UNIVERSITY OF CALIFORNIA AT LOS ANGELES GIFT OF Charles H. Titus Library Graduate School of Business Administration University of California Los Angeles 24, California X MINER AND KL.WELL. SERIES INTRODUCTORY COURSE ILLUSTRATING THE JOURNAL METHOD OF CLOSING THE LEDGER BY GEORGE WiMINER AND FAYETTE H: ELWELL, A.B., C.P.A. PBOFESSOK OF ACCOUNTING, UNIVERSITY OF WISCONSIN GINN AND COMPANY BOSTON NEW YORK CHICAGO LONDON ATLANTA DALLAS COLUMBUS SAN FRANCISCO COPYRIGHT, 1912, 1916, BY GEORGE W. MINER COPYRIGHT, 1918, BY GEORGE W. MINER AND FAYETTE H. ELWELL ALL RIGHTS RESERVED 318.3 gftt gtfremtnm j>re GINN AND COMPANY- PRO- PRIETORS BOSTON U.S.A. PREFACE The modern business world demands of its employees economy and efficiency, and the commercial training in our schools, to be successful, must meet this demand of the business world by texts whose value is educational as well as practical. Such a text the authors have tried to furnish in this volume. Their aim has been an elementary book which shall present a simple, practical study of the basic facts of book- keeping in a manner that will command the interest of the pupil and 5 that will impress upon his mind the methods and practices of the - office as well as the duties and technical knowledge and vocabulary ' of the bookkeeper and the accountant. The grading and development . of the work, its classification, the terms used, and the forms adopted | all have the same aim, the making of an efficient, well-informed bookkeeper. P To apply a principle is of far more practical value than the ability w to define it, and in this text principles are described and applied by ** the pupils before they are formally defined for them. This inductive ^ method, characteristic of the entire book, stimulates the pupil to think for himself and to cultivate the self-reliance and independence so univer- ^ sally demanded of him. The numerous exercises and illustrations used *- in the approach to a given subject, and the many and varied reviews and problems, are positive factors in appealing to and developing this J* in dependence. As a basis for the elementary work, the authors have adopted the pupil's own knowledge of simple business transactions, the exchange 5 of values with which he is already familiar in the buying of many of the articles used in the home. Thus the new subject is approached with confidence through well-known operations. A number of sets are arranged for business practice which may be carried out as fully as the instructor desires ; for since all of this work is optional, it may be fitted to the needs of the individual class. The business practice may be omitted in any set at the discretion of the instructor. The introduction of a retail set in which a cash journal is used, and of a set presenting departmental bookkeeping, add to the extent and the value of the work. RY iii * 265790 iv PRINCIPLES OF BOOKKEEPING The authors wish to acknowledge their indebtedness to the follow- ing persons for helpful suggestions and criticisms of the manuscript: Henry R. Hatfield, Professor of Accounting, University of California ; Stephen W. Oilman, Professor of Business Administration, University of Wisconsin; John K. Wildman, Professor of Accounting, New York University ; J. A. Book, Head of the Commercial Department, South Division High School, Milwaukee, Wisconsin ; Ivan E. Chapman, Head of the Commercial Department, Northwestern High School, Detroit, Michigan; Elizabeth Campbell, Commercial Department, High School, Somerville, Massachusetts ; Myron F. Palmer, Principal Bay Path Institute, Springfield, Massachusetts. Business men, bookkeepers, and certified public accountants have also been consulted freely regarding many features of the text, and their practical suggestions have added to the working value of the book. CONTENTS CHAPTER PAGE I. FUNDAMENTAL PRINCIPLES 1 II. SET I. RETAIL FUEL AND FEED BUSINESS 59 III. INTRODUCTION OF THE CASHHOOK 71 IV. SET II. WHOLESALE CARPET BUSINESS 75 V. ADDITIONAL BOOKS USED 86 VI. INTRODUCTION TO BUSINESS PRACTICE 96 VII. SET III. GRAIN AND SEED BUSINESS 106 . VIII. INDORSEMENTS AND INTEREST 118 IX. SET III. GRAIN AND SEED BUSINESS (Continued) .... 121 X. SET IV. GENERAL HARDWARE BUSINESS 128 XL SET IV. GENERAL HARDWARE BUSINESS (Continued) . . 142 XII. GENERAL KEVIEW 150 XIII. COMMERCIAL DRAFTS 155 XIV. THE DIRECT METHOD OF CLOSING THE LEDGER 167 XV. GENERAL REVIEW 172 XVI. ADDITIONAL BUSINESS FORMS AND MISCELLANEOUS EXERCISES 177 XVII. COMMERCIAL DRAFTS (Continued) 185 XVIII. SET V. JOBBING- FURNITURE BUSINESS 193 XIX. SET V. JOBBING FURNITURE BUSINESS (Continued) .. . . 233 XX. SET V. JOBBING FURNITURE BUSINESS (Continued) . . . 246 APPENDIXES A. DEFINITIONS AND RULES i B. COMMERCIAL TERMS DEFINED iii C. ABBREVIATIONS AND GENERAL TERMS vi I). FORMS AND LEGAL DOCUMENTS viii E. THE USE OF TELEGRAMS xiii F. THE FORMATION OF PARTNERSHIP xv INDEX . xvii LIST OF SETS SETS FOR RECORDING IX THE BLANK BOOKS PAGE SET I. RETAIL FUEL AND FEED BUSINESS 59 SET II. WHOLESALE CARPET BUSINESS 75 SET III. GRAIN AND SEED BUSINESS, MARCH , . 106 SET III. GRAIN AND SEED BUSINESS, APRIL 121 SET IV. GENERAL HARDWARE BUSINESS, MAY 128 SET IV. GENERAL HARDWARE BUSINESS, JUNE 142 SET V. JOBBING FURNITURE BUSINESS, JULY 193 SET V. JOBBING FURNITURE BUSINESS, AUGUST 233 SET V. JOBBING FURNITURE BUSINESS, SEPTEMBER 246 SUPPLEMENTARY SETS SET A. GENERAL MERCHANDISE 10 SET B. FURNITURE 25 SET C. GRAIN AND SEED 26 SET D. TEA AND COFFEE 54 SET E. FLOUR AND GRAIN 87 SET F. COAL AND WOOD ..... 94 SET G. GRAIN 151 SET H. GENERAL MERCHANDISE . 174 vi LIST OF EXERCISES PAGE EXERCISE 1. BUSINESS TRANSACTIONS, ORAL WOKK 1 EXERCISE 2. BUSINESS TRANSACTIONS, OKAL WORK 2 EXERCISE 3. BUSINESS TRANSACTIONS 3 EXERCISE 4. BUSINESS TRANSACTIONS 3 EXERCISE 5. BUSINESS TRANSACTIONS 5 EXERCISE 6. DEBITS AND CREDITS, ORAL WORK 6 EXERCISE 7. PROMISSORY NOTES, ORAL WORK 7 EXERCISE 8. BUSINESS TRANSACTIONS 8 EXERCISE 9. JOURNALIZING 15 EXERCISE 10. POSTING THE MODEL JOURNAL, FOR STUDY 20 EXERCISE 11. ANALYSIS OF ENTRIES, ORAL WORK 21 EXERCISE 12. POSTING 23 EXERCISE 13. JOURNALIZING 24 EXERCISE 14. JOURNALIZING 24 EXERCISE 15. JOURNALIZING 24 EXERCISE 16. JOURNALIZING . . 25 EXERCISE 17. NET PROFITS 29 EXERCISE 18. ANALYSIS OF ACCOUNTS, ORAL WORK 30 EXERCISE 19. REVIEW, ORAL WORK 33 EXERCISE 20. REVIEW 34 EXERCISE 21. REVIEW 35 EXERCISE 22. CLOSING THE MODEL LEDGER 44 EXERCISE 23. LEDGER CLOSINGS 44 EXERCISE 24. CLOSING THE LEDGER 45 EXERCISE 25. CLOSING THE LEDGER 49 EXERCISE 26. CLOSING THE LEDGER 52 EXERCISE 27. BALANCING THE CASH ACCOUNT 54 EXERCISE 28. REVIEWS: JOURNALIZING; STATEMENTS; CLOSING THE LEDGER . 64 EXERCISE 29. BOOKKEEPING PROBLEMS 70 EXERCISE 30. THE CASHBOOK 72 EXERCISE 31. REVIEWS: STATEMENTS; CLOSING THE LEDGER; JOURNALIZING . 80 EXERCISE 32. TRANSACTIONS WITH A BANK 101 EXERCISE 33. BUSINESS FORMS : RECEIPTS ; INVOICES ; PROMISSORY NOTES . . 103 EXERCISE 34. REVIEWS : JOURNALIZING ; CLOSING THE LEDGER ; STUDY OF THE BANK ACCOUNT 115 EXERCISE 35. REVIEW: STATEMENTS 116 EXERCISE 36. PROBLEMS 117 EXERCISE 37. INTEREST ENTRIES 120 EXERCISE 38. REVIEWS : JOURNALIZING ; ANALYSES ; CLOSING THE LEDGER ; WRITING BUSINESS FORMS 125 EXERCISE 39. REVIEWS: JOURNALIZING ; WRITING A SET 138 vii RY viii PRLNCIPLES OF BOOKKEEPING PAGE EXERCISE 40. REVIEWS: STATEMENTS ; ANALYSES; JOURNALIZING; CLOSING THE LEDGER 139 EXERCISE 41. REVIEWS: Joi - RXALI/IX<; ; WHITING BUSINESS FORMS; ANALYSES 148 EXERCISE 42. REVIEWS: STATEMENTS; CLOSING THE LEDGER 149 EXERCISE 43. GENERAL REVIEWS, SI-GGESTKD STUDIES FOR DISCUSSION: PROFIT AND Loss STATEMENT; BALANCE SHEET OR FINANCIAL STATE- MENT 150 EXERCISE 44. REVIEWS: STATEMENTS; CLOSING THE LEDGER ......... 163 EXERCISE 45. SIGHT DRAFTS 157 EXERCISE 46. BANK DRAFTS, ORAL WORK 163 EXERCISE 47. TIME DRAFTS 166 EXERCISE 48. REVIEW OF DEIJITS AND CREDITS 172 EXERCISE 49. REVIEW OF CHECKS AND DRAFTS 173 EXERCISE 50. MONTHLY STATEMENTS OF ACCOUNTS 178 EXERCISE 61. DISCOUNT OF NOTES 182 EXERCISE 62. PARTIAL PAYMENTS 183 EXERCISE 68. DISCOUNTS 184 EXERCISE 64. REVIEW OF SIGHT DRAFTS 185 EXERCISE 55. TIME DRAFTS 190 EXERCISE 56. REVIEW OF TIME DRAFTS 191 EXERCISE 57. OPENING DOUHLE-ENTRY BOOKS 194 EXERCISE 58. REVIBWS : JOURNALIZING STATEMENTS 230 EXERCISE 59. REVIEWS: STATEMENTS; DISCUSSION; JOURNALIZING 244 EXERCISE 60. REVIEWS: DISCUSSION; STATEMENTS; JOURNALIZING 265 EXERCISE 61. PARTNERSHIP ARRANGEMENTS . 256 RY PRINCIPLES OF BOOKKEEPING CHAPTER I FUNDAMENTAL PRINCIPLES BUSINESS TRANSACTIONS EXPLAINED g Business Transactions. A business transaction is an exchange of values ; that is, one value is given in return for another. / Property. In some transactions some form of property is exchanged for money. ILLUSTRATION. A man bought a table for cash, $:}(). What was the value received ? the value parted with ? Use, or Hire. In other business transactions the value received or parted with is the use, or the hire, of property which belongs to another. 1 1. LUST RATION. You hired a horse and carriage at a livery for an afternoon drive for which you paid cash, $3. What was the value received '! the value parted with ? Labor, or Service. In still another kind of business transaction the value received or parted with is labor, or service. ILLUSTRATION. A merchant hired a young man as a clerk and at the end of each week paid him cash, $10. What was the value received ? the value parted with ? Promises. In some business transactions the value received or parted with is an oral or an implied promise. ILLUSTRATION. A jeweler sold Henry Bird a watch for which he was to receive $20, in 1 mo. The value received by the jeweler was the promise of Henry Bird, and the value parted with was the watch. Exercise 1. Business Transactions For Oral Work Name the value received and the value parted with in each of the following transactions : Property : 1. A young man bought a pair of skates for cash, 2. You bought a hat for cash, $2. 2 PRINCIPLES OF BOOKKEEPING 3. A man bought an automobile for cash, $1000. 4. A man bought a piano for his daughter for cash, $400. 5. A sportsman owned a rifle which he sold for cash, $25. Use, or Hire: 1. A merchant rented a store for which he paid cash, each month, $75. 2. A doctor rented a suite of rooms in a business block for which he paid cash, each month, $50. 3. You hired an automobile for one hour for which you paid cash, $3. 4. A man borrowed $300 from a neighbor and at the end of 2 mo. he returned it and paid cash, $3, as interest. 5. You loaned $50 for 6 mo. which was repaid to you at the end of the time, with cash, $1.50, as interest. Labor, or Service : 1. A man paid a boy cash, 75^, for shoveling the snow from his sidewalk. 2. You gave a doctor cash, $20, for attending you during an illness. 3. A bookkeeper received cash, $60, for his monthly salary. 4. A messenger delivered some packages for you for which you paid him cash, $1. 5. You paid a stenographer cash, $10, for copying a manuscript. Promises : 1. A tailor sold John Larson a suit of clothes for $35, to be paid for in 20 da. 2. A grocer sold John Fallen a barrel of flour for $6, to be paid for in 10 da. 3. A dealer sold John Kenyon a Morris chair for $15, to be paid for in 20 da. 4. You bought of Connor & Co. a set of books for $12, to be paid for in 1 mo. 5. A woman bought of Searle & Son a writing desk for $18, to be paid for in 30 da. Exercise 2. Business Transactions For Oral Work Name the value received and the value parted with in each of the following representative transactions from the business of a merchant, John A. Weeks : Feb. 1. Bought of L. A. Crane, for cash, 2050yd. cambric at 5^. 2. Sold E. C. Lyman, for cash, 550 yd. cambric at 7#. FUNDAMENTAL PRINCIPLES 3 Feb. 3. Sold John Lester, for cash, 2(>0 yd. cambric at 70. 4. Bought of H. A. Lowney, for cash, 1020 yd. fancy gingham at 90. 5. Sold James Wade, for cash, 320yd. fancy gingham at 120. 3 6. Sold James Snyder, for cash, 75 yd. cambric at 70. ^x, 6" 8. Bought of Henry A. Wren, for cash, 500 yd. cambric at 50. 2 9. Sold Horace Jensen, for cash, 275 yd. cambric at 70. 10. Bought of Henry Taylor, for cash, 250 yd. fancy gingham at 90. 11. Sold Miller & Co., for cash, 200yd. fancy gingham at 120. 12. Sold Jones & Son, for cash, 450 yd. cambric at 70. 13. Sold John S. Reed, for cash, 250 yd. fancy gingham at 120. 15. .Sold Wilson & Allen, for cash, 300yd. cambric at 70. 16. Sold Henry Winters, for cash, 150 yd. cambric at 70. Merchandise and Cash. The technical term applied to goods bought \ /3 to be sold is merchandise ; that applied to all forms of money, and / business papers which pass as money, is cash. Cash includes gold, silver, paper money, checks, money orders, etc. Exercise 3. Business Transactions For Written Work Take a sheet of paper and draw a line through the middle of the page from the top to the bottom. On the left side of the line write the technical name of the value received, and on the right side of the line write the technical name of the value parted with, for each transaction in Exercise 2. The transactions of Feb. 1 and 2 will appear as follows, in the order named : Mdse. Purchases $102.50 Cash 38.50 Cash $102.50 Mdse. Sales 38.50 Exercise 4. Business Transactions For Written Work Work out in the same form as in Exercise 3 the following representative transactions from the business of a merchant, Richard S. Howe : SUGGESTION. As a review this exercise may be used orally. March 1. Bought of N. P. Weston, for cash, 400 bu. wheat at $1. 2. Sold Wm. Dresser, for cash, 100 bu. wheat at $1.25. 3. Paid Henry A. Milton cash, for rent of the store for 1 mo., $28. 4 PRINCIPLES OF BOOKKEEPING A receipt similar to the one illustrated in the following script form would be received by Richard S. Rowe from Henry A. Milton. The value received was the use of the store, and the name of this value is Rent Paid. A RECEIPT March 4. Bought of Henry N. Curtis, for cash, 200 bu. rye at $1. 5. Bought of A. L. Waters 50 bu. clover seed at $6, and Mr. Rowe agreed to pay for it in 30 da. In this transaction the value received is the 50 bu. of clover seed, and the value parted with is the stated or implied promise to pay for it in 30 da. 6. Sold Harry M. Wells 80 bu. wheat at |1.25, and he agreed to pay for it in 10 da. The transactions for March 5 and 6 will appear on the written sheet as follows: Mdse. Purchases $300 Promise of Harry M. Wells 100 Promise to A. L. Waters $300 Mdse. Sales 100 8. Sold Henry Dawson, on account, 60 bu. rye at $1.30. In this transaction on account means that the goods sold are to be paid for at some future time. A promise was received. 9. Sold Henry Cook, on account, 120 bu. wheat at $1.25. 10. Sold Henry C. Baker, for cash, 12 bu. clover seed at $7.50. 11. Received of Henry Dawson cash, to apply on account, $50. Henry Dawson's promise given March 8 is here redeemed. In this transaction to apply on account means that a part of what was owed on a given account was paid. 12. Bought of Carey & Co., on account, 200 bu. wheat at $1. 13. Bought of Lee & Wise, for cash, 100 bu. rye at $1. 15. Bought of T. A. Larson, for cash, 3 T. coal for office use at $7. The name of the value received is Fuel. 16. Sold Henry D. Wilson, for cash, 150 bu. rye at $1.30. FUNDAMENTAL PRINCIPLES 5 March 17. Sold John S. Wise, on account, 18 bu. clover seed at $7.50. 18. Received of Henry Cook cash, to apply on account, $100. 19. Received of Henry Dawson cash, in full of account, $28. In full of account means that all that was owed on a given account was paid. 20. Paid Carey & Co. cash, to apply on account, $125. ^ Exercise 5. Business Transactions For Written Work Work out in the same form as in Exercise 3 the following representative transactions from the business of a merchant, John R. Howe: SUGGESTION. As a review this exercise may be used orally. April 1. Bought of John E. Smith, for cash, 200 yd. Brussels carpet at $1.50. 2. Bought of Thomas A. Elton, for cash, 150 yd. ingrain carpet at 80#. 3. Sold James Warren, on account, 50 yd. Brussels carpet at $2. 4. Sold Hale & Co., for cash, 60 yd. ingrain carpet at $1. 5. Bought of Ernest M. Little, on account, 100 yd. velvet carpet at $1.40. 6. Paid Seth E. Drake cash, for rent of the store for April, $30. 8. Received of James Warren cash, to apply on account, $50. 0. Sold Helen S. Meek, for cash, 20yd. velvet carpet at $1.75. 10. Paid Ernest M. Little cash, to apply on account, $75. 11. Sold Henry C. Dane, on account, 40 yd. Brussels carpet at $2. 12. Sold Hale & Co., on account, 30 yd. ingrain carpet at $1. 13. Received of James Warren cash, in full of account, $50. 15. Bought of James Hardin, for cash, 4 T. coal for office use at $7.50. 16. Sold James Warren, on account, 50 yd. Brussels carpet at $2. 17. Sold Mary S. Packard, for cash, 25 yd. velvet carpet at $1.80. 18. Paid John E. Brown, a clerk, cash, $15. The value received w r as the service of the clerk, and the name of this value is Salary. Debits and Credits. In the preceding exercises all items at the left of the perpendicular line are debits, and all items at the right are credits ; hence debits represent values received, and credits represent values parted with. We come into possession of things because we are able to give some- thing in return for the things we receive and own, and bookkeeping 6 PRINCIPLES OF BOOKKEEPING necessitates the keeping of a record of all that is received and of all that is parted with. In business whatever we own costs us something, and this appears as a debit record , whatever we part with produces something, and this appears as a credit record. ILLUSTRATION. A man paid $5 for a hat ; the ownership of the hat cost him the $5, and the parting with the $5 made him the owner of the hat. Journalizing. A systematic classification of debits and credits in business transactions is called journalizing. By custom, the left-hand side is the debit side, and the right-hand side the credit side. Exercise 6. Debits and Credits For Oral Work As an oral exercise, go over all the transactions in Exercises 4 and o and classify the values received and parted with as debits and credits. Promissory Notes. In the preceding exercises it has been shown that men often buy and sell goods by giving or receiving an oral or an implied promise to pay. This is indicated by writing in the record the name of the person by whom or from whom the promise was given or received , this name indicates the value given or received. When the promise is made in writing, it is called a promissory note. f / '2-0 ' Q-^^~ ~fefo r 4^rt-yiS > S??a^L<1. Qa^s. /{,, 19 ' " t^^^LT^y s^^tz^if^sL/ ' after dale^L-pTomix to pay to the order n f vr//f>-^-^tZs^2^>7^/ ; ts/^x/^-/^/?-^^ fr^Y^xT?-^ ^- xi /r . x ^-^' : 'Dollars at "Oalue received ftfr / 2- 'Due <=*^-/JJ /# "^V^ A PROMISSORY NOTE In this note Henry W. Sherman promises to pay Morgan, Taylor & Co. the sum of $1200.65. This note was made on Jan. 16, 19, and payment will be made 30 da. after that date Your written promise to pay another person a sum of money is called notes payable; the written promise of another to pay you is called notes receivable. FUNDAMENTAL PKIXCIPLES 7 The promissory note in the illustration would he classified as notes payable by Henry W. Sherman, and as notes receivable by Morgan, Taylor & Co. When a note made by another person comes into your possession, the name of the value received is notes receivable ; when you give your note to another person, the name of the value given by you is notes payable. The following transactions and the records for each should be studied carefully : Receive of A. T. Parker his note at 10 da., on account ; record as follows : Notes Receivable A. T. Tarker Give your note at 30 da. to James L. Monroe, on account; record as follows: James L. Monroe Xotes Payable When you receive payment from A. T. Parker, make this record : Cash Xotes Receivable When you pay your note in favor of James L. Monroe, make this record : Notes Payable Cash When the settlement is made for a note, the money is received from or given to 'a person or a firm. In the following exercise, do not use the name of the person or the firm in making the record. When money is received for a note in full, the record shows Cash as the value received, and Notes Receivable as the value parted with, and the note is returned to the person who signed it, marked Paid. The business has received cash and parted with a note. When one pays a note, the value parted with is C'ash, and the value received is Notes Payable ; the note is then returned, marked Paid. Exercise 7. Promissory Notes For Oral Work Name the debit and the credit in each of the following transactions : 1. Give W. B. Mercer your note at 10 da., to apply on account, $200. 2. Receive of A. B. Slater his note at 30 da., to apply on account, $300. 3. Give Lowe & Co. your note at 15 da., to apply on account, $400. 4. Receive of H. M. Lawton his note at 10 da., to apply on account, $500. 5. Receive of A. B. Slater cash, for his note, $300. 6. Pay Lowe & Co. cash, for your note, $400. 8 PRINCIPLES OF BOOKKEEPING 7. Give A. L. Bronson your note at 20 da., in full of account, $150. 8. Pay W. B. Mercer cash, for your note, $200. 9. Receive of David I. Ware his note at 15 da., to apply on account, $250. 10. Pay A. L. Bronson cash, for your note, $150. 11. Receive of David I. Ware cash, for his note, $250. "^ Exercise 8. Business Transactions For Written Work Classify as debits and credits the following representative transactions from the business of a merchant, Datdel l r . Case : June 1. Bought of John L. Quaker, for cash, 100 bbl. apples at $3. 2. Bought of E. E. Weller, on account, 175bu. potatoes at 80<. 3. Sold L. A. Kane, at 5 da., 25 bbl. apples at $4. At 5 da. means on account, to be settled within 5 da. 4. Sold Johnson & Co., at 10 da., 40 bu. potatoes at $1. 5. Gave E. E. Weller a note at 5 da. for $100, to apply on account. 6. Sold E. E. Wiser, for cash, 20 bbl. apples at $4. 8. Received of L. A. Kane his note at 10 da. for $80, to apply on account. 9. Sold James D. Kerns, on account, 80 bu. potatoes at $1. 10. Paid E. E. Weller cash, for a note due to-day, $100. 11. Received of James D. Kerns his note at 30 da. for $50, to apply on account. 12. Received of Johnson & Co. their note at 20 da. for the amount of the invoice of June 4. 13. Received of L. A. Kane cash, in full of account. Refer to June 3 and 8. IS. Sold Hill & Co., on account, 10 bbl. apples at $4. 18. Received of L. A. Kane. cash, for his note due to-day, $80. SUGGESTIONS FOR RULING Good mechanical work is essential in bookkeeping. If good results are to be secured, the pen, the ruler, and the blotter must be used in the right way. When red ink is procurable, use it in ruling ; always have a blotter at hand ; use a medium pen, not too fine ; dip the pen in the ink lightly; avoid getting ink on the ruler. FUNDAMENTAL PRINCIPLES 9 Use ordinary writing paper, ruled ; sit facing the desk squarely ; place the paper directly in front of you. Place the beveled edge of the ruler just below the first ruled line on the page ; keeping the pen on the ruled line with the point away from the ruler, draw a line across the page as follows : Do not lift the pen until the line is finished. Continue this ruling until you have ruled a red line on every blue line of the page. Now rule lines between the ruled lines of the page just finished. Use a second sheet of paper for ruling double lines. Draw a single red line on the blue line ; without moving the ruler draw a second red line just underneath the first. You now have parallel lines across the page. Parallel lines : . In ruling parallel lines the position of the ruler is not changed, but the hand is pressed slightly forward. Repeat the parallel ruling until both sides of the sheet have been ruled, then rule parallel lines between the lines already ruled. This work in ruling should be repeated from day to day until good results are secured. THE SCRIPT FORMS AND MODELS In connection with the student's preliminary work he is directed to write some of the script forms given on later pages. These forms represent the highest excellence in penmanship and may serve as models in writing for the student. The plan, statement, and arrangement of these models may be a guide to the student in all his work throughout the book. The method of placing matter on the page and the complete- ness of explanations are parts of high-grade bookkeeping. While writing these models the student is learning how to place busi- ness transactions on the written page in the most approved manner. Busi- ness records are not only valuable when made, but may be of especial importance years hence ; therefore it is necessary that the statements be clear not only to the writer but to any person who may have occasion to examine them at any future time. If books are introduced into court as evidence, the explanatory part of the records is often the most impor- tant. It is the experience of attorneys that very few books of record that are brought into court have any value as evidence, because of the incompleteness of the explanatory matter. If explanations are not made clearly, a correct entry is of little value as conclusive evidence. Erasures are not to be tolerated, as they not only spoil the neatness of the page but often make entries look suspicious. 10 PRINCIPLES OF BOOKKEEPING In the work of the modern bookkeeper the accuracy of the facts stated as well as the form in which these facts are set forth are of increasing importance. The purpose which the statements are to serve should always be kept in mind, and the facts should be so arranged as to give the reader the maximum amount of information with a mini- mum amount of effort upon his part. Courts of law not infrequently reject reports submitted to them because of the lack in clearness of statement. Various departments of municipal, state, and federal govern- ments often require that certain reports and statements follow prescribed forms, and no others will be accepted. From these facts the student should realize the importance of both accuracy and proper form in preparing reports and statements. The script and other forms in this text present to the student a special opportunity for learning the standard forms of statements generally used in modern business. SET A. GENERAL MERCHANDISE MODEL SET Introductory Study. On pages 12, 13, 16, 17, 22, 32, 40, and 41 is a model set, in script, complete in every detail. This set was written from the Memoranda of Transactions on page 11. The following principles apply to entries in the model journal: A person who owes a debt is called a debtor; a person to whom a debt is owed, a creditor. A debit is an amount due the business, or the amount of a thing or a service received ; a credit is an amount owed by the business, or the amount of a thing or a service given. In the preceding exercises the transactions have been those of an individual, but in the sets transactions are considered in relation to a business. The money or property with which a man begins business, or which he puts into the business, is termed an investment. In these practice sets cash investments will be used. In Set A the proprietor, David Lane, makes a cash investment of $1800. The paragraph in script at the beginning of the journal is the memo- randum, setting forth the conditions under which the business was begun. Journalizing. Study each transaction of the following memoranda in connection with the entry for it in the model journal. Note both the debit and the credit, also the explanatory portion, and the name given to each column in the model journal. X? FUNDAMENTAL PRINCIPLES MEMORANDA OF TRANSACTIONS 1 Jan. 1. David Lane began business, investing cash, Si 800. 2. Paid A. L. Benson cash, for rent of the store for January, $40. 3. Bought of C. B. Mason for cash : 150 bl)l. Flour at $5.20 4. Sold John C. Eno for cash : 40 bbl. Flour at $6,50 5. Bought of H. M. Field on account : 400 bu. Corn at 60 ate ^Debits, Gredits, and Gxplanations it ^Amounts Greditdmounts /JO MODEL JOURNAL (CONTINUED) Analysis of the Model Journal. The follmving is an analysis of each entry in the model journal. Similar analyses should be used frequently in connection with journalizing, in order to familiarize the student with the principles which govern his work in bookkeeping. Entry 1. Cash is debited because value was received by the business under the title Cash. David Lane is credited because he invested vahie in the business. Entry 2. Rent Paid is debited because value was received by the business in the use of the store. Cash is credited because . value was parted with by the business under the title Cash. Entry 3. Merchandise Purchases is debited because value was received by the business under the title given. Cash is credited because value was parted with by the business under the title Cash. Entry 4. Cash is debited because value was received by the business under the title Cash. Merchandise Sales is credited because value was parted with by the business under the title given. Entry 5. Merchandise Purchases is debited because value was received by the business under the title given. H. M. Field is credited because he parted with value ; the business became indebted to him : an oral promise was given for the merchandise bought. 14 PRINCIPLES OF BOOKKEEPING Entry 6. R. N. Downs is debited because lie received value ; he became indebted to the business : an oral promise was received for the merchandise sold. Merchandise Sales is credited because value was parted with by the business under the title given. Entry 7. H. M. Field is debited because he received value from the business : a written promise is received by him to replace the oral promise. Notes Payable is credited because value was given : the business issued a written promise to pay a certain sum of money. Entry 8. Notes Receivable is debited because the business received value : a . written promise for the payment of a certain sum of money. R. N. Downs is credited because he has parted with value to the business : he gave his written promise to replace his oral promise. Entry 9. Cash is debited because value was received by the business under the. title Cash. Merchandise Sales is credited because value was parted with by the business under the title given. Entry 10. Merchandise Purchases is debited because value was received by the business under the title given. Ira M. Banks is credited because he parted with value ; the busi- ness became indebted to him : an oral promise was given for the merchandise bought. Entry 11. Notes Payable is debited because the business gave value to redeem its written promise. Cash is credited because value was parted with by the business under the title Cash. Entry 12. Salary is debited because value was received by the business in the form of service. Cash is credited because value was parted with by the business under the title Cash. Summary of Principles. In the study of the preceding analysis it has been seen that we debit and credit as follows : DEBIT 1. Merchandise and other prop- erty which is bought 3. That which costs value 5. All moneys received 7. Persons when they become indebted to the business 9. Persons when the business gets out of their debt 11. Other persons' notes received by the business 13. Notes redeemed or paid by the business CREDIT 2. Merchandise and other prop- erty which is sold 4. That which produces value 6. All moneys paid out 8. Persons when the business be- comes indebted to them 10. Persons when they get out of debt to the business 12. Notes given or issued by the business 14. Other persons' notes when paid by them to the business FUNDAMENTAL PRINCIPLES 15 The foregoing principles may be summarized as a general principle for journalizing, as follows : Debit, under appropriate names, values that are received by the business. Credit, under appropriate names, values that are given by the business. Omission of Cents. In the money columns at the right, when writing an even number of dollars, put a dash in the cents column. This shows that an omission has not occurred, and prevents the use of un- authorized figures. Another practice is to place two ciphers in the cents column rather than the dash. Exercise 9. Journalizing For Written Work Write the journal entries for Set A on a half sheet of journal paper. If journal paper is not available, rule a sheet of ordinary writing paper for a journal. If necessary, refer to the script form on pages 12 and 13. In writing this journal, omit the figures in the page column. Keep this work for a subsequent exercise. Posting. An account is a collection of related debits and credits under one heading. An account may contain but one debit or one credit. The ledger is a book which contains the accounts of the business. Posting is the process of transferring debit and credit items to their respective accounts in the ledger. At present all posting is from the journal. Each different name that appears in the model journal requires an account or a heading of the same name in the ledger : therefore there are twelve accounts in the model ledger. To open an account, write in the ledger, as a heading, the name to which items are to be posted. Note that in the model journal the debits and the credits of cash are distributed over the entire page. Then note that in the model ledger the debits and the credits of cash appear under the heading of Cash on one section of the page. Posting brings about this classification of debits and credits under appropriate headings. The model ledger on pages 16 and 17 shows the accounts posted from the model journal. The left and the right side of the ledger have the same rulings ; the left is the debit side, and the right is the credit side. 16 PRINCIPLES OF BOOKKEEPING so Gxplanation &". $ / foo 2-2-0 o. ) a . Gxplanahon / MODE!, LEDGER / 7- 7 'ft / O O 2-tto FUNDAMENTAL PRIXCI PLES 17 7ft MODEL LKDGKK /fo 2-&< /tft zz< 18 PRINCIPLES OF BOOKKEEPING Analysis of the Model Ledger. The posting of the model journal has been completed. The following is a full explanation of each account in the model ledger. Each account in which there is more than one amount, either in the debit or in the credit column, should be footed ; minute figures should be used to show these footings, and they should always be written in pencil. These pencil footings should be left in the account. Cash Account : The debit shows that the business received $2280. The credit shows that the business paid out 1020. This account is debited for all cash received, and credited for all cash paid out. The purpose of this account is to record and show the receipts and the payments in cash, and the amount of cash on hand at a certain time. The balance, that is, the debit (or total amount of cash received) minus the credit (or total amount of cash paid out), should be the balance on hand. Money kept in a bank as a deposit is counted as cash on hand. Notes Receivable Account : The debit shows that the business received notes made by others to the amount of $100. The absence of any credit amount shows that none of these notes receiv- able has been paid. This account is debited for all notes receivable received by the business and is credited for all notes receivable that are paid. If this account does not balance, the debit is the larger because the pay- ments cannot amount to more than the notes receivable which have been received by the business. Any balance in this account shows the amount due the business on notes receivable. R. N. Downs's Account : The debit shows that he has received values from the business to the amount of f!40. The credit shows that he has paid the business $100 to apply on his account. This is a personal account. Personal accounts are accounts with individuals, firms, or corporations. The debits of these accounts show the values received from the business ; the credits show the values parted with to the business. All personal accounts in a ledger in which the debit side is the larger show that the individual, the firm, or the corporation owes the business a certain amount. How much does R. N. Downs owe the business ? FUNDAMENTAL PRINCIPLES 19 Merchandise Inventory Account : At the close of the month this account will record, in this set, the value of the unsold merchandise as a debit amount. Notes Payable Account : The credit shows that the business issued notes payable to others to the amount of $150. The debit shows that the notes issued were redeemed, or paid in full, by the business. This account is credited for all notes payable issued by the business. It is debited for all notes payable that are redeemed, or paid, by the business. If this account does not balance, the credit side is the larger because the amount of notes redeemed, or paid, cannot be greater than the amount of such notes issued. Any balance in this account shows the amount owed by the business on notes payable. H. M. Field's Account : The credit shows that he has disposed of values to the business to the amount of $240. The debit shows that the business has paid him $150 to apply on its account with him. All personal accounts in a ledger in which the credit side is the larger show that the business owes the individual, the firm, or the corporation a certain amount. How much does the business owe H. M. Field ? Ira M. Banks 's Account : The credit shows that he has disposed of values to the business to the amount of $130. The absence of any debit amount shows that the business has not paid him anything to apply on its account with him. David Lane's Account : This is the Proprietor's account. The credit shows that he invested $1800 in the business. This account sets forth the money value of the Proprietor's interest in the business. This value is called the projtrietary interest. Other items which may appear in this account will be considered later. Merchandise Sales Account : The credit shows that the business has sold merchandise to the amount of $620. Other items which may appear in this account will be considered later. Merchandise includes all goods that are bought to be sold. This account records the money value of the goods sold. 20 PRINCIPLES OF BOOKKEEPING Merchandise Purchases Account : The debit shows that the business bought merchandise to the amount of $1150. Other items which may appear in this account will be considered later. This account records the money value of all goods bought. Rent Paid Account : The debit shows that the business received value (the use of the store), which cost $40. The debit side only of this account is used, except for making some credit correction, or in closing. This account represents an expense item ; that is, a cost of carrying on the business. Salary Account : The debit shows that the business received value (personal service), which cost $50. This also is an account in which only the debit side is used, except for making a credit correction, or in closing. It represents another expense item. Similar analyses of ledger accounts should be used frequently. The ledger is the book of accounts in the business and is referred to frequently for information that is wanted immediately ; hence one should be able to understand and interpret an ordinary account at a glance. For this reason strong emphasis has been placed on the analysis of ledger accounts in the very earliest stages of the student's work in bookkeeping. Exercise 10. Posting the Model Journal For Study Examine the posting from the model journal to the model ledger, in the text. The model journal is on pages 12 and 13, and the model ledger on pages 16 and 17. By referring to these script pages the student has the opportunity to study post- ing in just the form in which it will appear in his own work. In the model journal in each entry the name that is debited appears first, and the name that is credited appears second. The first money column records the amount of the debit, and the second money column records the amount of the credit. All items in the first money column will be posted to the left (debit) side of the ledger ; all items in the second money column will be posted to the right (credit) side of the ledger. Trace the posting of each debit item in the model journal to the model ledger. FUNDAMENTAL PRINCIPLES 21 The first item in the model journal is Cash. Turn to the C fifth account in the ledger, debit side, and note the amount, the i>a>-L^ 3n 2-<7 J 1 ^ Take trial balances of the ledgers just posted. Keep this work for a subsequent exercise. 