co.. W.C.Browning&Co Davis & Co 443 443 434 00 65 10 8 8 664 72 1,273 37 Bills Receivable Bills Payable . . 608 1,680 65 00 1,680 Or) q 48 66 Discount 63 60 14 94 9 40 40 Exchange 10 10 10 11 18 15 40 30 18 00 00 15 J. Edward Forth.. . J.Virgil Wright.. . Arthur J. Sheldon . . Wm. Ward 125 125 150 00 00 00 85 95 150 00 00 00 11 18 95 Wm French 18 95 11 15 40 James Elston 15 40 11 31 80 31 80 L Powell 11 11 50 00 J. K. Ross & Co.... Johnson & Co . . . 100 50 00 00 100 00 11 25 00 Lindsay & Co 25 00 11 W F Saxe 95 00 95 00 11 130 00 Martin & Brown . . . 130 00 $6,656 90 $18,762 10 $18,762 10 $6,656 90 Footing, C. B., Cr. . Footing, C. B., Dr.. Discount col. (C. B.), Dr $3,006 3,533 18 15 78 88 Discount col. (C. B.), Cr 43 60 Footing, S. B ..... Footing, Journal. . . 2,325 9,834 10 59 $18,762 10 A COMMON-SENSE VIEW OF BOOKKEEPING. TRIAL BALANCE, FEB. 28TH, 1885. 115 1 $50 00 P. A. Wright. . $QOQ oo 1 T P Noble. . QfiO oo 2 9, $245 327 00 86 1 562 43 Office Furniture Cash *! 700 90 you uu 3 8 3,516 966 25 15 326 468 00 40 Merchandise Expense 849 40 3 1 51 3 89 Interest Q qo 4 5 5 6 158 40 E. H.E. Wright & Co. Earlington & Co. . . Sandiford& Co.. .. Miller & Bros 2 040 81 QA 1,221 750 500 77 00 00 6 7 7 318 421 225 60 20 50 129 206 214 30 10 50 J. C. Brown & Co.. W. C. Browning & Co Davis & Co no 00 8 8 110 14 79 1 381 20 98 Bills Receivable. . . . Bills Payable 633 r/K(\ 78 oo 1(\AQ oo 9 48 20 37 Discount ... uu oo ,U4o \tm 9 40 Exchange 10 10 10 25 15 00 00 J. Edward Forth... J. Virgil Wright. .. A J Sheldon 125 125 1 *iO 00 00 oo 185 205 QOO 00 00 oo 11 18 15 Wm Ward uu oUU 11 31 80 L Powell 11 100 00 J K Ross 11 W F Saxe G~ oo 12 39 80 39 80 Profit and Loss yo uu $6,222 79 $4,780 37 $4,780 37 $6.222 79 Journal Footing. . . . C. B., Cr., Footing. C. B., Dr., " . Disct. (C. B.), Cr., Footing $880 1,762 1,562 47 20 43 00 Disct. (C. B.), Dr., Footing. ; 90 07 Sales Book KAQ QO Total &A 7Qfl 07 116 BOOKKEEPING SIMPLIFIED. $ CL. M ku & ta o Cb ^ fe ^ II O Q 8 . S :5 S cj i:l BALANCE SHEET. BALANCE SHEET. 117 268. The Balance Sheet is made from the last Trial Balance, usually according to the form given below. On page 116 will be found another form more artistic in design an( i better calculated to impress our employers that we are expert in our business. BALANCE SHEET, FEBRUARY 29TH, 1888. P. A. Wright & Co., New York. LOSSES. GAINS. Miller & Bros., 102 56 Mdse., 1126 65 Expense, 960 75 Discount, 68 92 Interest, 16 82 ^^^ Exchange, P. A. W.'s net gain, (Red ink.) 1 57 25 09 ^^^ (Junior's) net gain, (Red ink.) 57 08 ^^^^^ 1195 57 1195 5* ASSETS. LIABILITIES. Accounts Receivable, Bills Receivable, 1382 100 35 00 Accounts Payable, Bills Payable, 6165 500 35 00 Cash, Mdse. (Inventory), Office Furniture, 155 50 7300 00 24500 P. A. W. balance 1453.33 \ net gain 57.09 " net capital, (Red ink.) 1510 42 - Junior's balance, 950.00 ^______ - " i net gain, 57.08 I net capital, (Bed ink.) 1007 08 9182 85 9182 85 This Balance Sheet is made from the EIGHTEEN LESSONS course of practice. The Balance Sheet opposite on page 116 is from the Miniature Set. On page 131 is a single entry exhibit from the EIGHTEEN LESSONS also. 118 BOOKKEEPING SIMPLIFIED. o 3 s 1 V & ft; ! p ^ . | i a & f*i .- I i I |1* ^ g II LT <0 iS 5 R 8 5 3 1 Y * 1 3 s : I 03 O t-s fl "3 8 8 |8 8 8 5O CO rH CO 2 O QCU A COMMON-SENSE VIEW OF BOOKKEEPING. 119 , O O o t-H HH Q teS O 10 o QO ^ r> -^^ I- a r I < ^ 1 ^ ^ 1 * s KJ- 3 B i- S? R 3 . ^ < S 3 s k_r 'S W Q t^N (^ ^ 4 ^ 1 | pf S 1 | ^ bd* ^^ ^ t^ O K* ^ O ^ si J o ^ ** * ^ ^ J ^ fe ^ *> ^ h? P w s ^ ^ ! ^ ^ fe S p Ft 2 N ^5 *o ^i 'o fei o t^j t-i t., ^ [" -^ te ^ 1J M 0) g| 3 i 3 f >^ j^ 03 10 ^ > 03* fel ^ <& ^ * * Hi uo qn^s dqj. Sumvdi '9J,dii ffo UAOI 9q pinocn l s^9iiQ J,o ^S9(VO9\ dS9yj, S 88 I 8 * 3 |p . i i| - i^ ^ 15 i i i> ^^ o I d r + fl a ^^ d S rvj ^ ^ S r K$ JJH ** ^ -w ^ W 5 ^ |-5 M ^ s ^ s ^H Sj ^H TH 4O O 1 1 1 12 8 ? 1 t 1 ^ i 1 fi 1 1> 'oi fl ' 120 BOOKKEEPING SIMPLIFIED. NEW YORK, Jan. NAL BANK, P tq fel ^ s * "8 I I S o 3 >> CO ' r * I i a ^ o iq _ fH ^ ^ ^ ^ .a % ' ** 00 81 3 g O ej NATIONAL BANK, f T. C. Davis & Son, ndred and Eighty Dol R>\uo qnis ^MH ffo aq pinom M o o PQ M o w W S .SP .. Os" p bp O'SS fl o W .1 00 CO ? Sa I 3 - 43s O S3 . 00 1 iss o !i>o 'c<*o|ooo|ooo os I ost> I t>o|*>os t-o t- 1OOS JO ' 1C O CO ' rti CO OO ' f o H -2 ^ I A COMMON-SENSE VIEW OF BOOKKEEPING. 121 CHECK BOOK Continued. Balance brought forward $4 70 Feb. 9, Deposited for Collection Miller Bros.' note, due 13th 77 30 Feb 9, Proceeds of note 82 497 00 50 Feb. 14, Less Miller Bros.' note, returned protested 579 77 50 30 Feb. 21, Note due to-day 502 200 20 00 Deduct check No. 9 ...... . ... . 302 180 20 oo 122 20 This corresponds to back of Stub of Checks not used. DEBIT. The way to read the rules on page 63 is as follows : When prop- erty of any description enters it is iirst carried to the debit of the account which represents it. If the person who gives value has not received, or is not to receive hereafter, an equivalent for it, this person cannot be credited since he does not remain a creditor" but in double entry it is necessary to oppose to the debtor item in every account, a creditor; we therefore substitute a nominal or impersonal creditor, which takes the title most proper to point out the nature and origin of the transaction. CREDIT. When property of any description goes out it is first carried to the credit of the account which represent it. If the person who receives value has not given, or is not to give hereafter, an equivalent for it, this person cannot be debited since he does not remain a debtor" but in double entry it is necessary to oppose to the creditor item in every account, a debtor ; we there substitute a nominal or impersonal debtor, which takes the place most proper to point out the nature and origin of the transaction. BOOKKEEPING SIMPLIFIED. TRIAL BALANCE BOOK. This book is ruled with six sets of columns, that is, twelve columns altogether, requiring one column each for the debits and the credits, which constitute a set and represent the Trial Balance for one month. The object is to save writing the names but once in six months, and to show the balances for that time in juxtaposition for comparison. It requires two pages of an or- dinary book to make one page in the TKIAL BALANCE BOOK, that is, pages 2 and 3 when the book is open are regarded as one page. On the extreme left is a small column for Ledger folios, followed by a wide space for the names, which are alpha- betically arranged with sufficient number of lines left after last name under every letter of the alphabet for all new names that may be introduced as Ledger accounts during the next five months. More lines are left after B's, M's, S's, and W's than any other letters, as there are more names beginning with those initials than any other of the 26 letters. After the names follow the columns, the first two of which will be headed with the month on which the first Trial Balance appears in the book, the next two being headed with the next month in order, and so on for six months. It will be seen, therefore, that writing the names the first month will answer for the next five months also. The Trial Balance is first drawn off on journal paper, as before explained, and proven ; then copied into the Trial Balance Book. If it is first drawn off the Ledger into this book, and there should be an error, it would be extremely inconvenient to find it unless the accounts were arranged in the Ledger alphabetically also, as it would require constant turning from one part of the Trial Balance Book to another to find the names in checking the transfers from Ledger to Trial Balance. As the principal object of the Trial Balance is to prove our posting, we may, therefore, regard the Trial Balance Book as being more in the way than otherwise, and file original sheet for reference instead of copying it into this book, which would entail a great deal of work without its correspond- ing advantages. This book is adapted to the ordinary two-column Trial Balance described on page 90. It must be understood that a Trial Balance is not the result of differences for its respective month's busness, but is the net result or difference between the A COMMON-SENSE VIEW OF BOOKKEEPING. 123 total footings of the debit and the credit side of every unbalanced account in the Ledger from the beginning of the account or_from its last closing up to the time of taking off present Trial Balance. ASSISTANT BOOKKEEPER'S DUTIES. In the absence of the head bookkeeper the assistant takes his place. He makes statements of accounts when asked for, audits remittances, sends receipts therefor, makes up the deposit, sends it or takes it to Bank, makes memoranda of important matters requiring the attention of the chief on his return, but would not be permitted to do any writing on the principal books except, perhaps, post ; then he w r ould not open any new account on the Ledger if one had been started since the head bookkeeper left, as every bookkeeper who takes a pride in his books would not want a different handwriting on them neither better nor worse than his own. If the head bookkeeper is to be absent for a long or indefinite period, it would not do to permit the work on the main book to run behindhand ; the assistant would in that case make all current entries, and for that reason should be a good penman. He assists in checking the posting if there should be an error in the Trial Balance; also performs the duties of entry clerk and bill clerk, ex- amines extensions of invoices, goes to Bank with deposits, also becomes a trusted messenger when it is necessary to draw money out of Bank. Rules the Ledger at time of closing it at the end of the season. It is an easy position to fill ordinarily, as the assistant would be directed in everything he did and shown how to do it, as his superior in position may have a method of his own, differing possibly from the manner in which the assistant may have seen it done by others. He is first in the line of promotion if the head bookkeeper should be "fired," or concludes to cross the St. Lawrence into the elysian fields of the Dominion, or if by Omnipotence he is re- quired to ford the River of Styx, or better, if fortune smiles upon him he accedes to a copartnership. 124 Dr. BOOKKEEPING SIMPLIFIED. FIRST NATIONAL BANK In Account 1885. Jan. 1 R $2 000 5 R 126 76 5 D . 323 46 7 D 496 95 9 R 300 00 10 R 100 40 $3 346 87 3,346 87 Feb 1 455 97 9, D 369 75 7 R , 178 98 - 9 R 77 80 9 D 497 50 1 123 53 1,579 50 Mar 1 Balance 122 On this side of the Pass-book is entered the date of deposit and amount, also amount of Credit for notes discounted, with the initial of the Bank-clerk who makes the entry, " R" standing for Receiving-teller and " D " for Discount- clerk. It will be seen by comparison that the balance brought down in each in- stance at the end of the month agrees with our Balance, as indicated on stub of Check-book, on those dates that is, the first of February and March. with A COMMON-SENSE VIEW OF BOOKKEEPING. 125 P. A. WRIGHT & CO. Cr. $500 $300 500 200 470 300 .... 500 120 90 $2 890 90 Balance 455 97 Eight Vouchers returned 3,346 87 $500 $77 30 180 200 500 1 457 RO Balance 122 20 Five Vouchers returned . 1,579 50 On this side are entered the amounts of various checks that have been paid by the Bank and charged to our account, without giving the dates, on this book ; the order in which they are entered being the order in which they are paid or the order in which they appear on the Bank's Ledger. This book is balanced by the Bookkeeper for the Bank, who returns vouchers to us endorsing on the Pass-book the number of vouchers. 126 BOOKKEEPING SIMPLIFIED. *"*<_$< .0 -3 JO h i I a 1 hfl 5 ^ i ^ 3 5 1 I o *. '. o ' b <1 1 i i 1 II i 4 : . i i sj .go H ^ i I DQ , Cfl | | ' 2 3 I 5 1 % 8 8 H * i g ' H B > \ 1 P A i i 5, 1! a fc j i 1 j v i liiri I | | s M co H "-a S HJ *& TH w g so o ot 3- 00- g i 1 I 128 BOOKKEEPING SIMPLIFIED. ORDER BOOK. This book is used in a business where the demand for its goods is greater than the supply, or where goods are ordered for future delivery. The orders are copied on this book, from which it de- rives its name, beginning with the date on which the order was received, then the customer's name, address, terms, shipping direc- tions, description and price of the goods, and all other particulars. The orders are numbered on the book, and the same number marked on the original orders with colored pencil, which are filed away for reference. When the goods are shipped, the record is cancelled on Order Book and a direct charge is made on Sales Book. MEMORANDUM BOOK. If goods are sent out on approbation, with privilege to exam- ine and return part or all, they are charged on this book. First is entered the customer's name and address, then the description of the goods, quantity and price, and shipping directions. A memorandum-bill is rendered, differing from a regular bill only in the amounts not being extended. After a reasonable time has elapsed, sufficient for the customer to examine the goods and make returns of those not wanted, he is notified that unless ad- vised to the contrary the goods will all be charged to his account on (name the date), it being presumed the goods will all be re- tained. A minute should be made on Memorandum Book of the date notification was sent out, and of the time specified for charg- ing them to regular account. If part of the goods are returned, they are checked off memorandum and put in stock, the balance being charged on Sales Book and regular bill rendered. The mem- orandum-entry is then cancelled, giving the folio of Sales Book on which the goods are charged. If a customer fails with goods in his possession which were sent to him on memorandum, we can reclaim them and prevent them from being included in his effects and sold for the benefit of his creditors, as the goods are not his, although in his possession until he receives an extended bill com- pleting the sale on our part. All goods outstanding on Memoran- dum Book must be included in our Inventory upon " taking stock." A COMMON-SENS*, VIEW OF BOOKKEEPING. 129 FILING PAPERS. There are many convenient devices for filing papers, both temporarily and permanently, each having some special merit peculiar to itself. The most convenient temporary file is seen on page 233, showing papers filed both properly and improperly by its use. The wrong way, as seen in Fig. 1, where the file goes through the middle of the paper, makes it difficult to read that part of a letter without removing those subsequently filed on top of it ; furthermore, it would cause mutilation of the paper by tear- ing it in pieces in removing it by drawing it out, and would show lack of system and a lazy, careless bookkeeper. The right way, as seen in Fig. 2, shows the letter with the file through the upper left-hand corner, where there would be no writing, making a nicely arranged package, indicating that there was a man of method at the helm, and which would make it easy to examine the whole of any letter by turning it to one side, even though it be in the midst of a file full of papers, and, if necessary to take it off the file, it can be drawn out by tearing very little of the corner, without removing any others, and preserve the letter intact and in perfect shipshape, as the saying is. These remarks also apply to the upright file, or spindle, that sits on the desk, and which should never be left standing, especially on a low desk, but turned over on the side, as they are dangerous. The best way to file papers permanently is by arranging them alphabetically without folding, or without fastening them by wire driven through one side, as is usually done. Tying them with a small cord answers the purpose; then they can be untied and retied ad libitum. The filing should be done monthly, and each package marked " Letters" (or Invoices, or whatever it may be), for whatever month it is. In an extensive business, a cabinet is made full of compartments, or drawers, one for each letter of the alphabet, and one for Miscellaneous papers, into which the letters for a whole year can be kept and referred to easily. At the end of the year they can be tied up in separate packages for each letter of the twenty-six letters, and so marked ; then placed in a large box marked " old papers," with the year and the initial of firm-name also marked on the box. 130 BOOKKEEPING SIMPLIFIED. February 1. Miller Bros. ., 5/30 February 5. W. C. Browning n/30 February 7. Miller Bros 5/30 February 8. Davis & Co. . . .n/30 February 9. J. C. Brown & Co. ,n/30 February 10. Miller Bros n/30 March 1. Miller Bros .5/80 March 2. Wm. French n/30 Wm. Ward n/30 James Elston .n/30 March 3. L. Powell n/30 $134 24 76 37 13 190 18 18 15 31 85 00 80 00 00 40 80 Paid, 1/3 Paid, 1/10 Paid, 1/10 Paid, 1/9 Received Note, 1/10 Paid, 1/31 Paid, 1/31 ACCOUNTS RECEIVABLE BOOK. The figures 1/3 on the right of this page indicate the month and day when bill was paid. The month should never be written numerically, however, unless the space is too small to write it otherwise. It is never admissible to date a letter that way^ as is often done. It shows laziness and bad taste on the part of the writer. A COMMON-SENSE VIEW OF BOOKKEEPING. 131 ANNUAL STATEMENT FROM SINGLE ENTRY BOOKS. Accounts Receivable, Bills Receivable, Cash, Mdse. (Inventory), Office Furniture, Accounts Payable, Bills Payable, The firm' s present net capital,* ASSETS. $1382.35 100.00 155.50 7300.00 245.00 $9182.85 LIABILITIES. $6165.35 500.00 6665.35 $2517.50 2517.50 P. A. W.'s original investment, 1000.00 Additional investment and interest thereon, 503.33 1503.33 Withdrawn during the year, 50.00 1453.33 T. P. N.'s original investment, 1000.00 Withdrawn during the year, 50.00 Remainder of the firm's investment, Net Gain, P. A. W.'s remaining investment and interest thereon, 1453.33 Half of net gain, 57.09 His present net capital, 950.00 $2403.33 2403.33 $114.17 T. P. K.'s remaining original capital, Half of net gain, His present net capital, P. A. W.'s and T. P. K's joint capital (see firm's capital above),* $1510.42 1510.42 950.00 57.08 $1007.08 1007.08 $2517.50 2517.50 This statement is made according to the FOURTEEN RULES on pages 46 and 47, and from it the books could be changed to double entry according to the form of entry on page 48. 132 BOOKKEEPING SIMPLIFIED. COMMERCIAL CORRESPONDENCE. Business letters should be brief and decisive, but clear and courteous. The following forms will give the inexperienced reader a general idea how to word a letter on similar occasions. Every business letter is entitled to the courtesy of a prompt acknowledgement. In writing for information inclose stamps for a reply. Ladies should prefix Miss or MRS. to their name when writing to strangers. A LETTER REQUESTING NOTE TO BALANCE ACCOUNT. MEMORANDUM. NEW YORK, Jan. 31, 1885. From P. A. WRIGHT & Co., 769 Broadway. To MESSRS. J. C. BROWN & Co., Chicago, 111. DEAR SIRS: Enclosed herewith we hand you statement of your account, which you will doubtless find correct. If not con- trary to your custom of doing business, please send us your note at 60 days from average date, for the amount, $31 S^ ^-, and greatly oblige Yours truly, P. A. WRIGHT & Co. A LETTER TO BANK CASHIER ENCLOSING DRAFT FOR COLLECTION. From MEMORANDUM. NEW YORK, Jan. 31, 1885. P. A. WRIGHT & Co., 769 Broadway. To CASHIER IST NAT'L BANK, Detroit, Mich. DEAR SIR: We enclose herewith for collection our sight draft on Messrs. W. C. Browning & Co., for $24^. PROTEST WAIVED. Your kind and prompt attention will oblige Yours truly, P. A. WRIGHT & Co. A COMMON-SENSE VIEW OF BOOKKEEPING. 133 A LETTER NOTIFYING W. C. BROWNING & CO. OP DRAFT. MEMORANDUM. NEW YORK, Jan. 31, 1885. From P. A. WRIGHT & Co., 769 Broadway. To MESSRS. W. C. BROWNING & Co. , Detroit, Mich. DEAR Sms: We have this day drawn on you at sight, through First National Bank, Detroit, for $24^^, as per statement en- closed. Please honor draft on presentation, and much oblige Yours truly, P. A. WEIGHT & Co. A LETTER ACKNOWLEDGING RECEIPT OF REMITTANCE AND ORDER. MEMORANDUM. From P. A. WRIGHT & Co., 769 Broadway. To NEW YORK, Jan. 31, 1885. MESSRS. MILLER & BROS., St. Louis. DEAR Sms : Your valued favor of 5th inst., inclosing check for llTSy 9 ^, is received. We have placed the amount at your credit and note order, which will be executed as promptly as pos- sible, with our best care and attention. Accept our thanks. Yours truly, P. A. WEIGHT & Co. From A LETTER DECLINING TO ACCEPT SIGHT DRAFT. MEMORANDUM. NEW YORK, Jan. 31, 1885. P. A. WRIGHT & Co., 769 Broadway. To MESSRS. E. H. E. WRIGHT & Co. , Evansville, lud. 134 BOOKKEEPING SIMPLIFIED. GENTLEMEN: Your esteemed favor of 6th inst. is duly re- ceived. In reply to which, permit us to say it will not be con- venient for us to meet your sight draft for $500-^^, owing to non-receipt of money due us. It will be our pleasure, however, to honor your draft at five days' sight for that amount, which we trust will be satisfactory to you. In the mean time we beg to remain, Yours truly, P. A. WEIGHT & Co. A LETTER ACCOMPANYING OFFERING FOR DISCOUNT. MEMORANDUM. NEW YORK, Jan. 31, 1885. From P. A. WRIGHT & Co., 769 Broadway. To CASHIER IST NAT'L BANK, City. DEAR SIR: "We respectfully offer herewith for discount, and credit of our account, the following described notes, viz.: J. C. Brown & Co. . . Chicago. .Mar. 5, 1885, .$131.76 W. C. Browning & Co. .Detroit . . . Apl. 4, 1885 . . $195.85..$327.61 If acceptable, please pass the same to our credit, less discount, and oblige Yours truly, P. A. WRIGHT & Co. Form usually printed on bottom of Statement Blanks and filled out to suit the occasion, the appearance of which on bottom of statement without being filled out is often quite sufficient, as it is an evidence that such a one would likely follow. DEAR SIRS : Above please find statement of your account, which you will doubtless find correct ; unless we receive your re- mittance by return mail, we will draw on you at sight, for $ , amount of past-due bills, according to terms on bills rendered. P. A. WRIGHT & Co. A COMMON-SENSE VIEW OF BOOKKEEPING. 