24 PRINCIPLES OF BOOKKEEPING Exercise 13. Journalizing For Written Work Journalize Exercise 2, page 2, in the same form as in the model journal. The names and the amounts are different from those in the model. Under Feb. 1, the proprietor, John A. AVeeks, makes a cash invest- ment of $1050. (This is an additional item.) Make the memorandum and the entry for this investment, and then journalize the other business transactions. When goods are bought, an invoice is received by the buyer and placed on file ; for this reason the items of the invoice need not be recorded in the journal. When goods are sold, an invoice is sent by the seller, and a copy of it is not always kept on file ; for this reason the items of the invoice should be recorded in the journal. These explanations in the journal are of great value in the courts of law. Use half sheets of journal paper and ledger paper. In the ledger allow ten lines for each account. Recheck the posting. Take a trial balance. Pass all work to the instructor. Exercise 14. Journalizing For Written Work Journalize Exercise 4, page 3. Under March 1, the proprietor, Richard S. Rowe, makes a cash investment of $1250. (This is an additional item.) Pfcst to the ledger and then recheck the posting. ike a trial balance. iss all work to the instructor. Exercise 15. Journalizing For Written Work Journalize Exercise 5, page 5. Under April 1, the proprietor, John R. Howe, makes a cash invest- ment of $1150. (This is an additional item.) Post to the ledger and then recheck the posting. Take a trial balance. Pass all work to the instructor. FUNDAMENTAL PRINCIPLES 25 Exercise 16. Journalizing For Written Work Journalize Exercise 8, page 8. Under June 1, the proprietor, Daniel \ . Case, makes a cash invest- ment of $1350. (This is an additional item.) Post to the ledger and then recheck the posting. Take a trial balance. Pass all work to the instructor. SET B. FURNITURE Opening the Set. Journalize the transactions in the following memo- randa in the same form as in the model journal, on a half sheet of journal paper. SUGGESTION. As a class exercise, each transaction may be journalized orally. Give the reason for each debit and each credit named. MEMORANDA OF TRANSACTIONS N Feb. 1. Howard A. Marble began the Furniture business and invested cash,' $1600. ^ 2. Bought of Lewis & Taylor for cash: 15 Oak Dining Tables at $12,50 10 Library Tables at $22.75 3. Paid H. A. Harper cash, for rent of the store for February, $40. 3. Sold Wm. S. Warren for cash : 3 Oak Dining Tables at $17.75 2 Library Tables at $31.25 I 6. Bought of Reese & Co., for cash, office books and supplies amounting to $13.50. Debit Office Supplies ; this will be the name of an account in your ledger. 8. Sold Ellis & Johnson on account: 4 Oak Dining Tables at $17.75 3 Library Tables at $32 10. Bought of John D. Rice on account: 10 Oak Dining Tables at $14.25 12 Library Tables at $15.35 13. The Proprietor takes from the business cash, to apply on his monthly salary, $50. 16. Received of Ellis & Johnson cash, to apply on account, $83.50. 18. Paid John D. Rice cash, to apply on account, $200. 20. Received of Ellis & Johnson their note at 15 da* for $83.50, to apply on account. 26 PRINCIPLES OF BOOKKEEPING Feb. 23. Sold A. R. Kelsey on account : 5 Oak Dining Tables at $20.50 5 Library Tables at $21.75 26. Received of A. R. Kelsey cash, to apply on account, $125. 27. Paid Henry Mason, a clerk, cash, for his salary, $30. 27. The Proprietor takes from the business cash, for the balance of his monthly salary, $25. Inventories, February 27, 19 Merchandise : 8 Oak Dining Tables at $12.50 $100. 5 Oak Dining Tables at $14.25 71.25 5 Library Tables at $22.75 113.75 7 Library Tables at $15.35 107.45 $392.45 Office Supplies : Books and Supplies $6. NOTE. The use of the inventory is explained on page 28. Closing the Set. Post to the ledger; allow eight lines for each account. Take a trial balance. Keep all this work for a subsequent exercise. SET C. GRAIN AND SEED Opening the Set. Journalize the transactions in this set in the same form as in the mod^el journal, on a half sheet of journal paper. SUGGESTION. As a class exercise, each transaction may be journalized orally. Give the reason for each debit and each credit named. MEMORANDA OF TRANSACTIONS March 1. Student begins the Grain and Seed business and invests cash, $1500. 2. Pay Harold Brown cash, for rent of the store for March, $40. 3. Buy of H. H. Morley for cash: 400 bu. Corn at 600 350 bu. Oats at 480 4. Sell Smith Bros, for cash: 200 bu. Corn at 75^ 100 bu. Oats at 600 6. Buy of Grace & Co., for cash, office books and stationery amount- ing to $14.50. . The name of the account to be debited is Office Supplies. FUNDAMENTAL PRINCIPLES 27 March 8. Buy of Wm. A. Cannon on account : 250 bu. Wheat at $1 15 bu. ( 'lover Seed at $6 10. Sell James A. Butler on account: 150 bu. Corn at 750 200 bu. Oats at 600 13. Pay Wm. A. Cannon cash, to apply on account, $200. 15. Buy of the Larkin Coal Co., for cash, 2 T. coal, for office use, at |5.50. 17. Receive of James A. Butler his note at 10 da., to apply on account, $100. AVliat name is given to his note? 20. Sell A. R. Burton for cash : 8 bu. Clover Seed at $8 22. Give Wm. A. Cannon your note at 30 da., to apply on account, $100. What name is given to your note? 23. Sell Henry A. Barker on account: 120 bu. Wheat at $1.25 24. Receive of James A. Butler cash, to balance his account, $132.50. 25. The Proprietor takes from the business cash, for his salary, $50. 26. Receive of Henry A. Barker cash, to apply on account, $100. 27. Receive of James A. Butler cash, for his note due to-day, $100. What is the debit in this transaction ? the credit ? 29. Buy of Johnson & Co. for cash : 100 bu. Corn at 600 100 bu. Oats at 480 30. Sell Harding & Co. for cash : 50 bu. Corn at 750 50 bu. Oats at 600 31. Pay James A. Norton, a clerk, cash, for his salary, 122.50. Inventories, March 31, 19 Merchandise : 100 bu. Corn at 600 $60. 100 bu. Oats at 480 48. 130 bu. Wheat at $1 130. 7 bu. Clover Seed at $6 42. $280. Office Supplies: 10. Fuel, 1 T. coal 5.50 NOTK. The use of the inventory is explained on page 28. 28 PRINCIPLES OF BOOK KEEPING Closing the Set. Post to the ledger : allow fifteen lines for the Cash account and ten lines for all other accounts. Before taking a trial balance rule the accounts in the ledger that balance. The script illustrations below show how to rule them. Rule the accounts of James A. Butler and Notes Receivable. Jfiz^?^- < ; i/ // ^ y .;' /<7^ /2 -- y /? t? /^ >2^ -, 2^ *sa^/ I f Take a trial balance. Keep all this work for a subsequent exercise. INVENTORIES, AND THE DETERMINATION OF PROFIT AND LOSS Inventories. The student may verify the inventory in Set A, as follows : How many barrels of flour were bought ^ How many barrels were sold? How many barrels should be on hand? How many bushels of corn were bought ? How many bushels were sold ? How many bushels should be on hand ? ... An inventory is an itemized statement of the quantity and the value/ ' / 1 of the goods on hand. An inventory is usually taken at cost prices. J It is customary to inventory unused office supplies, unused fuel, etc. Inventories are taken at stated periods, as at the end of a year or at the end of a month. Unless otherwise instructed, date each inventory under the last day of the month in which the set was written. In business it is a common practice to make out the complete inventory on sheets of paper; these sheets are then bound and filed for subsequent use. i FUNDAMENTAL PRINCIPLES 29 The Determination of Profit and Loss. In working out the following analysis of accounts, refer to the model ledger on page 16 and to the model trial balance on page 22: In the Merchandise Purchases account, what are the total purchases ? In the Merchandise Sales account, what are the total sales ? What is the value of the merchandise on hand (the inventory) ? With the above data at hand, if any profit has been realized it can be determined as follows: The value of the merchandise sold is $620. The total purchases amount to $1150. The value of the merchandise on hand is $656. The total purchases minus the merchandise on hand must equal the cost of the merchandise sold : $1150 $656 = $494, the cost of the merchandise sold. The sales minus the cost of the merchandise sold must equal the profit on the merchandise sold : $620 $494 = $126, the profit on merchandise sold. To summarize: Mdse. Sales $620 Purchases $1150 Inventory 65(5 Cost of merchandise sold 494 Gross profit on sales $126 Refer to the Rent Paid account. What amount was paid for rent ? This is a loss. Why ? Refer to the Salary account. What amount was paid for salary? This is a loss. Why ? If the profit on merchandise sold is $126 and the loss on rent and salary is $90, what is the net profit ; that is, the excess of the profit over the losses? Exercise 17. Net Profits For Written Work Find the net profit in each of the following ; make a statement according to the model on page 32 : 1. Merchandise Purchases, $655.20 ; Merchandise Sales, $503.50 ; inventory, $254.25. Rent Paid: debit, $50. 2. Merchandise Purchases, $854.40 ; Merchandise Sales, $497.50 ; inventory, $470. Salary: debit, $35. 3. Merchandise Purchases, $1192.20; Merchandise Sales, $753.50; goods on hand, $510.40. Rent Paid: debit, $65. 30 PRINCIPLES OF BOOKKEEPING 4. Merchandise Purchases, $987.70: Merchandise Sales, $790; inven- tory, $318.50. Rent Paid: debit, $30. Salary: debit, $20. 5. Merchandise Purchases, $964.10; Merchandise Sales, $702.25; inventory, $458.30. Salary: debit, $25. 6. Merchandise Purchases, $1342.75; Merchandise Sales, $1059; inventory, $520. Rent Paid: debit, $55. Proprietary Interest. The excess of the assets over the liabilities is the capital, or the present worth, or the proprietary interest. Merchandise Inventory. The merchandise on hand (the inventory) is an asset. For the present, treat all inventories as assets. The Open Account. In the preceding exercise it is clear that each open account (that is, an account that does not balance) has a posi- tive bearing on the condition of the business ; and if these results are properly classified, what has been accomplished by the business, as well as the present state of affairs, may be determined. In business these results are usually set forth at stated periods, either monthly or once or twice a year. Exercise 18. Analysis of Accounts For Oral Work In working out this exercise, refer to the model ledger on page 16 and to the model trial balance on page 22. Refer to the Cash account in the trial balance. What was the total cash received ? the total cash paid out ? the balance on hand ? Is this balance an asset (property on hand) or a liability (amount owed) ? The Notes Receivable account shows notes on hand, and also that nothing has been received in settlement of any of the notes. Does this account show an asset or a liability ? In a legal sense notes on hand are a form of property. What is the condition of R. N. Downs' 's account ? Does he owe the business, or does the business owe him ? Is the balance an asset or a liability ? If he owes the business, the amount is an asset. What is the condition of H. M. Field's account ? Does he owe the business, or does the business owe him ? Is the balance an asset or a liability? If the business owes him, the amount is a liability. FUNDAMENTAL PRINCIPLES 31 In the account of the proprietor^ ]>ari ^ Instructors should state the form they prefer the student to follow. j Net Profit. The net profit is the excess of the profits over the losses. n-i Net Loss. The net loss is the excess of the losses over the profits. ~^ Assets. Assets, or resources, are property of value belonging to the business, or amounts due the business ; that is, what the business owns. Liabilities. Liabilities are amounts owed by the business ; that is, the debts of the business. '"* Proprietary Interest. The present worth, or capital, or proprietary interest is the excess of assets over liabilities. It is the net worth of the business at a definite time as shown by the books. The excess of Liabilities over assets is insolvency. 32 PRINCIPLES OF BOOKKEEPING l-^^ / <-? /_, >J /, /q- /oo. / 2~&o / o o tto &t / foo 3 t, / 2- ' ,- Jrt 2-2 /??* (J) 1685 350 IL i a (c) 2250 920 (c) 1930 3010 i o-9 /f-? 3 (d) 2975 1142 x > 74' (d) 3350 975 *fc 33. () 5575 2142 Mil () 4352 1231 .1 A*t-*^ff ' ^y/^J-T^T^ ^* CX.A/V. OGDuvu t/wV sv(jiAiMAJAj jCTr* jjHJ~^ ^7 /WJ ' d-1(Aj^ j&^A PURCHASES SALES INVENTO (a) $1100 $600 $700 (/,) 1250 750 350 (e) 1075 725 450 34 PKINCIPLES OF BOOKKEEPING Name quickly the profit or the loss in each of the following : 5. Merchandise 6. DEBIT INVENTORY Fuel: (a) 8155 $90 (/;) 210 93 (r) 86 62 (d) 128 79 Name quickly the result in each of the following problems : 7. John Smith has assets amounting to $800, and liabilities amount- ing to $300. What is he worth ? 8. Increase his assets $100 ; what is he worth ? 9. Decrease his assets $100; what is he worth? 10. Increase his liabilities $100 ; what is he worth ? 11. Decrease his liabilities $100 ; what is he worth ? 12. Increase his assets $100, and decrease his liabilities $100 ; what is he worth ? 13. Decrease his assets $100, and increase his liabilities $100 ; what is he worth ? 14. On page 35 there are four trial balances ; in each account name quickly those which show an asset and those which show a liability. Exercise 20. Review For Written Work Directions. From the following trial balances statements are to be made ; use sheets of journal paper. Unless otherwise instructed, use the form of statement given on page 32. Proceed as follows: 1. Copy the trial balance at the head of the journal page. 2. Make the profit and loss statement which shows the net profit. 3. Make the balance sheet or the financial statement which shows the present worth, or the proprietary interest. 4. Date each statement Jan. 31, 19 . 5. When completed, pass all work to the instructor for approval. FUND AMES T A L Pit IN C IP LES 35 2. Cash $1655 $650 Cash $525 H. Granger 352 141 M. Carson 285 F. Howard 368 255 Dun ton & Co. 376 Young & Co. 512 230 Lacey & Co. 532 Hale & Co. 216 456 H. Ranger $365 Student, Prop. 2000 Student, Pro]). 1850 Mdse. Sales 1873 Mdse. Sales 1893 Mdse. Purchases 2377 Mdse. Purchases 2215 Rent Paid 25 Fuel 75 Salary 100 Salary 100 Inventory : Merchandise $5605 $5605 $752 Cash Lee & Dane Jackson & Co. Macey & Son H. S. Arnold A. B. Lawton Lewis & Co. Student, Prop. Mdse. Sales Mdse. Purchases Office Supplies Salary Inventories : Merchandise Office Supplies 1 $874 485 325 654 125 312 100 2560 32 100 $105 84 139 637 422 205 2100 1875 $5567 $5567 $960 20 12. Inventor// : Merchandise 4. Cash Jas. Curry Louis Derby Henry Ware Adams & Co. H. C. Cain H. Wyman Student, Prop. Mdse. Sales Mdse. Purchases Fuel Rent Paid Inventories : Merchandise Fuel 1 $4108 $4108 $564.75 $835 358 298 252 $327 278 113 1700 1385 1945 65 50 $3803 $3803 $751.50 33. Exercise 21. Review For Written Work In this exercise, use the trial balances the student has made in Sets A, B, and C. Follow the directions given hi Exercise 20. This work should be done without reference to the text. After each statement has been approved by the instructor, keep the work for a subsequent exercise. These inventories are explained on page 36. 36 PRINCIPLES OF BOOKKEEPING Make statements from the trial balances of the following sets : 1. Set A, page 10. 2. Set B, page 25. 3. Set C, page 26. The inventories will be found in the text at the close of each set. Additional Inventories. The fuel and office supplies unused at the time the statements are made are inventories. ILLUSTRATION. If 10 T. of coal were bought at the beginning of the month and 4 T. were unconsumed at the end of the month, the 4 T. would constitute the inventory for the Fuel account. When there is an inventory, the loss 011 the Fuel account is found as follows: Fuel: Dr. $46.25 Inventory 16.20 Loss $30.05 The loss is the difference between the debit of the account and the inventory. In making the balance sheet or financial statement, record the fuel inventory as an asset. In making a detailed balance sheet or financial statement, never add together the inventories of different names, but use each as a separate' amount. It is not usual for the Fuel account to have any credits ; but if the account is closed with fuel on hand, or if some fuel that has been bought is sold, then the account shows a credit. All that has been said regarding the use of the fuel inventory will apply in every particular to the office supplies inventory. - CLOSING THE LEDGER Preliminary Work. The results and the condition of the business in Sets A, B, and C have been shown by the statements just made. The next step is to show the results of the business in the ledger. To do this it will be necessary to close the ledger. To close the ledger it is necessary to close only such accounts as affect the results shown by the business ; that is, the accounts that show profit or loss and the Proprietor s account. Preparatory to closing the ledger the student should have some practice in ruling. FUNDAMENTAL PRINCIPLES 37 The ruling of the following ledger page is the same as the ruling required in closing a ledger account. Practice this ruling until it is done well. Use red ink for this work. Notice that the single line extends over only the dollars and cents columns, while the double lines cover all the perpendicular columns, the explanatory column excepted. In business it is customary to show actual results ; that is, to make statements only once or twice a year, or monthly. The ledger is closed after such statements have been made. Closing the Ledger Defined. The results of the business as shown in the statements are now to be incorporated in the books of the business, and this operation is called closing the ledger. There are two general methods of closing the ledger, the direct method and the journal method. The first is explained and illustrated on page 167, but it is not used in this text. Journal Method. The following explanations and illustrations set forth the journal method of closing the ledger. By this method all closing entries are made in the journal and posted to the ledger accounts. Thus the ledger continues to contain a classi- fication of debits and credits recorded in the several transactions in the journal. The closing journal entries should record such data as are necessary to place upon the ledger the facts set forth in the statements, In this illustration these data may be summarized into three divi- sions: the accounts relating to merchandise transactions, the accounts showing losses, and the transfer of the net profit to the Proprietor's account. The closing, of the ledger is one of the most important features of bookkeeping, and its mastery is essential if one is to do good work. Merchandise Accounts. The first division of the closing entries in this exercise deals with the merchandise accounts and the entries necessary 265790 38 PRINCIPLES OF BOOKKEEPING to record the closing inventory, the cost of merchandise sold, and the profit on the merchandise sold. The following merchandise accounts and the closing inventory are used in the illustration : MERCHANDISE PURCHASES 19 Jan. 6 5 1200 19 6 1350 26 7 850 MERCHANDISE SALES 19 Jan. 10 6 950 23 7 750 29 S - 900 On Jan. 31 the merchandise inventory was $1100. 1. The first entry is to record the inventory of Jan. 31 in the journal. The entry is as follows: Mdse. Inventory 1100 ^- Mdse. Purchases 1100 t-fy To record the merchandise inventory and to credit the Merchandise Purchases account for the merchandise remaining unsold on Jan. 31. Open an account with Merchandise Inventory. After posting this entry the accounts will appear as follows MERCHANDISE INVENTORY 19 Jan. 31 9 1100 MERCHANDISE PURCHASES 19 19 Jan. 6 5 1200 Jan. 31 9 1100 19 6 1350 26 7 850 3**^ FUNDAMENTAL PRINCIPLES 39 _2^ The difference between the sides of the Merchandise Purchases account ($2300) will now show the cost of the merchandise sold. Use this amount and make the following entry : Mdse. Sales 2300 Mdse. Purchases 2300 To transfer the balance of the Mer- chandise Purchases account, representing the cost of the merchandise sold, to the Merchandise Males account. After posting this entry the accounts will appear as follows : MERCHANDISE PURCHASES 19 19 Jan. 6 5 1200 Jan. 31 9 1100 19 6 1350 31 9 2300 , 26 7 850 3400 3400 MERCHANDISE SALES 19 19 Jan. 31 9 2300 Jan. 10 6 950 23 7 750 29 8. 900. 300 300 3. The difference between the sides of the Merchandise Sales account will now show the profit on the merchandise sold. Use this amount and make the following entry : Mdse. Sales Profit and Loss To transfer the balance of the Merchan- dise Sales account, representing the profit on he merchandise sold, to the Profit and Loss account. After posting this entry the accounts will appear as follows : MERCHANDISE SALES 19 19 Jan. 31 9 2300 Jan. 10 6 950 81 9 300 23 7 750 29 8 900 2600 2600 40 PRINCIPLES OF BOOKKEEPING ^J^o. 00. Explanation 9T $ < e41o. G)a. Explanation 9T $ n / fo o / /.so -zz/u > Zl-f '- . f ^ MODEL LEDGER CLOSED FUNDAMENTAL PRINCIPLES 41 S)a. GxplanatiOn $ v e^lo. Dg. Gxplanahon 9T $ MODEL LEDGER CLOSED 42 PRINCIPLES OF BOOKKEEPING PROFIT AND Loss 19 Jan. 31 9 300 Accounts which show Losses. The second division of the closing journal entries in this exercise deals with the accounts which show losses. The following Rent Paid account is used as an illustration : RENT PAID 19 Jan. 25 Make this entry to close this account into the Profit and Loss account. 25 Profit and Loss Rent Paid To close the Rent Paid account into the Profit and Loss account. 25 After posting this entry the accounts will appear as follows: RENT PAID 19 Jan. 3 5 25 19 Jan. 31 9 2.-) PROFIT AND Loss 19 Jan. 31 9 2o Jan. 31 9 300 FUNDAMENTAL PRINCIPLES 43 If a Salary account were debited with $45, it would be closed by making and posting an entry similar to that given for the Rent Paid account. After posting such an entry the accounts will appear as follows : SALARY 19 Jan. 15 4 45 19 Jan. 31 9 45 PROFIT AND Loss 19 Jan. 31 9 25 Jan. 31 9 300 31 9 45 Proprietor's Account. The third division of the closing entries in this exercise deals with the transfer of the net profit to the Proprietor's account. Assume that David Lane is the proprietor, and his account in the ledger shows an investment of $1500 on Jan. 1. The following entry is necessary to transfer the net profit of $230 (the balance of the Profit and Loss account) to the Proprietor's account : Profit and Loss David Lane, Prop. 230 To transfer the balance of the Profit and Loss account, representing the net profit of the period, to the Proprietor's account. After posting this entry the accounts will appear as follows : PROFIT AND Loss 19 19 Jan. 31 9 25 Jan. 31 9 300 31 9 45 31 9 230 300 300 44 PRINCIPLES OF BOOKKEEPING DAVID LANK, PROPRIETOR 19 JHII. 1 2 1500 31 9 280 In the Proprietor's account enter the Present Worth in red ink on the debit side ; rule the account, and then transfer the Present Worth to the credit side of the account, below the rulings, in black ink, under Feb. 1. The account will then appear as follows : DAVID LAXK, PROPRIETOR 19 19 Jan. 31 Present Worth 1 1730 Jan. 1 _) 1500 31 9 230 1730 1730 Feb. 1 Present Worth 1730 This completes the closing of the ledger. Exercise 22. Closing the Model Ledger For Written Work Transfer the accounts represented in the model ledger, pages 40 and 41, to a sheet of ledger paper, and then close the model ledger ; the merchandise inventory is found on page 11. Make the closing entries on a sheet of journal paper. After posting these entries and ruling the accounts, your work should agree with the model ledger closed, pages 40 and 41. Exercise 23. Ledger Closings For Written Work On slips of ledger paper 'and journal paper open the following accounts, and then make the necessary entries to close them. Use Jan. 31 for the date. If necessary, the student may rule blank paper for the ledger and the journal. 1. Merchandise Purchases, $565 ; Merchandise Sales, $312 ; inven- tory, $315. 2. Rent Paid, $30. 1 To be written in red ink. FUNDAMENTAL PRINCIPLES 45 3. Merchandise Purchases, $980 ; Merchandise Sales, $675; inven- tory, $482. 4. Salary, $40. 5. Merchandise Purchases, $612 ; Merchandise Sales, $496; inven- tory, $375. Find the net profit or the present worth in each of the following accounts, and then make the necessary entries to close them : 6. Profit and Loss: debit, $116.25; credit, $226. 7. Student, Proprietor : credit, $1600 ; net profit, $150. 8. Profit and Loss: debit, $210; credit, $825. 9. Student, Proprietor: credit, $1500; net profit, $165. 10. Student, Proprietor: credit, $1700-; net profit, $235. Exercise 24. Closing the Ledger For Written Work Directions. On a half sheet of ledger paper open the following accounts ; allow eight lines for each account : Student, PROPRIETOR 19 Jan. 1 1 1800 MERCHANDISE SALES 19 Jan. 11 3 725 22 3 240 ' 29 5 70 MERCHANDISE PURCHASES 19 Jan. 9 2 850 15 4 275 27 4 162 46 PKINCIPLES OF I'.OOKKEEPINC RENT PAID 19 Jan. 2 1 35 1 SALARY 19 Jan. 29 6 20 31 7 30 Inventory : Merchandise a. Open the following accounts : Merchandise Inventory and Profit and Loss. b. Make the necessary entries and postings to close the above ledger. II W. H. HANSEN, PROPRIETOR 19 Feb. 1 1 1900 MERCHANDISE SALES 19 Feb. 9 3 208 50 20 5 297 25 26 6 . 510 65 FUNDAMENTAL PRINCIPLES MERCHANDISE PURCHASES RENT PAIJ> 47 19 Feb. 5 2 .310 16 4 422 50 23 5 538 75 19 Feb. 30 FUEL SALARY 19 Feb. 11 3 7 50 20 5 3 50 19 Feb. 40 Inventory : Merchandise 1395.40 a. Open the following accounts: Merchandise Inventory and Profit and Loss. b. Make the necessary entries and postings to close the above ledger. 1 This account is closed the same as the Bent Paid account in this exercise. 48 PRINCIPLES OF BOOKKEEPING Sundry Expense Inventory. Observe the following directions in closing the Office Supplies account : Make the following entry to record the inventory upon the books of account: Sundry Expense Inventory 8 50 Office Supplies 8 50 To record the inventory and to credit the Office Supplies account for the office supplies remaining unused on March 31. After posting this entry the accounts will appear as follows: SUNDRY EXPENSE INVENTORY Mar. 31 OFFICE SUPPLIES 19 19 Mar. 6 1 11 20 Mar. 31 7 8 50 17 2 4 70 23 3 3 10 Sundry Expense Inventory applies to all expense accounts in which inventories are found, at the end of a given period. Make the following entry to close the Office Supplies account into the Profit and Loss account: Profit and Loss Office Supplies To close the Office Supplies account into the Profit and Loss account. 10 .-50 10 50 After posting this entry the Office Supplies account will appear as follows : . OFFICE SUPPLIES 19 19 Mar. 6 1 11 20 Mar. 31 7 8 50 17 2 4 70 31 7 10 50 23 3 3 10 19 19 FUNDAMENTAL PRINCIPLES 49 It is now necessary to transfer the amount in the Sundry Expense Inventory account to the Office Supplies account so that the latter account will show the office supplies on hand April 1. To accomplish this transfer make the following entry : Office Supplies Sundry Expense' Inventory To transfer the inventory of office sup- plies to the Office Supplies account. 50 After posting this entry the accounts will appear as follows : OFFICE SUPPLIES 19 10 Mar. (3 1 11 20 Mar. 31 7 8 50 17 2 4 70 31 7 10 50 23 3 3 10 19 19 Apr. 1 7 8 50 SUNDRY EXPENSE INVENTORY 19 Mar. 31 7 ' 8 50 19 Apr. 1 7 8 50 Exercise 25. Closing the Ledger For Written Work Directions, a. On a half sheet of ledger paper open the following accounts ; allow eight lines for each account : Student, PROPRIETOR 19 Mar. 1 1 1750 50 PRINCIPLES OF BOOKKEEPING MERCHANDISE SALES ID- Mar. 8 3 376 45 16 4 282 27 5 432 90 30 ' 6 235 55 MERCHANDISE PURCHASES 19 Mar. 4 2 498 65 13 4 337 50 24 5 524 35 29 6 228 40 i OFFICE SUPPLIES l 19 Mar. 5 2 13 25 16 4 6 80 22 o 5 50 REXT PAID 19 Mar. 38 Inventories : Merchandise Office Supplies $524.50 12.20 b. Open the following accounts : Merchandise Inventory, Sundry Ex- pense Inventory, and Profit and Loss. c. Make the necessary entries and postings to close the above ledger. 1 See page 48. FUNDAMENTAL PKIXCIPLES II Student, PROPRIETOR 51 10 May MERCHANDISE SALES 19 May !) 3 108 25 10 4 390 35 26 5 553 10 20 5 65 40 MERCHANDISE PURCHASES 19 May 6 2 175 20 1,3 3 512 30 23 4 841 75 OFFICE SUPPLIES 19 May 8 3 14 65 23 6 11 20 FUEL 19 May 6 2 22 35 19 4 31 40 1 On page 48 instructions were given regarding the Office Supplies account and its inventory. These instructions will apply to the closing of the Fuel account. PRINCIPLES OF BOOKKEEPING SALARY May 31 Inventories : Merchandise Office Supplies Fuel |672.50 16.40 22.50 a. Open the following accounts : Merchandise Inventory, Sundry Expense Inventories, and Profit and Loss. b. Make the necessary entries and postings to close the above ledger. Exercise 26. Closing the Ledger For Written Work The ledgers which the student posted and kept will now be used for this exercise. In each ledger, open the necessary accounts for posting the closing journal entries. 1. Set A. Close the ledger. Compare the results with those shown in the statement of this set. 2. Set B. Close the ledger. Compare the results with those shown in the statement of this set This set shows a net loss. 3. Set C. Close the ledger. Compare the results with those shown in the statement of this set. After closing each ledger, keep it for a subsequent exercise. Balancing the Cash Account. The Cash account in the ledger may be balanced according to the model at the top of the opposite page. After balancing the account the condition of it is shown as a single item, the balance. Any account may be balanced when the space assigned to it is filled and it is necessary to transfer it to a new space. The use of red ink is largely a matter of custom. Many bookkeepers use no red ink at all, insisting that it is a waste of time to change from one to another. The use of red ink is advised for exercises in this book. FUNDAMENTAL PK1N CIPLES Forwarding the Footings. Instead of balancing an account when it is necessary to transfer it to a new, space, the total of each column may be carried forward. This is illustrated by the following script form : '7 fo 7^ / / 77* 1 fc s 54 PRINCIPLES OF BOOKKEEPING Exercise 27. Balancing the Cash Account For \Vrlttrn Work Balance the Cash account in the ledgers of Sets A, B, and C. SET D. TEA AND COFFEE Directions. Journalize the following transactions, post (allowing ten lines for each account in the ledger), take a trial balance, make the statements, and close the ledger. Balance the Cash account and then take a second trial balance. Write on sheets of journal paper and ledger paper. After the ledger has been closed, some of the accounts will have been changed ; but if the work of the set has been done correctly, the balance of the ledger has not been impaired. In making the second trial balance, use only the accounts which remain open upon the ledger. If the student is able to do this work without assistance, he is ready for subse- quent work ; if not, he should rewrite one or more of the preceding sets. MEMORANDA OF TRANSACTIONS Apml 1, Win. A. Springer began the Tea and Coffee business, in- vesting cash, |1250. 3. Bought of Amos R. Hyde on account: 800 Ib. Tea at 35 1200 Ib. Coffee at 280 4. Sold L-. AiM8 wanoon 4. or cash: 150 Ib. Tea at 50 300 Ib. Coffee at 350 5. Paid E. S. Washburn cash, for rent of the store for April, $40. 6. Paid Hays & Co. cash, for office books and supplies, $12.50. 8. Sold John Freeman on account: 240 Ib. Tea at 500 150 Ib. Coffee at 350 9. Paid Little & Lane cash for 6 T. coal at $7.25. 11. Sold Harry M. Grace on account : 250 Ib. Coffee at 350 12. Paid Amos R. Hyde cash, to apply on account, $500. 13. Bought of Amos R. Hyde on account : 750 Ib. Coffee at 280 15. Received of John Freeman cash, to apply on account, $100. FUNDAMENTAL PRINCIPLES 55 April 16. The Proprietor takes from the business cash, to apply on his monthly salary, $37.50. 17. Gave Amos R. Hyde a note at 10 da., to apply on .account, $150. 19. Sold Harper & Co. on account : 200 Ib. Tea at 500 500 Ib. Coffee at 350 20. Received of Harry M. Grace cash, in full for the sale of April 11. 22. Bought of Greene & Co. on account : 2000 Ib. Tea at 350 23. Sold Miller & Dunn for cash : 800 Ib. Tea at 500 24. Received of Harper & Co. their note at 30 da., to apply on account, $100. ^ 26. Sold Harry M. Grace on account: 200 Ib. Tea at 500 27. Paid Amos R. Hyde cash, for a note due to-day, $150. 29. Gave Greene & Co. a note at 20 da., to apply on account, $200. 30. Paid John S. Potter, a clerk, cash, for his salary, $40. 30. The Proprietor takes from the business cash, for the balance of his monthly salary, $37.50. Inventories, April 30, 19 Merchandise : 1210 Ib. Tea at 350 $423.50 750 Ib. Coffee at 280 210. $633.50 Fuel: Coal unused 21. Office Supplies : Supplies unused 7.50 NOTE. The notes receivable are always assets ; the notes payable, liabilities. CORRECTION OF ERRORS The correction of errors in books of record is a matter of special importance. Even careful workers make occasional errors, but correc- tions can be made so that the neatness of the books and their legal value are not affected. When an error is made, consult the instructor before attempting to correct it. Do not erase. 56 PRINCIPLES OF BOOKKEEPING If a journal entry is wrong, correct it as follows : draw a red line through the wrong name, and then write the correct name in black ink either above or at the right of the correction, thus : / 02- JM? / O 2-J-0 If a journal entry is reversed, it may be corrected by writing, in red ink, Or. after the debit item and Dr. after the credit item. Then post correctly. 2-0 If it is found that a wrong amount has been entered in the ledger, correct it as follows: 1. Rule a red line through the wrong amount. 2. Write the correct amount in black ink above the amount canceled. ~J Is !} If an amount has been entered on the wrong side of the ledger, correct it as follows: 1. Draw a red line through the amount that is wrong. 2. Enter the correct amount in black ink on .the proper side of the ledger. FUNDAMENTAL PRINCIPLES 57 NOTE. Sometimes a correction may be made by a counter entry in the journal. To illustrate: Suppose one had made this entry, Notes Receivable, Dr., Cash, Cr., and it was a wrong entry. It may be canceled as follows : Cash, Dr., Notes Receiv- able, Cr. As the wrong entry is thus disposed of, the correct entry may now be made. FORMS OF STATEMENT The profit and loss statements and the balance sheet or financial statement are made in many different forms, depending on the char- acter and the volume of the business, and the facts that are to be set forth. In a business under the control of one proprietor very simple state- ments may answer every requirement. In a partnership, when a number of persons are interested, a more complete setting forth of the facts of the business is necessary. In a corporation, organized under the laws of the state or the nation, the statements must show the results and the condition according to the demands of the authority under which the corporation is organized. In cities where many departments require separate accounting, still another form of statement may be de- manded to set forth the facts that public business requires to be made known. > Working Sheet. The form illustrated on the following page is called a working sheet. Sometimes it is referred to as a working balance sheet or as a six -column statement. This model gives in a condensed form the final results of the ' business. The net profit for a given period, the total assets and liabilities, and the proprietary interest at a given period are the chief outstanding facts in this form of a working sheet. The first two columns of the working sheet illustrated contain the triak; balance debits and credits respectively, the third and fourth columns are used to record the amounts necessary to determine the net profit or loss of the period, the fifth column contains the assets, and the last column contains the liabilities and proprietary interest of the_]jiuikiess. The working sheet well illustrates the relationslirpBetween the trial balance and the profit and loss statement and the balance sheet, since all the amounts appearing in the trial balance are distributed in one or more of the columns. The fact that closing inventories, those not given in the trial balance, must always be considered in making accurate statements applies with equal force to the compilation of a correct working sheet. The working sheet should not be used as a finished statement to present to the Proprietor or creditor, but rather as a means of 58 PRINCIPLES OF BOOKKEEPING obtaining rapidly all data necessary for making a correct profit and loss statement and an accurate balance sheet or financial statement. r*. \%c J" '77 Z/o 2-0 ZZ 7 J /(?4O tttff & & Z-33 JfoVtt So 3; so 7 ;z^3 Y 7 30 JJ" 3/ZJ-/3 3 /Z- zo 7- Z33 /oT 3'fo ^.f A WOKKINU 8IIKET SET I. RETAIL FUEL AND FEED BUSINESS The object of this set is to illustrate in a practical manner one of the simplest forms of bookkeeping. In the preceding illustrative work the student has recorded all transactions and entries on sheets of journal paper and ledger paper, but now he is given a set of bound books, in which all records will be made. The books used are the journal, the ledger, and the statement book. No business forms are handled, but different forms are illustrated, and entries are made directly from them. Price List. The prices at which goods are to be bought and sold in this set are given in the following table : \ PRICE LIST FOR JANUARY ARTICLE COST SELLING PRICE Grate Coal $7.10 $8.25 Stove Coal $7.25 $8.50 Nut Coal $7.20 $8.50 Hay $12.50 $16.50 Opening the Set. In working out this set the student should observe the following: 1. For the introductory memorandum, refer to the model journal on page 12. Follow this model carefully. 2. In this beginning work it is well for the student to journalize the transactions first on a sheet of journal paper; after correction, this work may be copied into the bound journal. The posting should be directly to the ledger. 3. A. M. Benton is represented as the proprietor. 4. Use the sam^e explanatory forms as in the model journal (see page 12). 5. Take special pains in all writing, for legibility is most important in all work in bookkeeping. 6. Make neat, small figures. 59 60 PRINCIPLES OF BOOKKEEPING MEMORANDA OF TRANSACTIONS FOR JANUARY Jan. 1. A. M. Ben ton, Buffalo, N.Y., began thfe Retail Fuel and Feed business, investing cash, $2750. 2. Paid Edward N. Shaw cash, for rent of the store for January, $30. 3. Bought office supplies as per the following bill : 19^=. i Debit Office Supplies for the above bill. A detailed statement of goods bought or sold is called either a hill or an htnn<-i\ A detailed statement of goods bought to be used or consumed, or a statement of services rendered, is usually called a bill. Thus, a physician's statement of services rendered, and the charges for the same, is called a bill ; a statement of a quantity of silk bought or sold by a merchant is called either a bill or an invoice. 4. Bought of Allen & Parker for cash: 50 T. Grate Coal 3 ^C 35 T - Nut Coal 40 T. Stove Coal ^ f 20 T. Hay 5. Sold John S. Adams for cash: f 10 T. Grate Coal 5 T. Hay 6. Sold A. M. Paterson on account : 1 5 T. Stove 'Coal 1 T. Nut Coal / L~ SET I. RETAIL FUEL AND FEED BUSINESS 61 Jan. 8. Sold John S. King for cash : 5 T. Grate Coal 5 T. Hay 9. Sold Charles M. Gray on account : ^ 10 T. Stove Coal 10T. Hay 11. Bought of Henry A. Stevens on account: 15 T. Stove Coal 15 T. Hay 12. Received cash as shown by the following check : I f 79 Nn Rational /oo - 'Dollars 'Pay to the order of A check is an order on a bank by a depositor for the payment of money. 13. Received the following note to apply on account : $ / / n /.?. 79 after date^3Lpromise to pay to the order of. f^^^ ^r7 ^f^SL' -'Dollars Value received //2.J//0 -f 7 7^- 15. Gave Henry A. Stevens a note at 10 da., to apply on account, $150. Id. Bought of Johnson & Main for cash: 5 T. Nut Coal ! 18. Gave the Monroe Typewriter Exchange cash for the following: 1 Typewriter, $50 1 Office Desk, $25 Debit Office Furniture for the amount of this bill. 19. Received of A. M. Paterson his check for the balance of the invoice sold him on Jan. 6, $87.50. 62 PRINCIPLES OF BOOKKEEPING ! Jan. 20. Received of Charles M. Gray cash, to apply on account, $75. 20. Sold James W. Traver on account : N f 20 T. Grate Coal 12 T. Nut Coal ' x (, > ^ 29. Bought of Lane & Son merchandise as follows : 3 ^JJvJ*^ O^s,, /Q_ d^Z^p^^^^ _ rr )r. ^erms M ^^^^^^^ Cjo '~^/^^-^^ f ^7 ^^ ^ y* Scti^G "s^J^s i -> O-tt 4~- 10 ^~~&-fZ^?s /2 2=uQ2 _ LQ. ^^^2^^^A ^ -7 / ,^Z/ ^-~ ' ' // \i ^J. Received of Charles M. Gray cash, for his note which is due to-day, $110. 24. Received of James W. Traver his check, to apply on account, $100. 25. Gave Henry A. Stevens cash, for a note which fell due to-day, $150. 26. Sold A. M. Paterson on account: |-jv }/ v 5 T. Hay 5 T. Grate Coal 27. Gave Henry A. Stevens cash, to apply on account, $50. 29. Gave Lane & Son a note at 30 da., to apply on account, $1 :}.">. 31. Paid Student cash, for services to date, $20. Debit Salaries. 31. The Proprietor takes from the business cash, for his monthly salary, $50. Pass the journal sheet to the instructor for correction and criticism : then copy carefully into the bound journal. SET I. RETAIL FUEL AI\J) FEE1) JJUSINESS 63 Inventories. Record the inventories on a sheet of journal paper. Keep this sheet for future reference. Inventories, January 31, 19 Merchandise : 20 T. Grate Coal at $7.10 $142. 30 T. Stove Coal at $7.25 217.50 18 T. Nut Coal at $7.20 129.60 30 T. Hay at $12.50 875. $864.10 Office Furniture : Typewriter, at cost $50 Office Desk, at cost 25 $75 Office Supplies : Unused supplies $5 NOTE. The student may verify the merchandise inventory. Closing the Set. Open accounts in the ledger, four accounts on each page, in the following order: Cash A. M. Beiiton, Prop. Notes Receivable Profit and Loss *ii I IIITIH i Fin i j_ii i Mi Sundry Expense Inventory 2 A. M. Paterson Merchandise Sales .^ Charles M. Gray Merchandise Purchases James W. Traver Rent Paid Merchandise Inventory 2 Office Supplies , Office Furniture Salaries Lane & Son Henry A. Stevens NOTE. The accounts are opened in this order to facilitate the making of the statements. After posting, foot the accounts having more than one item, in pencil, making very small figures. Take a trial balance of the ledger, omitting all accounts that balance : record it in Blank No. 1, on the page indicated by the index. 1 Accounts Receivable are the personal accounts that show the amounts owed to the business. Do not write Accounts Receivable in the ledger. These are the personal accounts in which the debit side is the larger. 2 These accounts will be used when the ledger is closed. Sundry Expense Inventory ap- plies to all expense accounts in which inventories are found, at the end of a given period. 8 Accounts Payable are the personal accounts that show the amounts owed by the business. Do not write Accounts Payaljle in the ledger. These are the personal accounts in which the credit side is the larger. The Proprietor'' s account is not included. 64 PRINCIPLES OF BOOKKEEPING Make the profit and loss statement showing the net profit. Make the balance sheet or financial statement showing the present worth, or proprietary interest. Record the statements in Blank No. 1; on the page indicated by the index. Make the necessary journal entries and postings to close the ledger. Balance the Cash account. Take a trial balance of the ledger. Present all books to the instructor for approval. Exercise 28. Review For Written Work I. JOURNALIZING Journalize orally or in writing each of the following transactions, and state the reason for each debit and each credit named: 1. Student begins business with the following investment : cash, $1500; merchandise, $1350. When several asset items represent the Proprietor's investment, each item is debited under its appropriate name, and the Proprietor is credited for the total. The following is the correct entry for problem 1 : Cash Mdse. Inventory Student, Prop. Investment at the beginning of business. 1500 1350 2850 The above is a compound entry; it may consist of any of the following: several debits and one credit ; one debit and several credits ; several debits and several credits. A simple entry consists of one debit and one credit. i 2. Edward M. Burke began business with the following investment: cash, $650; merchandise, $1152; A. J. Wilson's note, $675. 3. Adam H. Ross began business with the following assets: cash, $625 ; merchandise, $1450 ; R. M. Herring's note, $375 ; coal on hand for use in heating the store, $42. 4. Lincoln & Son began business with the 'following assets: cash, $875 ; account against Robinson & Co., $285 ; merchandise, $1155 ; J. R,. Kent's note, $450 ; coal on hand for use in heating the store, $35. 5. Student begins business with the following assets : cash, $1100 ; merchandise, $1360 ; George Manning's note, $350 ; account against Price & Co., $235. SET I. KETAIL FUEL AND FEED BUSINESS 65 6. Gave Warren & Son your note at 30 da., to apply on account, $250. 7. Gave Martin V. Atkins your note at DO da., with interest, to apply on account, $375. No entry is made for the interest until the note is paid. 8. Received of Henry A. Cole his note at 20 da., with interest, to apply on account, $310. 9. Received of Lane & Lyman their note at 30 da., with interest, to apply on account, $215. 10. Received of Thomas & Co. cash for their note and the interest: face of the note, $400 ; interest, $12. The following is the correct entry for problem 10 : Cash Notes Receivable 400 Interest Earned 12 For the note of Thomas & Co. and the interest. When money is borrowed we pay for the use of it, and we debit Interest Paid for the sum paid ; when money is loaned by us we receive pay for the use of it, and we credit Interest Earned for the sum received. When the statement is made that we pat/ interest, we really mean that we pay cash for the interest, or for the use of money. 11. Paid your note and the interest in cash, in favor of James S. Manner: face of the note, $255; interest, The following is the correct entry for problem 11. Notes Payable Interest Paid 10 Cash Paid James S. Manner for my note and the interest. 12. Received of H. H. Marden cash, for his note, $212.50. 13. Received of Henry N. Monroe cash, for his note and the interest: face of the note, $300 ; interest, $3. 14. Paid your note and the interest in cash, in favor of Bronson & Co.: face of the note, $250; interest, $5. 15. Paid your note in favor of Jenkins & Son in cash, $400. 16. Received a check from A. D. Franklin for his note, $200. 17. Paid your note in favor of H. C. Pomeroy in cash, $125. 18. Received a check from Lewis & Son for their note and the interest: face of the note, $325; interest, $6.50. 66 PRINCIPLES OF BOOKKEEPING 19. Paid your note and the interest in cash, in favor of A. D. Matthews: face of the note, 225; interest, $9. 20. Gave M. A. Grant your note at 30 da., with interest, to apply on account, $425. 21. Received of David S. Malloy his note at 60 da., with interest, to apply on account, $385.20. II. STATEMENTS Directions. Make the statements from the following trial balances, observing these directions: 1. Office Furniture is an asset, and in these exercises should be taken at the values shown in the trial balances. 2. Interest Paid always shows a loss. 3. Interest Earned always shows a profit, 4. Date each statement Feb. 28, 19 . Cash Notes Receivable Mason & Ferris H. A. Barker Henry & Son Riggs & Co. Sanford & Co. John M. Grace Office Furniture Notes Payable J. K. Luce D. A. Ward Ames & Co. Charles S. Beard Kane & Co. Moore & Co. Student, Prop. Mdse. Sales Interest Earned Mdse. Purchases Salary Interest Paid Inventories, Feb. 28 : Merchandise Office Furniture 1. $2443. 347.50 400. 50.20 500. 210. 312.40 150.75 110. 1142.50 50. 13.50 $177. 108. 120. 43.60 147.25 123.75 109. 4500. 390.50 10.75 $5729.85 $5729.85 $943.25 110. SET I. RETAIL FUEL AND FEED BUSINESS 67 Cash Notes Receivable A. K. Williams Parson & Co. John S. Arden Office Furniture Notes Payable Race & Hunter S. A. Alden George M. Lee, Prop. H. K. Paine, Prop. Mdse. Sales Interest Earned Mdse. Purchases Office Supplies Salary Interest Paid Inventories, Feb, 28 : Merchandise Office Furniture Office Supplies $1143.35 405. 133.40 175.80 341.15 100. 2053.70 17.50 30. 7.15 $100. 143.25 65.20 1250. 1250. 1637.50 21.10 $4467.05 |4467.05 |701.20 100. 12. III. CLOSING THE LEDGER Directions, a. On a sheet of ledger paper copy the following accounts, allowing eight lines for each account : Student, PROPRIETOR 19 Jan. 1 2 2400 MERCHANDISE SALES 19 Jan. 11 2 414 35 19 3 231 40 24 4 142 29 5 341 25 68 PRINCIPLES OF BOOKKEEPING MERCHANDISE PURCHASES 19 Jan. 6 9 525 50 15 3 365 25 22 4 2!>7 10 26 5 25-2 40 SALARIES 19 Jan. 31 4 45 OFFICE SUPPLIED 19 Jan. 3 3 12 50 18 6 7 50 Inventories, Jan. 81 : Merchandise Office Supplies $621.45 11.20 II A. R. THOMAS, PROPRIETOR 19 Feb. 1 2 2250 MERCHANDISE SALES 19 Feb. 13 1 235 20 20 2 443 30 25 3 511 45 27 4 364 20 SET I. RETAIL FUEL AND FEED BUSINESS 69 INTEREST EARNED l ly Feb. 10 7 10 20 25 8 9 45 MERCHANDISE PURCHASES 19 Feb. 10 1 312 55 17 2 641 05 23 3 704 65 26 4 140 SALARIES 19 Feb. 15 3 30 28 4 50 INTEREST PAID 19 Feb. 11 2 7 70 23 3 11 25 Inventory, Feb. 28 : Merchandise >72.10 b. Open the following accounts: Profit and Loss and Merchandise Inventory. c. Make the necessary entries and postings to close the above ledger. 1 The closing journal entry for accounts which show profits, other than on the mer- chandise sold, may be illustrated from an Interest Earned account which shows a credit of f 5. The following entry would be made to close this account into the Profit and Loss account : Interest Earned Profit and Loss To close the Interest Earned account into the Profit and Loss account. What entry should be made to close the Interest Paid account ? 70 PRINCIPLES OF BOOKKEEPING Exercise 29. Bookkeeping Problems SUGGESTION. The following problems may be used either for oral or for written work ; they also offer material for profitable discussion. 1. In Set B, verify the inventory wliicli is given on page 26. How may one determine the value of the inventory ? 2. On page 28 is a ledger account with M. M. Pond. Study this account and then answer the question, Was this account opened with Mr. Pond as a debtor or as a creditor ? 3. On page 28 is a ledger account with D. A. Zook. Study this account and then answer the question, Was this account opened with Mr. Zook as a debtor or as a creditor? 4. On page 35 there are four trial balances. State what each debit amount stands for and what each credit amount stands for. 5. Give the reason for each debit and each credit in the transac- tions on page 54, Set D. Name the proper explanation for each entry. 6. Turn to your written ledger for Set I and quickly name the persons or firms of whom the proprietor bought goods, and the persons or firms to whom he sold goods. 7. In your ledger for Set I, name the following, relating to personal accounts : a. The names of the accounts on which the business owes something. b. The names of the accounts on which something is owed to the business. c. The names of the accounts that have been paid in full. d. The names of the accounts on which something has been paid on account. e. The names of the accounts on which something has been received on account. 8. On page 65, state, in each transaction, when the word interest is used, whether it means interest paid or interest earned. 9. Give the name of the note on which interest is paid ; the name of the note on which interest is received. 10. On pages 66 and 67 there are trial balances. State what each debit amount stands for and what each credit amount stands for. CHAPTER 111 INTRODUCTION OF THE CASHBOOK In all the preceding work, in this text, it 1ms been seen that every transaction of a business may be first recorded in a book called the journal. The journal entry is undoubtedly the clearest und the most definite form of expressing the debits and the credits of business transactions ; for this reason all the preceding work has been journalized. In business it is more convenient, simple, and effective to classify the transactions as they occur; this is effected by using one or more books in addition to the journal. In the next set the cashbook will be introduced, a model of which is given on pages 72 and 73. The cashbook contains a record of all the receipts and the payments of cash in a given business. It is the detailed Cash account of the business. The left-hand page contains a record of all the cash debits, the receipts, the names of the accounts to be credited, and a brief explana- tory statement. The right-hand page contains a record of all the cash credits, the pay- ments, the names of the accounts to be .debited, and a brief explanatory statement. The difference between the two sides of the cashbook should show the amount, balance, of cash on hand. In the next set all cash items will be entered in the cashbook, all the other transactions will be journalized as usual. Both the cashbook and the journal will be used as books of original entry. On pages 72 and 73 is a script cashbook ; the entries are from transactions similar to those in Exercise 30. Turn to these pages and note the cashbook entries. As a preliminary drill it will be found helpful to study the journalizing of each cash transaction that -has been entered in the script cashbook, as shown on page 72. Cashbook entries, like journal entries, are all classified debits and credits. 71 72 PBINCIPLES OF BOOKKEEPING If the cash receipts, from the model cashbook, and the cash payments were put in journal form, there would be two compound journal entries as follows : Cash Student A. D. Marks Anna Carr T. M. Kellar C. D. Acres $1758.20 Rent Paid $22.50 $1400. II. C. Beard 321. 112.40 Fuel 36. 18.50 Office Supplies 10.20 117.30 Salary 15. 110. Boone & Co. 170. Lake & Co. 130. Cash $704.70 The first record of a business transaction reveals the debit and the credit, no matter in what book the transaction may be recorded. Exercise 30. The Cashbook For Written Work Opening the Cashbook. Observe the following directions: 1. Use a double sheet of journal paper, four pages ; make the entries on pages 2 and 3. 2. This work is not to be recorded in the bound blank books. 3. Student is represented as the proprietor. Below is given a script cashbook, complete in every detail. ' Refer to this model in recording the transactions on opposite page. 3t / '4-0 O / / 2. /

/i SET II. WHOLESALE CAKPKT P.l'SINESS 77 * Feb. 11. Received of Ernest B. Jackson cash for his note and interest due to-day: face of note, $300; interest, 50. (> in cash. Enter the amount of the note in the journal, and enter to the proper account in the . r* cashbook the difference between the amount of the note and the invoice of Feb. 6. >r\ g ' 13. Sold George S. Rollins, City, for cash : 100 yd. Brussels _100 yd. Linoleum Enter this sale in the journal; also4n the casHboofejiaderX-rew*^ Stdlollins. ' 15. Bought of A. R. Prescott & Co., New York, on account, invoice of carpets amounting to $172.50. ^p 16. Sold'W. F. Pratt, Springiield, on account: 40yd. Ingrain 65yd. Brussels 100 yd. Axminster 20. The First National Bank presented for payment the note in favor of A. R. Prescott & Co., due to-day. Paid the note and interest in cash: face of the note, $612.95; interest, $1.02; total, $013.97. There are two entries in the cashbook. What names are to be used? ^ $0. Sold John A. Newton, City, for cash : 70 yd. Wilton ^S*. ^ * 22. Received of W. F. Pratt cash for his note and interest due to-day: face of the note, $250; interest, 420; total, $250.42. . N| 22. Bought of C. W. Allen & Co., City, for cash, an invoice of carpets amounting to $410.50. . Tnt.pr in the journal and in ihe-sfeJ&t>ok. 23. Received the following check, to apply on account : No. traders Rational {F}ank 'Pay to the order ofJuL 78 PRINCIPLES OF BOOKKEEPING Under what name is this check entered ? As checks are used so commonly in business, a careful study of this form is commended. Feb. 25. Sold John W. King, City, the following (received cash, $65 ; balance on account) : . lf _ v ^ 3 7, SCO 50 yd. Ingrain 40 yd. Axminster Enter the whole invoice in the journal ; under Cash Received, in the cashbook, enter the $65/\nnder John W. King. > 26. Received of John W. King his note at 30 da., with interest at , for the amount of the invoice of F<>1>. 9. 26. Remitted to W. B. Mason & Co. a note at 30 da., with interest at 6%, in full for the invoice of Feb. 4. 27. Sold Lewis & Parsons, City, for cash: 200 yd. Ingrain 50 yd. Linoleum 100 yd. Oilcloth 27. Paid Student, for services to date, $40 ; paid A. M. Olcott, for services to date, $30. 27. The Proprietor takes cash from the business for his monthly salary, $125. Balancing the Cashbook. Balance the cashbook according to the script model on pages 72 and 73. Pass all work to the instructor for approval. All work is to be recorded in the blank books on the pages indicated for Set II, in Blank No. 1. Inventories. The following inventories are to be used in this set: Inventories, February 28, 19 Merchandise : Per schedule prepared by Denison $2214.92 Office Furniture 200. Closing the Set. Open accounts in the ledger, four accounts on each page, in the following order, beginning on the page indicated by the index : NOTE. On page 63 a note states that the order of accounts to be followed in open- ing the ledger was so arranged as to facilitate the making of the statements. It should be noticed that each of the various groups of accounts follow in order, and if they are properly entered, it is unnecessary to turn all the pages of the ledger in order to know that all the accounts of a group have been included in the appropriate statement. SET II. WHOLESALE CAKPET P.USINESS 79 Cash Accounts Payable ' Notes Receivable A. K. Pn-scott & Co. Accounts Receivable 1 W. Jl. Mason & Co. W. F. Pratt . I C. W. Allen & Co. John W. King James R. Denison. Prop. M. F. Newbury Profit and Loss 1 James R. Holoomb ' ' Merchandise Sales I George S. Rollins Interest Earned | John A. Newton Merchandise Purchases |Lewis & Parsons Rent Paid Merchandise Inventory < >ftice Supplies Office Furniture Fuel Notes Payable Salaries Interest Paid Foot the accounts in pencil. Take a trial balance; omit all accounts that balance. After approval, record it in Blank No. 1, on the page indicated by the index. Make the profit and loss statement showing the net profit. Make the balance sheet or financial statement showing the present worth, or proprietary interest. Record the statements in Blank No. 1, on the page indicated by the index. Make the necessary entries and postings to close the ledger. In this set there is a merchandise inventory at the beginning, $2595.50, and it is necessary to transfer this amount to the Merchandise 1'urcha.ies account before the other closing journal entries are made. The Merchandise Inventory account, as here given, represents the merchandise that was purchased and on hand before the business of the month of February was undertaken; hence it must be transferred to the Men-kamline Purchases account in order that that account may show all the merchandise for the month from which the sales were made, otherwise the correct profit on the merchandise sold could not be found when the books were closed. The following is the entry : Merchandise Purchases 12.V.I5 50 Merchandise Inventory To transfer the inventory of Feb. 1 to the Merchandise Purchases account. After posting the entry, rule the Merchandise Ini-entory account. Balance the Cash account. Take a trial balance of your ledger. Present all books to the instructor for approval. 1 Remember, do not write Accounts Receivable nor Account* Payable in your ledger. 80 PRINCIPLES OF BOOKKEEPING Exercise 31. Review For Written Work I STATEMENTS Make the statements from the following trial balances. Date each state- ment March 31, 19 . 1. Cash Notes Receivable James A. Hardin Martin & Son Mdse. Inventory Notes Payable Frederic & Co. Lyman A. Grant Student, Prop. Mdse. Sales Interest Earned Mdse. Purchases Salaries Interest Paid Inventory, March 31 : Merchandise Cash Henry Johnson Henry T. James Mdse. Inventory Office Furniture Notes Payable H. H. Weston H. M. Reed Morris & Son Geo. S. Masten, Prop. Mdse. Sales Interest Earned Mdse. Purchases Salary Interest Paid Inventories, March 31 : Merchandise Office Furniture $661.75 125. 365. 235.20 920. $325. 286.50 67.40 2450. 1827.40 13.75 2554.75 100. 2. $4970.05 $4970.05 |1926.50 $1364.35 238.20 107.75 1000. 135. $411.45 320. - 298.40 205. 2250. 2400.60 13.50 2975.50 50. 28.15 $5898.95 $5898.95 $1826.50 135. SET II. WHOLESALE CARPET BUSINESS II. CLOSING THE LEDGER 81 Directions. On a sheet of ledger paper copy the following accounts, allowing eight lines for each account : I Student, PROPRIETOR 19 Mar. 1 1 2500 MERCHANDISE SALES 19 Mar. 9 1 582 20 1(3 2 359 40 2:5 4 157 80 29 4 108 25 INTEREST EARNED 19 Mar. 17 6 10 30 24 6 5 85 MERCHANDISE PURCHASES 19 Mar. 4 1 347 65 13 2 247 80 19 2 475 10 26 3 512 OFFICE SUPPLIES 19 Mar. 3 3 12 45 15 4 8 75 30 5 6 40 82 PRINCIPLES OF BOOKKEEPING RENT PAID Mar. 45 SALARIES INTEREST PAID Inventories, March 31 : Merchandise Office Supplies 19 Mar. 15 4 37 50 31 5 37 50 19 Mar. 12 4 7 15 22 5 8 20 $694.60 15.40 a. Open the following accounts : Profit and Loss, Merchandise Inven- tory, and Sundry Expense Inventory, b. Make the necessary entries and postings to close the above ledger. II MERCHANDISE INVENTORY 19 Apr. 1 1 856 40 SET II. WHOLESALE CA11PET BUSINESS 83 JAMES H..CONAVAY, PROPRIETOR 19 Apr. 1 1 a 150 MERCHANDISE SALES 19 Apr. 9 3 978 45 13 4 671 50 22 4 572 00 20 5 110 25 INTEREST EARNED 19 Apr. 17 4 9 GO 25 5 16 25 MERCHANDISE PURCHASES 19 Apr. 4 3 758 30 11 4 862 55 17 5 265 75 24 5 488 30 OFFICE SUPPLIES 19 Apr. 10 3 15 35 24 5 9 85 84 PRINCIPLES OF BOOKKEEPING RENT PAID 19 Apr. 3 4 42 SALARIES 19 Apr. 15 ;; 32 50 30 I 32 50 INTEREST PAID 19 Apr. 12 3 10 70 15 3 8 75 23 4 3 60 Inventories, April 30 : Merchandise Office Supplies $1120.70 9.50 a. Open the following accounts : Profit and Loss and Sundry Expense Inventory. b. Make the necessary entries and postings to close the above ledger. III. JOURNALIZING Journalize orally or in writing each of the following transactions, and state the reason for each debit and each credit named. 1. You began business by investing cash, $1275; merchandise, $925; real estate, $1800. 2. Richard J. Dobbin began business with the following assets : merchandise, $865 ; cash, $775 ; account against Geo. S. Hanoly, $235 : Leon H. Parker's note, $450 ; real estate, $825. 3. Henry L. Thomas gave you his note at 60 da., with interest, to apply on account, $400. SET II. WHOLESALE CAKPET BUSINESS 85 4. You gave W. H. Acker your note at 30 da., with interest, to apply 011 account, $250. 5. Bought merchandise of Gross & Co. amounting to $720. Gave them cash for one half the invoice ; balance! on account. 6. Sold James S. Marble merchandise amounting to $550. Received his check for one half the invoice; balance on account. 7. Paid your note in favor of Markham & Co. in cash, $325. 8. Received a check from Henry A. Nolan for his note, $100. 9. You gave Canton & Co. cash for your note and the interest : face of the note, $245; interest, $4.90. 10. Received a check from J. K. Allis for his note and the interest: face of the note, $515; interest, $10.30. 11. You, the proprietor, take cash from the business, to apply on your monthly salary, $60. 12. Borrowed from the First National Bank cash, $200 ; gave them your note at 30 da. 13. Loaned David R. Best cash, $160, and received his note at 60 da. 14. Paid Harding & Baker cash, for the interest on your note, $15. 15. Received of John S. Durkin cash, for the interest on his note, $20. CHAPTER V ADDITIONAL BOOKS USED The student has already used the journal and the cashbook in which entries were first made, and then postings have been made to the ledger. In subsequent sets the purchase book and the sales book are to be used as books of original entry ; that is, books in which entries are first made. Purchase Book. The purchase book contains, usually, an abstract of all bills of merchandise bought. At regular intervals the book is footed, ruled, and posted. The script purchase book is illustrated on page 89. Sales Book. The sales book contains a record of all sales on account, and usually of all cash sales, except small retail sales for which no bills are rendered. In this text all sales are entered in the sales book. The records consist of the names and the addresses of the purchasers, the terms, the items, the prices, and the amounts of goods sold. At regular intervals the book is footed, ruled, and posted. The script sales book is illustrated on pages 90 and 91. When the cashbook, the purchase book, and the sales book are used, only such transactions as do not affect these books are entered in the journal. It will be found helpful, as a preliminary drill, to journalize each purchase or each sale on the blackboard, and then note the corresponding entry in the purchase book or the sales book. ILLUSTRATION. All the entries in the purchase book might be written as a com- pound journal entry, as follows : Mdse. Purchases John Adams TVm. A. Smith D. S. Jones Asa M. Martin 600 120 180 200 100 ILLUSTRATION. All entries in the sales book might be written as a compound journal entry, as follows : R. H. Downey Leon J. King Benj. L. Ransom * Mdse. Sales 150 125 75 350 86 ADDITIONAL BOOKS USED 87 The receipts and the payments of cash, the purchases, and the sales constitute the leading entries and records in bookkeeping, and the keep- ing of separate books for each results in these advantages : 1. Information is more readily obtained if the cash, the purchases, and the sales are each grouped in separate books. 2. The balance of cash may be readily found at any time. 3. The individual and collective purchases may be referred to at once, for all the purchases are in one book. 4. The individual and collective sales may be referred to at once, for all the sales are in one book. 5. Much time is saved in posting, as the totals of cash, of purchases, and of sales are posted to the ledger. SET E. FLOUR AXD GRAIX MODEL SET On pages 89-93 is a model set in script, in which the journal, the cashbook, the purchase book, and the sales book have been used, and posted to the ledger. This set was written from the following Memoranda of Transactions, but different prices were used in some instances. Opening the Set. Write the set from the Memoranda of Transactions following. If necessary, be guided by reference to the mochl script set. 1. Use a double sheet of journal paper (four pages) and a sheet of ledger paper (two pages). 2. On the upper half of page 1 of the journal sheet write the journal, and on the lower half, the purchase book : on pages 2 and 3. the cashbook; on page 4, the sales book. On the unused portion of page 3 write the trial, balance. 3. This set is not to be recorded in the bound blank books. 4. The entries will be the same as in the script models, but the amounts will differ in some of the transactions. 5. A. B. Coates is represented as the proprietor. MEMORANDA OF TRANSACTIONS March 1. A. B. Coates, 728 Market St., Chicago, 111., began the Graia. "and Produce business, investing cash, SloOO. Make a memorandum in tla.e journal, but the entry for the cash invested is to be made in the cashbook. 1. Paid H. C. Inman cash, for rent of the store for March, 75. 1. Paid Resor & Co. cash, for office books and supplies, 812.50. 88 PRINCIPLES OF BOOKKEEPING March 2. Bought of Rowen & Co., Minneapolis, on account, 30 da. : 400 bbl. Flour at 5.20 3. Bought of Wesley & Son, City, for cash : 600 bu. Wheat at 81 4. Bought of Rising & Co., for cash, 4 T. coal, for heating the store, at $6.40. 5. Sold E. M. Ferris, Buffalo, on account, 20 da. : 150 bbl. Flour at $6.50 150 bu. Wheat at $1.25 9. Bought of Rowen & Co., Minneapolis, on account, 30 da. : 800 bu. Oats at 48 2X? The Invoice. The following model shows how an invoice should be made out. The terms are on account, 60 da., therefore it is not receipted. In this invoice who is the buyer ? the seller ? What is meant by terms 60 da. ? * Note that the dollar sign is not used in writing either the prices or the extensions. Filing Invoices. For convenience in handling, invoices may be folded lengthwise with the printed matter outward. INTRODUCTION TO BUSINESS PRACTICE 103 The manner of folding the invoice is not imperative. The invoice may be folded lengthwise, the printed matter within ; on the left end write the name of the seller, the amount in. figures, and the date. After the invoices are folded a rubber band may be placed around them, and then they are in a convenient form for handling. The filing should be in the order of the dates. These suggestions are simply for the students in the classroom. The Promissory Note. Study all the details of this model note : I after date^-^Lpromise to pay to aL Value received Promissory notes are of two kinds : notes that we give, Notes Payable ; notes that we receive, Notes Receivable. They are always in writing, a written promise to pay money. They are usually given or received on account, or when money is borrowed or loaned. The giving or the receiving of a note, for a personal account, is merely the substitution of a written promise for an oral promise. The holder of a note may sell it to a bank, and thus secure cash to use in his business. If a note is sold before maturity, a reduction, called discount, is usually made. If a note is to bear interest, it must be so stated in the note. Exercise 33. Business Forms for Written Work I. RECEIPTS Write the folloiving receipts on slips of paper properly ruled : 1. S. T. Wade owes you $56.75, and pays the whole amount. The receipt bears these words: in full of account. 2. R. O. Warner owes you f 120. 50, and pays you $75. The receipt bears these words : to apply on account. 104 PKINCIPLES OF BOOKKEEPING 3. You owe John Wheeler $102.50, and pay it all. 4. You owe J. H. Leaman $62.50, and pay him $35. 5. You pay J. K. Lamson, in full, the account at the bottom of page 23. II INVOICES Rule two sheets of paper according to the model, and write the following invoices : 1. Set I, page 60, under the dates of Jan. 4 and 6. 2. Set II, page 76, under the dates of Feb. 6 and 9. Ill PROMISSOKY NOTES Write the following notes on slips of paper, using the current date : 1. Gave Henry A. Morton your note, at 60 da., with interest, payable at the First National Bank, $250. 2. Received of Henry S. Mercer his note, at 30 da., payable at The Union Bank, $128.50. 3. Gave Wilson & Brown your note, at 2 mo., payable at your office, $175.20. 4. Received of A. D. Rose & Son their note, at 1 mo., with interest, payable at their office, $200. DAILY CASH PROOF Date Daily Cash Proof. In the follow- ing sets the student will use repre- sentative money in carrying out his business transactions. At the close of each day's business cash should be proved. How to prove cash: 1. The left side of the cashbook shows all cash received. 2. The right side of the cashbook .shows all cash paid out. 3. The difference shows the amount of cash the business has on hand. MODEL FOR DAZLY CASH PROOF 4 The 8Um f *J m the CaSh drawer added to the amount on deposit in the bank should equal the difference shown by the cashbook. 5. If no bank account is kept, the cash in the drawer should equal the difference shown by the cashbook. Cash received per cashbook, total <5~7 (> O Cash paid per cashbook, total /J* O ff.