135 A LETTER INVESTIGATING REFERENCE. NEW YORK, Jan 'y. 1st, 1888. Mr. A. M. Warner, Boston, Mass. DEAR SIR : Having been referred to you by Mr. G. B. Allen of your city, with whom we expect to have some business deal- ings, we request that you will kindly furnish us with any in- formation you may possess concerning his responsibility, relia- bility, and general business qualifications. We will regard such information as confidential, and be pleased to reciprocate the favor if the opportunity presents itself. Yours truly, " P. A. WRIGHT & Co. A LETTER OF APPLICATION FOR A POSITION. NEW YORK, Jan. 1st, 1888. A. D. Will please consider me as an applicant for the position ad- vertised in the Herald of this inst. I am thirty-four years old, and have had twelve years experience as head book-keeper and cashier in first class New York houses ; therefore feel equal to any emergency in accounting, and capable of assuming entire charge of the affairs of your office and conducting them to your infinite satisfaction. The question of salary can be settled .ac- cording to your estimation of my ability after a fair trial. I am perfectly abstemious ; in fact, have no objectionable habits. Satisfactory reference as to honesty and reliability will be furnished at interview, if you are pleased to accord me one. Yours obediently, P. A. WRIGHT. ULTIMATUM WITH DELINQUENT CUSTOMER. Mr. Wm. Smith. DEAR SIR : Our draft on you for past-due account has been returned, accompanied by no explanation from you as to why you failed to honor it. Unless we receive your remittance by return mail, we will place the matter in the hands of our at- torney, with instruction to bring suit for the amount, without delay. By giving this your immediate attention, you will save further trouble and expense. Yours truly, P. A. WRIGHT & Co. LETTER TO ATTORNEY. NEW YORK, Jan. 3d, 1888. M- P- Stafford, Esq., Attorney '-at- Law. DEAR SIR : We enclose herewith, for collection, a statement 136 BOOKKEEPING SIMPLIFIED. of our account against Wm. Smith. If not paid promptly, on presentation, you will please institute suit against him, and ob- tain judgment for the amount and cost. Your prompt attention will oblige, Yours truly, P. A. WEIGHT & Co. ACKNOWLEDGMENT OF ORDER. HEW YORK, Jan. 1st, 1888. Mr. R. V. Johnson. DEAR SIK : Your order was duly received and appreciated ; but having been mislaid through clerical carelessness, it has failed to receive the prompt acknowledgment and attention it otherwise would have had. We hope the delay has caused you no serious inconvenience or loss, and promise that it shall not occur again, if you should be pleased to favor us with fur- ther orders. Yours truly, P. A. WEIGHT & Co. A LETTER OF INTRODUCTION. EVANSVILLE, IND., June 17th, 1873. Messrs. H. W. Rogers, Jr., <$ Bro., Chicago, fil. GENTLEMEN : Permit me to introduce to your acquaintance, Mr. P. A. Wright of this place, who visits your city for the purpose of seeking employment as book-keeper. You will find him perfectly reliable, competent, and trustworthy : and I would deem it a special personal favor if you would take a little interest in doing something for him. You can recommend him fully for any position in which he will offer hip? self. Yours respectfully, H. O. BABCOCK. Letters of introduction must not be sealed, and on tbe envelope must be written in the lower left hand corner, " Introducing Mr. ." A LETTER OF RECOMMENDATION. EVANSVILLE, IND., May 21st, 1873. To tuhom it may concern : The bearer, P. A. Wright, of this city, we have had business associations with for several years ; and know that, as an accountant, he has good ability and writes a good clear hand. Habits good. We feel satisfied that he would be regarded with favor in any commercial firm giving him employment. Our acquaintance with the young gentleman has been of such a character as to commend him to our notice ; and without hesi- tancy we recommend him to any firm in Chicago or elsewhere. Yery respectfully, CHARLES YIELE & Co. A COMMON-SENSE VIEW OF BOOKKEEPING. 137 FORM OF PROMISSORY NOTE. CHICAGO, ILL., Jan. 1/1885 Sixty days after date we promise to pay to the order of P. A. Wright & Co., One Hundred, Thirty-one, and ^ Dollars. Payable at our office, with exchange on New York. Yalue received. J. C. BROWN & Co. FORM OF SIGHT DRAFT.* NEW YORK, Jan. 31, 1885. At Sight pay to the order of Cashier of First National Bank, Detroit, Twenty-four -ffa Dollars, value received, and charge same to account of P. A. WRIGHT & Co. Io MESSRS. W. C. BROWNING & Co. , Detroit, Mich. FORM OF ACCEPTANCE. $500^. EVANSVILLE, IND., Feb. 1, 1885. At five days' sight, pay to the order of ourselves five hundred dollars, value received, and charge to account of To E. H. E. WRIGHT & Co. MESSRS. P. A. WRIGHT & Co. , 769 Broadway, New York. The following is written across face of the above form, in red ink: "Accepted, Feb. 3, '85, payable at First National Bank. P. A. WRIGHT &Co." *Time draft differs from this only in having the time to run specified. 138 BOOKKEEPING SIMPLIFIED. FORM OF A RECEIPT- NEW YORK, Jan. 31, 1885. Keceived of Miller & Bros, sixty dollars, in full of all demands. P. A. WEIGHT & Co. FORM OF DUE BILL. Dae on demand, to Austin Koss or order, seventy-five dollars,, value received. New York, Jan. 31, 1885. $75 T V P. A. WRIGHT & Co. "I. O. U. A paper having on it the capitals I. O. IT., with amount stated, signed and dated, constitutes another form of due bill used for small sums and short time, as a rule called an I. O. U. FORM OF CERTIFICATE OF DEPOSIT. $100^. NEW YORK, Jan. 31, 1885. P. A. Wright & Co, have deposited in this bank one hundred dollars, payable to the order of Austin Ross, on the return of this certificate properly indorsed. JEREMIAH BEHM, Cashier.* *Form of exchange is not given, as it is a class of paper peculiar to banks, and bookkeepers are never required to make out a bill of exchange. A COMMON-SENSE VIEW OF BOOKKEEPING. 139 FORM OF MONTHLY STATEMENT. MONTHLY STATEMENT. NEW YORK, March 1, 1885. MESSES. J. C. BROWN & CO., Chicago, 111., In account with P. A. WRIGHT & CO., 769 Broadway. 1885. Jan 1 To Mdse as per bill rendered .... 4/60 $137 9!5 9 9 " " ' " " " n/30 " " " " " " 4/60 13 88 00 25 23 189 30 Jan 24 On. By Cash on a/c 100 00 $427 80 94 <* i K 75 00 31 < 50 00 225 00 Balance $202 80 INVOICE OR BILL. Terms: 4$, 60 days. Bills not paid at Maturity subject to Sight Draft. Book, A. Folio, 1. Salesman, Ross. Shipping Directions, M. D. 769 Broadway, NEW YORK, Jan. 1, 1885. MESSES. J. C. BROWN & CO., Chicago, 111., Bought of P. A. WRIGHT & CO., DEALERS IN SHIRTS, COLLARS AND CUFFS. 94 Doz. No. 1 Shirts $10 00 $25 00 B 1 " 2 " ' 11 00 33 00 9, "3 " '1200 24 00 1 "4 " 13 00 | " 5 " . . . ' 14 00 7 00 10 Collars ' 1 60 16 00 5 Cuffs ' 3 60 18 00 Case and cartage 1 25 $137 25 140 BOOKKEEPING SIMPLIFIED. MERCANTILE CALCULATIONS. It does not follow that one must have sounded the depths of mathematics before he can become a bookkeeper. A common- school education, and therefore familiarity with the four princi- pal rules of arithmetic (addition, subtraction, multiplication, and division), common fractions, simple interest, discount, and equation of payments, is all that is necessary. In fact, the old-time qualifications of " read, write, and cipher" are the fundamental principles of a business education. A few examples and short rules are given by way of refreshing the student's memory, it being presupposed that he is already conversant with all the above principles, for a better understanding of which he is referred to works on mathematics. PERCENTAGE. To get 10$ of any amount, remove decimal point one place to the left. To get 5$, remove decimal point one place to the left and divide by 2. To get 1$, remove decimal point two places to left. To get any other percentage, remove decimal point two places to the left and multiply by the given rate. MULTIPLICATION. The shortest method of multiplying any amount by any num- ber less than 100 is to annex two ciphers and take aliquot parts. EXAMPLE 1. Multiply 436 by 62| : 2)43600 4)21800 5450 27250 (Answer). A COMMON-SENSE VIEW OF BOOKKEEPING. Demonstration. 436 multiplied by 100 = 43600; 436 50 = 21800 (half as much); 436 " 12i = 5450 (i of 50); 436 " 62| = 27250 (50 and 12i added). 141 EXAMPLE 2. Multiply 738 by 4)73800 2)18450 9225 27675 (Answer). Demonstration. 738 multiplied by 100 = 73800; 738 738 738 25 = 18450 (one quarter as much); 12| = 9225 (half of one quarter): 37| = 27675 (25 and 12 added). EXAMPLE 3. Multiply 973^ by 67i : 2)97350.00 4)48675.00 12168.75 10)4867.50 65Y11.J (Answer). Demonstration. Express the fraction in multiplicand decimally. 973.50 multiplied by 100 = 97350.00 973.50 973.50 973.50 50 = 48675.00 (half as much); 12| = 1 21 68. 75 (i of 50); 5 = 4867. 50 ( T V of 50); 973.50 " 67i = 65711.25 (50, 12|, and 5 addedX Restore the decimal to common fraction T 2 ^ = . EXAMPLE 4. Multiply 769 by 95 : 769.00 as multiplied by 100 38.45 " " 5 Answer 730.55 95 143 BOOKKEEPING SIMPLIFIED. EXAMPLE 5. Multiply 769 by 76900 X 3 = 230700 76900 -7- 3 = 25633 205066| Demonstration. Annexing two ciphers to any amount multi- plies it by 100. It will be perceived that 266f is 33-J, or one third less than 300 ; hence, by annexing two ciphers and first multiplying by 3, then dividing same amount by 3, the difference between the two results thus obtained gives the answer. It re- quires many less figures by this simple operation than by the usual method of multiplication. CANCELLATION. It is the fewest number of persons who, after learning this beautiful operation as school-boys, give it any practical applica- tion in after-life to the many problems that can be solved by it quicker than by any other, requiring the fewest figures, and pro- ducing the most accurate result. The principle is to draw a perpendicular line and place the principal and all multipliers on the right of the line thus drawn and all divisors on the left, first reducing both multipliers and divisors to a common denomination. Then strike out on both sides of the line any amount that can be divided without a re- mainder by a common factor, then multiply all the remaining numbers together on the right and divide their product by the product of all the remaining numbers on the left; the quotient thus obtained will be the answer. EXAMPLE 1. What will be the interest on $424 at 6% for 2 yrs. 2 mos. 15 days ? 106 m 159 X 106 = 168.54 + 3 = 56.18 Answer $56.18. Demonstration. 2 yrs. 2 mos. 15 days are equal to 795 days. Multiplying $424 by Q% would give the interest for one year, or A COMMON-SENSE VIEW OF BOOKKEEPING. 143 360 days. To get the interest for one day we divide by 12 X 30, which is equal to 360. Then to get it for the required time multiply by 795, the number of days in that time. EXAMPLE 2. If a piece of cloth containing 60 yards cost $34, what would be the selling price per yard in order to make 20 percent? Answer 68 cents. Demonstration. 34 EXAMALE 3. If I the cost per gross ? Demonstra tion. 00 2 X 34 = 68 sell a hat for $4.50, making 20^, what was Answer, $540. 450 IM = 12 = 10 X 12 X 450 = 540 RULE FOR REDUCING FRENCH MONEY FRANCS TO U. S. CURRENCY. Multiply francs and fractions thereof by the decimal .193, one franc being equal to 19^- cents. Point off three places in the product (five places if there are fractional francs), and that will give the answer in dollars and cents. RULE FOR REDUCING GERMAN MONEY MARKS TO U. S. CURRENCY. Multiply the given amount in marks by the decimal .238, one mark being equal to 23 T 8 cents. Point off three places in the product : that will give the answer in dollars and cents. RULE FOR REDUCING STERLING TO U. S. CURRENCY. The exchange value of the num- ber of days between now and its maturity. We find the maturity by reference to Bills Receivable book. Discount and Interest are both figured the same way in business, although they are really different results. See Interest Rules, pages 144 and 145. 176 A THREE WEEKS' COURSE OF PRACTICE. 68. Passing the money to our credit is virtually giving it to us, as we can draw a check for it any time we want it. We therefore enter the money received for the note in C. B., charging cash and crediting Bills Receivable in this way on the debit side of C. B.: Bills Receivable, Discounted at 1st Ntl. Bk., Miller & Bros. ' Note, 128. 1 1 @,Q% for 22 days, 47 127.64 extending the net amount in the Sundries column. Then charge the bank account on stub of check thus: Jan'y 12, Proceeds of Note, 127.64, locating the figures in the column under last balance and adding them thereto. 69. The 6# for 22 days we lose and must enter in the Journal, charging it to Interest and crediting Bills Receivable in the First Form of entry, and explain thus : Q% dis. on Miller & Bros.' Note, 128.11, for unexpired time, 22 days. The 6$ is legitimately discount, but having adopted Discount as an account representing the percentage we deduct from the face of an open account without reference to time, we call this kind Interest, as it is a certain per cent per annum for a given number of days on cash values ; and as it is supposed we wish to know definitely what each kind amounts to during the year, we must keep a separate account for each. We then make an extra memorandum on Bills Receivable book in the space for remarks, as follows : Disct d at 1st Natl. Bank, Jan. 12. TO. Assume that the Wright Mfg. Co. drew on us at sight for $500, part of what we owe them, and that their draft was this day presented at our office by the Ninth National Bank's messenger, to whom (the bankers) they sent it for collection. We make out a check on our bank, payable to the order of Ninth National Bank, for $500, the amount of the draft, and hand it to the mes- senger, first making the following memorandum on the stub from which the check will be detached : No. 3. Jan'y 12, 1888, Ninth National Bank, for Sight Draft of Wright Mfg. Co., 500.00, FIFTH LESSON. 177 deduct it from the bank as before explained, giving the bank credit; then enter it on credit side of Cash-book, charging 7 the amount to "Wright Mfg. Co., thus : 12 By Wright Mfg. Co., Sight Draft, 500.00. 71. Assuming it to be Saturday night, and therefore pay night for the employees, we hand the porter $20, also the office-boy $7 out of the cash-drawer for two weeks' services. We charge the full amount to Expense, and credit Cash in the Expense column, thus : Expense, Porter, 2 weeks, @ $10.00, 20.00 Office boy, 2 weeks, @ $3.50, 7.00 substituting their names for their clerical names. 72. If, however, we had many employees, we would keep a pay roll, to show how much time was put in by each and the amount due each. The total amount of pay-roll would be entered in Cash-book and the explanation would be : See Pay Roll. 73. If part of the employees were manufacturers, the pay roll would have to be arranged with their names together and the names of the clerical help together. The amount paid manufactur- ers would be charged to Mdse. and the balance of the pay roll to Expense. If only a few employees, however, no pay roll would be necessary, but the names would each appear in the C. B., in the space for explanations. Assume that Austin Ross, another salesman, draws $25, part of what is due him, we charge his account and credit Cash, same way as in W. S. Jenkins' case on the 5th. Assuming the day's work to be over, we must enter the retail sales, say $27.50 (see paragraph 58); then prove the cash; then write up the daily Cash, balance and close it for the day. See paragraphs 20, 21, 22. 74. The checks all having been torn out of first page of Check- book, we write opposite last balance, Carried forward. Then turn over the stubs from which the checks were detached and write on back at the top of the page, Brought forward. 178 A THREE WEEKS' COURSE OF PRACTICE. The amount of each check must be deducted on a direct line on the left \vitli the figures in the column on the right, so that the explanation on the stub will explain the figures on both sides ; furthermore, it prevents unnecessary crowding of the matter. If the space on the left is all consumed by deductions and deposits before the checks on that page are all drawn, the remaining checks must be deducted on next page, which would necessitate making this memorandum opposite the deduction, Less check No. . 75. On January 12 it is assumed that we buy a job lot of collars and cuffs amounting to $150 from Clnett & Son, with whom we have no account on the books, and as we are not likely to do any more business with them would not like to open a ledger account for one transaction ; hence we settle for the goods by a note antedated Dec. 26, having 45 days to run. We record the transaction in the Journal, charging Mdse. with the amount of goods received, and crediting Bills Payable by the same amount for which w r e issued our note, according to First Form of Jour- nal entry ; then make the following explanation : Gave Cluett & Son our note of Dec. 26 at 45 days in settlement of their bill on file. Then make an extra memorandum on B. P. book. 76. If somebody with whom we have no account on the books should buy say $100 worth of goods of us, and give us their note in settlement, we would not make Sills Receivable Dr. to Mdse. in the Journal, as our Commercial College professors would say should be done, and which would be the theoretical way of doing it ; but practical!} 7 or in a business way we dispose of it by charging the buyer on our Sales-book, which would insure the proper credit in Mdse. at the end of the month as we have seen, and having charged the buyer in Sales-boo'k would of necessity cause him to be charged in the Ledger also, but his name would be carried under the Petit Accounts Receivable. See Ledger Accounts Elucidated, pages 110 and 111. Then we would enter the note received in the Journal according to First Form, charg- ing Bills Receivable and crediting the buyer, making a duplicate of entry and explanation as in paragraph 39, except in name and amount of course, and omitting discount in the explanation, and then we would make an extra memorandum on B. R. book of FIFTH LESSON. 179 the note. This method of disposing of it requires more entries, but it is the proper way to do it, for the potent reason that the buyer may want the same kind of goods again and write us to duplicate the bill, in which event we would naturally look for the mutter in the Sales-book, where we keep a detailed account of all large lots of goods sold. 77. If we did not find it in the Sales-book, we would naturally conclude that it had not been entered at all, not thinking to look in the Journal, and would therefore be subjected to the embarrass- ing necessity of having to write to our customer to return the original bill, so we could see what kind of goods he had, as we could find no record on our books that he had ever been charged with anything. To avoid multiplicity of ledger accounts, which would give us no more ideas than we gather from a few, we will hereafter charge the same four customers with whom we already have accounts, repeating their terms and address, and endeavor to have a variety of amounts in each account. 78. We then post the day's transactions from all three books, beginning with debit side of C. B., proceeding according to the theory advanced in last part of paragraph 23. Turn to Bills Receivable account in the Ledger, and en.ter on credit side Jan'yl2 By Cash, 2. 127.64. and mark it posted. Read the next entry and pass it for the reason stated in paragraph 63. 79. Turn to Wright Mfg. Co.'s account and enter on debit side, Jan'y 12 To Cash, 3, 500.00. Read next entry and pass it as explained in paragraph 25. Open Austin Ross' account in same page with W. S. Jenkins, and post it the same way in every particular. (See Appendix, question 366.) 80. Read the next Journal entry to be posted, and turn to Mdse. account and enter on the debit side 12 ,, B. P., 1. 150.00. Then turn to Bills Payable account and say, Mdse. having been debited to B. P. $150, B. P. must be credited by Mdse. $150, and enter on the credit side 12 Mdse., 1. 150.00. Do not foriret the 180 A TIIKEE WEEKS' COUKSE or PEACTICE. 81. Post from the Sales-book, proceeding according to instruc- tion in paragraph 50, entering in the four Ledger accounts the date, Sales-book folio, and amounts, dittoing (thus ) the u To" and " Mdse." repeating the terms in each case. This would complete the work of January 12th, and the Fifth Lesson. SIXTH LESSON. 82. January 15. Reopen the daily cash by bringing down the balance. Assume that we want to use $1000 in cash to-day, which will require about all we have. In order not to be short of funds we negotiate a loan of $500 at our bank ; in other words, we borrow that much from the bank, which they would be glad to accom- modate us with if we were a responsible and reliable firm, but they would require our note for the amount, deduct their per- centage for the use of it, and give us credit by the net proceeds. The rate of percentage would be fixed according to the risk they considered they were taking in lending the money. The less the capital of the borrowers the greater the risk of the lenders, and the greater the rate of interest that would be charged. 83. Giving us credit is the same thing as if they gave us the money. We therefore enter the amount of money received for the note on the debit side of C. B., charging Cash and crediting Bills Payable thus : ,, Bills Payable Borrowed of 1st Nat'l Bk. on our note 500.00 for 30 days @ % 2.75 497.25 We then make an extra memorandum on the stub of Check-book charging the bank with the money, thus : Jan'y 15. Proceeds of Note. 497.25 adding the amount to last balance in bank. We also make an extra memorandum on Bills Payable book of the note given to the bank. 84. The discount, amounting to $2.75, we lose; therefore SIXTH LESSON. 181 charge it to Interest and credit Bills Payable in the Journal, First Form of entrv, making the following explanation : t/ / ^* 5 r 6$ dis. on our note at 30 days in favor of First National Bank for 500.00. 85. The $2.75 being a deduction is in that sense discount, but being a penalty we pay for the use of the money, is in that sense interest. We call it discount in the explanation because it is discount, but charge it to Interest in the Journal entry because that is the name by which we identify that kind of discount. See paragraph 69. In figuring the discount on notes the three days of grace must be included, making the time of a thirty-day note really thirty -three days. 86. Assume that we receive a letter from Wright Mfg. Co., requesting us to send them $500 on account; also requesting us to pay for their account John Smith $300, and John Jones $200. First thing upon receipt of the letter in the morning, before we become busy during the day, would be to make out a check to their order for $500, and deduct it from the bank ac- count. Fill out the stub first, thus : No. 4 Jan'y 15, 1888. Wright Mfg. Co. On account, 500.00. Tear out the check and deduct it as before. The money is virtu- ally gone, but not yet entered, and will not be until we have made the other two payments for them, which would be done when- ever the parties call for it. Suppose that John Smith calls for his about noon. We make out a check to his order for $300, first making memorandum on the stub thus: No. 5. Jan'y 15, 1888. John Smith, On account of Wright Mfg. Co., 300.00. Tear out the check and give it to him, and deduct it from bank account at once, but do not enter it yet, as we know there is an- other pavment to be made, but not certain it will be made to-day. We leave the matter open until the close of the day, until we find out. About 2 o'clock in the afternoon, just before time for depositing, we suppose John Jones calls for his money. We 182 A THREE WEEKS' COURSE OF PRACTICE. give him a check for $200, payable to his order, making same kind of memoranda in on stub as in case of John Smith, and de- ducting it from bank account to see how much we have left. The day's work being now far advanced towards the close, and knowing of no other payments to be made for the same account as the last three, we enter the amount of all the checks drawn during the day in the Cash-book in one sum, charging the Wright Mfg. Co. and crediting Cash by entering thus on credit side of C. B.: 15 By Wright Mfg. Co. Check, 500.00 John Smith, 300.00 John Jones, 200.00 1000.00 extending the total into the Sundries column, thereby having but one amount to post instead of three we otherwise would have by entering each check soon as drawn. It is not at all necessary to enter checks in the order they are drawn, but those given for the same account must be entered together. 87. Enter the retail sales for the day, charging Cash and cred- iting Mdse. as usual, say $32.50, also enter the expense for the day from Petty Cash book, say $4.75, charging Expense and crediting Cash, which would end the day's work. Then prove the cash, write up the daily cash, balance and close it as explained in para- graphs 20, 21, 22, 59 and 60. 88. Assume that J. C. Brown & Co. return by express 1 doz. No. 2 Shirts which are damaged. We enter it in the Journal, First Form, charging Mdse. and crediting their account by the amount they were charged for the shirts, which would be found by reference to the Sales-book, and explain thus: For 1 doz. No. 2 Shirts returned damaged. 89. Assume that Davis & Co. write to us declining to credit us for case and cartage charged to them on last three bills, which by reference to the Sales-book we find amount to $4. We credit their account and charge Mdse. with the claim which we allow, in the Journal, First Form* and explain : Allowed them for Case and Cartage on bills January 1 $1.50, 5th $1.25, 12th $1.25. SIXTH LESSON. 183 Notwithstanding first bill has been paid, including the $1.50, it would be deducted from next settlement. (See Appendix, ques- tion 387.) 90. Post the entries of this date, beginning with the debit side of Cash-book, proceeding as explained in paragraph 23, by read- ing first entry on that side. We turn to Bills Payable ac* count in the Ledger, page 8, and enter on Credit side, 15 Cash, 2, 497.25 Read the next entry and pass it (see paragraph 63). Read the first entry on credit side (see paragraph 26) ; then turn to Wright Mfg. Co.'s account, page 4 in the Ledger, and enter on the debit side, 15 3, 1000.00. Read the next entry and pass it (see paragraph 25).* Read the next Journal entry to be posted, and turn to Mdse. and enter on debit side, 15 J. C. B. & Co., 2, 11.00. Then turn to J. C. Brown & Co.'s account, page 6, and enter on credit side, Jan'ylS By Mdse., 2, 11.00. 91. In the first entry on the credit side of every account we write "jSy," and each subsequent entry on that side we ditto the ".Zfy," thus (). In the first entry on the debit side of every account we write " To" and ditto it the same way in each subse- quent entry on that side. Always repeat dates and folios. 92. Read the next Journal entry and turn to Mdse. account again, and enter on debit side, 15 ,, D. & Co., 2, 4.00. Then turn to Davis & Co.'s account and enter on credit side, 15 Mdse., 2, 4.00. This would complete the day's work, without entering anything on Sales-book. * Read first Journal entry to be posted and turn to Interest, page 9, and enter on the debit side thus, 15 " B. P. 1, 2.75. Then turn to Bills Payable, page 8, and euter on the credit side thus, 15 " Int. 1, 2.75. 184 A THREE WEEKS 7 COURSE OF PRACTICE. SEVENTH LESSON. 93. January 18. Assume that we receive a letter from J. C. Brown & Co. enclosing their note at 60 days for $220.32, to settle their bill of January 1, less goods returned, also less 4$ dis. Also by the same mail a letter from W. C. Browning & Co., en- closing their note at 90 days for $211.22, to settle their bill of Ja- nuary 1, less 3#. We first turn to J. B. & Co.'s account in the Ledger to see the amount of their bill, also what amount of goods they had returned. Calculate the 4$ on the difference, and find it will be $9.18, and the amount of their note to be correct as stated. Returned goods should be credited at the price they were charged, and at time of settlement of any bill deducted from the face before the discount is deducted ; if deducted from the net amount of the bill, that is, after discount is taken off, we would lose the discount on the return goods; in other words, we must not consider credit items at the long or gross price and debits at net figures. This is an important matter to be remem- bered, as many picayune merchants often try to take that advan- tage in making their remittances, and unless the book-keeper is on theqwvive much loss could be incurred during the year. We do not enter it until we have also audited W. C. B. & Co.'s ac- count in the same way, calculating the 3$ dis., which we find to be $6.53, and the amount of their note correct also as stated ; we then make a record of both settlements in the Journal at one time, charging Discount $15.71, entering both items one above the other in the order of addition just after the name, extending the total into first column and charging Bills Receivable with total of both notes, $431.54, giving the amount of each, one above the other in the same order, extending the total into first column, and crediting J. C. Brown & Co. $229.50, the amount of their note and the 4$, also crediting W. C. Browning & Co. $217.75, the amount of their note and the 3$. 94. This would require an entry of the Fourth Form, as we have two debtors and two creditors. We state the debtors first, SEVENTH LESSON. 185 giving Bills Receivable the preference of first location, because it is the larger of the two; then write J. C. Brown & Co. in the po- sition of the first credit account in the entry, making the follow- ing explanation after their name before entering the other cred- itor : Received their note of Jan'y 1st at 60 days in settle ment of bill Jan'y 1 st, 240.50, less goods returned 11.00 = 229.50, less 4$ dis. = 9.18 = 220.32. Then enter W. C. Browning & Co*'s name in the same way, making the following explanation after their name : Received their note of Jan'y 1st at 90 days in settlement of bill Jan'y 1st, 217.75, less 3$ dis. = 6.53= 211.22. It requires an explanation after each, because the details as to fig- ures are different. We make an extra memorandum on Bills Receivable book of the two notes received. 95. We then transfer J. C. Brown & Co.'s note for $220.32 to Wright Mfg. Co. in part settlement of our indebtedness to them, charging their account with its present worth at the rate of 6$ dis. for the time the note has yet to run. We refer to the B. R. book to see when the note falls due, and count the actual number of days between now and then, which we find is (13 more days ir January and 29 in February (leap year) and four in March) 46 days. The interest on $220.32 @ 6$ per annum is $1.68, which, deducted from face value of note, $220.32, shows its present worth to be $218.64. 96. We make a record of having transferred the note to them in the Journal, Third Form, charging their account $218.64, and charging Interest account $1.68 because we lose it, and crediting Bills Receivable account by the full amount of the note given out. Make the following explanation : Transferred and charged to them on account J. C. Brown & Co.'s note 220.32 less Qf dis. = 1.68 = 218.64, for unexpired time 46 days. Also make the following memorandum on Bills Receivable book in the space for remarks : Transf'd to W. Mfg. Co. Jan'y 18. 97. Assume that we have an invoice of goods for $1500 from Wright Mfg. Co., also an invoice for $500 each from Earle & Co. 186 A THREE WEEKS' COURSE OF PRACTICE. and San ford & Co., all of which have been properly checked and OK'd by the receiving-clerk, which would signify that the goods were in store. We also have marked them OK as to extensions and amounts, hence we owe them that much. We record the facts in the Journal, duplicating first entry in the Journal except in amounts, making the same explanation. 98. Assume that the Wright Mfg. Co., to whom w r e are now largely indebted, draw on us at 10 days' sight for $250, and that their draft was this day presented at our office by the Ninth National Bank, to whom they sent it for collection. We would accept it by writing across the face in red ink : Accepted, Jan'y 18th 1888. Payable at the First National Bank. P. A. Wright & Co. (or the firm's name, whatever it may be, in place of P. A. Wright & Co.) We then hand it back to the messenger who presented it, which was virtually delivering it to Wright Mfg. Co. through their authorized agency. The facts we record in the Journal, First Form, charging Wright Mfg. Co. and crediting Bills Payable ; ex- plaining thus : For their draft on us at 10 days' sight, which we this day accepted on account. We make a memorandum on Bills Payable book also, and in the space for time we write 10^/s, which would distinguish it from an ordinary note. (Eead TENTH AFTERTHOUGHT, page 354.) 99. In accepting a draft the firm name must be written by a member of the firm, as the book-keeper would not be permitted to sign the firm name either to a note, acceptance, or check, in fact, to any obligation that would be binding on the firm, without he lias the power of attorney, a written authority given to him to act for the firm. He can of course sign the firm name to a receipt for money, or anything delivered to him in the interest of the firm. He can also indorse checks for deposit in bank, as the bank's receiving teller is not supposed to know the firm's signature; furthermore it would be presumed to be right, as nobody would be likely to place money at the credit of another un- less it was right, as it could in no wise benefit him, as the money SKVKXTII LESSON. 187 could be drawn only by presenting a check at bank signed by the authentic firm name, which would be known by the bank's~^zy- ing teller. He could not indorse a check in the firm's name for the purpose of cashing it, however, a forcible example of the man- ner in which circumstances alter cases. 100. The first deposit in bank must be made by a member of the firm, who is required to leave the j^rm's signature; that is to say, he will write in a large register (kept by the bank, containing signatures of every depositor) the firm name as it must always .be written on checks, which if otherwise signed would not be paid. 101. Having no more entries for this day, we post those already made. Read the first entry on the Journal to be posted Sun- dries Dr. to Sundries then turn to Bills Receivable account, as it is the first in the entry (see page 35), and reason thus : Sundries debtor to Sundries means, the following accounts on the left are debtors to Sundries, that is, to the other accounts following on the right of the entry; and as Bills Receivable is one of those following on the left, it is therefore debtor to those on the right; but in place of writing each one of them in posting we write Sundries, which includes both. Hence WQ enter on the debit side of Sills Receivable account, 18 Sundries, 2, 431.54. Turn to Discount, and reason the same way from the Discount standpoint, and enter on the debit side, 18 ,, Sundries, 2, 15.71. 102. J. C. Brown & Go's, account is the next we turn to, and reason thus : As the two accounts on the left referred to as Sundries are debtor to those under the word Sundries, on the right, which includes them, their account is for that reason to be credited by those on the left ; but in place of writing each one of these names on the left in posting we write Sundries which in- cludes both. Hence we enter on the credit side of their account now under consideration, 18 Sundries, 2, 229.50. 188 Turn to W. C. Browning & Go's, account and pursue the same line of reasoning:, crediting it the same way, C" c5 / " Jan'ylS By Sundries, 2, 217.75. 103. Read the next entry and turn to Bills Receivable account again, as it is the first in that entry, and reason as in the case of Miller & Bros., paragraph 44, and enter on the credit side, 18 Sundries, 2, 220.32. Next account in the entry is Wright Mfg. Co., which we dispose of the same as in the case of Bills Receivable in paragraph 45, and for the same reason entering on the debit side of theiraccount, 18 B. R. 2, 218.64. We dispose of Interest account next, as explained in the case of Bills Receivable just cited, entering on the debit side, 18 B. R. 2, 1.68. Read the next entry, and post it, same as explained in paragraphs 29, 30, using the ditto () marks as substitutes for each word in the transfer. Wright Mfg. Co. is the first account in the next entry, and it is disposed of by entering on the debit side, 18 B. P. 2, 250.00, As explained in paragraph 65 in the case of Discount. Bills Payable is disposed of next by being credited thus, 18 W. Mfg, Co. 2, 250.00, Same as it was disposed of in paragraph 80. EIGHTH LESSON. 104. January^. Assume that P. A.Wright puts $500 more cash into the business, with the understanding that lie is to be allowed 6$ per annum for the use of it. We charge Cash, and credit his account same as before, and in the space for explana- tions we write, Additional Investment. EIGHTH LESSON. 189 105. Assume that Miller & Bros., in order to avail themselves of our largest discount, which is 6$ for 10 days or promplTcash, requested us to draw on them at sight four days ago for amount of their bill of January 5, $190.40 less 6$; we would have made a draft therefore for $178.98 (for form of draft see page 137), and sent it to the First National Bank in St. Louis, enclosing it in a letter addressed to the cashier like the one on page 132, thereby consti- tuting him our agent to collect the money. He would have re- ceived it two days later, and presented it at Miller & Bros.' office and received the amount drawn for, $178.98; but he could not attend to our collecting for nothing, and would deduct 50 cents, called exchange, from the money and sent us his check on a New York bank, which would be exchange on New York for the bal- ance, $178.48, which we would have this day received, it having required at least four days from the time we made the draft until we received returns. No entry was made on making the draft (see answer to question 158 in Appendix), but on receipt of the money we make an entry in the Cash-book charging Cash and crediting Miller & Bros., because the money was received from them, although in an indirect way. Hence our entry would be on the debit side of C. B. thus : Miller & Bros. Bill Jan'y 5th, 190.40 Less 6$ 11.42=178.98 Less Exchange, 50=178.48 If the draft had been for a large amount the bank would have charged -^ of \. -The discount and exchange must also receive our attention later. 106. The entry first made on C. B. will probably fill that page. If so, we draw a red line across all the columns, and add them below the line in black ink, and on same line with footings write in red ink, Amounts carried forward, and on first line on next pnge write in red ink, Amounts brought forward, putting the figures in red ink also. Head both sides of the Cash- book as before, also all the columns, and on the first line below the writing in red ink, we repeat Jarfy 20. 107. We assume that Davis & Co. also requested us to draw on them at sight, four days ago for their bill of Jariy 5, $166.45 less 6#. We would have drawn for $156.47, proceeding in the same way as in the case of Miller & Bros., by sending the draft to cashier of First National Bank, Cincinnati, and received returns this day for amount drawn for, less 50 cents exchanger, which we would enter on the debit side of Cash-book, charging Cash and crediting Davis & Co., in the following manner: Davis & Co. Bill Jan'y 5 166,45 Less 6# = 9.98 = 156.47 Less Exchange 50 = 155. 97 The items of Discount and Exchange would be disposed of last thing in the evening or first thing next morning, whereby we would be enabled to include in the same entry all other items of differences arising in the cash settlements on that day. It is by being thus methodical as to the time of attending to those mat- ters that we do not forget them, otherwise they escape our at- tention for the time being, as there is no check-mark admissible showing they have been properly disposed of. If perchance they should be overlooked, we discover it later in settling the account, which could not balance by that much, and enter it under the date of discovery. 108. In looking over our Cash-book for this day we find two items of Discount and two items of Exchange arising in the settlements with Miller & Bros, and Davis & Co., which we will enter in the Journal according to Fourth Form. We charge Discount $21.40, and if we wish to know how much our out-of- town collecting costs us in a year, we must have an account to represent it; hence we create a new account called Exchange, which we will charge with the two items of that name, placing one above the other, in the order of addition; also Discount same order, extending the total into first column. We credit Miller & Bros, by both the Discount and Exchange in their case, also Davis & Co. by the two items in their case. 109. After Miller & Bros.' name in the entry we make the following explanation : Allowed them 6# dis. on bill Jan'y 5, 190.40 = 11.42, also Exchange for collecting, 50c. EIGHTH LESSON. 191 Also the same memorandum after Davis & Co.'s name except in figures, which in their case are different. We deposit the three checks received to-day, making the same kind of memorandum on Check-book as we did with the first deposit, except in the figures, which are different, but must be arranged in like manner. We make but one deposit each day, which would be deferred until about 2.30 P.M. so as to include all the checks that come in during the day. 110. Suppose J. K. Pine has sent us C.O.D,, pursuant to our order, $150 worth of goods. We make out a check to his order for the amount, first making the following memorandum on stub : No. 7. Jan'y 20, 1888. J. K. Pine. Bill on file 150.00 We deduct the amount from bank-account and enter it on credit side of Cash-book, crediting Cash and charging it to Mdse. thus : 20 By Mdse. J. K. Pine's bill, 150.00 If we sell goods C.O.D. and it would require several days to get returns, we would charge the buyer on the Sales-book same as a regular customer, and post his name under Petit Ac- counts Receivable. See pages 110 and 111. If we were doing an extensive C.O.D. business, we would have a C.O.D. account, and manage it same as Petit Accounts Receivable. If we expect returns same day for the goods, we make a memorandum (See Memorandum-book, page 128) until we get the money, and enter it as a cash sale in the special Mdse. column in Cash-book. Suppose we hand P. A. Wright $50 out of the cash-drawer, we charge it to his account and credit Cash, thus : P. A. Wright To himself, 50.00. If the money had been handed to another person for him, or he had instructed us to pay a personal bill that may have been presented against him, we would charge his account the same way, substituting the name of the person in place of " To him- self'' 1 Not to do so would be a bad omission, for if the space was left blank the entry would likely come up for dispute in the future when the circumstances had been forgotten, and the 192 A THREE WEEKS' COURSE OF PRACTICE. cashier could never satisfy him that he had paid the money either to him or for him. 111. We enter the amount paid for expenses during the day as per Petty Cash-book, crediting cash and charging Expense say $.25 as we did before. Also enter the retail sales, charg- ing Cash and crediting Mdse. as usual, say $4:2.50. 