~ Balance per cashbook Cash on hand per cash drawer Cash in bank per check book _ Total INTRODUCTION TO BUSINESS PRACTICE 105 6. If all money is in the bank, the true bank balance should equal the balance shown by the cashbook less any checks that may be outstanding. It is suggested that the form of proof shown in the illustration on page 104 be used. To find Errors in the Trial Balance. If the debit and the credit items are not equal (that is, do not balance), observe the following suggestions in tracing the error: 1. Go over all additions, both in the trial balance and in the ledger. 2. Find the exact amount of the error ; if ten or some power of ten, the error is usually in addition. 3. If the amount of the error is exactly the same as some amount in a book of original entry, the error is likely to be with that amount. 4. Divide the amount of the error in the trial balance by 2, and look for an amount corresponding to this result. If a debit item has been posted to the credit, it will cause an error equal to twice the amount of the item thus posted. 5. If the amount of the error is divisible by 9, the error is probably the result of the transposition of figures. 6. If necessary, recheck the posting to determine if that work was done correctly. (This manner of rechecking is described on page 23.) Rechecking involves a great deal of extra work ; it should be under- taken only as a last expedient. A trial balance that balances is not absolute proof that the ledger is correct. If a credit of Notes Receivable were posted to the credit of Cttxh, it would not affect the trial balance. CHAPTER VII SET HI. GRAIN AND SEED BUSINESS PRELIMINARY EXPLANATIONS The object of this set is to give systematic drill in elementary business practice. Student is represented as the proprietor. Business forms are used, and all transactions in cash admit the handling of currency. An account is kept with the bank ; deposits are made and checks are drawn. This set covers a period of two months, March and April, the books being closed at the end of each month. The books used in this set are the journal, the cashbook, the sales book, the purchase book, the statement book, and the ledger. All business forms handled are either incoming papers or outgoing papers. Incoming papers are those received from others ; outgoing papers are those given to others. Incoming papers will be received and recorded by the student as in business, and he will issue and record all outgoing papers as in business. Selling Price Lists. Different selling price lists may be used if desired. Twenty-five selling price lists are provided for tlu's set (see below). When the instructor gives the student the necessary blank forms, he should assign him a price list. Any one of the selling price lists may be used in connection with the buying price list. In the box of business forms a card containing the selling price lists may be found. SELLING PRICE LISTS 1 2 3 4 5 6 7 8 9 10 11 Barley .... 1. 1.05 1.08 1.10 1.04 1.02 1.07 1.09 1.10 1.12 1.08 Clover Seed . . 8.80 9. 8.75 8.80 8.90 8.95 9.02 9.10 9.05 8.85 8.95 Dwarf Beans 8. 8.25 8.10 8.20 8.05 8.30 8.35 8.40 8.45 8.10 8.13 Field Corn . . .75 .74 .76 .80 .84 .79 .81 .83 .82 .80 .78 Garden Corn 3.80 3.85 3.00 3.95 3.75 3.82 3.86 3.98 4. 3.82 3.92 Oats .... .58 .60 .59 .61 .63 .62 .65 .66 .60 .57 .64 Rve. 1 30 140 1 35 1 9 8 1 31 1 33 1 34 1 40 1 37 1 26 1 33 Timothy Seed . 3.40 3.45 3.50 3.35 3.42 3.47 3.35 3.38 3.40 3.36 3.42 Wheat. . . . 1.30 1.28 1.25 1.32 1.35 1.27 1.29 1.33 1.31 1.26 1.34 106 SET III. GRAIN AND SEED BUSINESS 107 Buying Price List. In Set III all merchandise is to be bought at the following prices per bushel : BUYING PRICE LIST Barley Clover Seed Dwarf Beans Field Corn Garden Corn 750 |6 |6 (!()(/; $3 Oats Rye Timothy Seed Wheat . 48< AI fl $2.50 $1 Blank Business Forms. Ask the instructor for "Blank Business Forms, Box No. 1," before proceeding to write Set III. WORK FOR MARCH Incoming Business Forms for March. These incoming forms are included in the text for the following reasons : 1. All material in any given set is included in the text proper, in order that the textbook may be complete in itself. 2. The student is able to make a study of the work of the set before attempting to write it; this is especially important. 8. By having all matter included in the text, extended and varied reviews are made possible. A tablet, separate from the text, containing all the incoming business forms shown in the list on the following page is available for use with this set when business practice is used. 1 All incoming checks are drawn on Traders National Bank. 1 See under Opening the Set, para FOR MARCH AND APRIL ;e 100. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1.09 1.05 1.11 1.10 1.04 1.08 1.06 1.09 1.07 1.10 1.05 1.09 1.10 l.(H 8.98 8.80 9.05 9.12 8.93 8.86 8.85 8.92 8.91 8.80 8.88 9.04 8.79 9. 8.22 8.21 8.11 8.24 8.27 8.32 8.35 8.25 8.02 8. 8.15 8.20 8.25 8.30 .75 .77 .84 .85 .82 .79 .83 .81 .78 .83 .80 .79 .7-"> 3.95 .78 3.95 3.90 3.88 3.76 3.85 3.88 4. 3.95 3.97 3.80 3.85 3.90 3.92 .60 .57 .59 .63 .66 .61 .65 .62 .68 .58 .62 .66 .63 .61 1.32 1.25 1.29 1.30 1.38 1.34 1.30 1.29 1.28 1.25 1.30 1.35 1.2S 1.32 3.50 3.45 3.33 3.37 3.41 3.44 3.33 3.39 3.34 3.35 3.40 3.45 3.50 3.52 1.28 1.30 1.31 1.32 1.35 1.27 1.34 1.33 1.35 1.25 1.30 1.32 1.36 1.29 108 PRINCIPLES OF BOOKKEEPING If business practice is not used, the tablet of incoming forms and the box of blank business forms will not be needed. Form 1. Invoice of E. C. Ferry, City, March 2. Terms : cash. 50 bu. Clover Seed 100 bu. Field Corn 100 bu. Oats Form 2. Invoice of S. D. Welch, City, March 5. Terms : on account. f rf"*/o journal entry. Make the proper entry in the cashbook. Receive the currency from the instructor and put it in the Business Cash envelope. _?. You have entered into an agreement with Amos Graves for the rental of his store, 120 Main St., at $35 per month. iJtlV;"*; r Y i s required. A memorandum of this agreement may be made and filed the incoming papers. .Buy of E. C. Ferry, City, for cash, merchandise as per the following invoice, Form 1. I'D* / /oo LGJL ^ .^ o o \\ 110 PRINCIPLES OF BOOKKEEPING Remove this invoice from the tablet of incoming papers. Xote the extensions and the addition. In business the goods received are compared with the invoice, and if found to be correct, check marks are placed at the li-ft, as shown iu the script illustration on page 109 ; then the extensions and the addition are verified and checked as shown at the right. Verify the- extensions and the addition. Make the proper entries in the cashbook and the purchase book. In the purchase book, write the name, the address, the terms, and the amount on one line. Pay for the invoice. In the box of business forms there is a filing envelope for invoices of merchan- dise purchased. Place the invoice in this envelope. If business practice is not used, fold the invoice once lengthwise, face outward, and place it in the Paid Bills envelope. March 3. Sell John Williams, City, for j^agh, at the prices given herewith : 20 bu. Clover Seed at f 8 50 bu. Field Corn at 75 40 bu. Oats at 600 Make out an invoice and receipt it. If correct in every detail, record it in the sales book and the cashbook. Do not put any check marks on any bill of goods that you sell. Receive the cash and place it in the Business Cash envelope. Pass the bill to the office, or dispose of it according to directions received. Take great pains in counting all cash. 4. Deposit in The Union Bank cash, $1800. Read pages 96-98 for instructions. Make out a deposit ticket. Record the amount in the check book. Place the currency and the deposit ticket in the pass book and hand it to the bank. 5. Buy of S. D. Welch, City, on account, merchandise as per invoice, Form l?^ Remove the invoice from the tablet. Check the extensions and the footing. Record it in the purchase book. File this invoice in the proper envelope. Do not receipt this invoice. Why? 6. Sell John Wells, City, on account: 5 bu. Dwarf Beans 20 bu. Garden Corn 50 bu. Barley AA r rite the invoice, but do not receipt it. Why ? Use the selling prices of the list assigned to you. Record in the sales book. Refer to the model, page 90. Dispose of the invoice according to directions received. 7. Pay Amos Graves cash, for rent of the store for March, $35, Form 3. Remove this receipt. Make the entry in the cashbook. Pay the money. Place the receipt in the Paid Bills envelope. \1 SET III. GHAIN AND SEED BUSINESS 111 *? "" March 8. Pay David Ross cash, for ot'lice books and stationery, $12.50, Form 4. Examine and check the bill. If correct, pay it. Make the entry in the cashbook Fold the bill and file it in the Paid Bills envelope. . 9. Give S. D. ^Wgjch your check, to apply 011 account, $ 200. Fill out the stub in the check book, Xo. 1. (See model script check book, page 99.) Write the check and detach it. Make the entry in the cashbook. . A receipt need not be taken when an amount is paid by check, as the canceled check will be returned as a receipt. However, a receipt may be taken if desired. In the package of business forms there is a sheet for keeping a record of your dealings with the bank for one month. If the checks are passed to an office, this sheet should lie left at the office. The form and the use of this sheet are illustrated and explained on page 100. Place the student's name on the sheet. As checks are received they may be recorded thereon. \If the checks are kept by the student at his desk, he may keep the sheet and do this work himself. At the end of the month the sheet and the checks will be -^placed in the bank envelope. . Buy of Henry Bruce, City, on account, merchandise as per invoice, Form 5. Remove this invoice from the tablet. Examine and check as previously instructed. ter in the purchase book. File the invoice. . Pay the bill of I. N. Moss in cash for 2 T. coal at $5.20, Form 6. Remove the bill from the tablet. Examine and check it. If correct, pay it. 12. Pay the bill of A. C. Webb, by check, for office safe, $75, Form 7. Debit Office Furniture. 3. Receive of John Wells cash, to apply on account, $100. Write a receipt in favor of John Wells and receive the currency. Make the cashbook entry. Place the money in the Business Cash envelope. \ \l ^14. ISuy of Haynes & Co., City, on account, merchandise as per invoice, Form 8. gamine and check the invoice, and then proceed as usual. Xj 15. Sell Boyd & Co., City, on account : 100 bu. Field Corn 50 bu. Eye 100 bu. Barley 10 bu. Dwarf Beans Write the invoice and record it in the sales book. 4 16. Deposit currency, $200. Make out the deposit ticket. Record it in the check book. Place the currency and the ticket in the pass book and hand it to the bank. 112 PRINCIPLES OF BOOKKEEPING March 17. Pay Henry Bruce by check, to apply on account, $112.50. Write the check and make the entry in the cashbook. How do you dispose of the check? 18. Sell Howard Young, City, on account, at the prices given herewith: 20 bu. Clover Seed at $8 10 bu. Timothy Seed at $3.40 'SJ 19. Sell Jesse Watson, City, on account, at the price given herewith : ' 200 bu. Wheat at $1.25 ?. Receive of Boyd & Co. their check, on account, $200, Form 9. Remove the check and enter it in the cashbook. Place the check in the Business Cask envelope. y^i . l***23. Pay Haynes & Co. by check, to apply on account, $500. /^^ 24. Buy of S. D. Welch, City, on account, merchandise as per invoice, Form 10. <& Examine and checVit. 25. Buy of Henry Bruce, City, on account, merchandise as per invoice, v Form 11. - >4 26. Sell John Wells, City, on account : 50 bu. Rye 150 bu. Wheat -i -\ 27. Give S. D. Welch your note at 15 da., to apply on account, $100. Write the note, payable at my office. The note which you write will be similar to the script form given below. The signature to this note will be the student's own name. Make the entry in the journal. Dispose of the note according to directions received. afle.r dote^zLpromise to pay to the order o/ " 'Dollar* ; 7 28. Sell Boyd & Co., City, on account: 100 bu. Wheat 10 bu. Clover Seed 5 bu. Dwarf Beans 10 bu. Garden Corn SET III. GRAIN AND SEED BUSINESS 113 March 29. Receive of Jesse Watson his note at 30 da., in full of account, Form 12. Remove the note from the tablet. Make the journal entry. Place the note in the Unpaid Bills envelope. 3 z&r Receive of John Wells his check, on account, 100, Form 13. Place the check in the Business Cash envelope. *~. .^r^ell Oscar Wilson, City, for cash, at the prices given herewith, giving in payment his check, .Form 14. 50 bu. Field Corn at 75 < 100 1m. Oats at 60 ^ 10 bu. Garden Corn at $3.80 150 bu. Rye at $1.30 Write the invoice and receipt it. Record it in the sales book and the cashbook. Remove the check and place it in the Business Cash envelope. . Student takes from the business for his monthly salary, $50. Take $50 in currency from the Business Cash envelope and place it in the envelope for Personal Cash. 31. Deposit the three checks and all the currency on hand. Take the currency and the checks from the Business Cash envelope ; count the currency and make out the deposit ticket. Indorse each check, as shown in the accompanying illustration. The full indorsement, shown in the accompanying illustration, is the one most commonly used in business, and some banks and the clearing houses insist that this form must be used. Th^ blank indorsement is simply the writing of one's name on the back of the paper. (See page 118.) Place the currency and the checks in the pass book and hand it to the bank. When the pass book is returned, examine it to see that all is entered correctly. \~ 31. Give Henry T. Dale, your clerk, a check for his salary, $30. Monthly Bank Statement. At this point the monthly bank statement should be made. Proceed as follows : Enter all deposits and all checks on the statement sheet. Refer to the model on page 100. Total both the deposits and the checks and find the balance. Place the checks and the statement sheet in the envelope. If the deposits and the checks have been passed to an office, these instructions should be followed by the one in charge of that work; if not, the student may make the statement himself. 114 PRINCIPLES OF BOOKKEEPING Total the deposits in the pass book, subtract the total checks, enter the balance, rule, and foot. Bring the balance down under April 1. Before closing the books hand them to the instructor for approval. Inventories. Record the following inventories on a sheet of journal paper, and file for future reference : Inventories, March 31, 19 Merchandise : , 15 bu - Barley * ? 60 bu. Oats z g 5 i x o. ^'^~ 40 bu. Dwarf Beans ^~~ 50 bu. Rye S~ < o^_ ^ 0/200 bu. Field Corn ^ 40 bu. Timothy Seed 7TI7?D 3r- 20 bu. Garden Corn / 50 bu. Wheat AT.^.T __ . / , 3 o ^ ce Supplies : Office Books $8. Office Supplies 2.75 $10.75 Office Furniture, at cost 75. Fuel: Coal on hand 6.40 Closing the Work for March. Close each of the following : the cash- book, the purchase book, and the sales book, liefer to pages 8991. Open accounts in the ledger, four accounts to the page, in the f ollowing order ; begin on the page indicated by the index : Cash Accounts Payable : l Notes Receivable E. C. Ferry Accounts Receivable : l S. D. Welch John Williams Henry Bruce John Wells Haynes & Co. Boyd & Co. C. V. Cronin Howard Young Smith & Bowers Jesse Watson 'Student, Prop. Oscar Wilson Profit and Loss P. H. Morse Sundry Expense Inventory F. G. Morgan Merchandise Sales Johnson & Pease Interest Earned Merchandise Inventory Merchandise Purchases Office Furniture Rent Paid Notes Payable Office Supplies Fuel Salaries Interest Paid NOTE. The Interest Earned account will not be used until April. 1 Do not open an account with Accounts Receivable nor Accounts Payable. SET III. GRAIX AND SEED BUSINESS 115 1. Post from the journal, writing rk 1. Use one sheet (two pages) of ledger paper. Refer to Exercise 35 ; open an account with the Proprietor and each proiit or loss account that is found in problem 1 , allow six lines for each account. Make the necessary entries and postings to close the ledger. The inventories are to be found just below the trial balance. 2. In Exercise 35, analyze each debit and each credit in trial balances 1 and 2. 3. Each student is to use his own ledger for the month of March, in the following exercises : a. Analyze each open ledger account. b. Analyze each profit or loss account before it was closed. c. Analyze each profit or loss account after it was closed. 4. Each student is to use his own cashbook for the month of March, in answering the following: a. Tell why each name under Cash Received represents a credit. b. Why is the total cash received a debit ? c. Tell why each name under Cash Paid represents a debit. d. Why is the total cash paid a credit ? 5. Give the journal entry for each entry under Cash Jlecr'tved. 6. Give the journal entry for each entry under Cash ]*! 50 bu. Garden Corn >.*"*=+* 100 bu. Barlev Form 16. Invoice of S. D. Welch, City, April 9. Terms'? 'on account. <* 200 bu. Field Corn A 100 bu. Rye * & t '**>. f. 200 bu. Wheat Form 17. Invoice of C. V. Cronin, City, April 11. Terms : cash. Z 6 50 bu. Timothy Seed - * Form 18. Note of Boyd & Co., City, for $100, in your favor, at 10 da., April 14. Form 19. Check of Howard Young, City, for $193, in your favor, April "15. Form 20. Check of Boyd & Co., City, for $165, in your favor, April 2.S. Form 21. Check of Boyd & Co., City, for $100, in your favor, April 24. Form 22. Invoice of Smith & Bowers, City, April 25. Terms : cash. /^. &-~ - 20 bu. Dwarf Beans 200 bu. Field Corn ^ / /, ^o O- - 50 bu. Garden Corn >^ Form 23. Check of Jesse Watson, City, for $175, in your favor, April 27. Form 24. Check of Jesse Watson, City, for $251.25, in your favor. April 28. Form 25. Check of Howard Young, City, for $125, in your favor, April 29. Opening the Work for April. The following general directions should be observed: 1. Use the same price list, the same books, etc., as in March. 2. Begin a new page in the journal. In the sales book, leave a space of three lines, then write the first sale in April under the last sale in March. 121 122 PRINCIPLES OF BOOKKEEPING 3. The balance brought down from the cash account, under April 1, is to be reckoned with the cash receipts in April. Use a new sheet for the bank account. Record the balance at the head of the deposit column. MEMORANDA OF TRANSACTIONS FOR APRIL April 1. Give Amos Graves your check for the rent of the store for April, $35. 1. Give Henry Bruce your check in full of account. ' Turn to Henry Bruce's account in the ledger and find the balance of his account ; write the check for this amount. 3. Receive of Howard Young cash in full of account. Turn to Howard Young's account in the ledger and verify the balance. Write the receipt and get the money. Enter it in the cashbook. Cj? 6. jBuv^ of Henry Bruce, City, on account, merchandise as per invoice, Form 15. 7. Sell Howard Young, City, on account, at the prices given herewith : 1 C. 100 bu. Field Corn at 750 50 bu. Barley at $1 J . * o a 20 bu. Timothy Seed at $3.40 9. Give S. D. Welch your check, to apply on account, for $200. 9. Buy of S. D. Welch, City, on account, merchandise as per invoice, Form 16. 10. Sell Boyd & Co., Cit^, on account: 30 bu. Garden Corn' ' V 20 bu. Clover Seed 100 bu. Oats 11. Buy of C. V. Cronin, City, for cash, merchandise as per invoice, Form 17. Write a check in payment. 11. The note in favor of S. D. Welch falls due to-day; pay it by L 1 / 0-~. check. Write the check. Pass it in and receive the canceled note. The note will be can- celed by writing across the face Paid April 11, 19 , and the name of the payee. Make the entry in the cashbook. What account is debited in the cashbook ? Place the canceled note in the Paid Bills envelope. 12. Sell P. H. Morse, City : 3j *~ 20 bu, Timothy Seed J^ C 10 Receive cash, $125 ; balance on account. 20 bu, Timothy Seed 100 bu. Field Corn lOObu. Wheat 13 SET III. GRAIN AND SEED BUSINESS 123 Write the bill. Terms : cash, $125 ; balance on account. Enter the entire bill in the sales book, and the cash received in the cashbook as a receipt on account. Record the amount of the cash 011 the bill and receive the money. April 13. Give Henry Bruce your note at 15 da., with interest, to apply on account, for |200, payable at Ids office. 14. Receive of Boyd & Co. their note at 10 da., to apply on account, for $100, Form 18. Place the note in the Unpaid Bills envelope. 15. Sell Jesse Watson, City, on account : /f 20 bu. Dwarf Beans 50 bu. TCye *^ 50 bu. Barley 10 bu. Timothy Seed 15. Receive of Howard Young his check for invoice of April 7, Form 19. ' ?:, - . Deposit the check and all currency on hand except $25. Give S. D. Welch your check in full for the invoice of April 9. ^ j- Verify the amount by referring to the purchase book. - ^J 19. Sell Howard Young, City, on account, at the price given herewith : 100 bu. Wheat at $1.25 -^^7 ^* 20. Sell F. G. Morgan, City, for cash, at the prices named herewith : 10 bu. Clover Seed at $8 10 bu. Timothy Seed at $3.40 Write a receipted bill and enter it in the sales book and thejjashbook. Pass in the bill and receive the currency. ^ 21. Sell Boyd & Co., City, on account : 30 bu. Timothy Seed 20 bu. Garden Com 50 bu. Barley 40 bu. llye 22. Sell John Wells, City, on account : -^ 200 bu. Oats 50 bu. Barley 100 bu. Field Corn 23. Receive of Boyd & Co. their check, to apply on account, for $165, Form 20. 24. Receive of Boyd & Co. their check, in payment of their note due to-day, for $100, Form 21. Enter the amount of the check in the cashbook. Under what name? Cancel the note and pass it in. 24. Deposit the two checks and all currency on hand. Indorse the checks. 124 PRINCIPLES OF BOOKKEEPING April 25. Buy of Smith & Bowers, City, for cash, merchandise as per invoice, Form 22. jf ^ 3 Examine and check the invoice ; if correct, pay it by check Enter in the pur chase book and the cashbook. Where is this invoice filed? v 26. Sell Johnson & Pease, City, for cash, at the prices named herewith : 10 bu. Dwarf Beans at $8 100 bu. Field Com at 750 25 bu. Garden Corn at $3.80 After entering the invoice in the required books receipt it, pass it in, and receive the currency. How is this invoice receipted ? 27- Receive of Jesse Watson his check, to apply on account, for $175,^Form 23. . Give Henry Bruce your check for your note and the interest, due to-day. Face of the note, $200; interest, 500. What two entries are made in the cashbook? Remember to cancel and file the note. How is this note canceled? 28. Receive of Jesse Watson his check for note and interest due to-day, Form 24. Face of the note, &25IU, interest. Jfcl.25. What two entries are made in the cashbook? Cancel the note and pass it in. What is the value of a canceled note ? ' 29. Receive of Howard Young his check for the invoice of April 19, Form 25. / 2. *^. - 30. Give Henry T. Dale, your clerk, a check for his salary, $30. 30. The Proprietor takes from the business cash for his monthly salary, $50. 30. Deposit the checks and all currency on hand. SO. Withdraw by check the balance on deposit in The Union Bank. This withdrawal is made as a matter of convenience in closing the set. The amount of the check is for the balance in the bank. Make the check payable to Self and pass it in. No entry is required. Monthly Bank Statement. Proceed with your bank account as you did at the close of March. What is the value of the monthly bank statement to the depositor at the close of each month? Before closing the books hand them to the instructor for inspection and approval. SET III. GRAIN AND SEED BUSINESS 125 Inventories. Record the following inventories on a sheet of journal paper, at the cost price, and file for future reference : Inventories, April 30, 19 Merchandise : ^ V^ 5 50 bu. Barley 45 bu. Garden Corn 20 bu. Clover Seed (50 bu. Oats 30 bu. Dwarf Beans GO 1m. Rye ~ 200 bu. Field Corn 50 bu. Wheat Office Furniture : Office Safe Office Supplies 7.50 Closing the Set. After looking over the closing of each book in March, close the cashbook, the purchase book, and the sales book. The careful bookkeeper checks his work (it m-cr/i fttf-.p. Check all additions before writing the results in ink. A simple way to chvk a<]s column to the Discount on Sales account in the ledger. The small circle underneath these columns is for the ledger page. To post the cash payments : debit each item in the General column ; credit the footing of the Net Cash column to the Cax/i account in the ledger, and credit the footing of the Discount on Purchases column to the Discount on Purchases account in the ledger. Rule a very light line under the balance. Do not use the balance in footing either column when closing the cashbook. Cash Paid F. Cas t Disc, on General n I urch. May 1 Rent Paid For May 10 10 6 Office Supplies Stationery, etc. 50 !) ; 50 11 Warren & Co. Inv. 5/1, less 2% 171 50 :} 50 175 17 Elson & Son Inv. 5/15, less 1% 272 25 2 75 275 20 Student, Drawing For personal use 50 50 20 W. K. King, Drawing 50 50 22 Notes Payable Favor Way & Co. 300 :;i)0 25 Wilson & Co. Inv. 5/19 S7 50 *7 50 30 Salary Of clerk 30 30 1010 75 (j 25 1017 no RIGHT-HAND PAGE OF CASHBOOK, SET IV 130 PRINCIPLES OF BOOKKEEPING Selling Price Lists. The table below gives twenty -five different selling price lists, any one of which may be used if the instructor so desires. Buying Price List. In Set IV all merchandise is to be bought at the following prices : BUYING PRICE LIST FOR MAY AND JUNE ARTICLE AND QVANTITY COST Carpenter's Chisels, i-in.., cloz. $4.20 Coal Hods, doz 4.50 Door Knobs doz. 75 Family Scales, each 1.75 Grindstones, each . 1. Hammers, doz. . 9. Handsaws, doz 18. Ice-cream Freezers, each 2.50 Knives and Forks, set 3.75 Lanterns, doz 8. Meat Choppers, doz 12. Mortise Locks, doz. . .- . 6. Nails, 8d, wire, keg 3.20 Planes, $4, doz 24. Railroad Picks, 9 lb., doz 10. Steel Axes, doz 12. Try-squares, 6-in., doz ... 2.50 SELLING PRICE LISTS f ARTICLE AND QUANTITY 1 2 3 4 5 6 7 8 9 10 . Carpenter's Chisels, ^-in., doz. 5.25 5.30 5.35 5.20 5.40 5.18 5.22 5.37 5.74 5.30 'Coal Hods, doz 5.80 5.85 5.72 5.84 5.74 I 5.90 5.88 5.83 5.75 5.78 Door Knobs, doz 1. 1.03 1.06 1.10 1.08 1.07 1.12 .98 .99 1.11 Family Scales, each . . 2.20 2.10 2.14 2.18 2.22 2. Ob 2.13 2.19 2.21 2.20 Grindstones, each .... 1.25 1.40 1.45 1.50 1.30 ! 1.35 1.39 1.43 1.37 1.28 Hammers, doz 12. 12.06 12.22 12.25 12.30 12.50 12.45 12.55 12.60 12.05 Handsaws, doz 24. 24.20 24.25 24.32 23.50 2340 24.50 2485 24.09 24 10 Ice-cream Freezers, each . 3.10 3.25 3.20 3.30 3.12 3.32; 3.35 3.40 3.31 3.26 Knives and Forks, set . . 4.80 4.75 4.90 4.95 5. 4.82 4.92 4.85 4.95 4.80 Lanterns, doz 10.20 10.25 1030 1035 10 40 JO 45 10 50 10 55 1045 1048 Meat Choppers, doz. . 16. 17.50 17. 16.25 15.80 10.21 16.26 16.31 16.36 16.41 Mortise Locks, doz. . . . 8. 8.20 8.15 8.10 7.90 7.!)."> 7.80 7.95 8.25 8.30 Nails, 8d, wire, keg . . . 4.10 4.20 4.25 4.09 4.12 4.15 4.18 4.22 4.16 4.12 Planes, $4, doz 30. . 32. 29. 31. 33. 29. 28. 27.50 30. 28.50 Railroad Picks, 9 lb., doz. . 12.50 13. 13.25 12.60 13.40 12.40 12.50 12.75 13.10 13.20 Steel Axes, doz 15.50 1560 15 75 15 25 15 50 *15 70 15 80 1530 1515 1520 Try-squares, 6-in., doz. . . 3.20 3.10 3. 3.05 3.25 3.28 3.30 3.35 3.35 3.10 SET IV. GENERAL IIAKDWAUE BUSINESS WORK FOR MAY 131 Incoming Business Forms for May. Please read the instructions given f h> SL ' on page 107 and apply them to the following list: Form 1. Invoice of Turner & Moss, (.'ity, May '2. Terms : cash. ^^ ,"*10 doz. Carpenter's Chisels . 20 sets Knives and Forks , I . 12 Family Scales -i do/. .Mortise Locks 10 Grindstones 1 do/. Planes, #-i 3 doz.~llan.dsa\vs Form 2. Bill of H. L. Mills, City, May 4. Terms : cash. Set Office Books, $12 .Stationery, $3 Form 3. Invoice of Wilder & Chase, City, May 7. Terms : 1/2 in 3 da.. balance in 10 da. I 8 doz. Coal Hods 12 doz. Door Knobs f 15 doz. Hammers 10 Ice-cream Freezers w ', ~) do/. Lanterns /V 10 kegs Nails _, A'7i~" 30 Family Scales /*>$. 6 doz. Handsaws / 7 V 20 doz. Door Knobs 40 Grindstones ^ se *" s K n i ves au d Forks Form 7. Invoice of Wilder & Chase, City, May 16. Terms : on account. g 0. 10 doz. Lanterns Jj, 10 kegs Nails f 7tg 3 L- 6 doz. Mortise Locks / **+ ^ 6 doz. Planes, $4 2 ? a. 9 ~~ / ? 4, , <- Form 8. Invoice of Dunn & Sanford, City, May 20. Terms : 1/30. \ / O-o . - 10 doz. Railroad Picks 7^ . 6 doz. Steel Axes 172.* 7,2-__ 6 doz. Meat Choppers _.3 s".- 10 doz. Try-squares ^4 f~~ t~* * ^??- -S^ NOTE. The terms given mean that 1% will be taken off the face of the invoice if it is paid within 30 da. Form 9. Check of Strong & Hunter, City, for $150, in your favor, May 23. Form 10. Check of John H. Sand, City, for 200, in your favor, May 30. Opening the Set. Observe these general directions: 1. The same bound books are used as in Set III. 2. Student and James A. Hart are represented as proprietors. 3. The firm name is to be Student & Hart. 4. Student will keep the books and manage the business. 5. Begin a new page in the cashbook, the journal, the check book, and the sales book. 6. Unless otherwise stated, all payments are to be made by check. Use a new sheet for the bank account. 7. In the month of May, omit the use of the Discount on Sales column and the Discount on Purchases column in the cashbook. These columns will not be used until the month of June. MEMORANDA OF TRANSACTIONS FOR MAY May 1. Student and James A. Hart begin a General Hardware busi- ness, investing cash, $3000. Each partner invests $1500. Place the above memorandum in the journal, but make no journal entry. Receive the currency from the instructor. Refer to the model cashbook, and make the entry for each partner. 1. Deposit all currency in The Union Bank, under the firm name. In the pass book, above the student's name, write the firm name, Student & Hart. SET IV. GENERAL HARDWARE BUSINESS 133 May 1. You have entered into an agreement with Wm. H. Kellogg for the rental of his store, 266 Broad St., at $50 per month. No entry is required. A memorandum of this agreement may be made and filed with the incoming papers. Engage Henry Lakey as a clerk at $35 per month. 2. Buy of Turner & Moss, City, for cash, merchandise as per invoice, Form 1. This check will be No. 1. Now that yon are engaged in a partnership business, checks are to be signed with ihejirm name. ;-^L^Give Wm. H. Kellogg a check for rent of the store for May. 4. Buy of H. L. Mills, City, for cash, books and stationery, as per bill, Form 2. Remember that all cash payments are made by check unless otherwise noted. 5. W.. D. Mendon, City, places an order for the following goods. Fill the order at the prices given herewith. Terms : cash. - 4doz. Carpenter's Chisels at $5.25 1 doz. Handsaws at $24 'J.Jl tf 6 Family Scales at $2.20 5 sets Knives and Forks at $4.80 j^r d Grindstones at $1.25 2 doz. Mortise Locks at $8 Record the invoice in the sales book and the cashbook. Begin a new page in the sales book. Receipt the invoice and receive the currency. 6._ Hall & Son, City, place an order for the following goods. Fill the order. Terms : on account. 3 doz. Carpenter's Chisels 3 Ice-cream Freezers at $8.10 _**"- 5 doz. Door Knobs at $1 ...~-~~*J^ ' ' 2 doz. Lanterns at $10.20 o j- ^7-77) 9. Buy of Dunn & Sanford, City, at 10 da., merchandise as per invoice, Form 4. 9, Withdraw by check $15, to be used for office expenses. "Write this check to the order of Cash. No entry is required because no cash has been paid out. Place the currency in the Business Cash envelope. This is called a cash check. 134 PRINCIPLES OF BOOKKEEPING May 10. Remit to Wilder & Chase a check for one half the invoice If there is a half cent in the division, call it one cent ; always reckon the odd cent on the first transaction. 10. Pay S. H. Lyman, in currency, $5 for office stationery. 11. Receive of Strong & Hunter their check for the invoice of May 8, v oim o. Examine the check; if correct, enter the amount in the cashbook. Place the check in the Business Cash envelope. 12. Give each partner a check for $50, for his personal use. Write your check as follows : Pay to the order of Student. Make your partner's check payable to his own name. Sign each check with ihejirm name, as usual. Enter in the cashbook as payments, under each partner's name, Drawing account. Place the currency in the Personal Cash envelope. The Drawing Account. Why Used. This account does not represent any part of the investment of a business, but the dealings of the busi- ness with the individual members of the firm ; for this reason they are kept separate from the investment, or capital, of the firm. The investment, or capital, account is to be used in carrying on the business, and it is not to be disturbed except by agreement of the partners and the amendment of the articles of partnership. In this set the following items are entered into the drawing accounts : DEBITS CREDITS 1. Cash withdrawn by a partner for 1. Proper share of any net profits of private use the business 2. Proper share of any net losses when the books are closed ' * ' ._ May 13. L. P. Austin, City, places an order for the following goods. Fill the~ order. Terms : on account. j 7 ' 5 doz. Railroad Picks 6,?,-* #* B doz. Try-squares / 4 H' 9 2 doz. Meat Choppers jf A, MJU ' 5 doz. Hammers /$,/{; 6 doz. Steel Axes cy V,jLp_ " 3 Ice-cream Freezers 14. Buy of Turner & Moss7 City, on account, -merchandise invoice, Form 6. 15. Deposit the check on hand. SET IV. GENERAL HARDWARE BUSINESS 135 May 15. Wilson & Barton, City, place an order for the following goods: Fill the order. Terms: 10 da. / / 10 doz. Door Knobs X Lee-cream Freezers 1 >*~ 3 doz. Hammers i sets Knives and Forks 2 doz. Handsaws 4 doz. Carpenter's Chisels 2 < 7 i ' f ~ " -J6L_Buy of Wilder & Chase, City, on account, merchandise as per ' invoice, Form 7. 17. Remit to Wilder & Chase a check for the balance of the invoice Note the amount, paid on this invoice on May 10. 18. John Howe, City, places an order for the following goods. Fill the order at the prices given herewith. Terms: cash. 4 doz. Lanterns at $10.20 5 kegs Nails at $4.10 ._*&-. ." 3. doz. Mortise Locks at $8 ' 3 doz. Planes, #4, at $30 $ * y f . " IJ / / 5 - 19. Strong & Hunter, City, place an order for the following goods. ^ Fill the orderT Terms: on account. JF'^" 6 doz. Carpenter's Chisels,, 8 doz. Door Knobs J-,*rL- 13V 1. Make the statements from the following trial balance. Date the statements March 31, 19 . Cash Notes Receivable lies & Son H. R. Eaton Arthur Lessing Mdse. Inventory Office Furniture Real Estate Building and Fixtures Notes Payable Kittredge & Co. H. D. Greene E. M. Baker John S. Graves, Investment John S. Graves, Drawing David Freeman, Investment David Freeman, Drawing Mdse. Sales Interest Earned Mdse. Purchases Rent Paid Office Supplies Interest Paid Inventories, March 31 : Merchandise Office Supplies Office Furniture Real Estate Building and Fixtures $671.55 534.75 194.65 114.85 265.20 1100. 145.20 1200. 1515.75 100. $356.70 77.50 108.95 45.80 4200. 4200. 5421.50 16.20 8381.55 65.50 38.90 23.75 $14426.65 $14426. 65 $4562.70 12.50 145.20 1200. 1515.75 2. Use the work for May in the books for Set IV, in the following exercises : a. Analyze each ledger account. b. Analyze each cashbook entry. c. Journalize orally each purchase-book entry. d. Journalize orally each sales-book entry. e. Distinguish between the Drawing account and the Investment account. 140 PRINCIPLES OF BOOKKEEPING 3. a. On a sheet of ledger paper copy the following ledger accounts, allowing eight lines for each account : MERCHANDISE INVENTORY 19 May 1 4 725 Student, PROPRIETOR 19 May 1 2 1400 Student, DRAWING 19 May 19 5 60 HENRY SEARLE, INVESTMENT 19 May , 1 2 1400 HENRY SEARLE, DRAWING 19 May 15 5 50 SET IV. GENERAL HARDWARE BUSINESS 141 MERCHANDISE SALES INTEREST EARNP:D lo MERCHANDISE PURCHASES OFFICE SUPPLIES INTEREST PAID 19 May 31 7 1749 45 19 May 10 5 12 75 19 May 13 4 8 50 Inve ntoi Me Offi ies, May 81 : rchandise ce Supplies |735.20 6.25 b. Open the following accounts : Profit and Loss and Sundry Expense Inventory. c. Make the necessary entries and postings to close the above ledger. CHAPTER XI SET IV. GENERAL HARDWARE BUSINESS (CONTINUED) WORK FOR JUNE The memoranda of this month are a continuation of the memoranda for May, representing a partnership business. Incoming Business Forms for June. The following list is a continua- tion of the Incoming Business Forms for May 011 pages 131 and 132: Form 11. Invoice of Wilder & Chase, City, June 3. Terms : 2/10, n/30. / g 6 doz. Carpenter's Chisels 5 doz. Hammers ' / x 10 doz. Door Knobs (3 doz. Handsaws (J 6 Grindstones Form 12. Invoice of Dunn & Sanford, City, June 5. Terms : on account i; _ - / s , f a /\ ^ Ice-cream Freezers (*, 10 doz. Mortise Locks * *^. ^.f$ 12 sets Knives and Forks ^ 2-o 20 kegs Nails C Y. -^, ', ~> cV 10 doz. Lanterns ^**4~ 6 doz. Planes, #4 '^H <-* ' Form 13. Check of Arnold & Davis, City, for $100, in your favor, June 5. Form 14. Note of P. D. Anson, City, for $100, in your favor, at 10 da., with interest, June 6. Form 15. Bill of H- L. Mills, City, June 9. Terms : cash. Office Stationery, $6.75 Form 16. Invoice of Turner & Moss, City, June 12. Terms : 1/2 cash ; balance in 30 da. 10 doz. Carpenter's Chisels 6 Grindstones 5 doz. Coal Hods 6 doz. Hammers 12 Family Scales 5 doz. Handsaws 6 doz. Door Knobs Form 17. Check of L. P. Austin, City, for $73.85, in your favor, June 14. Form 18. Invoice of Wilder & Chase, City, June 15. Terms: 1/2 cash; balance in 30 da. 6 Ice-cream Freezers 12 doz. Mortise Locks 10 sets Knives and Forks 20 kegs Nails 6 doz. Lanterns 5 doz. Planes, #4 142 SET IV. GENERAL HARDWAKE BUSINESS 143 Form 19. Invoice of Turner & Moss, City, -June 21. Terms: 1/2 cash; balance in 10 da. 12 doz. Railroad Picks (i do/. Steel Axes 8 doz. Meat Choppers 10 do/. Try-squares Form 20. Check of P. 1). Anson, City, for $100, in your favor, June 25. ' Opening the Work for June. The following general directions should be observed : 1. Use the same price list and the same books as in May. 2. Begin a new page in the journal. In the sales book, leave a space of three lines, then write the first sale in June under the last sale in May. 3. The balance brought down from the May cashbook, under June 1, is to be reckoned with the cash receipts in June. Use a new sheet for the bank account Record the balance at the head of the deposit column. (MEMORANDA OF TRANSACTIONS FOR JUNE June^E\ Give Wm. H. Kellogg a check for rent of the store for June, $50. \js Receive of Hall & Son cash for the balance of the invoice of May 6. x ~*^^^i ve Turner & Moss your note at 15 da. for the balance of the invoice of May 14. ^* C:D Buy of Wilder & Chase, City, merchandise as per invoice, Form 11. Terms : 2/10, n/30. ^4^4%) Hall & Son, City, place an order for the following goods. Fill * the order. Terms: 30 da. 4 doz. Coal Hods * 3 -^o $~.t$ 3 doz. Carpenter's Chisels //j$Y 4 Family Scales 9 3 *- ' * ^ 3 doz. Hammers ? i u 3 doz. Handsaws t^JLJL. ?.