112. Suppose the Wright Mfg. Co. have returned the note of J. C. Brown & Co. which we transferred to them January 18, stating they could not use it to advantage. We must there- fore make a counter entry to the one we made on the 18th, crediting their account by the amount we charged them for the note, and crediting Interest with same amount it was charged with before, because in this case we recover that which we then considered lost, and charge Bills Receivable with the amount of the note, which will require an entry in the Journal, Second Form / then make the following explanation : For J. C. Brown & Co. i Note 220.32, which we transferred to them on a / c Jan'y 18, returned to us. Then duplicate the original memorandum on Bills Eeceivable book that was made when the note was first received. 113. Assuming that we have received another lot of goods from the Wright Mfg. Co. amounting to $500.00, also the same amount each from Sanford & Co. and Earl & Co., we dispose of it in every way the same as we did in the other two instances of the same kind. 114. If in posting the entries of this date, we are bothered to know how to proceed, refer to previous entries of the same kind and dispose of them the same way, entering the date on the Ledger in every transfer made to it, also the folio of the book from which it was made, dittoing all other words if they are the same as those used in the last transfer. 115. There is a new account to be opened for Exchange, which we locate near the bottom of page 9, on which the Dis- count and the Interest account have been opened, repeating the Dr. on the left and Or. on the right. It will be debited same as Discount (see paragraph 101). 116. In the first entry in every account on the Ledger on both NINTH LESSON. 193 sides, in fact the first entry in every book, tha year and the month must both be given, but neither must be repeated on the same page. Each succeeding month and year must also be stated on all the books and in every Ledger account. NINTH LESSON. 117. January 26. Suppose that we have received by the same mail a remittance from J. C. Brown & Co. and W. C. Browning & Co. to settle their bills of January 5, less 6$, W. C. Browning & Co. having included in their check $100 which they request us to hand to Dougan & Co. for their account. We turn to each of their accounts in the Ledger to see the amount of their bills, and find the former's to be $137.25, 6% of which is $8.23, and their check would be $129.02. The latter's biU we find to be $201.90, 6$ of which is $12.11, and their check would be $289.79, providing they had remitted correctly. We enter each check on the debit side of Cash-book, crediting each firm by its respective check, making same kind of explanation after J. C. Brown & Co.'s entry as in the case of Davis & Co., paragraph 52; but in W. C. Browning & Co.'s case the entry and explanation would be as follows : W. C. Browning & Co., Bill, Jan. 5, 201.90 Less 6& 12.11 = 189.79 For Dougan & Co., = 100.00 = 289.79' Many book-keepers would have entered only the money be- longing to us, omitting the last line in the explanation, taking no notice of the $100 for Dougan & Co. further than to hand them the money, which would be decidedly incorrect, as our books should show the full transaction, and the full amount received from any firm should appear in their account. When we pay the money to Dougan & Co. we will charge W. C. B. & Co. with it. 118. The two items of 6^ we lose, and, therefore, charge the total to Discount $20.34, and credit J. C. Brown & Co. by the item allowed them, $8.23, and W. C. Browning & Co. by $12.11, 194 A TiiKEE WEEKS' COURSE OF PRACTICE. for the same reason requiring a Journal entry of Second Form. making an explanation after each firm's name, like the one in Davis & Co.'s case, paragraph 52. We deposit the two checks in bank, making a duplicate of the memorandum that was made in the other cases where two checks were deposited. 119. We pay by check both San ford & Co. and Earle & Co. the amount of their bills of January 18, less 6$. Each bill being $500, -we therefore make out a check for each firm for $470, first mak- ing memorandum on each stub, like the one in paragraph 54; then enter them both on credit side of C. B., crediting Cash and charg- ing their account in the same kind of entry and explanation for each as in the case of San ford & Co., paragraph 55. 120. The 6$ we make, and credit Discount by the amount of both items, $60, charging Earl & Co. and Sanford & Co. $30 each, because they each allowed us the same, requiring an entry of Third Form and but one explanation after both names, like the one in Sanford & Co.'s case, paragraph 55. One explanation will do for both, because the details are in every particular the same ; if the bills had been of different dates or different amounts, or the discount had been different, two explanations, one after each firm's- name, would have been necessary for clearness. 121. We hand Dougan & Co. $100 out of the Cash-drawer and charge it to W. C. Browning & Co., on credit side of C. B., thus : ,, W. C. Browning & Co., Dougan & Co., 100.00. We also hand the porter and office-boy their pay for two weeks and charge it to Expense (see paragraph 71), also entering the amount of petty expenses for the day by writing in explana- tion column, See Petty Cash-book, 3.75, ivithout repeating Expense or dittoing it. Enter the retail sales for the day, charging Cash and crediting Mdse., say $47.50. 122. Assume that we drew on Miller & Bros, four days ago> by their permission, at 15 days' sight, for $100 on account, ana that we have this day been advised by the bank we sent it to for TENTH LESSON. 195 collection that they accepted it on the 24th. We record the facts in the Journal, First Form, charging Bills Receivable and "credit- ing Miller & Bros., after which we explain thus, For our draft on them at 15 days' sight, which they accepted on the 24th on account. We also make an extra memorandum on Bills Receivable book, stating the time, (Read TENTH AFTERTHOUGHT, page 354.) 15 d/s, for the reason before explained, and in the space for remarks we make a pencil memorandum, thus, In the hands of First National Bank, St. Louis, for collection, so as not to lose sight of it. 123. Make four more entries on the Sales-book, charging the same four customers : W. C. Browning & Co., $121.85, dupli- cating Miller & Bros', first bill; Davis & Co., $175. 90, duplicating W. C. Browning & Co.'s bill of 5th; Miller & Bros., $124.25, duplicating J. C. Brown & Co.'s bill of 5th; J. C. Brown & Co., $140.45, duplicating Davis & Co.'s bill of 5th, omitting the item for No. 4 Shirts in each. Repeat their terms and address. Post from all three books, according to suggestion in para- graph 114. TENTH LESSON. 124. January 31. Reopen the daily Cash-book. Assume that we received a check from Davis & Co. for $100 on account. We would enter it on debit side of C. B., crediting their account, and the explanation would be simply. On Account Deposit the check in bank and add it to the bank account. 125. By referring to our Bills Payable book, which we should do every day, we notice our acceptance of $250 is due to-day, and being payable at our lank, it would be presented there and paid by the bank, with our funds on deposit there ; hence we must 4 196 A THREE WEEKS' COURSE OF PRACTICE. give the bank credit by the amount of the acceptance by making the following memorandum on same side where we enter deposits :: Jan'y 31, Less acceptance due to-day, 250. "Less" always means to be deducted. 126. We credit Cash and charge Bills Payable account because we receive our note in exchange for cash, hence the following entry on credit side of C. B., 31. By Bills Payable, Acceptance due to-day, $250. 127. We start Austin Ross on the road as travelling salesman,, and give him $200 in cash to pay his expenses. We give him $100 out of the drawer and a check for $100. The advantage in giving him a check for part of the money is in the fact that the check would not be used until he had used all the ready money lie had, which would last him two weeks or more and carry him far out West, when he could then cash the check with some of our customers by presenting proper credentials, showing he was our agent. During that time the money would be in bank at our credit and subject to our use. At the time of making out the check we deducted it from the bank account to keep it straight. We could, therefore, apparently overdraw our bank account $100 and yet not be overdrawn. 128. We credit Cash and charge $200 to Austin Ross' Travel- ling Account, which will be a new account, meaning our money in his hands for travelling expense purposes. In the space for expla- nation we write, 100.00 100.00 " A. Ross, Trav. Acct., Check, Currency, placing the figures directly over each word, and extend the total; into the Sundries column. If lie required more money during the trip, we send it to him and charge same account, and upon his return it would be an easy matter to find out how much had been sent to him to be accounted for, by having such an account. 129. It would be wrong to charge it to the account already opened in his name, which would mean his money ; besides, it would reduce the credit of interest he would be entitled to on, TENTH LESSON. 197 whatever average balance there may be at his credit upon closing e'v books at the end of the year. 130. Enter the expense for the day as per Petty Cash book, ^"editing Cash and charging Expense, say $4.25. Also enter the retail sales for the day, charging Cash and credit- ing Mdse., say $52.50. Prove the cash balance and close it as before. 131. Being at the end of the month, it is assumed that we have balanced and closed the daily Cash-book every day during the month. Hence we must lay it aside, as it were, by disregarding the figures in the Amount columns, and take up the monthly cash and see how much we have received during the entire month, by -adding Mdse. and Sundries column on debit side, on proof sheet. Also see how iruch we have paid out during the month, by add- ing the Expense and Sundries column on credit side, noting the result on proof sheet, and if all the additions are right the differ- ence between the debit and the credit side will agree with our last daily balance. 132. We close the monthly cash by producing the line that extends across main part of the book across the Mdse. and Ex- pen.se columns only; the footing of the Mdse. and Expense column on next line are extended into the two Sundries columns on the same line; then we rule across the two Sundries columns on that line and add each below the line, also extending it into the Amount columns, which we balance thus in red ink : Balance Carried to Feb'y 1st. 337.07 Then rule a single line across the Amount column on both sides on same line with the balance, and on the next line draw a double red line from the Month column on each side across the page, thereby closing the book in its entirety. 133. We explain the footings of the Mdse. and Sundries columns on the debit side in the following manner: 1/31 To Mdse. Total Retail Sales 227,50 227.50 ,, Sundries. Total Receipts 4402.82 The figures on the line with retail sales we identify in posting as 198 A THREE WEEKS' COURSE or PRACTICE. Mdse., and the final footing of Sundries column we identify & Cash. 134 We explain the footings of the Expense and Sundries columns on the credit side in the following entries: 1/31 By Expense. Total Cash Expense 110.75 110. 7? ,, Sundries. Total Disbursements 4065.75 We identify the figures in the Expense column as Expense, and the final footing of the Sundries column we identify as Cash also in posting. The figures 1/31 in the date column mean from the first to the thirty-first. 135. In posting the Cash for the 31st we have to open a new account in the Ledger called A. Hoss* Travelling Account, and enter on the debit side thus : Jan'y 31, To Cash, 5, 200.00 We also have our first entry on the debit side of Bills Payable account under this date, as it is the first note we have paid ; hence this entry : Jan'y 31, To Cash, 5, 250.00 136. The footings of the Mdse., Expense and Sundries columns must also be posted. We credit Mdse. account in the Ledger by its footing, thus: Jau'y 1/31, By Cash, 4, 227.50 We then open Cash account in the Ledger on page 2, arid carry the footing of the Sundries column on the left to the debit side of the Cash account, thus : Jan'y 1/31, To Sundries, 4, 4402.82 137. Open an account for Expense on page 2 in the Ledger also, and post the footing of that column on the debit side of the Expense account, thus: Jan'y 1/31, To Cash, 5, 110.75, TKNTH LESSON. 199 and the footing of the Sundries column on the right we carry to the credit side of the Cash account, thus: Jan'y 1/31, By Sundries, 5, 4065.75. 138. We make a charge against Davis & Co. on Sales-book under this date to close it for the month; duplicate next to the last entry on page 89, omitting case and cartage, $1.25, as they decline to pay it, $213.25. Rule a red line on next line below the entry, terminating at the first column. Being at the end of the month, we draw a line across the outside column on the same line with last amount, add that column on next line, and opposite the final footing write, (see question 438 in Appendix,) Total Sales in January. Then on next line draw a double red line across the page, begin- ning under the word "total," simply as a matter of underscoring- the remarks. We post the final footing of Sales-book on the credit side of Mdse. in this way : 1/31 Sundries, 5, 2274.55. 139. On the lust day of each month we make an entry in the Journal, Second Form, crediting the two clerks with whom we have a Ledger account by their services, $100 each, also crediting the landlord (J. W. Carpenter) with one month's rent of store r $125, on the supposition that we pay him quarterly, and charge the whole amount of the three credits to Expense, $325. After the two clerks' names we make the following explanation, For services rendered in Jan'y as per agreement; then enter the landlord's name, after which explain as follows: Rent of Store for Jan'y as per lease. Draw a double red line across the page from the month to the first column on the right, which would close the Journal for the month. Journal columns are never added unless there are special columns or in making four-column Trial Balance. 140. When we agree to give a person anything we credit their 200 A THEEE WEEKS' COURSE or PRACTICE. account by it ; but when we actually give it to them we charge their account with it. In a bookkeeping sense, therefore, agree- ing to do anything is just the reverse of doing it. For example take the case of "W. S. Jenkins, whom we agreed to give $100 per month for his services, and for that reason we credited his account with $100 ; but as we gave it to him from time to time his account was charged with it. Hence bookkeeping sense and common sense are in this case, as in many others, greatly at variance. ELEVENTH LESSON. 141. Having closed the three books of original entry and carried the results into the Ledger, as must be done every month, we will now make our first Trial Balance, usual form, for an explanation of which see pages 90 and 91. We first go through the Ledger and make the pencil figures showing the condition of each account, according to instruction for making Trial Balance, pages 90 and 91 ; then go through it again, transferring the results to the Trial Balance Sheet in ink; and if it does not balance we find the error according to the rules on page 49. 142. If you do not find the error after applying all the rules the second time, you can compare your figures to those in the following Trial Balance, which will show the condition of all the accounts if you have made your entries correctly. We never made a transposition of figures in our twenty years' experience. They are errors very hard to find, but of exceedingly rare occurrence ; hence the rules usually advanced by theoretical book-keepers for finding errors are not very practicable. The phrase " Red Ink promises," descanted upon by an obscure writer, and which you may sometimes be asked about, is veritable bosh ; a solecism indigenous to and emanating from a small country town in the West, and has no general meaning. TWELFTH LESSON. 201 TRIAL BALANCE, JANUARY 31sT, 1888. P. A. Wright, (name of junior partner). Office Furniture. Mdse. Wright Mfg. Co. Earle & Co. Sanford & Co. JVIiller & Bros. J. C. Brown & Co. W. C. Browning & Co. Davis & Co. JMlls Receivable. Bills Payable. Discount. Interest. Exchange. Expense. W S. Jenkins. A. Ross. J. W. Carpenter. A. Ross Travelling */ c . Cash, 245.00 3812.95 24.25 140.45 121.85 285.15 531.54 3.22 1.00 435.75 200.00 337.07 1450.00 1000.00 1250.00 500.00 500.00 1125.00 38.23 75.00 75.00 125.00 6138.23 6138.23 TWELFTH LESSON. Head the Journal NEW YORK, FEBRUARY 1st, 1888. 143. In this our second month's business, we introduce a four- column Journal by ruling two special columns in an ordinary Journal, one for Mdse. Dr., and the other for Wright Mfg. Co., Or. For a full description of a four-column Journal, its use and advantages, see pages 77 and 78. 144. The entries we make this month will be made on the same principles that they were made last month ; the only differ- ence being the figures will be located in different columns as the case may require. We are not deviating from our routine already established, but we are developing it as our business increases. 145. Suppose we receive $2000 worth of goods from Wright 202 A THREE WEEKS' COURSE OF PRACTICE. Mfg. Co.; $500 each from Earle & Co. and Sanford & Co. r whose bills have all been examined and OK'd as before ex- plained. We would enter them in the Journal, charging Mdse. with the total $3000, in its special debit column. Credit Wright Mfg. Co., $2000 in their special credit column, and credit Sanford & Co., also Earl & Co., in the Sundries credit col- umn, requiring an entry of the /Second Form after which we. explain as usual, As per bills on file. 146. We also introduce two more special columns in the Cash-book this month, that is, the two Discount columns. The one on the debit side of Cash-book being for discount we allow our customers and therefore lose, and for that reason it will be a* Discount Dr. column ; the one on the credit side of C. B. is- for discount allowed us for prompt cash settlements, and there- fore we make it, and for that reason it will be a Discount Cr. column. 147. Instead of making Journal entries for the discount arising- on all cash transactions as we did last month, it will be disposed of by being entered in the two special columns in C B., there- by saving many Journal entries, a great deal of posting, and much, valuable Ledger space. 148. The figures in the Discount column, on either side, do- not affect the Cash in any way (see answer to question 98, in. Appendix), but are really innovations in the Cash-book which, greatly simplify the matter, and facilitate our work: for further explanations in relation to them, see pages 52, 53. 149. In reopening the Cash-book, February 1, 1888, we head it same as last month ;also head the columns, which will in every way conform to our miniature Cash-book, pages 64 and 65. We begin on first line on debit side thus, Feb'y 1, To Balance, From Jan'y 31, 337.07. locating the figures in the Amount column. To place them in- the Sundries column would be wrong, as the footing of that col- umn each month will show the amount of money received dur- ing the month, and the balance brought forward from last month TWELFTH LESSON. 203 could not be regarded as money received this month ; hence it must be kept apart from the receipts. 150. Assume that W. C. Browning & Co. pay by check their bill of 26th ult., $121.85, less 6f c . We record the whole settle- ment in the Cash-book, charging Cash with the amount of check received, charging Discount with the $% which we lost, and credit- ing their account by total of both by entering on the debit side ofC. B. as follows : W. C. Browning & Co., Jan'y 26, 121.85 7.31 114.54. In space for explanations we write Jan'y 26, $121.85, which means they paid that bill. We place the $7.31 in the Discount column,, which means less that much discount, and the differ- ence in the Sundries column, which means the amount they paid. 151. Assume that J. C. Brown & Co. also pay by check their bill of 26th ult., $140.45, less 6$, $8.42. We dispose of it in every way the same. We deposit the two checks in bank, charging the bank account as usual. 152. As fast as money accumulates on our hands we use it to the best advantage in paying bills not yet due, and thereby avail ourselves of a larger rate of discount than we would be allowed by deferring payment, and in so doing we offset the discount we- lose by the rapid accumulation ot unsolicited funds. 153. We therefore make out a check to the order of Earle & Co. for $470 in payment of their bill of 20th ult., $500 less 6$,. first making the necessary memorandum on the stub from which the check will be torn, as usual, and deduct it from the last bal- ance in bank. 154. We record this whole transaction in the Cask-book, credit- ing Cash by the amount of check given, crediting Discount by the 6% made, and charging the total of both to Earle & Co., in the following entry on the credit side of C. B. : Feb'yl, By Earle & Co., Jan'y 20, 500.00 30.00 470.00. Arranging the explanations, the Discount and Cash figures on the same principles just explained in connection with the entries or> the debit side. 204 A THREE 'WEEKS' COURSE OF PRACTICE. 155. Suppose our cartman brings in his bill for cartage for last month, an account of which he has kept on a small pass-book which has been checked and OK'd by our shipping-clerk, who would also have an account of the number of loads hauled by the cartman, also where they were delivered, making it an easy matter for him to pass upon the correctness of the cartman's ac- count ; after which it would be presented to and paid by the cash- ier, out of the drawer money, We credit Cash and charge Mdse. on the credit side of C. B., thus, Mdse., Cartage for Jan 'y, 7,50, placing the figures in the Sundries column, because we have no special column for Mdse. on that side. 156. The student would naturally conclude that it should be charged to Expense and not Mdse., but when reminded of the fact that the cartage, just paid for was charged to our customers on the bottom of their bill (Case and Cartage), and was credited in the Mdse. at the end of the month in the footing of the out- side column, which included the cartage, they can readily under- stand why Mdse. should be charged with its cost, as it has been benefited by its incurrence. If it had not been charged to our 'Customers and thereby sold, as it were, the cost of carting w r ouid be an expense. In fact the number of loads hauled that we had not charged our customers for should be charged to Expense -anyway, to be just with the Mdse. account. 157. Suppose we receive a case of goods from the "Wright Mfg. Co. on which there is $1.50 freightage and 40 cents cartage, which we pay out of the cash drawer to the Transportation Co.'s cartman. We credit Cash and charge Expense, by making the following entry on the credit side of C. B. : ,, Expense, Freight, 1.50 Cartage, .40 putting the figures in the special Expense column. 158. To the inexperienced it would seem to be inconsistent tc charge cartage to Mdse. in one instance and in the next to Ex- pense, but in the latter case the cartage was on incoming goods, and is an outlay of money that will in no way be recovered, and is therefore really an expense to the business. TWELFTH LESSON. 205 159. The next item of cartage may be charged to any other account that may have been benefited thereby, and which wrrnray consider responsible for it; hence it is always necessary to look into the previous conditions, or causes, of such things to be able to know what account to charge them to. 160. We enter the retail sales for the day, charging Cash and crediting Mdse. in its special column, as usual, say $62.50. Then prove the cash for the day, disregarding the figures in the two Discount columns, as they do not represent any part of the cash. Balance and close, as w r e have done each day. 161. Charge up more goods, that is, charge the same four customers on Sales-book with goods supposed to have been sold to them, as follows: J. C. Brown & Co., $175.90; W. C. Browning & Co., $140.45 ; Miller & Bros., $166.45 ; and Davis & Co., $240.50, omitting case and cartage in their case ; repeating the terms and address of each firm, also the items necessary to make the amounts, which will be found in previous charges of the same amounts to other customers ; if not, create them from others. 162. In posting from the Cash-book this month, we must con- sider the figures in the Discount columns in connection with those in the Sundries columns, which gives us an entry necessarily af- fecting three accounts. 163. For instance, our first entry on the debit side affects W. C. Browning & Co.'s account, also the Cash and the Discount ac- counts; hence our first double-entry proposition on that side must be stated thus : Cash and Discount both debtor to W .C. Browning <& Co., which means they are debited in the first entry in positions whereby they will be debited in the final entry at the end of the month, and for that reason are passed for the present. Then turn to W. C. Browning & Co.'s account in the Ledger and reverse the proposition, and say : Their account must be credited by both Cash and Discount. We enter on the credit side of their ac- count, as follows : 114.54 7.31 Feb'y 1, Cash, Dis., 6, 121.85 writing Cash and Discount both on the same line, with the figures directly over each word, and extend the total into the column. 206 164. If we were posting the two items from the Journal we would use the word Sundries in place of the two words Cash and Discount / but as they are differently arranged in the Cash-book, it is necessary to have each appear in the transfer to enable us to retrace them to the original entry. 165. We read the next entry the same way, and turn to J. C. Brown & Co.'s account and credit it thus: 13203 8.42 Feb'y Cash, Dis., 6, 140.45. arranging the figures the same way as in W. C. B. & Co.'s case. 166. We read the next entry as we read others of the same kind last month, and pass it for the same reason. 167. The first entry on the credit side of Cash-book also affects three accounts, Earle & Co., Cash and Discount. Hence our double-entry proposition must be stated thus : Cash and Discount are both credited by Earle & Co., at least, they are credited in the first entry, and will be in the final entry at the end of the month. .So they are passed for the present, and Earle & Co.'s account con- idered by reversing the proposition from their standpoint, thus, Earle & Co.'s account must be debited to both Cask and Discount, hence we write on the Debit side, 470.00 30.00 Feb'y Cash, Dis., 7, 500.00 disposing of the figures as explained in the case of W. C. Brown- ing & Co. 168. We read the next entry on that side, Cash credited by Mdse.; then turn to Mdse., and post it at once, because it is not n a Special Column. Write on the Debit side, Feb'y Cash, 7, 7.50. We read the next entry and pass it same as such entries were read and disposed of last month. 169. We then read the first entry in the Journal, Mdse. Dr. to Sunds., and as the first two accounts in the entry are in special columns, we pass and check them thus, f/, and post the next two in -every way the same as last month. We also post from the Sales-book the same way as before. THIRTEENTH LESSON. 207 THIRTEENTH LESSON. 170. Reopen the Cash on February 2, as usual. By reference to our Bills Payable book we will notice that our first note is due to-day, and the amount is $475.00. We also notice that it is pay- able at First National Bank, which means it would be presented there by whoever holds it, and that the bank will pay it with our funds, providing we have that much at our credit in bank ; and if we did not have enough to meet the note, the bankers would -advance whatever balance was necessary, providing they considered us good for the amount and worthy of the accommodation. If they did not so consider us the note would not be paid by them, but would be presented at our office. 171. We presume that the note was paid on presentation at the bank; hence we must give the bank credit by the amount by deducting it from last balance. 172. On looking at our Check-book we notice we have only a small balance of $41.89, and therefore the bank had to advance $433.11 of their own money to protect the note. We therefore make the following memorandum on stub of the Check-book, Feb'y 2, Less Note due to-day, 475.00 placing the $475.00 under last balance; draw a line and deduct the upper figures ($41.89) from the lower ($475.00), leaving $433.11, which must appear in red-ink figures, and will mean overdraft, or due the bank. Many book-keepers would say: " I can't de- duct $475.00 from $41.89, consequently will make no memo- randum of it until I have added enough to the bank account to pay the note ; then deduct it." 173. That would not be satisfactory, as we must show the ac- tual condition of the bank account every time it is changed, be it good or bad, and for that reason we deduct the note at once, giv- ing us a minus quantity, as it were ; then we can see how much we are overdrawing, and therefore know what amount to raise to make it good. 208 A THREE WEEKS' COUESE OF PRACTICE. 174. Furthermore \ve would receive a notification from the bank, by special messenger, that our account was overdrawn $433.11, and that they expect us to make it good before 3 o'clock, which we would do by exchanging checks with a neighbor possi- bly in some instances and depositing it, but in this instance we will attend to it in another way, hereinafter explained. Ex- changing checks would not change the condition of the bank account according to our version, but would set it aright accord- ing to the bank's version, as the check we deposit reaches the bank at once, whereas the check w r e give in exchange would be deposited by our neighbor in his bank and would have to go through the clearing-house and therefore not reach our bank tin- til next day, and by that time we will have funds there to meet it. 175. We make a double entry in the Cash-book of having paid 1 our note, crediting Cash and charging Bills Payable, because we receive our note back when we pay the cash for it. On the credit side of C. B. we make the following record : 2, By Bills Payable, Note due to-day, 475.00. We also mark it Paid on the Bills Payable book in the space for remarks. 176. Our bank account being in bad condition, we must raise the money to make good the overdraft, and having $431.54 in other people's notes on hand, according to our Bills Receivable book, we offer them for discount at the bank, and assume that the bank accepts and passes them to our credit, less Qfc discount for the unexpired time. See THIRD AFTERTHOUGHT on page 226. 177. We must see if the amount they give us credit by is cor- rect. We find the date of maturity of each note, also the amount of each, by reference to the Bills Receivable book; then calculate the number of days from now to the due date of each and reckon the 6$ for the unexpired time on the amount of each separately^ as the time is different, and find the total discount to be $3.27 y which, deducted from the total of all the notes, must agree with the net proceeds by which the bank gives us credit on their books, also on our Bankbook or Pass-book, fora description of which see page 58; also see Miniature Pass-book, pages 124 and 125. THIRTEENTH LESSON. 209 We charge the bank on stub of Check-book, thus, Feb'y 2, Proceeds of Notes, 428.27 219.19 209.08 428.27 178. We show in our memorandum the net amount of each note on the supposition that each has been entered on our Pass- book by the discount clerk ; if he had entered only the total, as is often the case, then we would have only the total in our mem- orandum. The main idea is to have ours agree with his, as a mat- ter of convenience in checking up the bank account when the Pass-book has been balanced at the end of the month. We place the total proceeds in the column under the red-ink figures and de- duct'the lower (black-ink figures) from the upper, which will leave a small overdraft still, which must also appear in red-ink figures. 179. We take $100 out of the Cash-drawer and deposit it to cover the shortage in bank, and charge the bank, thus : Feb'y 2, Deposited Currency, 100.00. If it had been a check instead of currency, we would have writ- ten simply Deposited 100.00. 180. We deduct the upper amount (in red ink) from the $100 deposited, and the difference will indicate the balance at our credit in bank, and must, therefore, appear in black ink, restoring the bank account to its normal condition. 181. We charge Cash with the amount received for the notes, and credit Bills Receivable by making the following entry on the the debit side of C. B.: Bills Receivable, Discounted at First Natl. Bank the following Notes, 211.22 W. C. B. & Co., 2.14 209.08 220.32 J. C. B. & Co., 1.13 219.19 428.27 182. We name the notes by the initials of the firm and place the amount of each just above the line, and the discount of each: on the line under the amount in the order of subtraction, and: COURSE OF PRACTICE. extend the net amount of each near the Discount column in the order of addition, and extend the total into the Sundries column. 183. The Discount, $3.27, we lose, and enter in the Journal, charging it to Interest and crediting Bills Receivable by it, in the First Form of entry, and explain thus : 6? dis. on Notes, see C. B. 6, referring to Cash-book page 6, where we have the details already stated, which will save repeating them. 184. "We also make the following memorandum on the Bills Receivable book under Remarks: Disctd. at 1st Natl. Bk. Feb'y 2, including the two notes in a brace (\). 185. Assume that the man who furnishes us with cases that we pack our goods in for shipment to customers, brings in his bill for cases delivered to us in January, say $6.50. We pay him out of the cash-drawer, credit Cash, and charge Mdse., for the same reason we charged the cartage to Mdse. 186. Assume that the collector for the gas company presents his bill for gas consumed last month. We pay him out of the cash- drawer also, say $4.50, credit Cash, and charge Expense in the special Expense column* 187. Charge Cash and credit Mdse. with the amount of retail sales for the day as usual, say $67.50. Prove the cash, balance, and close it for the day. 188. Assume that we receive $500 worth of goods from Wright Mfg. Co. We enter it in the Journal, charging Mdse. in its special column, and credit their account in their special column, neither of which will be posted at present, but passed and checked thus ( |/ ) on the left of each name where the post-mark would be. 189. We make no entries in the Sales-book this lesson, but conclude by posting from the Cash-book, and, as there are no figures in either Discount column, the entries will all be read and posted same as last month. * It will be noticed that this payment did not pass through petty C. B. The amount is sufficiently large to entitle it to a place in principal C. B ; further- more it is a matter we may want to refer to, and it is easier traced when thus entered. FOURTEENTH LESSON. FOURTEENTH LESSON. 190. Eeopen the Cash-book February 9. Assume that Miller & Bros.' note, which was due on the 3d, was protested for non-payment, which means they could not pay it, and therefore it was placed in the hands of & notary public, who would notify everybody whose name appeared on the note as indorsers, of the fact that it had not been paid and that they were looked to for making it good. The notification he sends to each is called a Protest, and his services in the matter usually cost $1.50, which is called protest fee. 191. By referring to our Bills Keceivable book we will see that we discounted the note at our bank January 12, at which time we indorsed it wrote our name across the back of it which meant that we would guarantee the bank against loss in the event it was not pai3 ; hence the note would reach us again via First National Bank, to whom we would give a check on themselves for the amount of the note, including protest fees, first making the following memorandum on the stub from which the check will be detached : No. 12. Feb'y 9, 1888. First National Bank. For Miller & Bros. Note, 128.11 Protest fees 1.50 129.61 192. It would be necessary to give them a check, which would authorize them to charge our account with the amount, which they would have no right to do without such authority, although they hold our funds on deposit. 193. We deduct the $129.61, from last balance, which will again overdraw our account, hence the difference must appear in red ink again. 194. We enter the amount of check in the Cash-book, crediting Cash and charging Miller & Bros., because we hold them account- able for the amount we advanced to meet their obligation. We enter on the credit side of the C. B. as follows : * 9 By Miller & Bros. Note due 3d, 128.11 Protest fees 1.50 129.61 * See FIRST AFTERTHOUGHT on page 226. 212 A THREE WEEKS' COURSE OF PRACTICE. 195. Assume that we receive a remittance from Davis & Co. to pay their bill of 31st ult. $213.25, less 60. We make the fol- lowing entry on the debit side of C. B.: Davis & Co., Jan'y. 31, 213.25 - 12.79 = 200.46. disposing of the matter as already explained in the case of W. C. Browning & Co., paragraph 150. 196. We would deposit the check and charge the bank ac- count with it as usual, which would settle the overdraft and leave a balance at our credit, which must appear in black ink figures. 197. Assume that our neighbor and friend, A. F. Benson, solicits the loan of $100 from us for 42 days, agreeing to pay us 7$ for the use of it. We will lend him the money on bank prin- ciples ; that is, we will require his note for the amount, deduct the 7$ for 42 days, and give him a check for the balance. 198. We make this memorandum on stub before making out check : No. 13. Feb'y 9, 1888. A. F. Benson, Loaned 100.00 42 days 1% .88 99.12 Deduct it from balance in bank 199. We enter it in the Cash-book, crediting Cash and charg- ing Bills Receivable on the credit side of Cash-book thus : * Bills Receivable. Loaned A. F. Benson On Ms note 100.00 42 days 1% .88 99.12 Make an extra memorandum on Bills Receivable book according to the facts in the case. 200. The 88 cents we make, and in a strict sense of the word is discount, but we credit interest by it, and charge it to Bills Receivable in the Journal according to First Form, and make the following explanation : 1% discount on A. F. Benson's note at 42 days for 100.00. 201. In the explanation we must allude to it as discount to make sense, because it was deducted from the face of the note, and to say 7$ interest would mean that it was added to the face * See FIRST AFTERTHOUGHT on page 226. FOURTEENTH LESSON. 213 By referring to paragraph 69 you find a full explanation of the matter, and the seeming incongruities reconciled. 202. Supposing it to be regular pay-night, we hand the porter $20 and the office-boy $7, credit Cask and charge Expense, same as before ; also enter the retail sales for the day, charging Cash and crediting Mdse., ay $72.50. Prove the cash, balance, and close it as usual. 203. Suppose we receive an apologetic letter from Miller & Bros., explaining how it happened that their note went to protest, stating that Mr. Miller was out of the city and forgot to leave a check signed with the book-keeper, which would doubtless be a fabrication from whole cloth, designed to impose on our credulity ; at the same time they request an extension of 30 days for the amount of protested note, and enclose a new note with interest added at 6$ per annum, covering the protest fees also ; hence the new note would be for $130.26. 204. We record the facts in the Journal, making two entries * 5 of First Form. We charge Bills .Receivable, and credit Miller & Bros.' account with the amount of note, and and explain as follows : Received their note of Feb-'y 3d at 30 days in renewal of note due Feb'y 3, 128.11 including protest fees 1.50 aud 30 days' interest @. 6$ = .65. We also make the necessary memorandum on the Bills Receiv- able book. 205. We make another entry charging Miller & Bros, and crediting Interest 65c., which we made, and explain as follows: % interest on 129.61 for 30 days ; see above entry. The 6$ in this case was really interest, being a percentage added to the face cf the amount ; hence we allude to it as interest in the explanation. 206. Our Commercial College professors (?) would never have disposed of the matter in two entries, but would have made one entry charging Bills Receivable with the amount of note, credit- ing Miller & Bros, by $129.61 and Interest by 65 cents, which would have been theoretically correct, but practically incorrect, as in business we desire that Miller & Bros.' account must show the full transaction, which it would not do if we had credited them 214 A THKEE WEEKS' COURSE OF PRACTICE. only by the amount they were previously charged with in the Cash-book, in which case the interest would not appear in their account, nor would their account have shown the amount of note received from them, as it should. 207. Assume that we receive $800 worth of goods to-day, $450 from Earle & Co., $350 from Sanford & Co. We enter it in the Journal, charging Mdse. in its special column $800, and crediting Earle & Co. and Sanford & Co. in the Sundries Cr. column by the amount of their respective bills, and explain, As per bills on file. The Mdse. would be passed in posting and checked as usual, and the two firms would be dealt with same as before. 208. Charge on Sales-book as follows: Davis & Co. $213, duplicating the items in next to last entry on page 89, omitting case and cartage. Charge J. C. Brown & Co. $204.50, duplicat- ing last entry on page 87. Charge W. C. Browning & Co, $206.10, duplicating first entry in February on page 89. We would decline to ship any more goods to Miller & Bros., since they failed to meet their note. 209. We conclude this lesson by posting from all three books as usual. The first entry on debit side of Cash-book will read Cash and Discount both debtor to Davis <& Co., which means,. their account must be credited by both Cash and Discount. On the credit side of their account we write, 200.46 12.79 Feb'y9, Cash. Dis., 6, 213.25, all on one line, arranging the figures as already explained in a similar case. First entry on credit side reads, Cash credit by Miller <& Bros. $129.61, which means, their account must be debtor to cash $129.61. We therefore write on the debit side, 9, Cash, 7, 129.61. 210. The next entry reads Cash credit by Sills Receivable $99.12, and therefore Bills Receivable must be debtor to Cash $99.12. Hence we write on the debit side, Feb'y9, Cash, 7, 99.12. The next entry on both the debit and the credit side we read, pass.. t/ j L and check as we have others of the same kind. FIFTEENTH LESSOJX". 215 FIFTEENTH LESSON. 