<*. F 5 doz. Try-squares ^ - / 1 j L i ttH- of Dunn & Sanford, City, on account, merchandise as per invoice, Form 12. \J$ Arnold & Davis, City, place an order for the following goods. Fill the order at the prices given herewith. Terms: caslv*|100; balance in 15 da. 3 Ice-cream Freezers at $3.10 1.3O 5 doz. Lanterns at $10.20 * J 3 doz. Try-squares at $3.20 ^- c o 6 doz. Mortise Locks at .$8 * ?. - 8 sets Knives and Forks at $4.8+' " 6 ke^s Nails a*. t 4 v <- > ~^' n '**' r *->*> 2 doz. Hammers 3 * ' 4 doz. Try-squares ' *- 'J-? J 'f" V'f^ ({j]j} Buy of Turner & Moss, City, merchandise as per invoice, Form 16. Terms: 1/2 cash; balance in 30 da. Enter the entire amount in the purchase book. Remember the check for the cash payment. Give Wilder & Chase a check for the amount of the invoice of June 3, less 2%. &3\ Give each partner a check" for $50, for personal use. Sign each check with the firm name. To what account are these amounts to be posted ? (^) L. P. Austin, City, places an order for the following goods. Fill the order at the prices given herewith. Terms : 1/2 cash ; balance in 30 da. j. /. - - 4 doz. Carpenter's Chisels at $5.25 ^ 2 Grindstones at 1.25 A/. *" 6 Family Scales at $2.20 * - ^ 3 doz. Hammers at S12 , 6 kegs Nails at $4.10 2 doz. Railroad Picks at 812.50 (%fc Receive of Arnold & Davis cash for the balance of the invoice ofJ|me 5. %|rBuy bf Turner & Moss, City, merchandise as per invoice, Form 19. Terms : 1/2 cash ; balance in 10 da. 146 PRINCIPLES OF BOOKKEEPING June @\ Wilson & Bartorl^xCity, place an order for the following goods. Ftil the order. Terms: cash, 875: balance in 10 da. f J>9 5 doz. Carpenter's Chisels ', ' 5 Grindstones t ? $' -76 s:c> 3 doz. Coal Hods '7f6 4 doz. Steel Axes ^ 3 3 o '^ z -' 5 doz. Meat Choppers j^^P 3 doz. Try-squares ^ g <_ >* ^^ Receive his check for $100, Form 20. _*^--C* x t f ^~~ I (^jXp Receive of Strong & Hunter cash for the invoice of June 11. V &^ Deposit the check on hand, and currency, $250. C^T^ Strong & Hunter, City, place an order for the following goods. Fill the order. Terms: 10 da. ^ 3 doz. Railroad Picks ?.* 4 doz. Try-squares 10 kegs Nails ' *". 7v 2 doz. Steel Axes ., Henry Zaner, City, places an order for the following goods. Fill the order at the price given herewith. Terms: caslu 6 kegs Nails at $4.10 JO. 1 Prepay your note in favor ot Dunn A: Sanford, issued on June 2 by giving them a check for the net proceeds. This note has 24 da. to ran ; compute the interest on the face of the note for that time. Enter in the cashbook as follows : under Cash Paid, the face of the note ; under Cash Received, Interest Earned for the interest. Write a check for the face of the note minus the discount. Hand in the check and receive the canceled note. This note will be canceled by writing across the face of it Paid June 29, 19 , Dunn $ Sanford. Place the canceled note in the Paid Bills envelope. This serves as a receipt for the note which has been paid. SET IV. GENERAL HARDWARE 15CSIXESS 147 Juneizy. Hall & Son, City, place an order for the following goods. Fill the order. Terms : on account. 4 Family Scales Y.? *- * ^ 3 loe-cream Freezers t?f~ 3 Grindstones Y^i" -2?*ft> 2 doz. Handsaws ^ *~~ ^ * * $#. Give Henry Lakey, your clerk, a cheek I'or his salary, $0. Deposit all currency on hand. 30. Withdraw, by check, the balance on deposit in The Union Bank. Write the check payable to the order of Cash. The reasons for this withdrawn were given at the close of April. Xo entry is rc,-1- 1. Make the statements from the following trial balance. Date the statements June 30, 19 . In this trial balance use is made of Accounts Receivable and Accounts Payable; the former is always an asset ; the latter, a liability. These terms are denned on page 63. The use of Accounts Receivable and Account* J'tiynhle not only shortens the trial balance but gives the amount owed to the business, and the amount owed by the business as a single item. In subsequent work these terms will be commonly used. Cash. $507.75 Notes Receivable 756.55 Accounts Receivable 504.50 Mdse. Inventory 700. Real Estate 750. Building and Fixtures 1200. Office Furniture 110.35 Delivery Equipment 350. Notes Payable $234.0.5 Accounts Payable 263.25 Geo. A. Emerson, Investment 2600. Geo. A. Emerson, Drawing 65. Henry S. James, Investment 2600. Henry S. James, Drawing 65. Mdse. Sales 2144.60 Interest Earned 17.45 Mdse. Discount on Purchases 8.10 Mdse. Purchases 2683.90 Mdse. Discount on Sales 13.55 Office Supplies 21.95 Rent Paid 42. Interest Paid 31.50 $7868.05 37868.05- Inventories, June 30 : Merchandise $1697.45 Real Estate 750. Building and Fixtures 1200. Office Furniture 116.35 Delivery Equipment 350. 2. Transfer to sheets of ledger paper the necessary ledger accounts. and then close the ledger. 154 PRINCIPLES OF BOOKKEEPING Inventories. Taking stock, sometimes called making up inventories, is one of the most important features of a business, at the period when the books are to be closed. The following will make an interesting study for the class: Members of the class, in groups of two, may be appointed to secure facts from local firms as to the taking of the inventory, and such in- formation as the merchant may choose to give, and report to the class. Each group may secure material from a different business. A profitable discussion should grow out of this report. The following questions are suggestive : Under what conditions should an article be inventoried at less than cost? Why do merchants often have a special sale just before the inventory is taken ? What important facts are revealed by the taking of the inventory ? If the inventory is valued too high, what will be the effect on the profit and loss of the business ? on the proprietary interest ? If the inventory is valued too low, what effect will it have on the profit and loss of the business ? on the proprietary interest ? CHAPTER XIII COMMERCIAL DRAFTS 1 Commercial Draft. A commercial draft is a written order in which one person directs another to pay a specified sum of money to the order of himself or to the order of a third person. Use of the Draft. Commercial drafts are used primarily to effect the settlement of debts without the risk or the inconvenience of trans- mitting money. These debts may be past due, and the draft is used as a means of securing payment. More frequently, however, the draft is used because of the terms indicated on an invoice, as follows : Subject to draft in 30 da. (or some period that may be named). At the end of the 30 da. the seller draws a sight draft on the buyer and sends it through his bank of deposit, the buyer honors the draft by paying it, and the money is sent by the bank making the collection to the drawer or to his bank of deposit. The number of commercial drafts handled by banks is so large that they represent a marked feature of the banking business. Parties to a Draft. Usually there are two parties to a draft, as follows : The drawer, the one who draws the draft. The drawee, the one on whom the draft is drawn. A large number of the commercial drafts used as a means of collecting debts are dishonored. The drawee refuses to pay the draft when it is presented to him. Unless there is a special reason, such as dealing with a delinquent debtor, a draft should not be drawn without a previous arrangement or an understanding between the persons. Without such notice, a draft ordinarily has no more significance than the sending of a monthly statement of account. The giving of the notice is an expression of business courtesy. Sight paper is paper payable on presentation. Sight Draft. To illustrate the use of the sight draft as an aid in collecting debts that are past due, suppose that Edgar McMickle, Put- erson, N.J., owes Wilb.ert, Closs & Co., Springfield, Mass., $260.50. 1 A brief study of the commercial draft and the bank draft is introduced at this stage of the student's work for the convenience and accommodation of those instructors who desire to take up the study of drafts, in a brief way, in connection with the introductory work of the text. 155 156 PRINCIPLES OF BOOKKEEPING The account is now past due, and Wilbert, Closs & Co. want the money. They will, after proper notice to the drawee, draw the following draft : 'Pay to the order of 'Dollars Value received and charge to account of Wilbert, Closs & Co. will indorse the draft and leave it with the Springfield National Bank for collection. As the bank has no account with a Paterson bank, they will again indorse the draft and forward it to the Chemical National Bank of New York City, with whom they have a regular account. The following indorsements will appear on the back of the draft: The blank indorsement, simply the name, is but little used in business. Banks insist on the use of the special, or full, indorsement. A number of indorsements that are common in business are illustrated and explained on pages 118 and 119. The Chemical National Bank will collect the money from McMickle through a bank in Paterson, and then notify the Springfield National Bank that the draft has been collected and the amount credited. The Springfield National Bank notifies Wilbert, Closs & Co. that the pro- ceeds have been credited. COMMERCIAL DRAFTS 157 Entries. The following are the entries for this draft : The Drawer's Entry. Wilbert, Gloss & Co. make this entry on the left side of their cashbook : f WILBERT, (.'LOSS & CO.'S CASHHOOK Should the bank make a charge for collecting' this draft, the amount of such a charge would appear on the right side of the above cashbook. The Drawee's Entry. When Edgar McMickle pays the draft, he will debit Wilbert, Gloss & Co. on the right side of his cashbook, as follows : MCMICKLE S CASHBOOK From the preceding discussion the following principles are deduced regarding the entries for commercial sight drafts : 1. The drawer's entry when lie draws a sight draft in his own favor, and it is collected, is as follows : Cash Drawee 2. The drawee" 1 * entry when he pays a sight draft is as follows: Drawer Cash Exercise 45. Sight Drafts For Written Work 1. Write each of the following drafts, at sight, and make the entry for each party. Use the current date. DRAWER (a) J. C. Green (Your Place) (#) Student (Your Place) (e) A. B. Mentor Chicago, 111. (d) David M. Gay Alton, 111. DRAWEE Amos Hamilton Albany, N.Y. John Garson Columbus, Ohio Student (Your Place) John A. Saxon (Your Place) A MO I NT $350. )2.10 $378.~>0 $1200. 158 PRINCIPLES OF BOOKKEEPING 2. F. A. Wright, Atlanta, Ga., owes you $42.50 on account. Draw a sight draft on him, in favor of yourself, indorse it, and leave it at The Union Bank for collection. In 5 da. the bank informs you that the draft has been collected. Make the entries. 3. The Union Bank presents a sight draft drawn by O. M. Howe, Denver, Colo., on you, in favor of himself, for 8104.25. Pay it by check and make the entries. When you pay a sight draft drawn on you, the draft should be canceled and kept as a receipt. 4. Frank Weeks, Austin, Texas, owes you 200 on account. Draw a sight draft on him, in favor of yourself, for that amount, indorse it, and leave it at the First National Bank for collection. In 6 da. the bank informs you that the draft has been collected. Make the entries. REVIEW QUESTIONS 1. Define a commercial draft. 2. State the object of drafts. 3. What names are given to the parties to a draft ? 4. What is the drawer's entry when he draws a sight draft on A in favor of B ? 5. What is the payee's entry for a sight draft received and collected ? 6. What is the drawee's entry for a sight draft paid ? 7. Do all drafts have two parties ? Explain. 8. How is a sight draft used to collect a debt? 9. Is it wise to draw on a good customer without notifying him in advance? Why? 10. How would you -indorse a sight draft left at The Union Bank for collection ? Sight Draft Payable to a Bank. The sight draft already illustrated is made payable to Ourselves. It is very common, however, to make these -drafts payable to the bank with which the drawer does business. By so doing he avoids the necessity of indorsing the draft after he has drawn it. The following is an illustration of a sight draft drawn payable to the order of a bank : $ (Zf*- ^ SpringfifU, .'XCm-L, (/^sf^l^ ^L^2f 19 'Pay to the order of Hanover ^rust Company 'Oalue received and charge the same to account of o -^y. W. /Sfa^^ft^rz^&Cs \ _j^ ^y 7 ^?^^; ^>^f>-r^/^f^^i^^f/f^^^ ^>T } COMMERCIAL DRAFTS 159 This draft shows that G. A. Fetters has a claim against S. A. Marshall, of Columbus, Ohio, for $68.40, and by using this form of draft or by indorsing it to a bank, the bank named is made the agent for colleeting the draft. Who is the drawer of this draft ? the drawee ? What is the relation of the parties in this draft ? How would Marshall's account appear on Fetters's ledger at the time the draft was drawn ? What entry would Fetters make when he received word that the bank had collected the draft ? What entry would Marshall make when, he paid the draft? Assuming that the Commercial Trust Co. sent the draft to the First National Bank in Columbus, Ohio, what indorsement would be made on the back of the draft ? The Three-Party Draft. There may be three parties to a commercial draft, as follows : The drawer, the one who draws the draft. The drawee, the one 011 whom the draft is drawn. The payee, the one to whom the order is made; payable. These are the original parties to a three-party draft. The three-party draft is used less frequently than the two-party draft. Study the sight draft on page 160 in connection with the accompany- ing diagram, which sets forth the relation of the parties in the draft. The persons to a three-party commercial draft usually bear the following relation to each other : The drawee generally owes the drawer. The drawer generally owes the payee. The payee and the drawee bear no relation to each other. F. C. Gorluun, drawee, owes Mason & YOUHK, drawers, Springfield The drawee and the payee usually live in the same place. While not bound to do so, the drawer usually notifies the drawee before or at the time of drawing the draft. It is customary to send it to the payee, and he presents it to the drawee for payment. Entries. The following illustrations set forth the form and the entries for the three-party draft : 160 PKIXCIPLES OF BOOKKEEPING ^/9^= (S) ..'Pay to the order of dollars "Dalue received and charge to account of The Drawer's Entry. Mason & Young mail the above draft to C. W. Gray, and make this journal entry : MASON & YOUNG S JOURNAL Mason & Young have given C. A^ ^ . Gray an order equivalent to $500 cash, when presented to Gorham ; therefore they should debit Gray. When F. C. Gorham pays the sight draft, he gets out of Mason & Young's debt, $500. He gave the money to Gray, but for the account of Mason $ Young; therefore Mason & Young will credit F. C. Gorham. The Payee's Entry. Immediately upon the receipt of this draft Gray will take it. to F. C. Gorham and receive the cash, or deposit it in his bank for collection and credit. Gray will get the cash, $500 ; he will make this cashbook entry on the left side: GRAY'S CASHBOOK The cash received by Gray came from Mason & Young through Gorham ; there- fore Gray should credit Mason & Young, as they have canceled a debt they owed to him. COMMERCIAL J)KAFI> 161 The Drawee's Entry. When the draft is presented to Gorham, he will pay it, and make this cashbook entry on the right side: S00 OOKHAM'S CASH HOOK Gorham paid Gray $500, but he paid one of his debts to Mason & Young, and thus got out of their debt; therefore he should ili'hlt them. Model Draft and Entries. The following illustrations suggest a model for the student to follow in writing drafts and in making the entries: $Joo THE D11AFT o o DRAWERS JOUHXAI. KXTRV 3 ff PAYEES EXTRY OX LEFT SIDE OE CASHHOOK DRAWEE'S ENTRY ox RIGHT SIDE OF CASHHOOK 162 PRINCIPLES OF 1JOOKKEEPIXG Bank Drafts. Business men usually keep an account with a bank and make a large proportion of their payments by check. However, they find it necessary sometimes to make payment to persons or firms who do not care to give credit for private checks, and then some other form of transfer must be used. A very common and convenient form of remittance is by means of a check of one bank upon another. This is called a bank draft. Suppose that C. C. Canan, Boston, Mass., wishes to buy a bill of goods of Jordan, Marsh & Co., New York, amounting to $400.60. If his financial standing is unknown to Jordan, Marsh & Co., he should not send his personal check. He therefore draws the following check and exchanges it at his bank for a New York draft: {Boston, 3ass., V^sf^csis / (a ; 19 traders Rational 'Pay to the order q ^^^^^^L^L^^Z. CHECK TO PAY FOR BANK DKAFT The check is drawn for 500 more than the face of the draft, and this charge is called exchange. Some banks do not make any charge to regular customers. For this check the Traders National Bank will issue the following draft : traders Rational 'Pay to the order of CosAier BANK DKAFT COMMERCIAL DKAFTS 163 A bank draft is usually drawn payable to tbe order of tbe purchaser, who indorses it to the person or the iirin to whom it is to be sent, as shown herewith. In this way the name of the sender appears on the draft, and he is identified as" such. The one who purchases a bank draft may require that the name of the one to whom it is to be sent shall appear as the payee. In opening letters that contain drafts, if the name of the sender does not ap- pear on the draft, care must be taken to keep the draft and the letter together. If his name is on the draft, it may be identified without the letter. AX IXDOKSKD RANK DKAKT Entries. The sending of this draft constitutes a cash payment by C. C. Canan to Jordan, Marsh & Co., and he makes- the following entry on the right side of his cashbook : <&/2^2^rz^l-' Upon the receipt of the draft Jordan, Marsh & Co. will make this cashbook entry on the left side : 7 When Jordan, Marsh & Co. make their deposit for the day, they will include the draft received from Canan, swc/i ^/rq/?s being treated as check*. "> Proprietor's Account. The next step is to transfer the difference between the debits and the credits of the Profit and Loss account to the Proprietor's account. This difference (f 230) represents the net profit. After this is done, the accounts will appear as follows : PROFIT AXD Loss 19 19 Jan. 31 Rent Paid 6 25 Jan. 31 Mdse. Sales 7 300 31 Salary 6 45 31 *D. L.Net Profit 4 230 300 .300 DAVID LAN?:, PROPRIETOR 19 Jan. 1 2 1500 31 Profit and Loss 4 230 In the Proprietor 's account enter the Present Worth in red ink on the debit side ; rule the account, and then transfer the Present Worth on the credit of the account, below the rulings, in black ink, under Feb. 1. The account will then appear as follows: DAVID LAXE, PROPRIETOR 19 19 Jan. 31 * Present Worth 1730 Jan. 1 2 1500 31 Profit and Loss 7 L':50 1730 1780 Feb. 1 Present Worth 1730 This completes the closing of the ledger by the direct method. The various exercises in the text for closing the ledger may be used for addi- tional work in the class. THE DIRECT METHOD OF CLOSING TILE LEDGER 171 Additional Points. In succeeding periods the merchandise inventory at the beginning of the period, as recorded in the Merchandise Inven- tory account, should be transferred to the Merchandise Purchases account. The steps as outlined above should then be followed in order. If the cost of the merchandise sold exceeds the sales price, a loss on sales results, which should be transferred to the debit of the Profit and Loss account. The net loss should be transferred to the debit of the Proprietor's account. The accounts which show profits other than the protit on merchandise sold are each closed directly into the Profit and Loss account. To illus- trate, assume that the Interest Earned account shows a credit of $10. After this amount is transferred to the Profit and Loss account, the accounts will appear as follows : INTEREST EARNED 19 Mar. 81 * Profit and Loss 4 10 19- Mar. 2i) 2 10 PROFIT AND Loss 19 Mar. 1:51 Ki The Sundry Expense Inventories account may be used to record the amounts of unused office supplies, fuel on hand, etc., under the direct method of closing the ledger, the same as in the journal method. The only difference is that the amounts would be recorded and transferred directly rather than entered in the journal and posted to the ledger. Exercises 28, 31, and 38 are suggested for reviews, for closing the ledger. CHAPTER XV GENERAL REVIEW Exercise 48. Review of Debits and Credits For Written Work Directions. In this exercise postings are to be made directly to the ledger. Open the necessary accounts on a sheet of ledger paper ; allow five lines for each account. Proceed as follows: 1. In each transaction, note mentally the debit and the credit, and post directly to the ledger. ILLUSTRATION. Suppose you receive a note from John Brown for $200. On the ledger, debit Notes Receivable and credit John Brown. 2. For each cash item received, credit the account for the amount received ; for each cash item paid out, debit the account for the amount paid. Post the total receipts and the total payments of cash. 3. Credit each purchase, and debit the footing. 4. Debit each sale, and credit the footing. 5. In the journal, determine the proper debits and credits, and post. 6. Take a trial balance ; if correct, hand all work to the instructor. The following are the cashbook entries : June 1. Student invested cash, $1450. 2. Paid Burton A. Pease cash, for rent of the store for June, $40. 3. Paid Ely & Co. cash, for office supplies, $12.50. 6. Paid Lowder & Co. cash, for 3 T. coal for the office, $15.75. 10. Received of Esten & Clark cash, to apply on account, $54.20. 12. Gave Arnold & Co. a check, to apply on account, $135. 14. Received of A. H. Brownell a check for the invoice of June 4. 16. Received of Leon B. Shaw cash for the invoice of June 12 y less \J . 20. Paid Harry S. Moore cash for the invoice of June 10. 22. Paid John Clark cash, for cleaning the store windows, $2. 23. Received of H. C. Gowdy cash, to apply on account, $200. 24. Received of Silver & Case a check for the invoice of June 24^ less 1%. 172 GENERAL REVIEW 173 June 25. Received of Esten & Clark cash, for their note due to-day, $100. 26. Paid H. S. Ranger cash for the invoice of June JO, less \.25. 8. Esten & Clark, on account, $154.20. 12. Leon B. Shaw, 2/10, n/30, $250. 16. H. C. Gowdy, on account, |325. 24. Silver & Case, cash, less 1%, 8300. 29. Silas N. Cook, on account, $212.60. The following notes were received or given : June 15. Received of Esten & Clark their note at 10 da. for 8100. 18. Gave Arnold & Co. your note at 30 da. for 200. Exercise 49. Review of Checks and Drafts For Written Work Directions. Journalize each transaction, post to the ledger, and take a trial balance. In the ledger, allow five lines for each account. Use sheets of journal paper and ledger paper. After completing the work, hand it to the instructor. June 1. Student begins business with the following assets and liabilities : N Merchandise, stock on hand, $2456.10 N Cash on hand, $845.20 The following owe you on account : Frank M. Good, $148.10 James D. Harris, $86.50 Fred D. Wickens, $112.75 Hastings & Co., $136.45 Notes Eeceivable, J. N. Hensen's note, $225 Notes Payable, in favor of Helm & Co., 8150 174 PRINCIPLES OF HOOK KEEPING You owe the following on account : Wright & Son, $234.60 O'Xiel & Co., 115 Keeley & Stacy, 145.65 Richard A. West, $275 Credit the Proprietor for his net investment. June 2. Receive of Frank AI. Good a check, to apply on account, 190.25. 4. The sight draft which you drew on James D. Harris for $86.50 has been collected by your bank. 5. Give Wright & Son a check, to apply on account, $85. 6. Buy at the First National Bank a New York draft. After in- dorsement, remit it to Helm & Co. in settlement of your note and the interest, in their favor. Face of the note, $150; interest, $1.50. 10. Receive of Fred D. Wickens a sight draft in your favor, drawn on L. M. Mitchell, of your city, for $112.75, to apply on account. 13. The sight draft which you drew on Hastings & Co. for $100 has been collected by your bank. 15. Give Richard A. West a check, to apply on account, $120. 16. Receive of J. N. Hensen a Chicago draft, indorsed to you, for his note and the interest, due to-day. Face of the note, $225 ; interest, $4.50. 20. Give O'Niel & Co. your check, to apply on account, $75. 25. Receive of Frank M. Good a check, in full of account, $57.85. 26. Give Wright & Son a check, to apply on account, $110. 27. Give Keeley & Stacy a check, to apply on account, $85. SET H. GENERAL MERCHANDISE Opening the Set. Observe the following directions: 1. This set is to be written on sheets of journal paper and ledger paper. 2. It is a general merchandise business in which the invoice totals are given, both for the purchases and for the sales. 3. Use the following books: cashbook, journal, purchase book, sales book, and ledger. 4. On the journal sheet, record the journal and the purchase book on page 1, the cashbook on pages 2 and 3, the sales book on page 4. 5. In the ledger, allow five lines for each account, except the Profit and Loss account, for which allow ten lines. 6. Ernest B. Faxon is represented as the proprietor. GENERAL KEVIEVV 175 MEMORANDA OF TRANSACTIONS May 1. Ernest B. Faxon began a (Jeneral Merchandise business with the following assets: cash on hand, $1285.40; merchandise, stock on hand, $1536.85; note of A. M. Freeman, in favor of the Proprietor, dated April 20, at 30 da., with interest, $250. Make a journal entry for the above, and check the cash item. Record the cash in the eashbook, and check it. 2. Engage Theodore Slayton as clerk at 835 per month. No entry for the above. % 3. Bought of Arden & Race an invoice of merchandise amounting to $322.50. Terms : 10 da, 4. Paid B. N. Halsey cash, for rent of the store for May, $45. 5. Sold H. M. Pierson an invoice of merchandise amounting to $182.50. Terms: 30 da. 6. Sold Chas. 'S. Earle an invoice of merchandise amounting to $202.50. Terms: cash, less 1 '/. 8. Bought of Gordon & Co., for cash, ol'licc books and supplies, $17.20. 9. Gave Little & Co. a check, for fuel for use in the store, $26.25. 10. Bought of Arthur Bowers an invoice of merchandise amounting to $262.40. Terms: cash, less \%. 11. Paid cash, for stamps and post cards, $5. 12. Sold Fred T. Lynch an invoice of merchandise amounting to $175.20. Terms: on account. 13. Paid Arden & Race by check, to apply on account, $122.50. 15. Gave Arden & Race a note at 30 da. for $200, to balance their account. Rule their account. 16. Received of H. M. Pierson a sight draft on Lowney ov Co., in favor of the Proprietor, for $100, to apply on account. 17. Received of H. M. Pierson a check for the balance of the invoice of May ,5. 18. Bought of Hunter & Son an invoice of merchandise amounting to $258.50. Terms: 2/10, n/30. 19. Sold Benj. I. Weed an invoice of merchandise amounting to $156.50. Terms: 1/10, n/30. 20. Received of A. M. Freeman a check for his note and the interest, due to-day. Face of the note, $250; interest for 30 da. at 6%. 176 PRINCIPLES OF BOOKKEEPING May 22. Sold Arthur H. Clay an invoice of merchandise amounting to $201.45. Terms: 10 da. 23. Bought of T. N. Woodson an invoice of merchandise amounting to $194.75. Terms: on account. 24. Gave Theodore Slay ton a check for $15, to apply on his monthly salary. 25. Sold Chas. M. Dewey an invoice of merchandise amounting to $198.65. Terms : on account. 26. Bought by check, at the First National Bank, a New York draft and remitted it to Hunter & Son for the net amount of the invoice bought of them on May 18. 27. Gave T. N. Woodson a check, to apply on account, for $120. 29. Bought of Loomis Bros, an invoice of merchandise amounting to $248.90. Terms: on account. 29. Received of Benj. I. Weed a Chicago draft for the net amount of the invoice sold to him on May 19. 30. Sold Farmer & Co. an invoice of merchandise amounting to $145.55. Terms: 10 da. 30. Prepaid the note given to Arden & Race on May 15, less the discount for the time the note has yet to run. Credit Interest Earned for the discount. 31. Gave Theodore Slayton a check, for the balance of his monthly salary, for $20. 31. Gave T. N. Woodson a note at 20 da. for the balance of the invoice bought of him on May 23. Inventories, May 31, 19 Merchandise $1871.40 Office Supplies 12. Fuel 20. Closing the Set. Proceed as follows : Rule and foot the different books, and then post. Take a trial balance, and then make the statements. Close the ledger. Take a second trial balance. Pass all work to the instructor. CHAPTER XVI .19 tg'-^--Z>7, ADDITIONAL BUSINESS FORMS AND MISCELLANEOUS EXERCISES The work of this chapter is purely optional. Many students study bookkeeping only one year, and some instructors deem it wise to give these students such information as this chapter contains, for it is their only opportunity to gain knowledge of this character, which is valuable to every student whether he enters business or professional life. If a student studies bookkeeping for more than one year, the work in this chapter may be deferred. MONTHLY STATEMENT OF ACCOUNT A statement of a ledger account is a copy of a cus- tomer's account, and also shows the balance remaining unpaid on a given date. It is a common practice for mer- chants to send, at the close of each month, to each cus- tomer a statement of his account. The accompany- ing illustration is the ledger ac- count of Amos T.- Harmon on the books of Austin & Son. The script illus- tration shows the a In account Wilh MODEL STATEMENT OF ACCOUNT 177 178 PRINCIPLES OF BOOKKEEPING monthly statement for May, which was rendered June 1 ; below it is given the first line of the statement for the month of June, which will be rendered July 1. The first line reads Per statement rendered, and this makes unnecessary a repetition of the debit and the credit items on the preceding statement. Exercise 50. Monthly Statements of Accounts For W'ntti'ii \\' . / f) O O / Z- Received % to apply in prepayment of the charges on the property described -fa^^^s-tfL&s^fcL/ / Agent or Cashier (The signature here acknowledge* Charges Advanced * - -Shipper Per. Per_ (Th is Bill of Lading Ii to be signed by the shipper and agent of the carrier Issuing same) MODEL BILL OF LADING This model shows a bill of lading made out properly by the shipper. Those blank spaces which are not filled out in the model may be tilled out by the representative of the railroad, if the circumstances of the particular shipment call for such information bein< r shown For use In connection with the Standard form of Straight Bill of Lading approved by tht Interstate Commerce Commission by Order No. 787 of Jxie 27, 19 THE COMMERCIAL TRANSPORTATION CO. ia an acknowledgment that a Bill of Lading has been issued and is not the Original Bill of Shipper's No._ T H I S MEMO RAN D U M Lading, nor a copy or duplicate, covering the property named herein, and is intended solely for Ming or record'. Agent's No. ' RECEIVED, subject to the cl; Original Bill of Lading, from the property described below, in apparent good order, exce (contents and condition of contents of packages unknown), marked, consigned and destined as indicated below, which said Company agn to its usual place of delivery at said destination, if on its road, otherwise to deliver to another carrier on the route to said destination. It agreed, as to each carrier of all or any of said property over all or any portion of said route to destination, and as to each party at any ested in all or any of said property, that every service to be performed hereunder shall be subject to all the conditions, whether printed herein contained (including conditions on back hereof) and which are agreed to by the shipper and accepted for himself and his assigns. mutually me inter- written. The Kate of Freight fron /> ia in rent* ppr 100 lh. IF Sp.ei.l 1 1 MODKL MEMORANDUM (HEADING) 180 PRINCIPLES OF BOOKKEEPING For uie In connection with the Slandird form of Straight Bill of Lading approved by the Interstate Commerce Commission by Order No. 787 of June 27, 1908 THE COMMERCIAL TRANSPORTATION CO. must be legibly filled in, in ink, in indelible pencil, or in carbon, and Shipper's No ING ORDER retained by tie .gent. Agent's No RECEIVE, subject to the classifications and tariffs in effect on the date of issue of this Shipping Order, ~ Jf) , - ' from ~V^. Sf~ s^sL^rf^TZ '^3^7 '^ the property described below, in apparent good order, except as noted (contents and condition of contents of packages unknown), marked, consigned and destined as indicated below, which said Company agrees to carry to Its usual place of delivery at said destination, if on its road, otherwise to deliver to another carrier on the route to said destination. It is mutually agreed, as to each carrier of all or any of said property over all or any portion of said route to destination, and as to each party at any time inter- ested in all or any of said property, that every service to be performed hereunder shall be subject to all the conditions, whether printed or written, herein contained (including conditions on back hereof) and which are agreed to by the shipper and accepted for himself and his assigns. The Kate of Freight from. to la 'n Cents per 100 Ib. Psptcul IF Spciil - MODEL SHIPPING OUDKR (HEADING) NOT?:. Bills of lading were lacking in uniformity until a final decision of the Interstate Commerce Commission regarding them was secured. Previous to this they were so varied in size and form as to occasion much confusion and a conse- quent loss of time. To obviate these difficulties, business men appealed to the Interstate Commerce Commission to issue an order that would require a uniform bill of lading for all shipments. This request resulted in many conferences between the shippers, the transporta- tion companies, and the Commission, with the result shown in the form of the bill of lading here illustrated. The straight bill of lading is drawn up in a set of three papers, duplicates being made by using carbons, as follows: the straight bill of lading, original; the memorandum, an acknowledgment that a bill of lading has been issued ; the shipping order. Tim form i not nego- tiable, and must be printed on white paper. The shipping order is signed by the shipper only, while the others are signed- by both the shipper and the agent of the railway company. The shipping order is left with the agent; the bill of lading is sent to the purchaser of the goods ; the memorandum is retained by the seller. The goods may be delivered to the purchaser without his surrender of the bill of lading. A bill of lading is a receipt of a transportation company, containing an account of the goods shipped and the conditions of shipment. As the bill of lading is drawn up in triplicate, each party the shipper, the transportation company, and the consignee has an exact copy of the receipt. Study the preceding model bill of lading and answer the following questions : Who is the shipper? Who is the consignee of the goods named? What is done with the original copy ? the memorandum ? the shipping order ? By whom is the bill of lading made out ? ADDITIONAL IH'SIXESS FORMS 181 KINDS ()K NOTES Joint Note. An individual note is a note in which one person is responsible for its payment. If in such a note the pronoun we were used in the body of the note, instead of 7, and if it were signed by Samuel A. Long and George Al. Watson, it would then be a joint note ; both of the signers would be responsible jointly, not individually, for payment. Joint and Several Note. If this same note should read Ninety days after date we jointly and severally ///'/ ////.