211. February 12. Suppose we receive a 4 mos. note from Davis & Co. for $240.50 to settle their bill of 1st inst. We would enter it in the Journal, First Form^ charging Bills Receiv- able and crediting their account by the same amount, and explain thus : Received their note of Feb'y 1st at 4 mos. in settlement of bill of same date, 240.50. Also make the usual memorandum on Bills Receivable book. 212. Reopen the Cash-book February 12. Suppose J. C. Brown & Co. desire to take up, in other words call in, their note which they gave us January 18, $220.32, and for that purpose send us their check to pay it 19 days before its maturity (count- ing 29 days in February), deducting 6$ per annum for the time yet to run. 213. By reference to Bills Receivable book it will be noticed that we discounted the note at bank February 2; hence we would have to withdraw it from the bank, which would cause them to lose the discount, and for that reason they would not like to give it up until due, but would do so as a matter of business courtesy. We would give them the note just received from Davis & Co. as a substitute for the withdrawn note to protect them from loss, and as an act of reciprocal favor. 214. Would-be professors or proprietors of so-called business colleges who vaingloriously style themselves presidents ( ?) would not dispose of this matter properly or as it would be done in a business-like way by a practical bookkeeper. Their first thought would be to journalize it ; the burden of their song is journalize everything. They deal in theories, not conditions ; in shadows, not substances. They have no knowledge of the many exigencies arising in business which their theories do not encompass, a fact that has brought their teaching and methods into disrepute and desuetude. 216 A THREE WEEKS' COURSE OF PRACTICE. 215. The money received from J. C. Brown & Co. we enter at their credit on debit side of C. B., thus: J. C. Brown & Co. For iiote due Mar. 4. 220.32 Less 6$ dis. 19 days .69 219.63 We deposit the check and charge the bank in the usual way; then make out a check to the order of the bank on themselves, first making the following memorandum on stub : No. 14. Feb'y 12, 1888. First Natl. Bank. For J. C. B. & Co.'s Note 220.32 Less 6$ for 19 days .69 219.63. Deduct it from bank account. 216. Then enter it on the credit side of Cash-book, charging it to J. C. Brown & Co., thus : By J. C. Brown & Co. For note due Mar. 4, 220.32 Less 6$ for 19 days .69 219.63. We take no notice of the discount in either case, as one offsets the other, and in no way affects onr Interest account. The two entries of Cash also offset each other, and neither increase nor diminish our balance; but it is entered on the books for the pur- pose of having J. C. Brown & Co.'s account show the transaction as it should. 217. The note we give the bank as a substitute would be sub- mitted as a new matter for discount, and the proceeds charged to the bank account in the usual w r ay, and then entered on the debit side of Cash-book at the credit of Bills Receivable in the follow- ing manner : 12 ,, Bills Receivable. Discounted at 1st Natl. Bank D. & Co.'s Note 240.50 i @ 6^ 113 days 4.53 235.97. 218. We make the following remarks on Bills Receivable book; Disctd. at 1st Natl. Bank Feb'y. 12. The 6$ ($4.53) w r e lose, and enter it in the Journal, charging Interest and crediting Bills Receivable, and explain it as follows: Qfc dis. on Davis & Co.'s Note 240.50 for unexpired time 113 days. 219. By referring to the Bills Payable book we notice that we * See SECOND AFTKKTHOUGHT on paalso makes $200, less the^^^charges, $l#tH), or $1^.50 net./^^ A-^vfl^- POOL. A combination of lookers, or kather a combination their capital for the purpose of controlling certain stocks. Kind of a distant relation to a corner, but less powerful and far-reaching in effect. PUT. A privilege to deliver stocks at market price any time within a specified time below a fixed price. PYRAMIDING. Investing profits as fast as they accumulate. It is a very dangerous method and usually results in loss of margin PARLAYING. REACTION. Making lower prices, usually the result of realiz- ing or taking profits. RALLY. Making higher prices, the result of shorts covering. REALIZING. Closing deals to take profits. SHORT. Having sold stock one does not have, .expecting a decline. STOP ORDER. Fixing a price at which to close a deal and thereby limit loss if one is on the wrong side. SCALPERS. Professional traders who get in and out with small gain or loss a point or less. STRADDLE. A privilege covering both puts and calls. TAPE. A white paper ribbon, f inch wide and about 300 feet long, rolled so it can be adjusted to the ticker in such a way that the latter can supply itself as fast as required for quotations or news. TICKER. A small electrical instrument or machine that auto- matically registers in printed style on the tape every transaction that takes place on the Exchange. The tape is an indispensable concomi- tant of the ticker, without the former the latter would be useless. 300 WALL STREET MATTERS. TRACTIONS. Street railroads, Metropolitan, Third Avenue, Brooklyn Eapid Transit, Manhattan Elevated. UNDER THE RULE. When a broker fails his commitments ;are closed out by the chairman according to the rules of the Ex- change for the protection of other interested brokers. Such trans- actions appear on the tape as U. E. WASH SALES. Mutual agreement between brokers to buy and sell among themselves to create false impression as to move- ment in certain stocks, part of the agreement being that such deals are declared off after the movement is thoroughly under way and in the hands of others. WALL STREET METHODS. 1. This is a subject prolific of thoughts worthy of engrossing the pen of one more versatile than the writer assumes to be. We write from our own experience and observation, which we admit is limited, covering a period of but a few years. Hence our conclu- sions may not be as correct nor our views as broad and comprehen- sive as those of some who will no doubt peruse these pages, and whom for that reason we do not presume to enlighten or interest. Our main object is to explain later how books are conducted in a broker's office; and in order to do that it is necessary to look into the peculiarities of their business. 2. There are two great classes that do business in Wall Street, viz., INVESTORS and SPECULATORS, the latter being subdivided into two other classes commonly called BULLS and BEARS. 3. INVESTORS are those who buy stock outright at its intrinsic value, and are satisfied to make a reasonable rate of interest on their money without regard to fluctuations in the market prices. 4. It goes without saying that this class has ample means to carry out its undertakings and eventually gets all the money. 5. SPECULATORS are those who buy or sell stocks on margin WALL STREET METHODS. 301 with a view of benefiting alone by the fluctuations in market valuations. 6. As an example we take a stock that paid 12 per cent per annum for many consecutive years, the par value of which is $100 per share, the market value having fluctuated during the writer's observation from $95 to $180 per share. 7. The INVESTOR who is satisfied to make 6 per cent per an- num on his capital could afford to pay $200 per share for the stock in question and consider it intrinsic value for his money, so long as he felt assured that the 12 per cent rate would be main- tained ; but inasmuch as there never has been a time when he would have been required to pay $200 per share for this stock, his pro rata of interest would have been as much more than 6 per cent, as the price per share was less than $200. 8. The wide difference between the highest and the lowest price of this stock and many others is what brings to the fore the Speculator Bovine or Bruin as the opportunity would suggest. 9. At the minimum price the BULLS would be rampant or ag- gressive, as they would feel assured that INVESTORS would pay more than the current price for stocks; and as a matter of fact the bidding which begins between the INVESTORS and the BULL specu- lators (BEARS remaining under cover for the present) brings about the advance that the Speculator expected. 10. When this state of affairs has continued for several days, and as a consequence prices have advanced from ten to thirty points, which often has been the case, even when the market is in a normal state, it would then be a question in the mind of his Bo- vine highness as to whether or not the INVESTOR would pay a still higher price; and, believing that he would not, the speculator begins to realize in other words, begins to sell the stock he is long of and take his profit, which would be the difference between the price at which he sells and at which he had previously purchased. 11. At this stage of proceedings the BEAR makes his advent and begins to sell short, as it is called, because he believes he can buy later at a much less price ; and as the INVESTOR has all he 302 WALL STREET MATTERS. wants, buying ceases and a reaction sets in, that is, offering stock at a fraction less, which starts a downward movement, often culmi nating in a big break or decline in prices, possibly back to, or even lower than, the last minimum which INVESTORS considered intrin- sic value. 12. When any stock can be bought for less than it is worth, new INVESTORS are ready to buy, a fact BEARS are well aware of; hence they begin to cover, as it is called that is, turn buyer in- stead of seller, thus gaining the difference between the price at which they buy in and at which they previously sold. 13. The big BEARS, who are heavily short and desire to cover at a lower price, will select a weak stock and raid it by offering 1,000, 2,000, 3,000, 5,000, 10,000 shares in bewildering succes- sion. The result is a big break in that stock within a few min- utes, which causes & sympathetic break throughout the whole list. The money-powerful BULLS who desire to unload at higher prices, and for that reason are determined to force prices upward, snap up these big lots as quickly as a hungry trout would a minnow. 14. Here is where the real tug of war begins and rages furi- ously for hours between the BULLS and the BEARS, the INVESTORS remaining in the background as disinterested onlookers, that is they do not participate in the buying or- selling but reap a rich harvest in lending their holdings at high rates of interest which partly accounts for the fact that they in time get all the money. It is a battle royal between money giants, and fortunes are often made and lost in a single day, thus proving the great possi- bilities of Wall Street, such as do not exist elsewhere. Prices are high and low alternately, fluctuating upward and downward like the rise and fall of the tide. In wooing fickle fortune in Wall Street go with the tide, and she will smile upon you ; but to go against it is to cause smiles to give place to frowns. The great secret is to know when the ebb and flow begins. 15. Water seeks its own level, which is fixed by its source. The prices of stocks may not seek, but will in time find their level too, which is also fixed by their source ; and the source in this case is WALL STREET METHODS. 303 the promoters or insiders who know the real worth, which is meas- ured by interest-earning capacity. It requires artificial force^ to make anything rise above its level; and when that force is ex- hausted, natural force will send it downward again. The higher the ascent the greater the danger, and the more rapid the descent ; there is but little danger at the level. The old and familiar saying, "Everything that goes up must come down," is true when it relates to material things that are governed by the law of nature ; but it is often fallacious when applied to the price of stocks, although it is the BEAR'S great watchword, and he gives it as a reason for the hope that is within him that he is on the right side. No artificial force has ever been put in motion that is perpet- ual or inexhaustible. Natural force is perpetual, which would make it seem that those who are oh the side governed by natural force have the best of it. As the Bear's greatest opportunities are when prices are the highest, they are on the safe side because it is natural for -prices to go their way eventually. It is dangerous to be long of stocks above the level ; it is equally dangerous to be short of them below the level. It does not follow necessarily that an advance in the price of stocks is the result of artificial force called manipulation ; it may be a natural result of improved conditions enhancing the value and justifying a new and higher level. Professional speculators can easily discriminate between the two causes of an upward move- ment. The inexperienced public cannot so discriminate. SURE WINNERS. 16. It is safe to say that INVESTORS are the only sure winners, because when they choose to speculate they, as a rule, take the short side that is, sell short only when prices are higher than when they invested that is, higher than intrinsic value, as they buy only at real worth. In case they go still higher beyond their financial reach they can deliver the shares they own and still be a winner, the difference between purchasing price and selling price without regard to market price. In case the price decline imme- 304: WALL STREET MATTERS. diately after they sell, they can luy in again at a profit without- parting with their original investment. 17. Thus their chances of losing are reduced to a minimum, inasmuch as they are not forced to sell their shares in case of a decline, but always have what they paid for at intrinsic value; and it is only a question of time when the tug of war, before al- luded to, will force the price back to their purchasing price. It takes several months to manipulate the price of stocks upward from twenty to thirty points. It requires but a single day to smash them or send them downward that much. WHICH HAS THE BEST OF IT? It seems to us as if the BEARS have the best of it. 18. Inasmuch as Investors get all the money in the long run,, and the fact that they side with the Bears when they choose to speculate for the reasons already assigned, is the best evidence that BEARS have the lest of it. Professional speculators are too smart as a rule to sell anything below its real value. 19. It does not follow that one must go short to be on the side with the BEARS, as they do not always sell but also "buy when the conditions favor a protracted high market. The sellers in such a market are not BEARS only but also BULLS themselves, who sell to secure profits. 20. A movement in stocks either way is governed by the law of supply and demand. The greater the demand the less the sup- ply and the higher the prices. When the demand ceases, a new supply is suddenly discovered by the BEARS, and prices take a tumble. BEARS' ADVANTAGES. 21. Conditions often outweigh capital in this matter, and there are more conditions that favor the BEARS than there are favorable to their opponents, such as war and rumors of war ; over-produc- tion in manufactured articles ; strikes among the great army of employees ; closing factories ; bad crops ; reducing or discontinuing WALL STREET METHODS. 305 dividends ; death of some prominent man ; high rates of interest ; inflated prices ; approaching elections, etc., all of which- cause stocks to decline. BULLS' ADVANTAGES. 22. Universal prosperity ; low rates of interest ; oversold market ; participation of the inexperienced public; increased earnings which justify a belief in larger dividends all conduce to higher prices. 23. In order to speculate with any degree of safety one must study the causes and conditions that favor both sides; also must know something about the intrinsic value of the stock he chooses- to deal in, which would be governed by its earning power. 24. It is a well-known fact that the great majority of specu- lators lose their money ; it is also a well-known fact that the ma- jority buy stocks instead of sell, which proves the correctness of the conclusion that BEARS have the best of it. It is only a ques- tion of time when the BULLS are left with the lag to hold and both ends open. 25. One's first experience in Wall Street is on the long side, which is due partly to the fact that he is loath to sell that which he does not own. Furthermore, he knows that the limit of a downward movement is the bottom, whereas an upward movement is practically unlimited and the top may be beyond his financial reach (see Corner, page 297). "OLD COMMODORE," the great-grand- sire of the present generation of Vanderbilts, to whom they owe their colossal fortune and financial supremacy, said: "NEVER SELL WHAT YOU DO NOT OWN and NEVER BUY WHAT YOU CANNOT PAY FOR." That was the SECRET of his success and the GREAT SECRET OF WALL STREET BUSINESS in a nutshell. 26. We know of a certain bank stock (not listed on the ex- change) that could have been bought a few years ago at 10 per cent above par; it could not be bought now for 3,000 per cent ad- vance, and the end is not yet. If one had sold or been short 1,000 shares of that stock at par, his ruin would have been inevitable. On 306 WALL STREET MATTERS. the other hand, if he had bought 1,000 shares at par, his fortune, at this writing, would have been over $3,000,000, a certainty un- surpassed even by the possibilities of a Klondyke. In the face of such startling facts who can doubt the wisdom of judicious invest- ment and cautious speculation? DANGER IS UBIQUITOUS. 27. One often reads about defalcations and ruin the result of speculating in stocks ; hence arises the hue and cry of danger in Wall Street. The same causes ignorance and inexperience would produce the same effects losses and failures in any other field of industry. To invest capital in any kind of business one does not understand would be just as dangerous as speculating in Wall Street. 28. It is safe to say, however, that one can do more business in the market with less capital than any other place, not because -less money is involved but because he needs to advance only enough capital to cover possible fluctuations in prices, the balance or market value being taken care of by the broker with whom the deal is made. 29. In buying or selling stocks on margin the actual transfer or delivery of shares does not take place. All that is necessary is to adjust the difference between the buying and selling price, which is done by the broker. 30. One great danger that menaces those inexperienced in such matters, is falling into the hands of irresponsible brokers, who swindle them out of their capital, to say nothing of the possible profits ; hence the importance of finding out who can be trusted with impunity or rather WITH MONEY. 31. If afoot entrusts his money with a knave, to be invested according to the latter' s judgment, he will surely lose and the knave just as surely win. When fools renounce their folly knaves will be without occupation. 32. The greatest leader Wall Street ever knew, whose skill in juggling with millions was without a parallel, now gone to his WALL STREET METHODS. 307 reward, once said that one should not speculate in stocks until he had first studied them for at least three years. The fact that^he entered Wall Street a comparatively poor man, and at his demise he was a multimillionaire, proves that he was eminently capable of giving good advice.* 33. One is supposed to learn during that time how to weigh conditions ; also learn how much stocks are worth and the possible fluctuations in prices. 34. When thus equipped with prerequisites to success, if con- servative and patient enough to await opportunities, it seems to us that one has as good a chance to make money in speculation as he would have in any other kind of business. 35. Without some risk there can be no gain in any advent- ure, and the place to get money is where it is to be found most plentifully. THE NEW YORK STOCK EXCHANGE. 36. This is an association of men of great wealth, whose word is good for millions of dollars, and whose reputation for honesty and probity is of highest order. It began business in the year 1792, with twenty-four members; to-day, the beginning of the twentieth century, its membership is about eleven hundred. 37. It costs a small fortune to become a member now, as seats (memberships) have been sold for $76,000 each. Their building is situated on Broad Street near Wall. Its close proximity to the latter accounts for the fact that Wall Street gets credit for, or is charged with, everything good or bad that results from speculating in stocks. Business begins at 10 A.M. and closes at 3 P.M. Sat- urdays it closes at 12 M. The bulk of business is done on this * When the ticker announced the last bid and asked, his next thought was of his home on the Hudson. To see him on his beautiful lawn playing " leap frog " with his boys for their amusement, as he often did, even when his mind was burdened with weighty matters involving hundreds of millions of dol- lars, was to look upon a charming picture of home life and domestic felicity that would irresistibly win the beholder's admiration. 308 WALL STREET MATTERS. exchange and all the big deals are consummated there, the smallest transaction involving not less than one hundred shares. 38. The commission is one-eighth for buying and one-eighth for selling; that is, one-quarter on each deal. The minimum change in price is also one-eighth of a point. THE CONSOLIDATED EXCHANGE. 39. This is an independent and less important association, that has for its clientage those who deal in small lots, ten shares being the minimum, but no limit to the maximum, although rarely ex- tending into a thousand shares. Their building is at 62 Broad- way. 40. The commission is only one-eighth for completing each deal. No less than one -eighth of a point is offered or accepted as a bid. 41. Those who can afford to speculate in large lots would rather pay the extra one-eighth commission on the big exchange because of the advantage in prices. ROUTINE IN SPECULATING. 42. If one desires to buy or sell twenty shares of the Granger stocks he can do so on five points margin that is, he must deposit $100 with his broker; but to deal in the Industrials or Tractions (city), it would require from ten to twenty points margin, as the fluctuations in prices are more violent in these classes, often vary- ing five points or more within a few minutes. If one chooses to BUY 20 shares, he fills out WALL STREET METHODS. 309 FORM ONE. New York 1901 P. A. WRIGHT & Co. 148 WEST 14TH STREET. BUY Shares @ Stop loss @ (Approximate). It is agreed that P. A. WRIGHT & Co. have the right to hypothecate or dispose of, with- out notice to the undersigned, all stocks, bonds, petroleum, 'grain, and cotton, purchased or sold, on margin, upon the approximate exhaustion of margin. and hands it to the order-clerk, who wires or telephones the order to the broker on the floor of the Exchange. When the order has been executed, the clerk hands the purchaser a pencil memoran- dum like FORM TWO. A MEMORANDUM ONLY. BOUGHT Shares at. and the next day he receives by mail an authenticated report of the transaction like 310 WALL STREET MATTERS. FORM FIVE. P. A. WRIGHT & Co., 148 WEST UTH STREET. New YorTi 1901 M... DEAR SIR: We have this day BOUGHT for your account and risk We have this day SOLD for your account and risk P. A. WRIGHT & Co., Per. It is further understood that on all marginal business, the right is reserved to close transactions when margins are within a half per cent, of exhaustion, without further notice, and to settle contracts in accordance with rules and customs of Exchange where order is executed. P. A. WRIGHT & Co. which is a combination of forms two and four. If the price declines three or four points, more margin would be asked for in case he desires to hold the purchase, otherwise he can fill out WALL STREET METHODS. 311 FORM THREE. New York 1901 P. A. WRIGHT & Co. 148 WEST 14TH STREET. SELL , ..Shares. . @ loss @ (Approximate). It is agreed that P. A. WRIGHT & Co. have the right to hypothecate and dispose of, without notice to the undersigned, all stocks, bonds, petroleum, grain and cotton, pur- chased or sold, on margin, upon the approximate exhaustion of margin. ordering the 20 shares sold. When the order has been executed, the clerk hands him a pencil memorandum like FORM FOUR. A MEMORANDUM ONLY. SOLD: Shares at. The following day he receives the authenticated memorandum like FORM FIVE. In case the price advances he is $20 winner for each point above his purchasing price. When satisfied with the amount of profit one has, he fills out FORM THREE to sell, fixing the price or at market price. To be sure of selling, he takes market price as it may not be possible to get the price he names, and if a reac- tion sets in his profit may soon melt away ; in fact he may have to take a loss or produce more margin. 312 WALL STREET MATTERS. In case one chooses to go short (sell), in the first place he fills out FORM THREE just the same as selling long stock. If the price advances three or four points, more margin would be called for, as he would be $20 loser for each point advanced. He can put up more margin in case he does not want to take a loss, otherwise he fills out FORM ONE to buy, either fixing the price or at market price. It is better to deal at market price if one's capital is limited, for the reason already assigned, thereby limiting his loss or secur- ing his profit ; otherwise he incurs the risk of increasing the former and diminishing the latter. If the price declined after one first sold, he would be one dollar per share winner for each point declined, and when satisfied with the amount of profit he fills out FORM ONE the same as in buying long stock. Speculators who can furnish unlimited margin can deal with the same degree of safety as investors, as it would be only a ques- tion of time when prices would get back to starting point, either long or short. It seems to us to be better to take small loss and get out when one sees he is on the wrong side and get in again at a more ad- vantageous price than to tie up his capital indefinitely, awaiting return to starting point. Those young in the business, when the market goes their way, are inclined to plunge ; that is, when they get a profit they increase their deal to the extent of profit. The result is, when the turning point comes and the market goes against them, they lose twice as fast as they won. A better way would be to reduce the amount of deal in case of profit, then when the turn comes one loses less and can get out with some profit. If he starts with all he can carry and it goes his way, he gets all there is in it for him; but if it goes against him, he can close out half at a small loss and hold the other half. The margin will protect half twice as far as the whole, or until the remaining half recovers its own loss; also, possibly the loss on the half sold, by going the right way beyond the starting point. WALL STREET METHODS. 313 Those who have plenty of capital pursue the opposite course ; that is, if they buy, say, 20 shares and the price declines two points they buy 20 shares more, which makes their average one point lower than first purchasing price. Then, when there is a rally of one point in the price they close out the 40 shares without a loss, except the incidental expenses attending both deals. The more they buy on this scale the lower would be the average price, re- quiring less rally for them to get out whole. If the conditions favor either a protracted Bull or Bear market it is not a bad idea to pyramid or parlay, as it is called, which amounts to the same thing as plunging, but as the profits in- crease invest only half of it instead of all, thus compounding the gain in case it continues in the right direction, or saving part of the gain in case it goes wrong. It is by this method of trading that small fortunes are made on limited capital in a short time, when it was possible to lose only the margin. STATEMENTS. On page 315 we give two different forms of statements. No. 1 will bear investigation in the matter of interest. No broker has any right to charge interest on more money than he advances. In this case interest was charged on total cost of 40 shares of stock, $2,580, when it should have been on $2,380, as the margin, $200, covered part of the cost. This is a big percentage in the brokers' favor, and the interest alone would soon enrich him if he had cus- tomers enough who would submit to that kind of figuring. The first two items on credit side of statement ($200) were for margin. The first item on debit side was 20 shares L. & N (Louis- ville and Nashville) bought @ 86$ = $1,737.50, add com. = $2.50, extension $1,740. In each case it will be noticed that the extension covers $1.25 com. for each 10 shares. The second debit item was 20 shares Co. T. (Continental Tobacco) bought @ 41$. Next item was interest for carrying the 40 shares over Sunday, and the last item on that side was 10 shares P. 0. (People's Gas Light Company of Chicago) bought @ 115J. 314 WALL STREET MATTERS. The third item on credit side were \\% quarterly dividend on 10 shares P. 0., declared while the customer still held them. The other three items on that side were for the 50 shares sold at the prices indicated, hence a net loss on the whole of $106.77. It will be noticed that the first extension on the credit side is 20 cents less than it figures, and the other two 40 cents each less which is the charge for revenue stamps (20 cents is deducted for each ten shares). In statement No. 2 it will be noticed that interest is credited on the margin advanced, also on sales, and the balance of interest, 29 cents, adjusted properly, or 35 cents more in the customer's favor than would have been accounted for by the broker who ren- ders statement like form No. 1. FORM OF A PUT. For value received the bearer may DELIVER TO ME on one day's notice, except last day when notice is not required, .shares of the (common or preferred) stock of the company, at any time, within days from date. All dividends for which Transfer Books close during said time go with the stock. Expires 190 . . . . . M. (time of day on this line) Signed Dec. 31, 1900, Atchison Preferred was selling at 89. "A" is a broker who does not believe the price* of this stock will be lower than 86 within 15 days, hence is willing to sell for $85 all the profit that can be made on 100 shares below 86 within the speci- fied time. "B" buys the privilege, paying "A" $85 for it. All he can lose is the $85, no difference how high the stock goes be- fore the time expires, but his profit will be $100 for each point below 86 within the 15 days. He can put the 100 shares any time below 86 at market price, when he is satisfied with the WALL STREET METHODS. * - 4 PH H C 1-5 rfS COCO IH^H 8888888 315 1 : :H HJ i |o :s s^| 1 H^3| 3 SSSSSw H _; tfi d3 pq ^p,,j^. OOOOO^; grrrrr, 316 WALL STREET MATTERS. amount of profit. If he fails to put it within the limited time, he loses all. Say the price, after ten days, is 80, he can put it without wait- ing the other 5 days, as his profit at 80 would be $500, less $85, which he paid for the privilege. Within the remaining five days the price may advance again and all his profit would melt away unless he delivers the 100 shares below 86. FORM OF A CALL. For value received the bearer may CALL ON ME on one day's notice, except last day, when notice is not required, shares of the (common or preferred) stock of the company, at any time, within days from date. All dividends for which transfer books close during said time go with the stock. Expires 190 . . . . . M. Signed When St. Paul was selling at 125, a broker sold a call for $5 on 100 shares at 137, good for 30 days, believing it was not within the bounds of a reasonable possibility for that stock to advance 12 points in 30 days, or higher than it had ever sold before. Before the expiration of the time the price was 149, or 12 points higher than the call price. The purchaser of the call made $1,200 for his $5. All he stood to lose was his invest- ment. The price of St. Paul had to advance over 12 points to save his $5. To the maker of the call it looked like finding a five- dollar bill. The price continued to advance in this movement until it reached 162, without a reaction of any consequence. In a short time afterward it advanced to 185. We have often heard it said in silly rhyme, and have repeatedly seen it demonstrated in distressing reality, that, " We can never tell from where we sit How soon our money will ' git up and git. ' " WALL STREET METHODS. 317 WAYS THAT ARE DARK. It is a common belief that the regular commission is not the only source of gain of unscrupulous brokers on the Small Ex- changes ; in fact, it is believed to be the smallest part of their profit in a very active market. Our experience leaves no room for doubt in our mind that such is the case with some of those who handle the accounts of small speculators. That which now concerns us is what disposition is made on the books of the extra rake off or undue profit in this hypothetical case, otherwise we would not allude to ways that are dark and tricks peculiar to the unscrupulous. One way to cover such trans- actions would be a dummy account, that is, an imaginary customer represented by a fictitious name, or possibly the name of a clerk to make it appear more realistic and on the level, also easier to explain in case of an investigation. Say a customer gives an order to buy 40 shares of Sugar at the market price, which he observes by the tape is 135. The order is executed promptly at 135, but before reporting the purchase, the broker waits to see next quotation, and if it is lower, the customer gets the Sugar at the actual purchasing price, 135, and is of course, a loser; if, however, the next quotation to 135 is a fraction higher, the broker still ivaits to see a few more quotations ; as to how long he waits will depend upon whether he is dealing with an easy cus- tomer or a kicker. By an easy customer we mean one inexperienced in the busi- ness, who believes that everything is on the level, usually called a lamb. A kicker is one who knows the tricks of the trade. He de- mands immediate action, and will not submit to being gouged for more than a quarter of a point, whereas an easy customer usually abides the broker's pleasure and may get a point or more the worst of it. Say the price of Sugar advances to 140, and the movement seems to be over, the broker reports to easy customer 40 shares of 318 WALL STREET MATTERS. Sugar bought at 136. As he has no way of knowing the price at which the Sugar was bought, and the fact that he has a profit of four points, makes the deal very satisfactory and allays all sus- picion as to being charged one point higher than the market price when he gave the order to buy, which gives the dummy one point clear profit. The dummy would be charged with 40 shares of Sugar at 135, and credited at 136, the price charged the customer, apparently making two deals of it. Double dealing of this kind is a ruinous percentage against speculators, and is probably one of the principal reasons why the public cannot beat the game. The clerk must be wide awake and quick to discern as to an easy customer and a kicker, so as to avoid controversies and expose of little irregulari- ties of this kind. Do not do business with unscrupulous brokers. A FORTUNE-TELLER- THE TICKER. STOCK BROKERS' BOOKS. It is now in evidence that the books used in a broker's office are altogether different in design from those used in other lines of business ; hence, even though one may have spent half of his life- time handling the books hi all other branches, he could not suc- cessfully manage a broker's books without the technical knowledge contained in these pages. The following forms are those used by New York Stock Ex- change houses. We believe in meeting the issue squarely and weighing facts as we find them, but if we were put in charge of the books in a broker's office we would introduce what we conceive to be the indispensable Cash Book, which would conserve its part just as advantageously in this business as it would in any other kind, at the same time not disturb the usual routine. We find the ordinary Ledger, Check Book and Journal. The special books are BLOTTEK, PURCHASE AND SALES, LONG AND SHORT, MARGIN, BORROWED AND LOANED, CASH LOANS, SECURI- TIES, STOCK LOANS, DIVIDEND and COUPON. The Blotter is a general summary of each day's transactions and includes the cash. It is the main 'book. The others are used for the purposes indicated by their titles. Assume that P. A. WRIGHT & Co. (T. P. NOBLE being the "Co.") begin business as stock brokers Oct. 1, 1901. The profit or loss to be divided equally. NOBLE invests in cash (represented by check on his private bank) $10,947.16. WRIGHT invests 500 shares So. Eailway Com., 400 shares N. Y. Central, 10,000 Bonds (U. S. Gov. 4's). 1st entry is made on the " Deliver " side of Blotter crediting NOBLE with his check. 320 STOCK BROKERS' BOOKS. 2d entry is on back of stub of Check Book, charging UNION BANK with the check $10,947.16. 3d entry appears on the " Receive " side of Blotter, noting se- curities invested by WRIGHT without regard to prices or extensions. 4th entry on same side of Blotter shows securities deposited with us by SMITH as margin, also without regard to what they are worth. See Blotter on page 327. The top of page represents the " deceive " (or left-hand) side and the bottom of page represents the " Deliver " (or right-hand) side of Blotter. This gives rise to a Capital account on the Ledger which is credited $10,947.16 and Debited (prices and extensions blank) with the Securities belong- ing to the firm. SMITH'S ledger account would be debited in blank the same way with his securities. The Bank Ledger account would be debited with $10,947.16. As a matter of fact this is the usual way it is done, and we are assured has been in vogue for twenty years. It is positively wrong in principle, nevertheless, to debit a man's account with what he has, and if left to our judg- ment in opening the books we would not follow the prevailing custom, but we would introduce a way which seems to be un- known in this business, although in perfect harmony with the laws that govern the science of accounts. We would show the market price and extension for each of the Securities that appear on the "Keceive" side of the Blotter, the total amount of which we would charge to Securities account in the Ledger and so name it in the space designed for that purpose in the Blotter. Then on the " Deliver " side of the Blotter we would credit WRIGHT with the amount of his part of the securi- ties, and credit SMITH in the same way with the amount of his as shown on the " Eeceive " side. We would credit NOBLE in the Ledger with $10,947.16, and have no Ledger account called Capital Account. This would not change the present order of things that are gov- erned by the rule that all stocks coming in are long and those going out are short. The fact of making extensions of those on the " Eeceive " side and crediting the owners thereof with the STOCK BROKERS' BOOKS. 321 amount does not make the stocks short, no more so than when we extended the St. Paul and U. S. Steel, which we bought for JONES and SMITH. However, we give the forms of the usual way, and not, as in our judgment, would be the correct and better way. DAILY ROUTINE. 1st. Enter the purchases and sales in the PURCHASE and SALES BOOK. 2d. Write up LONG and SHORT book. 3d. Write up BLOTTER from PURCHASE and SALES BOOK. 4th. Make Clearing House Sheet from the exchanged tickets so it will agree with the BLOTTER. 5th. Plan out the day's work, that is, make out a list of stocks to be borrowed, loaned, or returned, and send it with Stock Loan book to exchange member for proper attention; borrow money, if necessary, to meet the requirements of the day, or pay off loans if funds are sufficient to do so and still have usual balance in Bank. 6th. Write up SECURITIES BOOK. 7th. Turn the BLOTTER over to the bookkeeper so he can make his extensions, i.e., commissions and total amounts, after which he posts the work of the day. PURCHASE AND SALES BOOK. The size of this book is 8 x 12 and contains 200 pages or more. It is a double page book, purchases on page 2 and sales on page 3. 1st entry is 100 shares of St. Paul bought from KRUSE & Co. @ 156^ for JONES. No extension necessary in this book. 2d entry is 50 shares Union Pacific, bought from VERMILLE & Co., @ 97 for BROWN. 3d entry is 500 shares U. S. Steel, bought from FLOHR & Co., @ 53 J for SMITH. 4th entry is 100 shares Pacific Mail, sold to PORTER & Co., STOCK BROKERS' BOOKS. @ 42-J for ADAMS. This order was executed for us by another broker (MILLER), whose name appears on the left, for which he gets $2.00, that being the regular rate ($2.00 per 100 shares) brokers charge one another. Miller would send in his bill at the end of the month, which we would pay and charge to Commis- sion account. BOUGHT, Oct. 2d, 1901. Broker. No. Shares. Stock. From Price. Account. 100 50 500 St Paul Kruse 156M 97 53^ Jones. Brown. Smith. Un. Pacific . . . Vermille. . . U. S. Steel Flohr SOLD, Oct. 8d, 1901. Broke r. No. Shares. Stock. To Price. Account. Miller... 100 Pacific Mail Porter 43^ Adams. i LONG AND SHORT BOOK. This book is uniform in size with PURCHASE and SALES, but of different design. The entries are made with lead pencil because they are subject to many changes. The first half of this book is for the stocks most popular with and dealt in by our customers, alpha- betically arranged with several pages for each stock. On the left side of the dividing line, on St. Paul page, is entered "100 Jones," that being the number of shares bought for his account, which also explains the entries on pages for Union Pacific and U. S. Steel. On the right of the dividing line, on page for Pacific Mail, is entered "100 Adams," that being the number of shares sold for his account. When these deals are all closed by selling the long stock and covering the short, the entries are erased. In the other half of this book, on page indexed "A" we find STOCK BROKERS' BOOKS. 323 ADAMS on the right of the dividing line is entered "100 JPacific Mail," being the sale made for his account. Any other sales made for him would be entered immediately under on the next line or lines. On page indexed "S" we find SMITH, and on the left of the dividing line is entered "500 U. S. Steel," being the number of shares of that stock bought for his account. Any other purchases made for him would follow in regular order under first entry, which will also explain entries on pages indexed " B " and " J. " As to how many pages would be left for each Customer will de- pend upon whether he is an active operator or an occasional dealer. When the deals are closed out for either stock, the entry is erased for that particular stock, and those not erased on the left would show long stocks still held, and on the right it would show the shorts still out. A ADAMS. 100 Pacific Mail. BROWN. 50 Un. Pacific. JONES. 100 St. Paul. 8 SMITH. 500 U. S. Steel. 324 STOCK BROKERS' BOOKS. LONG AND SHORT BOOK. (CONTINUED.) PACIFIC MAIL. 100 Adams. 100 Jones. 50 Brown. 500 Smith. ST. PAUL. UNION PACIFIC. U. S. STEEL. BLOTTER. This is a general summary of each day's business, and is the all-important book of the specials. It contains 300 pages, 14 x 17, nearly square in dimensions. Two are required, one for Mon- days, Wednesdays, and Fridays, the other for the alternate days, so that the bookkeeper can use one while the other is in use by the Cashier. 