^ t<> /"///, and it were signed by Samuel A. Long and George M. Watson, it would then be called & joint and several note; each party, individually, would be responsible for its payment, or both parties, jointly, would be responsible. It is a common practice in business for each member of a partnership to sign notes issued by the firm, thus making the notes of a partner- ship joint notes. Interest-Bearing Note. If a note bears interest, it must be so stated in -the note, and it is excellent business practice always to name the rate; that is, instead of writing with interest, write with, interest at o r / ( . If no rate of interest is stated in the body of the note, the legal rate is understood. Discount of Notes. Holders of notes often wish to secure their pay- ment before they are due, and many notes are offered for discount at banks. Generally the notes thus offered are non-interest-bearing, but notes that bear interest may be offered for discount. A person who sells a note to a bank must indorse it. If a note for $216.50, due Aug. 12, were offered by the holder, Arthur T. Young, for discount on June 13, and it was discounted by the bank, the holder would receive the face value of the note less the interest for the time between June 13 and the maturity of the note, Aug. 12, 60 da. In journal form the following would be the entry : Cash Interest Paid Notes Receivable 214.M 2.17 210.50 The compensation received by the bank is the interest on the note for the time it has yet to run, 60 da. If an interest-bearing note is discounted by a bank, the entry by the holder is not the same as for a non-interest-bearing note. Suppose you have an interest-bearing note dated March 1, at til) da., for $800, with interest at 6%. In discounting this note the value at maturity, that is. the face plus the interest for 60 da., is the sum on which the discount is reckoned. 182 PRINCIPLES OF BOOKKEEPING If tliis note is discounted March 31, make the following entry: Cash Interest Paid Notes Receivable Interest Earned 803.96 4.04 800 8 The credits are the face of the note and the interest for the full time, in this note, 60 da. The discount, the time from March 31 to April 30 (30 da.), is the period for which the discount is reckoned. The interest on $800 for 60 da. at 6% is $8; the sum of the face of the note and this interest is $808. The interest on $808 for 30 da. is $4.04, and the cash received by the holder is $803.96. Exercise 51. Discount of Notes For Written Worl: Make the proper entries for discounting the following notes : 1. A note dated Jan. 1, at 60 da., without interest, for $300. Dis- counted on Feb. 1, at 6%. 2. A note dated April 1, at 2 mo., with interest, for $600. Dis- counted on May 2, at Q%. 3. A note dated June 1, at 3 mo., without interest, for $500. Discounted on July 24, at 6%. 4. A note dated May 26, at 30 da., without interest, for $250. Discounted on May 26, at 6%. 5. A note dated March 1, at 2 mo., with interest, for $420. Dis- counted on April 1, at 6%. PARTIAL PAYMENTS When a part of the face value of a note is paid, it is called a partial payment. This amount is indorsed on the back of the note. ILLUSTRATION. A note for $1000 for 1 yr. is dated Jan. 1, 1918. On the back of this note are the following indorsements of partial payments : Received 4/1/18, $250 Received 7/1/18, The partial payments noted above would be journalized as follows: April Julv < 'ash Notes Receivable Cash Notes Receivable 250 200 250 200 ADDITIONAL BUSINESS FO1LMS 183 If the Notes Receivable account were debited for SlOOO, after posting the preceding entries the account would show the balance unpaid. The above statement makes no reckoning of the interest whatsoever. Exercise 52. Partial Payments For irrittm \Vorl; Indicate the correct indorsement, and make the proper entry for the following partial payment* : 1. A note for $750 for 1 yr. was dated March 1, 1918. The follow- ing payments were made on this note: June 1, 1918, $225; Sept. 1, 1918, |150; Nov. 1, 1918, $200. 2. A note for $800 for 10 mo. was dated Feb. 16, 1918. The following payments were made on this note: May 1, 1918, $250; Aug. 10, 1918, $300; Oct. 1, 1918, 8150. RENEWAL OF XOTES The renewal of notes is common in business. A man borrows a sum of money and issues his note. When this note becomes due, if he lacks -funds to pay it, he may issue a new note for the original one and pay the interest on the original note in cash. AVhen the original note was issued, the borrower would make the following entry: 1 Jan. 1 Gash Notes Payable 200 Borrowed of the First National Bank the sum of 200, and gave my note at 2 mo., with interest. When the new note is issued he would make the following entry: Mar. 1 Notes Payable 200 Notes Payable 200 Note at 2 mo., with interest, given to the First National Bank to cancel the note of Jan. 1. The original note should be marked Paid in the notebook. By this entry and record the books show that the original note has been disposed of and the new note has been entered as a complete and independent record. . 1 If interest is paid in advance, this entry would be modified. 184 PRINCIPLES OF BOOKKEEPING If a partial payment had been made on the original note, the new note would be issued for the balance remaining unpaid. Some bookkeepers mark the original note, in the notebook, as re- newed and do not make any entry or additional record for the new note. This practice is open to the objection of making one note of a given date the record of another note of a different date. If a partial payment had been made on the original note, the practice of marking it as renewed is open to a still more serious objection ; that is, the face of the new note is not the same as in the original note. TRADE DISCO UXT Trade discount is a discount allowed from the published catalogue and list price which enables a concern to change the selling price by altering the trade discount rather than by changing the published price. Trade discount usually is deducted before the invoice cost is entered in the books. To illustrate, the list price of an article may be $25, less a trade discount of 60%, 10%, and 5%. The actual invoice cost, the amount at which it is entered in the books, is $8.55, obtained as follows: $25 (list price) less 60% =$10; $10 less 10% =$9; $9 less 5% = $8.55, the selling price of the article. If it became necessary to increase the selling price to $9, the list price of $25 may be retained, but the percentages of the trade discount changed to 60% and 10%. Exercise 53. Discounts For Written Work 1. The catalogue price of an article is $50 ; the trade discount is 40%, 20%, 10%, and 5%. What is the invoice cost? 2. What would be the invoice cost of the article in problem 1 if the trade discount were changed to 40%, 20%, 5%, and 21 %? 3. The trade discount allowed on an article listed at $6.50 is 75%, 20%, 10%, 2%, and J%. What is the invoice cost of the article? 4. What would be the invoice cost of the article in problem 3 if the trade discount were changed to 75%, 20%, 10%, and 5%? Merchandise discount, allowed on an invoice for payment within a specified time, should not be confused with trade discount. If both trade discount and merchandise discount were allowed upon a purchase, the merchandise discount is calculated upon the invoice cost, after the trade discount has been deducted. 5. What would be the merchandise discount in problem 1 if the terms were 3/10, and the invoice were paid within the specified 10 da. ? CHAPTER XVII COMMERCIAL DRAFTS (CONTINUED) Sight Drafts. On preceding pages sight drafts are discussed. Be- cause of their importance a review of those pages is suggested, and then the following exercises may be worked out. Exercise 54. Review of Sight Drafts For Written Work 1. On May 6 you drew a sight draft on Warren & Son, in your own favor, for $325. a. Make your entry and the necessary explanations. It is assumed that the draft was paid when presented. Make Warren's entry. 2. On May 10 you drew a sight draft on Patterson & Co., Atlanta, Ga., for an invoice dated May 1, for $ 165. 20, in favor of yourself, and left it at your bank for collection. a. Write the draft. Show the necessary indorsement. b. Make the entry for each person when the draft is collected. 3. On May 15 you sold an invoice of merchandise to Geo. II. Powell, Cleveland, Ohio, amounting to $125.50, subject to a sight draft in 10 da. On May 24 you left the draft at your bank for collection. a. Trace the course of this draft until it is paid. Write the draft. b. Make your entry when your bank reports that it has collected the amount of the draft. c. Make Powell's entry when he paid the draft. 4. On May 20 you bought an invoice of goods of Thos. H. Head, Omaha, Nebr., amounting to $450, subject to a sight draft in 10 da. On May 31 A. A. Lewis, of your city, presented a sight draft drawn on you, in his favor, by Thos. H. Head, for the amount of the invoice. The draft was paid by a check on The Union Bank. a. Write the check. b. Write the draft, and make the entry for eacli person. If a sight draft was presented to the drawee, and payment, by request, was de- ferred for a number of days, it would be proper for him to accept the draft. After acceptance the sight draft may be treated as a time draft. Some states allow '> da. of grace on sight drafts. 185 186 PRINCIPLES OF P.OOKKEEP1NG Three-Party Time Drafts. The following is an illustration of a time draft having three parties, and the required entry for each party: Value receioed and chajge tQ\account of 00, balance in GO da. A draft similar to the above is mailed with the bill : The object of drawing a time draft in connection with a sale of merchandise is twofold : 1. When accepted, the draft serves as a written contract. 2. Since an acceptance is negotiable, it may be discounted and cash realized upon it before maturity. Necessary Entries for this Time Draft. The sale will be recorded in the sales book. The entry will be made when the draft is returned accepted. If this draft is discounted July 20, the date it is assumed they received it from L. B. Wade & Co. accepted, Quincy, Bradley & Co. will make the following 1 cashbook records: I.KFT SIDK RIGHT SIDE NOTE. Some business men prefer two distinct entries for the above, as follows : 1. Notes Receivable to L. B. Wade if Co. for the acceptance received. 2. Notes Receivable on the left side of the cashbook, $500, and I,,t<-r<:! on the right side for $2.08, when the acceptance was offered for discount. The making of the two distinct entries is recommended. 190 PKIXCIPLES OF IJOOKKEKPIXG Exercise 55. Time Drafts For Written U'url: SUGGESTION. These exercises may be used first orally. 1. On June 1 W. G. (fambee, Denver, Colo., drew on you at 45 days sight, in favor of Fred G. Mercier, of your city. Upon presentation, June 5, you accepted the draft. Face of the draft, $500. a. Write the draft and the acceptance. b. Make the entry for each person. 2. You bought of R. H. Macey & Co., New York, 750 yd. Scotch ginghams at 15 0, and received their 30-day draft dated June 4. This you accepted on June 6, for the amount of the invoice. a. Write the draft and your acceptance. b. Make your entry for the draft. c. Make R. H. Macey & Co.'s entry when they received the draft accepted. In the above it is assumed that R. II. Macey & Co. made one entry in their sales book at the time of shipping the goods, and another on the receipt of your acceptance ; also that you entered the invoice in your purchase book, and made a journal entry when the draft was accepted. i 3. You owed D. E. Smith, Seattle, Wash., $275, due in 30 da., and F. C. Kirkman, of Seattle, owed you $426.50, on account. You wrote a draft payable 30 da. after date, and sent it to Smith ; he presented the draft to Kirkman, who accepted it. This canceled your debt to Smith. a. Show the proper acceptance on the draft. b. Make the entry for each person. 4. S. C. Davis, St. Louis, Mo., owed you $500, due in 30 da. You needed the money at once, and drew a 30-day sight draft on him, in favor of yourself, and sent it to him. He accepted it and returned it to you. The draft was dated June 16, and the acceptance, June 18. a. Write the draft and show the acceptance. b. Make the entry for each person. 5. You drew a draft payable 30 da. after date on Frank H. Wilson, Trenton, N.J., in favor of yourself, for an invoice dated July 1, for $210.50, and left it at the Traders National Bank for collection. The bank presented the draft, and it was duly accepted. At maturity the Traders National Bank collected the draft, deducted 25 for charges, and remitted the balance to you. a. Write the draft and the indorsement. Show Wilson's acceptance and entry. COMMEBC1 A L I ) 1 { A FTS 191 b. Make your entry when notified that the draft had been accepted. c. Make your entry when you received the remittance. 6. You drew a draft payable 10 da. after date on James B. Stillman, Louisville, Ky., in favor of yourself, for foOO, and sent it to Stillmaii for acceptance. The draft is dated July (i, and the acceptance, July 9. He returned the draft, and you held it until it was paid at maturity. a. Write the draft, b. Show the acceptance. c. Make the entry for each person after acceptance. d. Make the entry for each person at the time of payment. Exercise 56. Review of Time Drafts For Written Work 1. Paid by check Arthur S. Harrington's sight draft on you, dated Birmingham, Ala., Aug. 5, in favor of Horace ('. Nelson, of your city, for $425. a. Write the draft and the check. b. Make the entry for each party. 2. On Feb. 2 Roger P. Mills, Oakland, Cal., accepted your draft at 60 clays sight, dated Jan. 29, in favor of yourself, for $900. The draft is payable at Alliance National Bank. a. Write the draft and show the acceptance. b. Show the maturity of the draft. c. Make the entry for each person when the draft was accepted. d. Make the entry for each person when the draft was paid at maturity. NOTE. When the time of a note or a draft is expressed in mouths, calendar months (that is, without regard to the exact number of days in each month) are used to determine the date of maturity; but when the time is expressed in days, the exact number of days is used. A note or a draft due two months from date matures on the corresponding day of the second following .month, provided there is a sufficient number of days in that month to make this possible. If there is not, it is due on the last day of that particular month. EXAMPLE. Notes and drafts dated Jan. 28, 29, -50, or .'51, and payable one month after date, would each mature on Feb. 28, except in leap year; but if payable ;>(> da. after date, they would be due Feb. 27, 28, and March 1 and 2, respectively. In most states the added day for leap years is not counted. For example, a note or a draft payable 30 da. after Feb. 25 in any leap year is due March 27, instead of March 26, as would be the case if the extra day were counted. It is suggested that some member of the class should consult a local banker on these points, and then report to the class. 192 PRINCIPLES OF BOOKKEEPING 3. On Feb. 1 you sold F. B. Norton, Buffalo, X.Y., on his acceptance at 60 da., 150 doz. cotton hose at $2.50. The draft drawn on the date of the sale, payable 60 da. after date, was received, accepted, 011 Feb. 5. a. Write the draft and show the acceptance. b. Make your entry for the draft. 4. On Feb. 6 you bought of the Mechanics National Bank, by check, a draft, No. 7521, on the Puritan National Bank, New York City, for $96.24, and remitted it to S. G. Metzer & Co., Cincinnati, Ohio, in full of account. Exchange on draft, 10<. a. Write a check on the Mechanics National Bank to cover the draft and the exchange. b. Write the New York draft. A. Turner, Cashier. c. Make your entry. CHAPTER XVIII SET V. JOBBING FURNITURE BUSINESS OPEXIX(i DorULK-EXTKY HOOKS The ability to open a set of books is of special importance to every student of bookkeeping. When business is begun with a simple cash investment, as has fre- quently been illustrated in the earlier pages of the text, the entry is easily understood. In the present illustrative examples both assets and liabilities are used at the time the books are opened ; hence it is well to state the principle which governs in these opening entries, as follows : Debit each asset, under its appropriate name, and credit the Proprietor for the total assets. Credit each liability, under its appropriate nnme, and del>it the Proprietor for the total liabilities. The student is requested to give special attention to the following exercise, as it illustrates the opening entries that will be used in subsequent sets. The following example illustrates the opening of double-entry books when the Proprietor begins business with both assets and liabilities: W. D. Fain began the Jobbing Furniture business July 1, with the following assets and liabilities : Cash in drawer, $2500 Merchandise, stock on hand. 81600 Jas. R. Milem's note, 8500 Real Estate, store lot, $ 1000 Building and Fixtures, inventory. 84000 Delivery Equipment, inventory, $325 Office Furniture, inventory, $260 The following owed him on account : Wm. K. Duffy, $1240 F. E. Bush, $400 C. O. Bond, $300 He owed the following on account : Ralph Dewey, $400 Arthur Lehan, $1600 His note in favor of Chas. B. Hawley. $1387 193 194 PKINCIPLES OF BOOKKEEPING The following is the entry for these assets and liabilities: Madison, Wis., Julv 1, 19 I, W. D. Fain, have this day begun : the Jobbing Furniture business with the following assets and liabilities : C. B. Cash 2500 Notes Receivable 500 Win. K. Duffy 1240 F. E. Bush 400 C. O. Bond 300 Mdse. Inventory 1600 Real Estate 1000 Building and Fixtures Office Furniture 4000 260 Delivery Equipment 325 W. D. Fain, Investment To credit the amount of these assets 12125 to W. D. Pain's Investment account. W. D. Fain, Investment 3387 Notes Payable Ralph Dewey Arthur Lehan 1387 400 1600 To debit the amount of these liabili- ties to If. D. Fain's Investment account. The cash item should also appear on the left side of the cashbook as follows: July .1. W. D. Fain Investment 2500 NOTE. The cash item is checked C.B. in the journal because it has been placed to the debit of the Cash account by the above record. W. D. Fain's Investment account has been checked ,/. in the cashbook because this item has been counted in determining the total assets in the journal. Exercise 57. Opening Double-Entry Books For Written Work On a sheet of journal paper or on paper ruled in journal form make entries for the following : 1. Chas. R. Osgood began the Furniture business July 1, with the following assets and liabilities: SET V. JOBBING FURNITURE BUSINESS 195 Cash in drawer, 1700 Deposit in The Union Hank, S'.)54.20 Chas. R. Dean's note, 500 Merchandise, stock on hand, 82(500 The following owed him on account : A. B. Knowlton, 81200 George K. Brown, 150 He owed the following on account : Foster, Hills & Co., 250 Traver, Bowe & Co., 8300 His note in favor of M. B. llanwuy, 600 2. James B. Ellis began business July 1, with the following assets and liabilities : Cash in drawer, 2000 Deposit in The Union Bank, 8870.45 Merchandise, stock on hand, $1300 F. M. Everett's note, S 1200 Office Furniture, inventory, 130 Delivery Equipment. 1 auto truck, 650 Real Estate, lot at 1625 Main St., $900 Building and Fixtures, inventory, 3600 The following owed him on account : E. T. Rose, 145.60 M. M. Parsons, 236.75 Daniel F. Mack's note, 425 He owed the following on account : Geo. L. Works, $212 A. C. Moore, $87.65 His note in favor of H. C. Baker, 250 3. Howard A. Johnson began business July 1, with the following assets and liabilities : Cash in drawer, $1750 Deposit in The Union Bank, $1278.50 Merchandise, steck on hand, 3875.40 He held notes against the following : John S. Gray, $625 A. S. Coleman, $450 Real Estate valued at $1000 Building and Fixtures, inventory, 4000 His note in favor of \V. A. Brown, $516.50 He owed the following on account : Samuel B. Lewis, $265 French & Co., $376.40 Office Furniture, inventory, $130 196 PRINCIPLES OF BOOKKEEPING PRELIMINARY EXPLANATIONS Object of the Set. This set is designed to illustrate the Jobbing Furniture business. A variety of advanced business forms is illustrated and explained, and a new book of record is used. The transactions deal largely with commercial paper, and the actual handling of money is avoided as far as possible. Notes, drafts, and acceptances, and the relations existing between the parties connected therewith, are made a prominent feature of the work. Books Used. In addition to the books with which the student is already familiar, the notebook is introduced. Notebook. This book is used for recording memoranda regarding all notes or acceptances which are received by the business, or which are issued by the business. It is generally divided into two parts, one for notes receivable and the other for notes payable. When notes or acceptances are received or issued, a full description of the paper NOTES No. DRAWEE OK MAKER DRAWER OK INDORSER FOR WHAT RECEIVED WHERE PAYABLE DATE Received Drawn 1 J. B. Maxwell On account Union Bank July 1 June 30 2 W. D. Rimbach J. B. Topham On account Union Bank 1 9 3 Walker, Brown & Co. Student's name Inv. July 8 July 8 NOTES No. To WHOM PAYABLE FOR WHOSE ACCOUNT FOR WHAT ISSUED WHERE PAYABLE DATE Accepted Drawn 1 Allen & Bailey Furn. Co. In full of acct. Union Bank June _'.-> 2 C. O. Boswell C. O. Boswell In full of acct. Union Bank June 25 20 3 Derby Mfg. Co. Derby Mfg. Co. Inv. July 9 Union Bank July *y July 1 6 Rent Paid For July 150 150 1 3 Office Furn. Office safe 250 250 1 7 Insurance Premium 1-20 120 3 3 J. O. Moran Sight draft paid 200 200 6 4 Bates & Co. Inv. 7/6, less 2% 1176 24 I! 1200 9 4 Allen & Go. Inv. 7/6, less 2% 852 60 17 40 1| 870 | 16 s Sund. Gen. Exp. Telegram ] 16 8 Office Supplies Stationery 4 50 4 50 18 8 Notes Pay. Accept, favor King 900 itOO 20 6 J. K. Levy Sight draft paid 1100 1100 21 6 Stoddard & Co. Inv.. 7/10, less 2% 1176 24 1200 23 8 Notes Pay. Favor E. C. Ellis 500 j| 500 23 8 Interest Paid On above 5 5 26 7 Salaries For the mo. 160 I 160 27 7 Fr't& Cart. Out For the mo. 10 1! 10 6605 10 (55 40 4570 2Hi(t 50 RIGHT-HAND PAGE OF CASH BOOK, SKT V 200 PRINCIPLES OF BOOKKEEPING SELLING PRICE LISTS FOR JULY, AUGUST, AND SEPTEMBER ARTICLE AND DESCRIPTION 1 2 3 4 5 No. 3116 Antique Card Table . . . " 2546 Antique Library Rocker . . " 693 Antique Wardrobe .... Blue Chenille Curtain . 19.75 12.00 25.75 5.00 15.00 22.50 2.25 21.25 15.75 25.00 20.00 11.00 110.00 100.00 5.50 50.00 10.00 10.00 23.25 9.50 25.00 6.00 40.00 5.00 21.25 1G.50 G5.00 80.00 195.00 12.25 10.00 9.75 14.25 5.25 37.00 16.00 17.00 28.00 18.75 38.00 92.00 24.75 3.25 4.00 5.00 613.50 29.25 27.50 5.00 15.00 24.00 1.85 21.99 9.50 24.50 26.00 19.00 98.00 152.25 4.10 39.75 10.00 9.00 19.25 9.00 23.75 6.00 23.50 9.00 20.00 17.25 65.00 75.00 145.00 12.00 14.75 9.75 14.25 12.00 43.50 10.00 9.00 21.00 18.75 15.50 137.50 22.00 3.00 3.00 4.00 15.00 11.75 29.50 5.00 11.75 21.50 1.75 22.00 10.79 39.00 20.00 9.50 90.50 175.00 3.60 33.75 10.00 17.25 21.00 7.50 21.50 6.00 35.00 10.00 19.25 19.00 65.00 112.50 135.00 10.00 18.59 9.75 14.25 10.00 50.00 9.50 6.00 21.50 18.75 19.75 139.50 25.00 2.50 3.00 5.00 17.50 22.00 28.75 5.00 13.00 23.00 2.22 20.50 15.65 19.90 26.00 9.65 110.00 125.00 3.15 39.75 8.50 22.50 22.00 9.50 15.00 6.00 39.50 6.00 15.00 13.50 65.00 60.00 120.00 15.00 15.00 9.75 14.25 9.50 65.00 7.50 9.50 17.50 18.75 20.00 75.00 15.00 4.00 2.75 5.50 24.00 13.50 22.90 5.00 12.00 21.G9 2.69 19.75 18.50 14.50 26.00 6.25 95.00 92.50 3.15 27.00 9.75 15.90 17.75 8.00 39.00 6.00 88.50 3.00 12.50 11.75 65.00 149.50 117.50 12.75 11.50 9.75 14.25 4.50 35.00 11.50 13.00 14.50 18.75 21.00 65.00 18.00 5.00 2.90 6.50 " 635 Brass Bedstead " 15 Cane-seat Dining Chair . . " 59 A Cheval Glass " 7 LA Child's Crib " 10 China Closet " 20 Corner Chair " 245 Cedar Chest " 16 A Complete Dining-room Set " 572 Drawing-room Suite . . 170 English Clothes Pole . . . 5932 Empire Toilet Table . . . " 3016 Fancy Rocker " 36 B Gentleman's Chiffonier " 6387 Hall Settle " 16 K Leather-seat Dining Chair " 169 c Library Table " 91 Lace Curtain " 16 Lady's Dressing Cabinet . " 835 Music Cabinet " 50 Mahogany Parlor Table 626 Mahogany Office Chair . . " 396 Mahogany Hall Stand . . . " 89 Mahogany Chamber Set . " 1008 Oak Sideboard 2229 Oak Dining Tablo .... 73 Oak Writing Desk .... " 68 Oak Bookcase . " 76 A Oak Chamber Set .... " 687 Ornamental Table .... " 20 D Parlor Cabinet " 821 Parlor Lamp " 176 c Piano Chair " 57 Reclining Couch " 17 A Roman Chair " 73 Sofa Bed " 5926 Secretary Book Cabinet . . " 65 Turkish Rocker " 27 c Woven-wire Mattress . . . " 16 Wool Mattress ... " 495 White Iron Bedstead . . . SET V. JOBBING FUHXITL'IIE BUSINESS 201 SELLING PRICE LISTS FOR JULY, AUGUST, AND SEPTEMBER 6 7 8 9 10 11 12 13 $19.00 $1G.50 $20.50 $23.20 24.00 15.00 818.50 S19.50 12.25 17.00 22.00 13.25 12.00 19.25 20.00 27.25 24.50 2G.75 28.00 29.00 27.50 29.50 24.00 30.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 13.50 12.25 14.00 14.50 17.00 11.00 12.75 14.75 22.00 23.50 22.50 20.00 21.50 21.75 22.25 23.25 2.10 2.45 1.90 2.45 2.50 l.SO 2.20 2.00 21.00 21.25 22.00 22.50 10.00 20.50 21.50 19.50 15.00 12.70 14.50 13.75 10,10 12.70 18.00 18.50 24.00 20.50 17.75 19.50 14.00 12.80 32.50 24.50 26.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 11.50 9.75 10.00 9.50 7.75 10.00 15.50 12.50 105.00 97.50 112.50 95.00 100.00 90.00 ' 94.50 110.00 97.50 100.00 115.00 102.50 92.50 120.00 135.00 137.50 4.00 5.20 3.65 3.00 4.25 5.00 ' 5.25 3.50 32.50 50.00 40.00 42.50 35.00 27.50 27.00 36.50 8.00 10.00 8.50 9.00 9.50 S.25 9.25 10.25 15.00 12.50 13.50 17.50 10.00 11.50 12.50 22.00 17.50 23.25 21.00 17.75 22.50 19.75 18.50 17.00 9.00 7.20 8.50 7.50 8.40 9.50 8.00 7.00 23.50 25.00 27.50 29.00 31.00 32.50 22.50 19.00 6.00 6.00 6.00 6.00 6.00 0.00 G.OO G.OO 35.00 25.00 27.00 33.50 38.00 . 25.00 34.00 39.20 5.50 6.00 5.00 7.00 6.50 9.00 10.00 8.75 20.00 21.25 19.50 13.00 15.50 17.50 19.25 15.00 15.00 12.00 16.40 14.50 18.50 17.00 15.00 11.50 65.00 65.00 65.00 65.00 65.00 65.00 05.00 65.00 95.00 140.00 87.50 90.00 100.00 75.00 110.00 105.50 150.00 125.00 145.00 120.00 135.00 137.50 120.00 1GO.OO 12.00 16.00 10.50 13.25 11.00 13.20 11.00 13.20 13.00 17.50 11.00 14.00 10.50 12.40 18.00 17.00 9.75 9.75 9.75 9.75 9.75 9.75 9.75 9.75 14.25 14.25 14.25 14.25 14.25 14.25 14.25 14.25 6.50 7.00 5.00 4.50 8.00 7.50 9.00 10.00 40.00 37.50 50.00 52.50 60.00 02.00 05.00 03.50 8.00 7.50 12.50 15.00 13.50 12.00 10.50 14.00 10.00 12.00 14.50 9.50 8.50 13.00 11.00 9.50 20.00 27.00 18.00 14.50 16.20 15.90 21.50 25.00 18.75 18.75 18.75 18.75 18.75 18.75 18.75 18.75 22.00 35.00 21.20 24.60 30.50 22.70 10.25 28.00 100.00 96.00 125.00 132.50 91.50 124.00 110.00 112.50 21.00 16.25 14.75 24.20 18.75 19.40 22.50 23.00 3.50 4.00 3.75 4.50 5.00 5.50 2.50 3.25 3.00 4.00 2.90 3.25 2.70 3.20 4.00 3.00 5.00 4.00 6.00 4.50 5.25 6.25 4.25 G.20 202 PRINCIPLES OF BOOKKEEPING SELLING PRICE LISTS FOR JULY, AUGUST, AND SEPTEMBER ARTICLE AND DESCRIPTION 14 15 16 17 No. 3116 Antique Card Tabh^ $21.60 $13.50 $16.50 $2000 2546 693 Antique Library Rocker .... Antique Wardrobe 14.50 25.00 18.00 26.00 26.00 25.00 17.50 2750 Blue Chenille Curtain 5.00 5.00 5.00 500 " 16s Brass Easel 12.50 16.00 13.00 1500 " 635 Brass Bedstead 21.00 20.50 24.00 21.50 15 " 59 A Cane-seat Dining Chair .... Cheval Glass 1.75 23 00 1.95 23 50 2.00 21 50 2.90 24 25 " 71 A Child's Crib 16 75 16 40 15 75 1725 10 China Closet 27 50 30 00 25 00 33 60 ' 20 Corner Chair 26 00 26 00 26 00 26 00 < 245 Cedar Chest 14 25 10 75 11 20 1500 < 16 A < 572 Complete Dining-room Set Drawing-room Suite 88.50 96.50 94.25 99 50 106.00 15225 91.50 125 00 ' 170 English Clothes Pole 3.60 420 4 30 540 < 5932 Empire Toilet Table . . 34 00 S 50 40 00 37 50 ' 3016 Fancy Rocker 10.00 9 75 800 9 50 " 36 B Gentleman's Chiffonier 20.00 21 50 16 40 21 20 ' 6387 Hall Settle 17 50 20 00 17 50 19 00 16 K < 169 c ' 91 Leather-seat Dining Chair . . . Library Table Lace Curtain 8.75 25.00 6 00 9.50 35.00 6 00 9.50 25.50 6 00 7.70 23.00 6 00 < 16 < 835 Lady's Dressing Cabinet .... Music Cabinet 32.00 4 50 30.00 7 00 34.00 5 50 31.50 7 00 ' 50 < 626 Mahogany Parlor Table .... Mahogany Office Chair 21.00 12.00 18.00 15 50 20.00 12 50 17.50 14 50 < 396 Mahogany Hall Stand . 65 00 65 00 65 00 65 00 ' 89 < 1008 Mahogany Chamber Set .... Oak Sideboard 112.50 150 00 125.00 13000 85.00 1 9 5 00 142.00 147 50 ' 2229 Oak Dining Table .... 14 00 19 50 12 50 14 90 ' 73 Oak Writing Desk 15 50 16 50 13 75 17 50 ' 68 Oak Bookcase . 9 75 9 75 9 75 Q 75 ' 76 A Oak Chamber Set 1425 14 25 14 25 1425 < 687 Ornamental Table 9 50 8 50 1000 750 ' 20 D Parlor Cabinet 45 00 47 50 50 OQ 43 50 ' 821 Parlor Lamp 16 00 10 00 8 25 10 50 < 176 c Piano Chair 700 10 00 9 50 13 00 < 57 Reclining Couch 2750 50 21 40 27 90 < 17 A Roman Chair 18 75 18 75 18 75 18 75 73 Sofa Bed 16 00 19 75 22 50 31 50 ' 5926 ' 65 Secretary Book Cabinet .... Turkish Rocker 75.00 2000 65.00 23 75 80.00 29QO 90.00 16 60 27 c Woven-wire Mattress 4 20 2 50 9 75 3 45 ' 16 Wool Mattress .... 290 3 00 2 90 4 00 ' 495 White Iron Bedstead . . 5 50 4 70 4 90 4 40 SET V. JOBBING FURNITURE BUSINESS 203 SELLING PRICE LISTS FOR JULY, AUGUST, AND SEPTEMBER 18 19 20 21 22 23 24 25 $15.20 $22.00 $21.50 $24.00 $23.50 $18.00 $19.50 $22.50 22.00 16.00 24.00 19.00 28.20 21.00 20.40 30.00 26.00 24.00 29.00 28.00 22.50 27.50 22.90 25.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 15.40 11.50 14.20 10.25 13.25 12.00 13.40 14.50 20.00 23.00 21.00 21.40 23.50 21.75 22.25 20.50 1.80 2.30 1.90 2.40 2.30 1.70 1.95 2.25 23.00 20.00 19.00 19.50 23.50 19.75 22.00 22.50 15.40 10.70 12.40 13.75 10.20 9.90 11.75 12.90 37.50 17.50 18.50 20.70 24.90 23.20 15.00 17.20 26.00 26.00 20.00 20.00 20.00 20.00 20.00 20.00 7.50 6.75 8.90 11.20 18.00 12.00 13.75 14.50 96.40 100.00 89.50 92.00 98.00 97.50 109.20 107.00 100.00 160.00 142.50 94.50 102.50 99.50 110.00 120.00 3.90 3.75 4.60 4.40 5.50 4.20 3.10 3.35 27.50 35.00 29.50 3.3.50 28.00 35.50 45.00 50.00 10.00 9.75 8.50 9.25 10.50 8.25 10.25 9.00 22.00 23.00 15.40 13.90 12.50 9.90 10.50 11.80 21.00 22.50 23.25 20.00 19.75 17.75 20.50 23.00 6.45 9.20 8.80 7.00 9.30 9.50 8.50 9.00 27.00 22.50 30.00 31.50 28.00 21.00 17.50 35.00 6.00 6.00 6.00 6.00 0.00 6.00 0.00 6.00 24.50 23.90 2G.20 32.00 39.00 37.50 39.00 40.00 9.50 8.00 5.00 10.00 8.50 0.50 4.50 7.50 16.00 19.25 15.50 18.50 21.25 17.00 10.25 20.50 16.00 17.20 11.70 19.20 18.00 17.50 13.30 14.75 65.00 65.00 65.00 05.00 05.00 05.00 05.00 05.00 130.00 117.50 94.40 97.50 124.00 101.75 109.00 114.20 122.50 165.00 175.00 127.50 162.50 IbO.OO 187.50 190.00 16.20 12.75 10.80 11.40 13.65 14.75 11.50 10.50 14.65 11.50 10.80 13.75 15.60 18.50 17.90 15.00 9.75 9.75 9.75 9.75 9.75 9.75 9.75 9.75 14.25 14.25 14.25 14.25 11.25 14.25 14.25 14.25 9.50 8.25 7.75 9.20 11.00 10.50 7.20 6.50 32.50 28.20 31.50 43.50 52.00 57.50 00.00 35.50 9.75 12.25 11.50 13.20 8.75 7.50 11.20 14.25 14.20 15.00 12.50 9.00 7.80 10.50 15.25 10.00 24.20 21.00 25.20 14.90 13.80 17.00 20.50 20.75 18.75 18.75 18.75 18.75 18.75 18.75 18.75 18.75 23.90 17.70 16.90 26.25 27.50 19.40 20.00 22.50 88.40 97.50 101.00 74.20 81.80 135.00 127.50 92.20 15.50 24.80 16.75 23.90 22.60 23.20 18.80 17.90 4.15 3.65 4.40 5.25 4.80 3.90 3.35 4.15 3.80 2.95 3.90 3.25 3.15 3.65 3.00 4.00 6.60 4.25 5.35 6.40 6.60 5.25 5.10 J.75 204 PRINCIPLES OF BOOKKEEPING BUYING PRICES FOR JULY, AUGUST, AND SEPTEMBER ARTICLE AND DESCRIPTIOX No 3116 Antique Card Table $14 50 u 2546 Antique Library Rocker 9.00 il 693 Antique AVardrobe .... 9 1 75 u 16 B Blue Chenille Curtain Brass Easel . 4.00 1 50 a 635 Brass Bedstead 15 75 tt 15 Cane-seat Dining Chair 1 50 U 59 A Cheval Glass .... 15 5 u 71 A Child's Crib ... 11 50 it 10 China Closet ... 17 25 u 20 Corner Chair .... . . 90 oo ff 245 Cedar Chest 8 50 (f 16 A Complete Dining-room Set 7800 (i 572 Drawing-room Suite .... . . 75 00 (l 170 English Clothes Pole 3 50 u I 5932 3016 Empire Toilet Table Fancy Rocker 39.00 7 50 I 36 B Gentleman's Chiffonier 750 I 6387 Hall Settle 16 50 I 16 K Leather-seat Dining Chair .... 6 50 ( 169 c Library Table 00 ( 91 Lace Curtain 4 50 It 16 Lady's Dressing Cabinet 30 00 I 835 Music Cabinet 4 00 , 50 Mahogany Parlor Table 15 25 ( 626 Mahogany Office Chair 1250 I 396 Mahogany Hall Stand 43 00 I 89 Mahogany Chamber Set 60 00 I 1008 Oak Sideboard 150 00 < 2229 Oak Dining Table 9 75 73 Oak Writing Desk 750 < 68 Oak Bookcase 750 ( 76 A Oak Chamber Set 1100 I 687 Ornamental Table 4 00 ( 20 D Parlor Cabinet 25 00 ( 821 Parlor Lamp 13 00 ( 170 c Piano Chair 12 50 ( 57 Reclining Couch 21 00 t 17 A Roman Chair 15 00 ( 73 Sofa Bed 30 00 ( 5926 Secretary Book Cabinet . . 6500 65 Turkish Rocker 18 00 u 27 c Woven-wire Mattress . . . 175 u 16 Wool Mattress . . . 225 u 495 White Iron Bedstead . . 3 75 SET V. JOBBING FURX1TUKU BUSINESS 205 WORK FOR JULY Incoming Business Forms for July. A tablet, separate from the text, containing all the incoming business forms, is available for writing this set when business practice is used. A list of the forms is given, so that the text affords all material for writing the set it' business practice is omitted. These forms also afford an opportunity for the study of the set as a whole before writing it, thus meeting a requisite for adequate drill work, whether business forms are used or not. The text is complete in itself. The list of incoming business forms for July is given on pages 205-207. If the set is written without using the tablet of printed incoming forms, it will be necessary for the student to prepare them before he begins to- write. the set. After these forms are written they should be placed in the envelope marked Incoming Business Forms, and withdrawn as they are needed when writing the set. Whatever plan the instructor may adopt, either using business prac- tice or writing the set as a study of the theory of bookkeeping only, this material is immediately at hand for reference, for class drills and discussion, for reviews during the progress of the set or when the set is finished. This plan of the text does away with the necessity of using- a pad of vouchers which are wholly independent of the text. In all the following invoices the student, as proprietor, is represented as the purchaser. Form 1. Note of J B. Maxwell, dated City, June 30, drawn in your favor, payable at The Union Bank 20 da. after date-, with interest at 6%, $500. Form 2. J. B. Topham's draft, in his own favor, on AV. D. Ivimbaeh, City, transferred to you by full indorsement. Draft is for $450 and is dated City, June 9, payable at The Union Bank, P>0 da. after date. Form 3. Bill of Thorp, Martin & Thorp, dated 798 Franklin St., City, July 1. Terms: cash, less 2%. Items as follows : 4 M Letterheads at $2 1 Ledger, $(> 2 M Envelopes at $1.50 1 Journal, $o 1 M Billheads, $2 1 Cashbook, $:).r><) 2 gro. Steel Pens at 75 1 Sales Book, $:S 1 qt. Writing Fluid, 75 1 Notebook, $1.50 1 doz. Pencils, 300 1 Purchase Book, $1 Deduct the discount on the bill and receipt it. 206 PRINCIPLES OF BOOKKEEPING Form 4. Invoice of Cobb, Bates & Co., dated 62 Portland St., City, July 6. Terms : 3/10, net 30 da. Items as follows : 9 #5932 Empire Toilet Tables 10 #76 A Oak Chamber Sets 12 #36 B Gentleman's Chiffoniers 5 #1008 Oak Sideboards 5 #16 Lady's Dressing Cabinets 6 #693 Antique Wardrobes Form 5. Invoice of Derby Mfg. Co., dated 17 Portland St., City, July 9. Terms : draft at 10 da. for the amount of the bill, less 2%. Items as follows : 4 #20 D Parlor Cabinets 10 #3110 Antique Card Tables 4 #169 c Library Tables "> #89 Mahogany Chamber Sets 10 #16 A Complete Dining-room Sets Do not deduct the discount on the bill ; a draft will be attached when it comes into your possession. Form 6. Draft of Derby Mfg. Co., dated City, July 9, payable at 10 days sight, on you, in favor of themselves, for the net amount of the above bill. Form 7. J. 0. Moran's sight draft, dated City, July 10, on you, in his own favor> $200. Form 8. Check of J. E. Bender, dated Troy. July 13, on Traders National Bank, in your favor, $1169.09. Form 9. Invoice of W. H. Stearns & Co., dated Chicago, 111., July 9. Terms : 30-day draft for one half of the bill ; balance in 45 da. Items as follows : 20 #626 M. Office Chairs 20 #3016 Fancy Rockers. 5 # 2546 Ant. Lib. Rockers 100 # 15 C. Dining Chairs 100 # 16 K L. Dining Chairs 10 #2229 O. Dining Tables Form 10. W. H. Stearns & Co.'s draft, dated Chicago, 111., July 9, payable 30 da. after date, on you, in favor of themselves, for one half the amount of the above invoice. Form 11. Your draft at 30 da. from July 10 on Samuel W. Bradley, Bedford, in favor of yourself, accepted, for $840.25. Form 12. Note of J. E. Farley, dated City, July 12, at 30 da., in favor of Samuel W. Bradley, Bedford, for |179. Transferred to you by full indorsement. Form 13. A bank draft drawn by Traders National Bank, Springfield, on Chemical National Bank, New York, July 16; drawn payable to G. H. Ingalls & Co., A. B. Turner, Cashier, for $1085.19. Transferred to you by full indorsement. Form 14. Invoice of C. W. Allen & Co., dated 46 Merrimac St., Trenton, N.J., July 9. Terms: 2/30, net 60 da. Items as follows: 24 #27 c Woven-wire Mattresses 10 #71 A Child's Cribs 24 #16 Wool Mattresses 24 #495 White Iron Bedsteads 50 # 635 Brass Bedsteads SET V. JOBBING Fl'RNITl'IlE BUSINESS 207 Form 15. Invoice of William Leavens & Co., dated 32 Canal St., New York City, July 11. Terms : sight draft in 15 da. for the amount of the bill, less 2 r / Items as follows : 12 #73 Oak Writing. Desks :} #5() per month as salesmen; Michael Donovan at $30 per month as delivery man; Daniel L. Coon and Geo. W. Ainsley at $48 and $40 per month, respectively, as upholsterers and finishers. A memorandum of the above may be made by the student and filed with the incoming papers. Letters Ordering Goods. In writing letters ordering goods, observe the following: 1. Arrange the items one on a line. 2. Give shipping directions in out-of-town orders. 3. In case of a first order: a. Give satisfactory references. b. State how you intend to pay. 210 PRINCIPLES OF BOOKKEEPING 4. When you name prices, state at what point you expect the goods f. o. b. This is a matter of importance, as it affects the cost of the goods. 5. Always be definite with regard to the quality and the quantity of the articles ordered. 6. If it is a special order, state the purpose for which the goods are intended. 7. State, if necessary, the exact date on which the goods must reach you, 8. Study the following model letter: Hartford, Conn., July 1, 19 Mr. Harold M. Bates 136 Main St. Grand Rapids , Michigan Dear Sir : Please ship the following goods by freight, subject to your beet cash discount : 10 #5926 Secretary Book Cabinets 15 #396 Mahogany Hall Stands 20 #73 Oak Writing Desks 10 #57 Reclining Couches 50 #65 Turkish Rockers 25 #68 Oak Bookcases 5 #73 Sofa Beds I am permitted to refer you to the First National Bank, of this city, as to my business standing. Yours truly, MODEL LETTER ORDERING GOOI>6 July 3 Write letters, ordering the following goods: 1. Of Cobb, Bates & Co., 62 Portland St., City, the goods outlined in Form 4. . Give references and ask for their best cash discount. NOTE. In this set no entry will be made at the time of ordering goods. Almost all of the orders are sent to out-of-town firms, and sufficient time is allowed to elapse for the student to receive the invoice and the goods before making any entry. SET V. JOBBING FURNITURE BUSINESS 211 2. Of William Leavens & Co., o2 Canal St., Xe\v York City, the goods outlined in Form lo. Offer to honor their sight draft in l.~t da. for tin- amount of the hill less the regular discount for payments within 15 da. As you are a stranger to this firm, give New York City references instead of local references. 3. Of C. W. Allen & Co., 40 Merrimac St., Trenton, X.J., the goods outlined in Form 14. You have had dealings with this firm before and expect them to name their regular terms. 4. Of Derby Manufacturing Co., 17 Portland St., City, the goods outlined in Form 5. Ask them to allow you their usual discount, and to draw on you for the amount of the bill at 10 da. from date. 5. Of W. H. Stearns & Co., Chicago, 111., the goods outlined in Form 9. Tell them that you will honor their 30-day draft for one half the bill, and will pay the balance in 45 da. July 5 Cancel your indebtedness to Paine Manufacturing Co., Bedford, by a sight draft on Samuel W. Bradley of the same place. Write a letter of remittance and send it with the above draft to Paine Manu- facturing Co. Also write a letter to Samuel W. Bradley, notifying him of the draft you have drawn on him at sight. Make the journal entry. The amount may be found on page 208 under the liabilities. Model Letters. The following models suggest what the above letters should contain : Boston, Mass., July 5, 19 0. M. Behrns & Go. Syracuse, N.Y. Gentlemen : Inclosed find a sight draft on K. P. Shedd, of your city, drawn in your favor, for Three Hundred Fifty (350) Dollars, in full settlement of account to date. Very truly yours , E. R. Gaylord & Co. per 7W. 212 PRINCIPLES OF BOOKKEEPING Boston, Mass., July 5, 19 Mr. K. P. Shedd Syracuse, N.Y. Dear Sir : We have this day drawn upon you at sight, in favor of 0. M. Behrns & Co., of your city, for Three Hundred Fifty (350) Dollars. Very truly yours , E. R. Gaylord & Co. per 7W. July 6 David E. Teeter, 360 Main St., City, orders the following goods. The order is filled at the prices given herewith: 10 #5932 E. Toilet Tables at $50 3 #89 M. Chamber Sets at $80 1 #16 A C. Dining-room Set, $110 2 #1008 O. Sideboards at $195 1 #396 Mahogany Hall Stand, $65 Terms : 3/5, 1/30, net 60 da. NOTE. The space allowed for recording the terms of sale on a bill is generally limited, and bookkeepers find it necessary to use symbols and abbreviations to indicate them. The following list explains the meanings of the abbreviations for terms used in this work : Net 30 da. means that the bill is to be paid in thirty days without discount. 1/30 means that 1% discount will be allowed if the bill is paid within thirty days. 3/10, net 30 da. means that 3% discount will be allowed if the bill is paid within ten days, or the amount of the bill will be due in thirty days without discount. Benj. P. Freeman & Co., 924 East St., City, order the following goods : 12 #170 Eng. Clothes Poles 12 #495 W. Iron Bedsteads 5 #245 Cedar Chests 25 #821 Parlor Lamps Fill the order. Terms: sight draft hi 10 da., less 3%. Make out the bill, have it approved by the instructor, and then copy it into the sales book. Do not deduct the discount on the bill nor in the sales book. Draw a sight draft in favor of yourself, dating it 10 da. ahead. Draw the draft for the net amount of the bill ; that is, take out the 3%. Remember that this is drawn as a sight draft, but it is dated 10 da. ahead of the date you are working on. On July 15 instructions will be given for the collection of this draft by The Union Bank. SET V. JOBBING FU UN ITU RE BUSINESS 213 July 8 Walker, Brown & Co., Albany, order: % 5 #20 D Parlor Cabinets 10 #835 Music Cabinets 24 #176 c Piano Chairs 15 #821 Parlor Lamps Fill the order. Terms: draft at 30 da, from date. The goods called for in the above order will be sent by freight, and it will be necessary for you to prepare a bill of lading and the duplicates, the shipping order, and the memorandum. Study carefully the following illustration and the explanation. This is a new feature of your work ; be sure you understand it thoroughly. In the box of business forms there is a pad of bill of lading blanks, and full instructions for using this form. Use the pad marked Strait///!, BUI of Lading. Order Bills of Lading. Refer to the explanation of the straight bill of lading given on page 178 before reading the following paragraphs. Study these instructions with care. The order bill of lading is also drawn up in a set of three papers, but in this form the bill of lading must be printed on yellow paper and the duplicates on blue paper. The order bill of lading is negotiable by indorsement, and is extensively used in the shipping of freight that is not to be delivered until it is paid for. When the order bill of lading is used, the shipment is termed a shipper s order, and is recorded as a C. O.D. account. When an order bill of lading is used, it is customary to draw a sight draft, attach it to the bill of lading, and make the collection through a bank. The name of the bank is written after Consigned to Order of, and the name of the consignee after Notify. The consignee cannot get the bill of lading until he pays the draft, and he cannot get the goods until he surrenders the bill of lading. For this reason, the shipper's order is a C.O.D. transaction. Prepare the straight bill of lading and the duplicates ; sign the ship- ping order and the duplicates, and then have the instructor or the freight agent sign the bill of lading and the memorandum. Place the bill of lading with the invoice, inclose both in an envelope addressed to Walker, Brown & Co., and hand it in. The shipping order should be left with the freight agent, and the memorandum placed on lile by the shipper. 214 PRINCIPLES OF BOOKKEEPING The bill of lading must be used in connection with all out-of-town shipments, the straight bill of lading for general orders, and the order bill of lading for all orders that are not to be delivered until the goods are paid for. Observe this distinction carefully. Draw a draft, in favor of yourself, payable 30 da. from the date of the invoice. Indorse the draft properly and leave it with your bank for acceptance and collection. It should be borne in mind that Walker, Brown & Co. have agreed to accept the draft, and it will be honored in due course. Make no entry in the check book. Some banks make a memorandum entry in the pass book for paper left for collection, but do not extend the amount into the money column. The journal entry will be made when the bank informs you that the draft has been accepted. The straight bill of lading will be used unless you are otherwise instructed. Leave W. D. Rimbach's acceptance at the bank for collection. Indorse it and record in the Date sent to Collect column of the notebook. July J. E. Bender, Troy, has agreed to honor your sigh't draft, in favor of Stoddard & Co., for $300. Write the draft and the letters, and hand them in. Make the proper entry in the journal. The Metropolitan Carting Co. has delivered to you the goods ordered of Cobb, Bates & Co. on July 3. Look up the invoice, Form 4. Enter it in the purchase book. Entries in Purchase Book. In entering purchases in the purchase book observe the following : 1. In actual business never enter a bill in the purchase book until the goods have been received. Sometimes it may happen that more than one bill is sent for the same goods, or perhaps a bill is sent and the goods are not delivered. 2. When the goods have been received, the invoice for the same should be cheeked. 3. If everything called for in the invoice has been received, then the bill should be compared with the order to find out whether or not you have received the goods you ordered. 4. If the items on the bill agree with the order, next observe if the prices and the terms are what you bargained for. SET V. JOBBING FU11NITUKE BUSINESS 215 5. Examine all the extensions of the invoice carefully, and, if every- thing is found to be correct in every detail, record it in the purchase book. 6. If the checking shows any irregularities on the bill or in the goods received, do not record it in the purchase book, but hold it, and immediately notify the persons of whom you are purchasing the goods, and await their reply. The goods ordered of the Derby Manufacturing Co. have been delivered. Look up the invoice, Form 5, and the draft sent with it, Form 6. Record the invoice in the purchase book. Accept the draft, payable at The Union Bank, and make the journal entry. Record the acceptance in the notebook. Place the draft in an envelope, address it, and hand it in. No deduction is made on the face of the invoice ; every invoice is to be entered in the purchase book at its face value. The following is the proper form of journal entry for the acceptance : Derby Mitf. Co. ' Mdse. Disc, on Purchases Xotes Payable The Union Bank reports that Walker, Brown & Co. has accepted your draft for the amount of the invoice of Jvl;i 8. Make the entry in the journal, and record in the notebook. Refer to the model notebook, pages 196 and 197. W. D. Rimbach's acceptance has been collected. Have the amount recorded in your pass book, and make the record in the check book. The following memorandum may be entered on the reverse stub of the check book. Credit JVotes Receivable on the left side of the cashbook. Mark the note Paid in the notebook. July 76> Pay by check J. O. Moran's sight draft on you, in favor of himself, for $200, Form 7. Write the check and make the cashbook entry. Hand in all outgoing papers. 216 PRINCIPLES OF BOOKKEEPING Samuel W. Bradley, 126 James St., Bedford, orders the following goods. The order is filled at the prices given herewith : 5 #3116 A. Card Tables at 19.75 3 #1008 0. Sideboards at $195 6 #687 O. Tables at $5.25 5 #169 c Library Tables at $25 Terms: draft at 30 da., drawn in favor of yourself. Write the draft and have it approved. Inclose the invoice, the bill of lading, and the draft in an addressed envelope, and hand it in. Make no entry for the draft until it has been returned accepted. July 11 Telegraph Randall Manufacturing Co., 126 East 126th St., New York, ordering: . 50 #65 Turkish Rockers 10 #57 Reclining Couches 5 #73 Sofa Beds Do not use more than twenty words for the message. Pay 75 charges in currency. Debit Sundry General Expense in the cashbook. NOTE. The telegram is illustrated and discussed in Appendix F. July 12 J. E. Bender, 127 Main St., Troy, orders : 15 #396 Mahogany Hall Stands 9 #68 Oak Bookcases 10 #76 A Oak Chamber Sets Fill the order. Terms: 3/5, 2/10, net 30 da. Prepare the bill of lading as under July 8. July 13 Receive a check from J. E. Bender for the amount of the invoice of July 12, less 3%, Form 8. Enter the check on the left side of the cashbook. Refer to the second entry in the model cashbook, under Cash Received, page 198. Merchandise Discount. This discount is an allowance for the pay- ment of an invoice within a specified time from its date. It is usually the result of giving optional terms of settlement to the buyer, as 3/10, 1/30, n/60; that is, a reduction of 3% if payment is made within 10 da., or 1% if paid after the 10 da. and within 30 da., or the face of the bill if payment is made after the 30 da. and within 60 da. Merchandise Discount is entered as follows: that which is allowed on purchases as Merchandise Discount on Purchases; that which is allowed on sales as Merchandise Discount on Sales. SET V. JOBBING FUKNITU11E BUSINESS 217 Because the buyer has this option the invoice is billed without reduction, as it is not known which option the buyer will choose. If he pays within the time for which the discount is allowed, a record is made of this discount as a regular entry, under the title Merchandise Discount on S. Li/inan under C.O.I). Account.*, as follows: '7 July 25 Your acceptance in favor of C. O. Bos well, and your note, with inter- est for 1 mo., in favor of Allen & Bailey Furniture Co., are due to-day. Issue checks in payment. Make the entries in the cashbook and the check book. Mark the acceptance and the note Paid in the notebook. Receive the goods ordered of S. T. Udell & Co., Chicago, 111., on July 15, Form 18. July 26 P. R. Brown, Rochester, orders : 25 #635 Brass Bedsteads 25 #6387 Hall Settles Fill the order, subject to the order of The Union Bank. 222 PRINCIPLES OF BOOKKEEPING Write a sight draft for the amount of the invoice, indorse it to The Union Bank, attach it to the bill of lading (which is made out accord- ing to the directions in the paragraph below), and then leave it with the bank for collection. Send the invoice to your customer in the usual way. Enter in the sales book as a C.O. D. item. See script illustration under July 24. Draft with Bill of Lading Attached. For the convenience of shippers when the responsibility or the credit of the buyer is limited or when his business standing is unknown, railway and steamship companies have provided a way whereby goods may be sent by freight so that the buyer cannot obtain possession of them without first paying for them. This method is commonly known among business men as ship- per's order, and is analogous to C.O.D. shipments in the express busi- ness, as explained in the transaction of July 24. Throughout the text, transactions of this kind will be entered as C. 0. D. Accounts. In the shipment to P. R. Brown of July 26 it will be necessary to make out an order bill of lading. This form is described on page 213. Observe the following directions : After the words Consigned to Order of write The Union Bank, and on the line following write your address. After Notify write P. R. Brown, and on the line following write Rochester, N. Y. The collection will be made by your bank as follows : Your bank will indorse both the draft and the bill of lading, and send them to its correspondent at Rochester. When the Rochester bank receives the draft, it will notify Brown. If he pays it, the bank will give him the freight receipt, which receipt, when properly indorsed and given to the transportation company, will give him access to the goods. Transportation companies will not deliver goods without obtaining an order bill of lading, for they would thereby render themselves liable to the shippers should the consignee not pay for the goods. July 27 Pay William Leavens & Co.'s sight draft, in favor of themselves, for the amount of the invoice dated July 11, Form 19. Verify the amount of the draft by comparing it with the invoice in the purchase book. If correct, write a check for it. Make the cashbook entry. Write Paid across the face of the draft and keep it as a receipt. SET V. JOBBING FUKXITL'KE BUSINESS 223 July ,M Receive returns for the C.O.I), shipment of July 24, Form 20. Take the money out of the C.O.JJ. envelope and place it in the Business Cash envelope. (If the incoming business forms are used, the envelope containing the currency will be found in the back of the tablet.) Enter in the cashbook. Refer to the model. Receive a check of David E. Teeter, iu full for the invoice of July 0, less 1%, Form 21. Examine the check and verify the amount before making the entry in the cashbook. Draw cash, for private use, $75. Enter in the cashbook under Dra icing account. Take $75 from the Business Cash envelope and place it in the Per- sonal Cash envelope. July 31 Pay by check the bill of the Metropolitan Carting Co., for freight and drayage to date, $169.25, Form 22. Debit Freight and Cartage Out, $38.15, and Merchandise Purchases, $131.10. The first of these terms applies to the freight and cartage which the business has paid on the merchandise sold; the second, to the freight and cartage paid on the merchandise bought. Pay by check the gas bill for the month, $7.07, Form 23. Debit Sundry General Expense for the gas bill. Pay by check salaries to date, as follows: Harry K. Sutton $60 Michael Donovan .30 Harvey L. Grant 50 Daniel L. Coon 48 Geo. W. Ainsley 840 Total the five checks, and enter under Salaries. Deposit David E. Teeter's check and all the currency on hand. Closing the Work for July. Proceed to close the month's work as follows : 1. The monthly bank statement should be made. 2. Prove the cash, and balance and post the cashbook. Note that the first two columns, on either side, balance the last two columns. The directions for posting the cashbook are given on page 198. 224 PRINCIPLES OF BOOKKEEPING in the following order: Student, Investment 1 Student, Drawing Harvey L. Manning, Investment Harvey L. Manning, Drawing Profit and Loss 3 Sundry Expense Inventories Merchandise Sales Interest Earned Merchandise Discount on Purchases Merchandise Purchases Salaries Freight and Cartage Out Delivery Expense Insurance Office Supplies Sundry General Expense Merchandise Discount 011 Sales Interest Paid Collection and Exchange 3. Open accounts in the ledger Cash Notes Receivable 1 Accounts Receivable 2 David E. Teeter Benj. P. Freeman & Co. Walker, Brown & .Co. Samuel W. Bradley J. E. Bender E. F. Green & Co. G. H. Ingalls & Co. M. N. Overman C.O.D. Accounts Chas. B. Sherman M. L. Covey & Co. J. B. Cox & Co. Foley Bros. Merchandise Inventory Real Estate . Buildings and Fixtures Office Furniture Delivery Equipment Notes Payable 1 Accounts Payable 2 Cobb, Bates & Co. Derby Mfg. Co. W. H. Stearns & Co. C. W. Allen & Co. William Leavens & Co. Randall Mfg. Co. S. T. Udell & Co. Fowler Furniture Co. J. K. Levy & Co. J. 0. Moran Paine Mfg. Co. Stoddard & Co. NOTE 1. The accounts are arranged in this order to facilitate the making of the statements. Accounts Receivable is a term applied to the total amount due the business on personal accounts ; Accounts Payable is a term applied to the total amount owed by the business on personal accounts. (The Proprietor's account is not included.) 1 For these accounts allow one third of a page ; for all other accounts, one fourth of a page. 2 Do not write Accounts Receivable nor Accounts Payable in your ledger, but the names of the persons and firms that belong under these titles. 8 Allow one full page for this account. SET V. JOBBING FUKNITURE BUSINESS 225 These terms, Accounts Receivable and Accounts Poijulile, are to be used in making trial balances and statements in subsequent work ; the result is to shorten the work. Another advantage of using the terms suggested in the preceding paragraph is to give information in summarized form. The important fact shown by these accounts in the statements is the amount due the business on account, and the amount owed by the business on account, as single items, rather than as a list of the individual debt- ors and creditors. Information pre- sented in concrete form is always a desirable feature in good bookkeeping. In account wit P NOTE 2. Blank ruled pages are pro- vided at the begin- ning of the ledger for an index. Ob- serve the following directions in prepar- ing the index : List all titles from the ledger al- phabetically. In each individ- ual name, write first the surname and then the Christian name; for example, Burton, John L. Illustrations for writing firm names : Brightwood & Co., John H. ; Cobb, Bates & Co.; Sherwood & Son, Henry L.; The American Standard Heating Co. Write on every other line, and place the page number of the account immediately after the name. When an account is transferred to a new page in the ledger, the number of this page should be written just after the number of the page on which the account was first written, as follows : Merchandise Inventory, 4, 76, etc. The last number indicates the page on which the open account may be found, and the series of page numbers enables the bookkeeper to refer to any page on which the account stands. Any new accounts that may be opened should be written in the index at once. NOTE 3. In this set there will be three accounts with merchandise, as follows : Merchandise Inventory, to which post the merchandise item from the opening journal entry; Merchandise Purchases, to which post the footing of the purchase book: Merchandise Sales, to which post the footing of the sales book. MODEL FOR MONTHLY STATEMENT OE ACCOUNT 226 PRINCIPLES OF BOOKKEEPING 4. Rule the purchase book as usual. The closing entry is Mdse. Purchases, Dr. Post. 5. Rule the sales book as usual. The closing entry is Mdse. Sales, Or. Post. 6. Post from the journal. 7. Prove the notebook. NOTE. To prove the notebook, find the total of the uncanceled notes receivable. This sum should agree with the balance of the Xotes Receivable account in the ledger. In like manner find the total of the unredeemed notes payable, and this sum should agree with the balance of the Notes Payable account in the ledger. 8. Prepare the monthly statements of the customers' accounts. Place them in an envelope properly addressed, and hand them in for approval. See model of monthly statement of account on page 225. 9. Take a trial balance of the balances of the ledger accounts, and hand it to the instructor for approval. 10. The inventory of stock was completed by Harvey L. Grant and Harry K. Sutton yesterday. The figures are given below. Copy the inventory on a sheet of journal paper, in the usual form, using the buy- ing price list for the merchandise. File the sheet containing the inventories. Inventories, July 31, 19 Merchandise : 5 #3116 A. Card Tables 5 #16 L. Dressing Cabinets 17 #2546 A. Library Rockers 19 #50 M. Parlor Tables 4 #693 Antique Wardrobes 20 #626 M. Office Chairs 25 #635 Brass Bedsteads 10 #396 M. Hall Stands 25 #16 B Brass Easels 2 #89 M. Chamber Sets 200 #15 Cane-seat Dining Chairs 10 #2229 0. Dining Tables 10 #71 A Child's Cribs 12 #73 Oak Writing Desks 10 #20 Corner Chairs 24 #68 Oak Bookcases 9 #16 A C. Dining-room Sets 10 #20 D Parlor Cabinets 15 #10 China Closets 10 #57 Reclining Couches 28 #3016 Fancy Rockers 12 #73 Sofa Beds 12 #36 B Gentleman's Chiffoniers 5 #5926 S. Book Cabinets 10 #6387 Hall Settles 20 #65 Turkish Rockers 275 #16 K L. Dining Chairs 24 #27 c W.-Wire Mattresses 5 #169 c Library Tables 24 #16 Wool Mattresses 10 pr. #91 Lace Curtains 12 #495 W. I. Bedsteads Office Supplies : Unused supplies $21.75 Office Furniture : Depreciation 4.50 SET V. JOBBING FUKNITUKE BUSINESS 227 Delivery Equipment : Depreciation Building and Fixtures : Depreciation Insurance : For 1 mo. $6.75 12.50 12,50 No inventory of real estate is given, as the book value of the account is to be used as an asset. The book value of the account is the value as it appears on the ledger. 11. Make the profit and loss statement. 12. Make the balance sheet or financial statement. Statements. The following suggest the forms of statement to be used Student PROFIT AND Loss STATEMENT For the month of July, 19 TRADING Mdse. Sales Inventory, July 1 (1384.20 Purchases for July 8488.75 9856 25 14872.95 Inventory, July 31 5759.43 Cost of merchandise sold nil: 1 , 52 Gross profits on sales OPERATING EXPENSES Freight and Cartage Out Salaries Insurance, 1 mo. Depreciation on Delivery Equipment Depreciation on Office Furniture ' Office Supplies Sundry General Expense 82 142 20 7 4 17 5 35 50 25 00 35 742 279 73. 05 Net operating profit Add: Mdse. Discount on Purchases 94.32 Interest Earned 13. 55 107 87 463 68 Deduct : Mdse. Discount on Sales 53.20 Interest Paid 31.15 Collection and Exchange 1.20 85 55 22 32 Net Profit for July 480 228 PRINCIPLES OF BOOKKEEPING FINANCIAL STATEMENT ASSETS Cash Notes Receivable Accounts Receivable Mdse. Inventory Real Estate Building and Fixtures Delivery Equipment Less depreciation Office Furniture : Less depreciation Office Supplies Insurance Unexpired Total Assets LIABILITIES Notes Payable Accounts Payable Total Liabilities PROPRIETARY INTEREST Student, Investment, July 1 Drawing : Net Profit for July Withdrawal Proprietary Interest, July 31 425. 7.50 425. 4.25 486. 845 1742 3895 5759 2000 3500 417 420 21 91 1425 3553 13304 411 IS 18693 4978 13715 18 BALANCE SHEET ASSETS LIABILITIES Cash 845 35 Notes Payable 1425 10 Notes Receivable 1742 30 Accounts Payable 3553 40 Accounts* Receivable 3895 60 PROPRIETARY INTEREST Mdse. Inventory Real Estate 5759 2000 43 Invest., July 1 13304.18 Building and Fixtures Delivery Equip. 425. Depreciation 7.50 3500 417 420 50 *75 Drawing : Net Profit 486. Withdrawal 75. 411. 13715 18 Proprietary Int., July 31 Office Furn. 425. Depreciation 4.25 Office Supplies 21 75 Insurance, Unexpired 91 18693 68 18693 68 SET V. JOBBING FUKNITUKE BUSINESS 229 Discuss the following questions on the Profit and Loss Statement. How would a statement be arranged to show a gross loss on sales ? Explain the items chargeable to each of the seven operating expense accounts. Refer to the Profit and Loss Statement on page 227. What is meant by net operating profit ? What is the distinction between net operating profit and net profit*? What is the source of the interest paid and the interest earned items ? Distinguish between the merchandise inventory of July 1 and of July 31. 13. Hand the statements to the instructor for approval. 14. Close the ledger by the journal method, as already instructed. To close the Delivery Equipment account and the Insurance account, observe the following suggestions : Assume that the Delivery Equipment account was valued at S400 on July 1 and has depreciated $8 during the month. Make the following entry to record the depreciation (the loss), as treated in this set: 8 Profit and Loss Delivery Equipment To record the depreciation on the De- livery Equipment account. After posting the above entry balance the account. Assume that the Insurance account appears on the ledger debited with |144 on July 1. The portion chargeable to each month (the loss) is $12. Make the following entry to charge the monthly premium and to record the inventory value : Profit and Loss Sundry Expense Inventories Insurance To close one twelfth of the yearly pre- mium into the Profit and Loss account and to record the inventory value. After posting the above entry rule the Insurance account. 15. Make the monthly statement of the bank account. 16. Pass all books to the instructor for approval. 230 PRINCIPLES OF BOOKKEEPING Exercise 58. Review For Written Work 1. Journalize orally or in writing each transaction in the month of July. All amounts may be omitted, as the value of the exercises is in determining debits and credits. 2. Make the following opening entries, referring to page 194, in order to determine the correct form of entry : Student begins business this day with the following assets and liabilities : a. Cash in drawer, 8231.40 Deposit in First National Bank, $1674. 50 Stock of merchandise valued at $9645.50 The following owe you 011 account : Henry A. Pell, $67.50 Morris & Co., $253.10 M. M. Bell, $167.25 Amos T. Young, $76.45 You owe the following on account : Barber & Co., $56.75 Young & Brown, $100.50 Thos. L. Parr, $25.25 b. Cash in drawer, $325 Deposit in The Union Bank, $2365.10 . Eeal Estate valued at $1000 Building and Fixtures valued at $3200 Stock of merchandise valued at $11,457.20 The following owe you on account : Warren & Son, $176.25 John K. Lamb, $200 C. H. Hartman, $423.50 D. B. Vance, $153.95 You owe the following on account : Marshall & Co., $235 Henry Marvel, $310 Chas. L. Burt, $65.70 You hold notes against the following : H. T. Inman, $125 L. L. Pond, $250 Mason & Son, $230 You have the following notes outstanding : R. N. Banks, $200 T. S. Little, $100 SET V. JOBBING FURNITURE BUSINESS 231 c. Cash in drawer, $410.20 Deposit in the Second National Bank, 81814.25 Office Furniture valued at 215 Coal valued at $49.10 Office Supplies valued at $23.50 Stock of merchandise valued at $8092.15 One delivery truck valued at $600 The following owe you on account : John L. Kinman, $235.85 Hart Bros., $35(5.30 Henry A. Morton, $205 You owe the following on account : Lee & Mason, $17(5.50 Edward C. Freeman, $83.40 Loomis & Co., 115.20 3. Make statements from each of the following trial balances: a. Cash $3165.50 Notes Receivable 270.45 Accounts Receivable 1050. 10 Mdse. Inventory 3250.10 Real Estate 2650. Building and Fixtures 5150.15 Office Furniture 125. Delivery Equipment 350. Notes Payable $1904.25 Accounts Payable 2708.55 John A. Smart, Investment 10018.85 John A. Smart, Drawing 125. Mdse. Sales 44 SI. 15 Interest Earned 53.20 Mdse. Discount on Purchases 151.95 Mdse. Purchases 3074.45 Salaries 98.35 Sundry General Expense 8-75 Interest Paid 42.10 $19377.95 $19377.95 Inventories : Merchandise $332.). 4 ( Building and Fixtures : Depreciation Office Furniture : Depreciation Delivery Equipment : Depreciation 232 PRINCIPLES OF BOOKKEEPING b. Cash Notes Receivable Accounts Receivable Mdse. Inventory Real Estate Building and Fixtures Delivery Equipment Notes Payable Accounts Payable L. S. Woods, Investment L. S. Woods, Drawing Mdse. Sales Interest Earned Mdse. Discount on Purchases Mdse. Purchases Office Supplies Fuel Mdse. Discount on Sales Interest Paid Inventories : Merchandise Fuel Building and Fixtures : Depreciation Delivery Equipment : Depreciation $346.20 265.70 1950.75 5860.40 1875. 6854.75 485. 150. 4123.20 45.90 123.45 45.70 29.50 $826.55 1625.40 11957.65 7546.50 54.20 145.25 $22155.55 $22155.55 $3842.25 25.60 68.55 4.85 CHAPTER XIX SET V. JOBBING FURNITURE BUSINESS (CONTINUED) PARTNERSHIPS Essential Elements. A partnership is a contract relation between persons who combine their property, labor, or skill in a business and who agree to share the profits and the losses jointly. Hence, a partner- ship, in order to be legal, must have the following essential elements of a contract: 1. Competent parties 4. Consideration (joint division of 2. An agreement profit and loss) 3. Lawful enterprise The agreement may be either verbal or written, preferably the latter. When reduced to writing, the contract of partnership is called the Articles of Copartnership. Usual Clauses. The most usual clauses in the articles of partnership are as follows: 1. Name of the firm 5. Capital to be invested, and provi- 2. Nature of the business sion for its withdrawal 3. Place of business 6. Salaries to be paid to the partners 4. Date of commencement and 7. Interest on invested capital duration of partnership 8. Division of profit and loss 9. Provision for dissolution WORK FOR AUGUST The work for August, in this set, is a continuation of the work of July. Incoming Business Forms for August. The student is referred to the instructions given for the use of the business forms in the month of July, page 205, of which the following list is a continuation: Form 24. Check of Harvey L. Manning, dated City, Aug. 1. drawn on Traders National Bank, in favor of your firm, for S7000. Form 25. New York draft, dated City, Aug. 1, drawn by The Union Bunk on Chemical National Bank, in favor of your firm, Chas. Cashier, for $319.72. 233 234 PRINCIPLES OF BOOKKEEPING Form 26. M. N. Overman's note, dated Albany, Aug. 2, in favor of your firm, at 30 da., for $469.39. Form 27. Invoice of C. W. Allen & Co., Trenton, N. J., dated July 31. Terms : 2/30, net 60 da. Items as follows : 17 #572 Drawing-room Suites 5 #59 A Cheval Glasses Form 28. Stoddard & Co.'s sight draft, dated City, Aug. 3, on your firm, in favor of themselves, for $150. Form 29. Invoice of J. K. Levy & Co., New York City, dated Aug. 5. Terms : cash, less 2 (r / . 15 #693 Antique Wardrobes Do not deduct the discount from the amount of the invoice. Form 30. New York draft, dated Olean, Aug. 10, drawn by The Union Bank of Olean, on Chemical National Bank of New York, in favor of M. L. Covey & Co., for 283.72, W. D. Byron, Cashier. Transferred to Student & Co. by full indorsement. Form 31. Invoice of Cobb, Bates & Co., dated City, Aug. 15. Terms : 3/10, net 30 da. Items as follows : 25 #5932 Empire Toilet Tables 18 #1008 Oak Sideboards 25 #76 A Oak Chamber Sets Form 32. Invoice of Derby Mfg. Co., dated City, Aug. 15. Terms : draft at 20 da. for the amount of the bill, less 2%. Items as follows : 5 #16 A Comp. Dining-room Sets 5 #693 Antique Wardrobes 10 #89 Mahogany Chamber Sets Do not deduct the 2% discount. Form 33. Draft of Derby Mfg. Co., City, on your firm, in favor of them- selves, for the amount of the above invoice, dated Aug. 16, payable at 20 days sight. Form 34. Invoice of C. -W. Allen & Co., dated Trenton, N. J., Aug. 12. Terms : 2/30, net 60 da. Items as follows : 20 pr. Blue Chenille Curtains 20 pr. #91 Lace Curtains Form 35. Check of David E. Teeter, dated City, Aug. 20, drawn on Traders National Bank, in favor of Student & Co., for $589.30. Form 36. Bill of Ward, Macey & Co., dated City, Aug. 17, for 1 letter file and cabinet, $65. Terms : cash. Receipt the bill. Form 37. Check of J. E. Bender, dated Troy, Aug. 19, drawn on Traders National Bank, in favor of your firm, for $920.95. Form 38. Bill of Tracy Coal Co. to Harvey L. Manning, dated Aug. 20, for 3 T. coal at $5. Terms : cash. Receipt the bill. SET V. JOBBING FURNITURE BUSINESS 235 Form 39. Check of David E. Teeter, dated City, Aug. 24, drawn on Traders National Bank, in favor of your firm, for 124-8.87. Form 40. C. O.D. envelope. Data as follows : Cash inclosed, $22. Goods were shipped by your firm to J. W. Clark, Waltham, Aug. 17. Refer to the note under Form '20, page '207. Form 41. New York draft, dated City, Aug. 30, drawn by The Union Bank, in favor of your firm, on Chemical National Bank, New York City, for $438.55, Chas. II. Palmer, Cashier. Form 42. Bill of the Metropolitan Carting Co., dated City, Aug. 31. Items as follows : Aug. 1, Freight and Cartage, $14.50 16, Freight and Cartage, $34.50 22, Cartage, $5 23, Freight and Cartage, $20.10 30, Freight and Cartage, 83.70 Receipt the bill. Form 43. Receipted bill of the Consolidated Gas and Electric Light Co., dated City, Aug. 31. Terms: cash, less 5^/. Items as follows: Meter at current date, 14,300 cu. ft. Meter at last settlement, 8200 cu. ft. Gas consumed, 6100 cu. ft. at $1.20 per 1000 Forming the Partnership. You are desirous of extending your busi- ness, and not having sufficient capital to do so, you have decided to enter into a partnership agreement with Harvey L. Manning. For the assets enumerated below you admit Harvey L. Manning as an equal partner in your business. Draw up articles of copartnership between yourself and Manning, embodying the following conditions (see Form II, Appendix D) : 1. The firm name shall be Student & Co. 2. Student shall contribute the net assets shown by his July statement of assets and liabilities. 3. Manning shall invest : Cash $7000 Merchandise 1500 Account with Foley Bros, due him 5725 4. Each partner shall devote his entire time to the business and receive a salary of $100 per month. 5. Neither partner shall engage in any other business. 6. The profits and the losses shall be divided equally. 7. The partnership shall continue for two years unless sooner dissolved by mutual consent. 236 PRINCIPLES OF BOOKKEEPING Hand the articles of copartnership to the instructor for his criticisms If they are correct, he will sign them for Harvey L. Manning. Make a copy of the financial statement for the month of ,.,.,, ,. , ,. ARTICLES OF COPARTNERSHIP July, attach it to the articles or i j copartnership, fold the sheets together, and in the outer right- hand corner at the top brief as shown in the Model for Brief- ing herewith. Student and Harvey L. Manning AUG. 1, 19 Opening the Work for August. . MODEL FOR BRIEFING The following memoranda of transactions are for the work of the student during the month of August : MEMORANDA OF TRANSACTIONS FOR AUGUST August 1 Draw a check, in favor of Student & Co., on The Union Bank for the amount of the balance on deposit. Have the check approved, and place it in the Business Cash envelope. This check is drawn in order that the bank account with the student may be closed. Presently this check will be deposited to the credit of the new firm. Receive Harvey L. Manning's check on Traders National Bank for the amount of his cash investment, Form 24. Make a memorandum in the journal, setting forth the change in the personnel of the business. Make a journal entry for the investment by Manning. Indorse the two checks on hand, and deposit them in The Union Bank, in the name of the new firm. Write a letter to J. K. Levy & Co., 27 East 126th St., New York City, ordering: 15 #693 Antique Wardrobes Inclose a New York draft for the amount, less 2%. Buy the draft by check. Exchange, 30$. Write the check. Take the New York draft, Form 25, and indorse it. Debit J. K. Levy fy Co. for the face of the draft, and enter the discount, $6.53, in the Discount on Purchases column. NOTE. When a remittance is sent with an order, the amount may have been determined by previous correspondence, or by reference to prices quoted in a catalogue issued by the firm. SET V. JOBBING FURNITURE BUSINESS August 2 Receive of M. N. Overman his note, in favor of your firm, at 30 da. from Aug. 2, on account, for f 469. 