1st entry Oct. 2, 1901, is on the right, or "To Deliver" side, and shows balance in Union Bank. 2d and 3d, on same side, are for checks received as margin from JONES and BROWN. 4th is on the left, or "Receive" side, and is for 100 shares of St. Paul, bought from KRUSE, @ 156J = $15,625, for JONES. This part of the entry is made by the Cashier, and the balance is made later by the bookkeeper. 5th, on the same side, is 500 shares U. S. Steel, bought from FLOHR, @ 53 = $26,750, for SMITH. 6th is on the right and is for 100 shares of Pacific Mail sold to PORTER @ 42-J = $4,212.50, for ADAMS. This part of entry only is made by Cashier, the balance is made later by Bookkeeper. As we did not have the 100 Pacific Mail, we borrowed it of SELIG, @ 43 = $4,300, which required STOCK BROKERS' BOOKS. 325 7th entry on the left, and is posted later at the debit of Bor- rowed and Loan account. As a matter of courtesy we executed ADAMS' order before we received his margin. If it was not forthcoming the following day, we would call for it in short order, although we know him to be good for his contracts. If he failed to respond promptly, we would close out the deal at once for self-protection and hold him for the difference. Brokers have great respect for nature's first law self- preservation or self-interest. 8th entry is made in the Borrowed and Loan book and ex- plains itself. 9th is on the left side of the Blotter, and is for 50 shares of Union Pacific, bought from VERMILLE & Co. @ 97 = $4,850, for BROWN. At this stage of the day's work the Cashier begins to size up the situation, to see if he will have ample means to meet his obliga- tions. The firm's commitments amount to $51,525. See footing of amount column on the "Receive " side ; and all there is in sight to take care of them is $15,959.66. See footing of amount col- umn on the " Deliver " Side. It becomes necessary, therefore, to borrow enough money to cover the deficiency and still maintain the average balance in Bank ; hence he negotiates a loan with THE POWHATTAN TRUST Co. for $45,000 @ 5$, which requires 10th entry, and is on the "Deliver" side, and the llth entry, which appears in the Cash-Loans book. He makes his Deposit. See stub of check book. He then balances and closes his part of the Blotter for the day and turns it over to the bookkeeper, who calculates the commission and makes the extension into the Total Amount column on both sides. He aggregates the commission on both sides, making $93.75, and the Kevenue stamps $2.00, which he enters on the "Deliver" side in the Total Amount column, then balances and closes his part of the Blotter. The extension in commission column, $14.50 on the "Deliver" side, includes $2.00 Revenue, which in summarizing appears separately. His 326 STOCK BROKERS' BOOKS. balance must agree with the Cashier's balance. He then posts the work of the day. The entries in Total Amount column on the "Deliver " side are carried to the credit side of the Ledger ac- counts named in the Account space on that side, and those on the " Receive " side are carried to the debit side of the Ledger accounts named in the similar space on that side of the Blotter. Before the Cashier turns the Blotter over to the bookkeeper, however, he makes an abstract from Blotter which he compares with the Clearing House Sheet, and which must agree with it; hence is a check on the correctness of the latter, which is made by a junior clerk. As the abbreviations for some of the stocks are very much alike when carelessly written, a small rubber stamp is required by the Clearing House to be used for certain stocks on the clearing sheet. The necessity for this great precaution is due to the fact that the Clearing House authorities impose a fine of $5.00 for each and every error in the sheet. The 50 shares of Union Pacific does not appear on the Clearing sheet owing to the fact that the Clearing House does not recognize deals for less than 100 shares. On both sides of Blotter we notice P. 0. (Paired Off), which signifies that the 100 Pacific Mail is a stand off as far as delivery is concerned. STOCK BECKERS' BOOKS. 327 O H of Dol S I S Numbers. 5 I ll s s S | d d s s 1 I I I P To Whom Sold. IN, If i i 328 STOCK BROKERS' BOOKS. !* 15 S JSS S3 i I i! 1 s ell 8 Is |S STOCK BROKERS' BOOKS. 329 After business closes on the Exchange, our clerk fills out the Deliver tickets which the Clearing House furnishes in blank form, 3X7, printed in red ink, like EXHIBIT A. N Q 39 New York 190.. CLEARING-HOUSE OF THE (E^) EXCHANGE, DELIVER TO.. share*., for account of the undersigned. which he delivers to the brokers who bought stock of us during the day, and receives in exchange a Eeceive ticket, which is also furnished by Clearing House, in blank form, 3x7 canary-colored paper, black print, like EXHIBIT B. N O 39 New Forfc, 190. CLEARING-HOUSE OF THE (ExcK) EXCHANGE, RECEIVE FROM shares @ for account of the undersigned. The reason for having different colors is to identify quickly and facilitate assorting the matter. The seller is the one who effects the exchange of tickets. The time for delivery of stocks is 2 : 15 P.M. sharp. In case one fails to be on time, and others cannot deliver for him, we have the right to buy the stocks of another broker and hold the delinquent broker for the difference. As a matter of fact we did not receive from KRUSE & Co. the 330 STOCK BROKERS' BOOKS. 100 St. Paul bought of them, nor did we receive the 500 Steel bought of FLOHR & Co. direct from them, but we were informed by the Clearing House that KUNE, Low & Co. would deliver the former and VAN SLACK & Co. would deliver the latter, which facts are noted on the Blotter in the space headed "Number " which would also show the number of the certificates. It is obvious, therefore, that we do not necessarily receive from those from whom we buy, as the Clearing House people can match the orders to suit their own convenience, it being immaterial to us who delivers the stocks so long as we get them ; but if it came to an issue of demanding the stocks, we hold the brokers from whom we bought, as in the case of a stock that is Cornered. The Clearing Sheet must be made at the price established by the Clearing House (in whole numbers) at the close of the day, which the tape indicates following last bid and asked and high and low. EXHIBIT C. This is the form of ticket we fill out for stocks to be received from others than those from whom we bought. This form is fur- nished by the Clearing House and is the only kind brokers are permitted to use. It is 3^ X 5^ canary-colored paper, black print. CLEARING-HOUSE OF THE (&M.) EXCHANGE. THE UNDERSIGNED WILL nLUhlVL FOLLOWING DnLANllL OF STOCK AT THE DELIVERY PRICE. SHARES. STOCKS. RECEIVE FROM 100 St. P. @ 157 Kune, Low & Co. DATE Oct. , 1901. NAME P. A. WRIGHT & CO. No 39 STOCK BROKERS' BOOKS. 331 EXHIBIT D. In case we have to deliver stocks we would fill out form, 3-^ X 5, red print, like this, which is also furnished by the Clearing House. CLEARING-HOUSE OF THE (^g&V EXCHANGE. THE UNDERSIGNED WILL UhLlvLn FOLLOWING BALnNlt. OF STOCK AT THE DELIVERY PRICE. SHARES. STOCK. DELIVER TO DATE NAME .. NO EXHIBIT E. This is the form of draft (usually tinted paper, to guard against erasures; size, 3 X 8-J-) we make on the POWHATTAN Co., which we assume is the Clearing House's depository, for balance due us according to Clearing Sheet. W 3! > tf<> Yrk 0cL2 1^01 Clearing -House of the (Name) Exchange Approved. ^otoJjattan Company Pay to the order of the undersigned Two hundred and thirty -seven J)nljnf9 as advised this day by the Clearing-House of the (Name) Exchange. Manager. $23750_ p, A. WRIGHT & CO. 332 STOCK BROKERS' BOOKS. CLEARING HOUSE SHEET. These sheets are furnished by the Clearing House in blank form like the following. The Clearing House assigns a number to each patron. Our number, being 39, appears on this sheet, also on other forms and books as will be noticed. The price of St. Paul 156J and U. S. Steel 53 on the Receive side of Clearing Sheet is the price at which we bought in each case, and on the Deliver side the price of the former is 157 and of the latter 54, which is the Clearing prices for each. On the Deliver side of Sheet the price of Pacific Mail is 42-J-, at which we sold 100 shares, but it advanced during the day and closed at 43, which coincides with the Clearing House price and appears on the Receive side for the 100 shares. This form is also furnished by Clearing House. A copy of each of the foregoing Exhibits (A, B, C, and E) must be attached to Clearing Sheet before submitting it. Two tickets like Exhibit C are required in this case, as we are to receive two lots of stocks. We had no stocks to deliver on this date, hence no ticket D would be attached. The business of one day is cleared on the following day. D Q X * u o STOCK BROKERS' BOOKS. _g _ii_ c a; =*: =' 333 ;3 I SP 8 88 8 h SJ ^ss fe a S83 334 STOCK BROKERS' BOOKS. BORROWED AND LOANED BOOK. This is also a double -page book uniform in size with the others. On the left, or page 2, "Borrowing," and on the right, or page 3, "Loaning." BORROWING. Date. No. of Shares. Stock. Rate. Price. Amount. Returned. 1901. Oct. 2 100 Pacific Mail 3 $43 $4,300 00 LOANING. Date. No. of Shares. Stock. Rate. Price. Amount. Returned. CASH LOANS BOOK. This book is also uniform in size with the others and contains 250 pages or more. The page is headed with the name of the company from whom we borrow, the amount borrowed and the rate of interest. The date on the extreme left, beneath follows the number of shares of each stock hypothecated or put up as security, also the number of each certificate. Oct. 2, 1901. Powhattan Trust Co., 5$, $45,000. 100 St. Paul (Numbers). 500 Steel (Numbers). 50 Union Pacific (Numbers). 300 So. Railway (Numbers) . SECURITIES BOOK. This book is also uniform in size with the others and needs to have only about 100 pages. STOCK BROKERS' BOOKS. 335 At the close of each day we show list of securities on hand, which must be verified by the contents of our strong box, where they are under lock and key. One member of the firm usually attends to this matter of verification, thereby forestalling pecula- tion of a dishonest cashier. On closing the business for Oct. 2d we make another summary. It will be noticed that the only change is in Southern Railway, 300 shares of which was used in negotiating loan with Powhat- tan Trust Co., and appears in the CASH LOANS book with those acquired during the day. SECURITIES ON HAND, Oct. 1, 1901. 500 So. Railway. 10 m U. S. Gov. 4s. 450 N. Y. Central. 25 So. Pacific. 100 Jones. Oct. 2, 1901. ST. PAUL. 100 Cash Loan. STEEL COMPANY. 500 Smith. 500 Cash Loan. PACIFIC MAIL. 100 B. & L. 100 Adams. UNION PACIFIC. 50 Brown. 50 Cash Loan. SOUTHERN RAILWAY COMMON. 500 on hand. 300 Cash Loan. 500 200 Over. 500 SECURITIES ON HAND, Oct. 2, 1901. 10 m U. S. Gov. 4s. 450 N. Y. Central. 25 So. Pacific. 200 So. Railway Com. When one side of the line is full we continue on the other siox 336 STOCK BROKEKS' BOOKS. MARGIN BOOK. This need not be a book, as a large silicon slate with, many pages would answer the purpose. In case a book is used, the en- tries would be made with a pencil, as they would be subject to many changes during the day, when market is very active. First entry on the right of the page would be the amount of Margin the customer has. The next entry would show the stocks bought or sold and the price, extensions being unnecessary. JONES. Margin, 500. 100 St. Paul, @ 156*. As St. Paul advanced to 157 during the day, no change is nec- essary in the margin, which can easily be seen remains intact. All that is necessary is to watch the fluctuations in the price of St. Paul, and in case it declines three or four points, more margins would be required, as each point declined below 15 6 J would re- duce his margin $100. STOCK LOANS BOOK. This is a small pocket memorandum sent over to the broker on the floor of the Exchange in case we wish to borrow or lend stocks. The figures at the head of the small spaces indicate the date bor- rowed and the figures in the spaces are the interest rates for that day. On Monday we borrow for Tuesday, and so on to Saturday, when we borrow for Monday. No borrowing on Friday. BORROWING. LOANING. OCTOBER 12345 100 Pacific M. Selig. 3 EXHIBIT F. The following form and matter would be printed on a large envelope, 4 X 10, in which would be enclosed the securities we STOCK BROKERS' BOOKS. 337 put up when negotiating a loan, which must be verified and would be held until we paid off the loan and then returned te-4ia. DEMAND LOAN. P. A. WRIGHT & CO. Borrow from . . . .???$^?..73!** .9: /"/>+ g> IQOI amount. ....... ...rate. 100 500 50 300 St. Paul. Steel. Union Pacific. So. Pacific. COUPONS AND DIVIDENDS BOOK. This is a small blank book without ruling in which would be kept a list of dividend-paying stocks that our customers deal in. It will show the date the dividends are payable, also the amount. One half of this book will show the same facts in relation to Coupons. When either or both are received, and all belong to one customer, his account would be credited the day received on the " Deliver " side of the Blotter. If either or both belong to several customers, the amount of either would be credited to Divi- dend or Coupon account, as the case may be, in lump sum, and distributed among the customers' accounts through the Journal* charging Dividend (or Coupon) account, and crediting each custo- mer with his part of either or both. Coupons can be deposited! same as a check. JOURNAL. This is an ordinary two-column book like the one on page 82. Nothing has occurred thus far in this business that requires a Journal entry. 338 Dr. Dr. Dr. Dr. Dr. STOCK BROKERS' BOOKS. LEDGER. CAPITAL ACCOUNT. Or. 1901. Oct. 1 500 So. Railway... 1901. Oct 1 T P Noble $10 947 16 400 N. Y. Central. 10m u. S. Gov. 4s. UNION BANK. Or. 1901. Oct. 1 Balance $10,947 16 1901. Oct. Sundries $10,947 16 2 9,434 66 JOHN SMITH. Cr. 1901. Oct. 1 50 N. Y. Central. 25 So. Pacific. . . . 2 500 U.S. Steel.... 53^ $26,812 50 J. JONES. Cr. 1901. Oct g 100 St Paul 156J4 $15,637 50 1901. Oct. 8 Check $500 W. BROWN. Or. 1901. Oft 50 Union Pacific 97 $4856 5 1901. Oct 9 Check $300 00 STOCK BROKERS' BOOKS. 339 LEDGER. Dr. JOHN ADAMS. Cr. - 1901. Oct. 2 100 Pacific Mail... 42^ $4,198 00 Dr. BORROWED AND LOAN. Cr. 1901. Oct. 2 100 Pac. M. Selig. $4,300 00 Dr. CASH LOAN. Or. 1901. Oct. 2 Loan Pow. T. Co. $45,000 e affected by the transaction? 427. Which form of entry would be used? 428. Where would you make an extra memorandum of the acceptance ? TENTH LESSON. 429. How often should we refer to our Bill-books ? 430. When our notes are payable at our bank, does it require our check to be sent there to meet it ? 431. Where do we make a memorandum, showing the bank paid it ? 432. Where would APPENDIX. 365 you make a record of having paid a note ? 433. What accounts would be in your entry ? 434. In advancing money to a sales- man for expenses, what is the object of giving him a check for part of it ? 435. Why would it be wrong to charge to account already opened in his name ? 436. What proof have we that our figures are correct, upon adding the monthly cash columns ? 437. Explain the peculiar way of closing the monthly cash ? 438. Explain how the Sales-book is closed monthly ? Para- graph 138 we say " omit case and cartage, $1.25." By referring to the entry alluded to on the sales book we notice that case and cartage was $1.50 ; we will omit it, however, and to make the $213.25 correct, we charge the cuffs at $3.65 instead of $3.60. 439. What entry is peculiar to the Journal on the last day of every month ? 440. Is book-keeping sense, so to speak, always in harmony with common-sense ? 441. Give an instance where it is not. ELEVENTH LESSON. 442. What is a Trial Balance ? 443. What is its two-fold object ? 444. How would you proceed in making a Trial-bal- ance ? 445. What would you consider the most difficult error to find. TWELFTH LESSON. 446. What distinctive feature in our Journal, the second month, that it did not possess first month? 447. What is peculiar in our second month Cash-book? 448. What is the advantage of this peculiarity ? 449. Do you include the figures in the discount columns, in proving your cash ? 450. Why locate the Balance brought forward from last month in the Amount column instead of Sundries column ? 451. If a customer pays his bill, less discount, in what book would you record the facts ? 452. How many accounts would be affected ? 453. How 366 APPENDIX. you state your proposition? 454. How could we use our money to best advantage ? 455. If we pay a creditor's bill, less discount, in what book would you record all the facts ? 456. How would you state your proposition in a double entry way ? 457. Why do we charge cartage to Mdse. in one instance, to Expense in another? 458. What is the first account to be posted in the first Journal entry this month ? THIRTEENTH LESSON. 459. If we did not have funds enough in bank to meet our note, what would be the result ? 460. In what peculiar way do we show that our account at bank is overdrawn ? 461. How is the bank account often made good, temporarily? 462. Our bank account being in bad condition, what did we do to make good over-draft ? 463. What would govern us in the manner of charging bank with proceeds of several notes ? 464. How could we restore the bank account to its normal condition, when the overdraft was small ? 465. To what account would you charge the cash paid case-maker, for boxes furnished us ? 466. When would it be charged otherwise ? 467. To what ac- count would you charge the money paid in liquidation of gas- bill? FOURTEENTH LESSON. 468. If a customer fails to pay his note when due, what would be the immediate result ? 469. What would be the re- mote result, if we had disposed of the note ? 470. What does protest mean? 471. To what account would we charge the money paid for protested note ? 472. If we lend money and receive a note for it, in what book would you enter it ? 473. How many accounts would be affected by the transaction ? APPENDIX. 367 474. What accounts would you charge with the cash advanced, and the interest made ? 475. If we receive a note from our customer in renewal of his protested note, covering protest fees and interest, how would you enter it ? 476. What would be the theoretical method of disposing of it ? 477. Why would it be incorrect ? FIFTEENTH LESSON' 478. If a customer sends us money to pay his note before it is due, and which we had previously discounted at our bank, how would you set the matter straight on the books ? 479. How would you dispose of transient customers' accounts on the Ledger ? SIXTEENTH LESSON. 480. If we had not the money to pay our note held by the l3ank for borrowed money, what would we do ? 481. Explain how we would renew a note held by an outside party. Ex- plain how we would renew a note at bank. 482. If we re- ceive a check for an acceptance, what account would you credit by the money received ; also by the Exchange for collecting it? SEVENTEENTH LESSON. 483. If a customer fails and compromises by paying 40$ in cash, what would become of the balance of his account ? 484. What account would you charge with the 60$ of his account ? 485. When you return his note, in which book would you enter it ? 486. If the note had been negotiated, and therefore not in our hands, it must nevertheless be included in the settlement, as we are liable as endorsers for its payment, and at maturity 368 APPENDIX. we must remit the money to the place where the note is payable, to meet it. 487. Name your Debtor account, also Credit account in the entry. 488. If the travelling salesman returns and hands you $50 in cash, ol the money advanced him, and also hands you his expense report, showing his expenses had been $125.00 on the trip, and that he had used $25.00 for his own private purpose, how would you adjust the matter on the books ? 489 When too much money accumulates in the drawer, what would you do with it ? 490. Explain the peculiar way of closing the Cash-book this month. 491. Explain how the Four-column Journal is closed. EIGHTEENTH LESSON. 492. What must we do before closing the Ledger ? 493. What do you understand by "Taking Stock?" 494. At what price would stock be figured? 495. What becomes of the inventory after preparing it? 496. What class of accounts do we dispose of first ? 497. How do we dispose of them ? 498. What classes are next disposed of, and how are they 'closed? 499. What will the speculative accounts show ? 500. What will all other account show ? 501. What is the object of closing the books ? Ans. To enable us to arrive at the true state of our business ; that is, see if we have made or lost during the year, and in what shape our capital is, if we are solvent. Books are not closed, " to mark an era in the business," as claimed by the president (?) of one of New York's business colleges, who evidently has more regard for a high-sounding phrase than for the sense it conveys. We could mark an era in the business without closing the books, by closing the store instead, and taking a vacation : that would be an era long to be remembered, but would by no means accomplish the result arrived at by closing the books. UNIVERSITY OF CALIFORNIA LIBRARY BERKELEY Return to desk from which borrowed Tins book is DUE on the last date stamped below. JAN 23 1948 LD 21-100m.9,'47(A5702sl6)476 BLANK BOOKS FOR PRACTICE, Those desiring to make themselves master of double entry in a practical way by writing up a set of books, as explained in our Eighteen Lessons, will be furnished with a full miniature set of blank books, consisting of Cash Book, Sales Book, Journal, and Ledger, uniform size, all properly ruled; also Check Book, Bills Receivable and Bills Payable Book. Price $1.50 for the set. P.- A. WRIGHT, 148 W. 14th St., New York City. LD 21-100m-9,'47(A5702sl6)476 YC 25026' mm, 380310 UNIVERSITY OF CALIFORNIA LIBRARY