39, Form "2(>. Chas. B. Sherman, 23 West Ave., Rochester, orders : 50 #15 Cane-seat Dining Chairs 3 #2229 Oak Dining Tables 25 #16 K Leather-seat Dining Chairs 16 #3016 Fancy Hookers References are satisfactory and you fill the order. Terms: sight draft in 30 da. for the amount of the bill, less 1%. Prepare the usual bill of lading. Place the invoice and the bill of lading in an addressed envelope and hand it in. Draw a sight draft, dating it ahead 30 da., in favor of yourself, for the amount of the bill, less 1%. Have the draft approved. It will be left for collection near the close of the month, just before it is due. The Metropolitan Carting Co. has delivered to yon the goods ordered of C. W. Allen & Co. on July W, Form 27. August 3 Pay by check Stoddard & Co.'s sight draft, in favor of themselves, for $150, Form 28. Place the draft in the Paid Bills envelope. David E. Teeter, City, placed the following order with you over the telephone this morning. The order is filled at the prices given herewith : 15 #16 B Brass Easels at $15 19 #68 Oak Bookcases at $9.75 5 #20 D Parlor Cabinets at $37 Terms : 3/5, 1/30, net 60 da. August 5 Your note of July 20 in favor of Stoddard & Co., made payable at the bank, was due yesterday, Sunday. Issue a check in payment. Enter in the cashbook, and make the usual record in the notebook. August 7 Your- bank reports that the draft on P. R. Brown, attached to a bill of lading, has been collected. Collection charges, $1. Have the amount entered in the pass book, and record it in the check book. The entry in the cashbook is the same as the entry of the shipment to Chas. B. Lyman, July 24. Remember the entry for the Collection and Exchange. 238 PRINCIPLES OF BOOKKEEPING The Metropolitan Carting Co. has delivered to you the goods ordered of J. K. Levy & Co. on Aug. 1, Form 29. Draw a eash check for office expenses, $25. At the bank, when you receive the money, ask for $5 in change. The money received on this check is placed in the cash drawer, and no entry is made. As it is paid out for small charges, like telegrams, expressage, etc., the entries will be made. Leave J. E. Farley's note, received July lo, with the bank for collection. August 8 Telegraph C. W. Allen & Co., Trenton, X. J., ordering : 20 pr. Blue Chenille Curtains 20 pr. #91 Lace Curtains Pay the charges in cash, 60 0. Limit the message to fifteen words. The acceptance of Walker, Brown & Co., drawn on July 8 and left with The Union Bank for collection, has been paid. Collection charges, 750. The bank teller will make the proper record in the pass book. Enter in the check book and in the cashbook. Make the record in the notebook. Acceptance in favor of W. H. Stearns & Co. is due to-day, payable at the bank. Issue a check in payment. August 10 J. E. Bender, Troy, sends the following order. Fill the order at the prices given herewith: 50 #15 C. Dining Chairs at $2.25 5 #495 W. Iron Bedsteads at $5 10 #16 Wool Mattresses at $4 5 #65 Turkish Rockers at $24.75 50 #16 K L. Dining Chairs at $9.50 3 #73 Sofa Beds at $38 3 #626 Mahogany Office Chairs at $16.50 Terms : 3/5, 2/10, net 30 da. M. L. Covey & Co., Olean, order: 3 #396 Mahogany Hall Stands 2 #68 Oak Bookcases 3 #20 Corner Chairs Fill the order. Terms: cash, less 3%. Do not deduct the discount on the invoice nor in the sales book. Prepare the bill of lading as usual. SET V. JOBBING FUKXITl-RE BUSINESS 239 A New York draft was inclosed in payment of the order, Form 30. Make a cashbook entry for the draft. 7,? Your bank lias collected J. E. Farley's note, due yesterday. Take your pass book to the bank and receive credit for the amount, NOTE. But few special instructions will be given to the student for entering tin- transactions of this month. He is supposed to be sufficiently familiar with tin- different books and the various transactions recorded therein to proceed without a guide. If in doubt at anytime, lie should consult the instructor. Auf/nst lo Place the following orders over the telephone: Cobb, Bates & Co., City: 25 #5932 Empire Toilet Tables 25 #76 A < >ak ( 'number Sets 18 #1008 Oak Sideboards Derby Manufacturing Co., City : 10 #89 Mahogany Chamber Sets 5 #693 Antique Wardrobes 5 #16 A Complete Dining-room Sets NOTE. Some memorandum should be made of each order placed as above. When these orders are frequent, a special order book is used. In this set the memoranda for all orders placed over the telephone may be written on a sheet of paper and filed with the incoming papers. August 16 Give Stoddard & Co. your note at 20 da., payable at The Union Bank, for $1500, on account. You have received the goods ordered of Cobb, Mates & Co. on Aug. 13, Form 31. Goods ordered of Derby Manufacturing Co. on Awj. J^ have been delivered, Form 32. Accept the draft which they inclosed, payable at The Union Mank. Form 33. The goods ordered of C. W. Allen & Co. on Aw/. if E.rpense In- ventory account: a. Under what conditions is this account opened ? ft. How is the account closed ? 5. Journalize orally or in writing each transaction in the month of August. The amounts may be omitted. CHAPTER XX SET V. JOBBING FURNITURE BUSINESS (CONTINUED) WORK FOR SEPTEMBER This work is a continuation of the work of July and August. Incoming Business Forms for September. Refer to the instructions given on page 205. The following list continues the August list: Form 44. Sight draft of S. T. Udell & Co. on your firm for $479.50, dated Chicago, 111., Aug. 31, drawn payable to W. D. Lapham. Form 45. Invoice of Fowler Furniture Co., dated Kochester, Sept. 2. Terms : cash, less 2 f c . Items as follows : 10 #245 Cedar Chests 10 #2229 Oak Dining Tables 10 #687 Ornamental Tables 15 #17 A Roman Chairs Do not deduct the discount on the invoice, but record it in the cashbook. Form 46. Invoice of C. W. Allen & Co., dated Trenton, N.0. Pay by check the gas bill for the month, $7.18, Form 50. Give each partner a check for his .monthly salary, '$100. Pay by checks salaries to date as follows : Harry K. Sutton $60 Michael Donovan $30 Harvey L. Grant 50 Daniel L. Coon 48 Geo. W. Ainsley $40 Closing the Set. The student should now close the work for this month as follows: 1. An inventory of everything on hand has been completed by Mr. Sutton. A statement of it follows : Make the extensions, at cost prices, on a sheet of journal paper, and file for future ' reference. 252 PRINCIPLES OF BOOKKEEPING Inventories, September 30, 19 Merchandise : 5 #3116 Antique Card Tables 12 #626 M. Office Chairs 14 #693 Antique Wardrobes 4 #50 M. Parlor Tables 10 #16 B Brass Easels 54 #396 M. Hall Stands 20 #635 Brass Bedsteads 17 #89 M. Chamber Sets 13 pr. Blue Chenille Curtains 20 #835 Music Cabinets 10 #245 Cedar Chests 25 # 76 A Oak Chamber Sets 50 #15 Cane-seat Dining Chairs 10 #687 Ornamental Tables 2 #59 A Cheval Glasses 17 #2229 Oak Dining Tables 10 #71 A Child's Cribs 12 #73 Oak Writing Desks 7 #20 Corner Chairs 43 #68 Oak Bookcases 25 #16 A C. Dining-room Sets 5 #20 D Parlor Cabinets 5 #572 Drawing-room Suites 35 #176 c Piano Chairs 25 #5932 Empire Toilet Tables 10 #57 Reclining Couches 35 #170 English Clothes Poles 15 #17 A Koman Chairs 7 #3016 Fancy Rockers 9 #73 Sofa Beds 32 #36 B G. Chiffoniers 28 #5926 Sec. Book Cabinets 25 #6387 Hall Settles 10 #65 Turkish Rockers 50 #16 K L. Dining Chairs 14 #27 c W.-wire Mattresses 5 #169 c Library Tables 4 #16 Wool Mattresses 13 pr. #91 Lace Curtains 2 #495 White Iron Bedsteads 30 #16 Lady's Dressing Cabinets Office Furniture : . Depreciation $5.15 Delivery Equipment : Depreciation 6.75 Building Fixtures : Depreciation 12.50 Insurance for 1 mo. 12.50 2. Make the statements and have them approved. 3. If the statements are correct, close the ledger. 4. Rule all the. personal accounts that balance. 5. Hand in all books to the instructor for approval. DISSOLUTION OF PARTNERSHIP Consequences of Dissolution of Partnership. The direct consequence of a dissolution of partnership is the necessity of taking effectual steps to close the partnership affairs. Some disposition must always be made of the partnership effects. Sometimes articles of copartnership provide that property on hand shall be taken at dissolution by one of the SET V. JOBBING FUEXITURE BUSINESS 253 partners according to a prescribed mode, and in that case the business may be continued without interruption. In the following case (Set Y) there was no such agreement, hut the partners between themselves entered into an arrangement whereby Planning continues the business and Student, for a sufficient consideration, consents to withdraw. Notice of Dissolution. A dissolution of partnership, so far as it con- cerns its own members, may be immediate, but with reference to the public the element of notice requires consideration. A -notice of dissolution is unnecessary : 1. When a partnership expires by its own limitation. 2. When a partnership is dissolved by the operation of law. 3. When dissolution occurs by the death of one of the partners. 4. When a dormant, or silent, partner retires. A notice of dissolution should be published in one of the usual advertising newspapers of the city in which the business has been conducted. This notice is deemed sufficient for all those who have not had previous dealings with the firm. A special notice of the dissolution should be sent to those who have had previous dealings with the firm. Dissolving the Partnership, Set V. It has been decided to dissolve the partnership existing between yourself and Harvey L. Manning. You dispose of your interest to Manning for the following : 1. A note at 60 da.,, with interest at 6%, |7500. 2. A check for the balance of your present worth as shown by your ledger account after closing, Sept. 30. Write the note and have the instructor sign for Manning. Make the journal entry, and then record the notes in the notebook. Write the check for the balance of your present -worth, Post both the entries to your account in the ledger and close the account. Harvey L. Manning is to conduct the furniture business at the old stand under the name of Harvey L. Manning. He is to have the assets and assume all the liabilities of the old firm. Draw a check in favor of Harvey L. Manning for the balance of the cash in the bank in the name of the old firm, and hand it in. It is assumed that your attorney, Fred V. Smith, has drawn up the contract of sale and the warranty deed necessary to transfer the title to all the chattels and the real estate to Manning. These documents, it is assumed, are on file with other important papers. Prepare a notice of your withdrawal from the firm. 254 PRINCIPLES OF BOOKKEEPING A notice of dissolution should be inserted in a local paper, and a circular mailed to each firm with whom you have had dealings. The writing of these notices is optional with the instructor. After giving these notices your liability regarding new debts ceases. DIVISION OF ACCOUNTS Real accounts are divided into three general divisions, assets, liabili- ties, and proprietary interest accounts. Assets. Assets are property of value belonging to the business, or amounts due the business. In this set the asset accounts are : Cash Real Estate Notes Receivable Building Fixtures Accounts Receivable Office Furniture Merchandise Inventory Delivery Equipment Liabilities. Liabilities are amounts owed by the business. In this set the liability accounts are : Notes Payable Accounts Payable Proprietary Interest Accounts. These accounts show the value of ownership or the net worth of the business. In a business which is conducted by a single proprietor or by partners, proprietary interest accounts are represented by the individual investment account with the Proprietor and with each of the partners. The drawing accounts and the Profit and Loss account are grouped under this division of accounts. In this set the proprietary interest accounts are: Student, Investment Harvey L. Manning, Drawing Student, Drawing Profit and Loss Harvey L. Manning, Investment Nominal accounts are divided into two general divisions, income accounts and expense accounts. Income Accounts. Income accounts record the income received by the business. In this set the income accounts are : Merchandise Sales Interest Earned Merchandise Discount on Purchases Expense Accounts. Expense accounts record the amounts spent with the object of earning a profit. In this set the expense accounts are : Merchandise Purchases * Office Supplies Salaries Sundry General Expense Freight and Cartage Out Interest Paid Delivery Expense Merchandise Discount on Sales Insurance Collection and Exchange SET V. JOBBING FURNITURE BUSINESS 255 Exercise 60. Review For Oral and Written Work 1. Name all the accounts receivable in the ledger for Set \ . 2. Name all the accounts payable in the ledger for Set V. 3. In the following trial balance, name the income accounts ; the expense accounts. 4. Make the statements from the following trial balance : Cash $2(551.40 Notes Receivable 320.35 Accounts Receivable 785.55 "Mdse. Inventory 3402.20 Real Estate 2500. Building and Fixtures 3200. Office Furniture 135. Delivery Equipment 500. Notes Payable $305.40 Accounts Payable 800. Martin S. Lake, Investment 5500. Martin S. Lake, Drawing 140. Henry A. Sampson, Investment 5500. Henry A. Sampson, Drawing 100. Mdse. Sales 4828.35 Interest Earned 70.95 Mdse. Discount on Purchases 134.70 Mdse. Purchases 3072.50 Salaries 156.65 Sundry General Expense 10. Mdse. Discount on Sales 74.25 Interest Paid 37.50 $17145.40 $17145.40 Inventories : Merchandise $3113.55 Building and Fixtures : Depreciation 32. Office Furniture : Depreciation 2.70 Delivery Equipment : Depreciation . 5. 5. Journalize orally or in writing each transaction of Set V in September. The amounts may be omitted. 256 PRINCIPLES OF BOOKKEEPING Exercise 61. Partnership Arrangements For Written Work Make entries for the folloiving partnership arrangements : 1. Henry T. Jackson and James Young form a partnership as follows: Henry T. Jackson invests cash, $1500, and a stock of merchandise valued at $2750. Janies Young invests cash, $1250, and a lot worth 3000. 2. Student and Fred S. Carmen form a partnership as follows: Student invests cash, $2000, and R. S. Good's note which he holds ; face of the note, $500. Fred S. Carmen invests cash equal to the total investment of Student. 3. Harold D. Powers owns a dry-goods business the present value of which is $16,450. He sells a half interest to Bernard F. Shaw for $8225. 4. George D. Fuller owns a drug store, and he values the store, fixtures, and stock at $12,600. Ralph F. Yarley becomes an equal partner with Fuller by investing cash, $7600, and a stock of drugs worth $5000. 5. Henry S. Carey, George R. Downey, and Harry S. Mason form a partnership on the following conditions : the capital is to be $25,000, of which Carey invests $12,500, Downey invests $7500, and Mason borrows $5000 of Carey and invests it in the business. QUERY. How much of the Mason investment and loan should be entered on the books of the business ? NOTE. The Formation of Partnerships is illustrated and discussed in Appendix G. APPENDIX A DEFINITIONS AND RULES DEFINITIONS AND EXPLANATIONS Bookkeeping. Bookkeeping is the art of making a systematic record of business transactions. From the record the Proprietor may ascertain the condition of ~~kis business. Business Transaction. A business transaction is an exchange of values. Double Entry and Single Entry. There are two methods of bookkeeping, {double entry and single entry. In double entry, accounts are kept not only with persons but with all sources \that affect the results or the condition of the business. In single entry, accounts are kept, usually, with persons only. iventory. An inventory is an itemized statement or schedule, in writ- ing, showing the amount of certain assets owned by the business, or certain liabilities owed by the business. Capital. Capital, at the beginning of the business, usually is the amount invested ; at other times it is the excess of assets over liabilities. Merchandise. Merchandise includes all commodities which are held for purposes of exchange. SExpense. Expense is any cost necessary to carry on the business. Interest. Interest is the compensation allowed by law or fixed by the parties for the use or forbearance or detention of money. HUFFCUT. Notes Receivable. Notes receivable are the written promises of others to pay us. Notes Payable. Notes payable are our written promises to pay others. Posting. Posting is a process of transferring debit and credit items to their respective accounts in the ledger. Present Worth. The present worth of the Proprietor's account is, Net credit plus net profit, or Net credit minus net loss, or The excess of assets over liabilities. Receipt. A receipt is a written acknowledgment of money or other value received. Voucher. A voucher is a written statement proving that some transaction has occurred. -"Solvency. When assets exceed liabilities a business is solvent. Insolvency. When liabilities exceed assets a business is insolvent. 11 APPENDIX A Journal. The journal is a book in which the debits and the credits of business transactions are arranged systematically ; the history of each trans- action and the amount are included. Ledger. The ledger is a book containing the accounts of the business, the debits and the credits having been collected from other books of entry. Book of Original Entry. A book of original entry is a book in which entries are first made. Book of Final Entry. A book of final entry is a book to which the debits and the credits of accounts are posted. Notebook. A notebook contains an itemized record of all notes received or issued by the business. Charge. The term charge, as used in bookkeeping, means debit. Invoice. An invoice is an itemized statement of goods bought or sold. It includes the names, the quantities, the prices, and the amounts. RULES FOR JOURNALIZING General Rule. Debit the account that stands for a value received, or for a person or a thing that causes value to go out. Credit the account that stands for a value given, or for a person or a thing that brings in value. The following is a general summary for the use of debit and credit : DEBIT CREDIT 1. Merchandise and other property which is bought 3. That which costs value 5. All moneys received 7. Persons when they become in- debted to the business 9. Persons when the business gets out of their debt 11. Other persons' notes received by the business 13. Notes redeemed or paid by the business 2. Merchandise and other property which is sold 4. That which produces value 6. All moneys paid out 8. Persons when the business becomes indebted to them 10. Persons when they get out of debt to the business 12. Notes given or issued by the business 14. Other persons' notes when paid by them to the business APPENDIX B COMMERCIAL TERMS DEFINED Acceptance. The name of an accepted draft; an agreement, by signature, to the terms named in the draft. Account Current. An open or a running account ; a detailed statement of transactions between two persons or two firms. Account Sales. An itemized statement of sales and expenses, rendered by a commission merchant to his prin- cipal. Acknowledgment. A formal admission, made before a notary or other quali- fied officer, that the act described was done voluntarily ; the officer's certificate of such admission. Affidavit. A written statement made under oath. Agent. One who acts for, or in place of, another, by authority from him ; a deputy. Assignee. One appointed by another to do some act or to enjoy some right ; generally, one to whom property is transferred for the benefit of the creditors. Attachment. A seizure or taking into custody by virtue of a legal process. Auditor. A person appointed to examine accounts. Bankrupt. Any person whose property becomes liable to administration under the bankruptcy laws. Bill of Lading. A receipt of a transpor- tation company, containing an ac- count of the goods shipped and the conditions of shipment. Bill of Sale. A writing given by the seller of personal property to the buyer. Board of Trade. In the United States, a voluntary organization of business men for the advancement of com- mercial interests. Bona Fide. In good faith. Bond. A written promise under seal, binding a person to do a certain thing or not to do it. Bonus. Something given in addition to what is strictly due the recipient. Broker. An agent between buyer and seller ; a dealer on the stock ex- change. Capital. The investment in a busi- ness. Cashier. One who has charge of money ; in banks, the financial officer. Certified Check. A check that has been accepted by the bank on which it is drawn, thereby making the bank security for its payment. Clearing House. An institution in a city where daily settlements are made between banks by the mutual ex- change of checks, drafts, etc., the difference between such exchanges being paid in cash. Collateral. A security additional to the personal obligation. Common Carrier. One who undertakes the office of carrying either goods or persons for hire. Copartnership. The voluntary associa- tion or joining of two or more per- sons in a business enterprise. The same as partnership. Copyright. A right of control granted by a government to an author or a publisher. IV APPENDIX B Coupon. A certificate of interest due, printed at the bottom of trans- ferable bonds, designed to be cut off and presented for payment when the interest is due. Credit Memorandum. A notice sent to a purchaser stating that an allow- ance has been made for goods re- turned, or for other causes. Deed. A contract under seal, usually transferring the title of real estate. Depreciation. A falling of value. Dishonor. A refusal to pay an obliga- tion when due, or to accept a draft when presented for acceptance. Dividend. The allotment to each stock- holder in the division of profits. Drayage. Charges for conveying goodsx from one place to another. Exchange. The method by which debts are discharged without the actual transference of money; the rate at which such exchange can be made. Extension. An allowance of further time for the payment of a debt. Fixtures. That part of the furnishings of a store or an office which is not movable. Footing. The adding of a column of fig- ures, or the result of such addition. Forgery. The writing of another's name, as a signature, with fraudu- lent intent, or the altering of a written document. Franchise. A certain right or privilege, granted by a government to indi- viduals or corporations. Freight. Compensation paid for the transport of goods or other property; that with which anything is laden for transportation. Good Will. The value, in a business, of established reputation or patronage. Guaranty. An agreement by which oneS. * Honor. To accept a draft, or to pay it when due. Income. The total amount of the earn- ings and the receipts of money from all sources. Index. An alphabetical table of contents. Indorse. To write one's name on the back of a note, a check, or a draft ; to record a partial payment on the back of a note. Installment. A sum of money paid in stated portions. Insurance. Indemnity against loss ; the premium paid for insuring. Jobber. A merchant who buys goods from importers and manufacturers, and sells to either wholesale or retail merchants. Liquidation. Act or process of settling debts. Lease. A contract, usually in writing, for the temporary possession of real estate or other property. Letter of Credit. A letter usually issued by a bank, addressed to banks in foreign cities, directing payment of a stated amount to the holder. Such letters are usually carried by travelers. Manifest. An invoice of a ship's cargo. Mercantile Agency. An institution which obtains and furnishes information regarding mercantile enterprises, their financial standing, their busi- ness reputation, etc. Money. Current coin ; any circulating medium. Mortgage. A conditional transfer of the title to real estate or chattels as se- curity for the payment of a debt. Negotiate. To treat with another with a view to reaching an agreement; to transfer for a valuable considera- tion. person promises to make another ^Net. Clear of all charges or deductions, secure in the possession or enjov- Notary. A public officer who takes ac- ment of something ; a security knowledgments of legal documents against loss. and protests paper for nonpayment. APPENDIX B Open Account. A running or an unsettled account. Open Policy. An insurance policy cover- ing undefined risks and admitting of subsequent indorsements or ad- ditions. Outstanding Accounts. Book accounts remaining unpaid. Overdrawn. A term applied to a bank account when a check has been issued for an amount greater than one's credit balance. Patent. An exclusive right to an inven- tion, issued by a government. Pawnbroker. One who makes a business of lending money on personal prop- erty pledged and in his keeping. Power of Attorney. A legal authority to act for another. Premium. The consideration paid for a contract of insurance ; a sum or bonus in addition to the capital. Protest. A formal notice, issued by a notary to the indorser or the in- dorsers 'of a note or draft, of the nonpayment of a note or a draft, or the nonacceptance of a draft. Quotations. The published or current prices of stocks, bonds, or any com- modity. Rebate. An allowance for overcharge, for early payment, or for other reasons. Receiver. A person appointed by the court to hold in trust property which is tho subject of litigation, pending the suit ; or one who is appointed to wind up the affairs of a partner- ship or a corporation oil its dissolu- tion. Retail. To sell in small quantities. Short-extend. To enter individual amounts at the left of the money column, to be extended in total in the money column. Sinking Fund. A fund set apart for the redemption of bonds or for other specific uses. Sundries. Many different or small things. Syndicate. A combination of capitalists who unite their resources to advance some specific business enterprise. Tariff. A lawful rate of duty on imports. Terms. Conditions of sale or of agree- ment. Tickler. A book containing memoranda of all time paper, and arranged so as to serve for a reminder to pay or to collect. Trustee. One intrusted with property for another. Underwriter. One who insures, Valid. Binding in law. Void. Not binding in law. Way Bill. A document containing a de- scription and shipping directions of goods sent by railroad. Wholesale. Selling large quantities, usu- ally in unbroken packages. APPENDIX C ABBREVIATIONS AND GENERAL TERMS A America ; American A I First class Acct. or acct. . . Account Acct. Cur. . . Account Current Acct. Sales . . Account of Sales Adv. or adv. . . Advertisement Agt Agent A.M Before noon ; Master of Arts Amt Amount App Appendix Asst Assistant Atty Attorney Av. or Ave. . . Avenue Bal Balance B.B BiU Book bbl Barrel bdl Bundle Bk. . . . . . Bank B/L .... Bill of Lading Bld'g .... Building bu Bushel bx Box I Cent Cash Cashier Ck Check Co Company; County C.O.D Collect on Delivery Coll Collection; Collector Cr * . Credit ; Creditor cwt Hundredweight da Day Dep't .... Department Dis Discount do The same doz Dozen Dr. ..... Debtor; Doctor E. & O.E. . . Errors and omissions excepted ea Each e.g For example Esq Esquire etc. or &c. . . And so forth Ex Example Exch Exchange fig Figure, Figures F.O.B. or f .o.b. . Free on board Fol Folio, or page ft Foot gal Gallon gr Grain gro Gross hhd Hogshead bund Hundred i.e That is in Inch Ins Insurance inst Instant; the present month Int Interest Inv Invoice Jr Junior kg Keg Ib Pound L.B Letter Book L.F Ledger Folio Ltd Limited M Thousand Mdse Merchandise Mem Memorandum Messrs. . . . Gentlemen; Sirs Mfg Manufacturing min Minute Mme Madam mo. . . . . . Month Mr Mister Mrs Mistress MS Manuscript APPENDIX C vn MSS Manuscripts St. . . Street ; Saint N.A North America Str. . . Steamer* N.B Take notice Sunds. . Sundries No. or no. . . Number Supt. . Superintendent O.K All correct Tr. . . Transpose Oz. or oz. . . Ounce Treas. . Treasurer P Page ult. . . Ultimo ; of the last Payt. or payt. . Payment month DC. Piece U.S.M. United States Mail Pd Paid via . - Bv way of per By viz. . Namely ; to wit Per cent or per vol. . . Volume cent .... By the hundredths vs. . . Against Dk. Peck W/B . . . . Way Bill Pkg Package wk. . . . . . Week P.M Postmaster ; After- wt. . . . . . Weight noon Yd. or yd. . . Yard P.O Post Office Yr. or yr. Year DD. Pages ARBITRARY SIGNS Dr. Pair Pres President a/c . . Account prox Proximo ; of the next @ - - At or to ' month c/o . . Care of Dt. Pint . . . . . . Cent P.S Postscript V Check mark or. Quire * Quarter $. . . . . . Dollar at. Quart # Number, if written Rec'd .... Received before a figure ; Ret'd .... Returned pounds, if written Rev Reverend after a figure R.R. ... Railroad % : Per cent Ry Railway I 1 . . One and one fourth Sec Secretary I 2 One and two fourths Shipt Shipment I 3 . . One and three fourths sq. ft Square feet 1 . . . Feet Sr. Senior "... Inches APPENDIX D FORMS AND LEGAL DOCUMENTS W. O. WEAVER C. W. FKEY Office of W. D. RADCLIFFE W. O. Weaver & Co WHOLESALE GROCERS FORM I. LETTER OF REMITTANCE viii APPENDIX D ix Of COpattttCt$I)ip made awl entered into this first day of May, one thousand nine hundred and eighteen, between Malcolm I). Gilbert, of the City of Boston, County of Suffolk, and Commonwealth of Massachusetts, and Chas. M. Wentworth, of said Boston : jFtrfit. This copartnership is formed for the purpose of carrying on in said City of Boston a Jobbing Furniture business under the firm, name, of M. 1). Gilbert & Co., and shall continue for two years from the date hereof unless sooner dissolved by mutual consent. rroilt). As his contribution to the capital of the firm said Malcolm D. Gilbert hereby transfers to the said firm his business now located at No. 467 East Street, and said firm assumes and agrees to pay the outstanding liabilities of the said business. Said business is taken over at the net value of $14.2,15. and is more particularly de- scribed in the Schedule of Assets and Liabilities hereto annexed. 2TI)trtI. Said Chas. M. Wentworth contributes as his share of the capital as follows: cash, $7000 ; stock of furniture, $1500 ; account u:ith Foley Bros., $5725 ; total, $14,225. jFottttl). Each partner shall, semi-annualltj , be credited on the books of the firm with interest at the rate of 6 per cent per annum on his share of the capital for the time being standing to his credit, before any division of profits is made, such interest charge to be treated as an expense of the business. jfiftl). Each partner shall be credited with the sum of $1W per month as salary, and he may withdraw the same monthly, for services rendered, or. at his option, any balance remaining undrawn may be carried to such partner's capital account. Such salaries shall be charged as an expense of the business and not reckoned as profits. Profits and losses shall belong to, and be borne by, the said partners in equal shares. Neither partner shall, for the benefit of any third person, indorse any notes or negotiable paper, or become surety or guarantor or otherwise liable for the benefit of third parties, without the assent in writing of the other partner first obtained. An account of the stock and of the debts and liabilities of the firm shall be taken at least annually, and the profits or losses computed and credited or charged to each partner's capital account. After such accounting, either party shall be at liberty to withdraw his share of any net profits of the firm, and any profits not so withdrawn shall be added to and deemed a part of the capital account of such copartner. Neither partner shall engage in- any other business, but each shall devote his entire time and attention to and put forth his best efforts and energy for the further- ance of the business aforesaid. QTttttl). Complete and accurate books of account shall be kept, used in common. and each partner shall, at all times, have access thereto. To the faithful performance of all the terms and conditions of these Articles of Copartnership, the undersigned partners hereby bind themselves each to the other, his heirs, executors, administrators, and assigns. 3Tn 5l8EitnC!S SRIjmof, the parties have hereto affixed their hands and seals, in duplicate, the day and year first above written. . [SEAL] [Signed] [SK.V.L] FORM II. ARTICLES OF COPARTNERSHIP APPEXDIX D all ;JHen by tfjese presents that w->, Jo. 10*. TWo^Mamr amd, /\o-6-A.t traJLL t fawn, oj. B. 10*. Tncyucfam, ty Co-., of the City of Boston, have -made, constituted, and appointed, and by these Presents do make, constitute, and appoint, (SAaAJL&a, ?H. Raymond, of the City of c/r&wton, TWoM/., ou'i, true and lawful Attorney, for u& and in OUA, name, place, and stead to and to c/c^z/ am^L lwu;toi&& cwvy o^ ait oi tA& n, the, &OUA&& oi ov i&O'UAsna fiuwn> ou,^ 6~uo,im,&&&, giving and hereby granting unto OUA, said Attorney full power and authority to a4^n> amd, {/YUOW,& o/u&h, {/nati/wwisE/yit&' / am,cL to fosAAowns cuit amd, EA>-eAA4 a#t wAat&o^v-EA, cd>~out tli& fo\/mAA/&' as freely, fully, and effectually as w-& could do if personally present, with full power of substitution and revocation, hereby ratifying and confirming all that OUA, said Attorney or his substitute shall lawfully do or cause to be done by virtue hereof. 3Tn Witntes H^Ijmof, ^t< l^ave hereunto set OUA, hands and seals this ILLt&emth, cLuy oi QuLy in the year nineteen hundred amd, Attorney's Signature Ro{>-At /"faLL [SEAL] Commonwealth of Massachusetts ) . . ,. - . }ss. JaooLon, fna&A,., jt-iuaj fo, Ivf County of Suffolk Then personally appeared the above-named B. W-. Tyioufam, amd, Rofj-eAt /tali and acknowledged the foregoing instrument to be tkeAA, free act and deed. Before me, . <&. A/Tt^ JQotarp public FORM III. POWER OF ATTORNEY APPENDIX D xi Commontoealti) of County of Suffolk City of Boston On the t&nt/i- day of Jb&e&VKbf'i , in the year of our Lord one thousand nine hundred amd, .icf/it&cii, ^, 7 A. (X. /At'tuyu, jBotarj) Public, duly admitted and sworn, and practicing in said Commonwealth, at the request of Ju&iyh /'f. $iiAwn, t (Esq., Caeljter of the &owvYn&(&iaL c/lrationa-L $ank- f went with the original not&, which is hereunto annexed , the time therein limited having fully elapsed, and demanded payment thereof at ttv& ?c&E&i fo. I/ft, /i-oat&n/ If &&., c (postage prepaid} of said cL&taatlt requiring payment. ^Ijereforc, I, the said JQotarp, by request as aforesaid, have pro- tested and by these presents do solemnly protest, against the drawer of said not&, the indorser, and all others concerned therein, for exchange, re-exchange, and all costs, charges, damages, and interest, suffered and sustained, or to be suffered and sustained, by reason or in conse- quence of the non-payment thereof. I have hereunto set my hand and affixed my Notarial Seal, the day and year first above ivritteji. Noting Non-Acceptance . . . Postage ......... Protesting for Non-Payment . $/.&(/ Postage ........ . .0? M. C( , Botarp public FORM IV. CERTIFICATE OF PROTEST xii APPENDIX D Commercial Rational Boston, Mass., &&. /O, / a half interest for '$7500; thus B becomes an equal partner. The money received by A is not a part of the capital of the new firm ; it is his individual possession, and the capital of the firm is $15,000. \ On A's books, as proprietor, the investment account appeared as follows : A, INVESTMENT 19 Jan. 1 3 15000 XVI APPENDIX F Under the partnership agreement one half of this sum must be credited to each partner, and this is accomplished by the following journal entry : A, Investment B, Investment 7500 When this entry is posted, the accounts of the proprietors, on the books formerly used by A, will appear as follows : A, INVESTMENT 19 19 Jan. 1 3 7500 Jan. 1 3 15000 B, INVESTMENT 19 Jan. 1 3 7500 Third, the formation of a partnership when the incoming partner makes an investment equal to the value of the established business. Illustration : A has a business worth $18,000 ; B invests a like sum and becomes an equal partner. The money invested by B is a part of the capital of the firm, which is now $36,000. On A's books, as proprietor, the investment account appeared as follows : A, INVESTMENT 19 Jan. 1 2 18000 The following entry should be made when B makes his investment : Cash 18000 isoou B, Investment When this entry is posted, B's account, on the books formerly used by A, will appear as follows : B, INVESTMENT 19 Jan. 1 7 18000 A's account will remain unchanged, and each partner is now credited for one half of the capital of the firm. NOTE. The cash items in the illustrations may be entered in the cashbook ; the journal entry has been used simply to set forth the debit and the credit items more clearly. Only two partners have been considered, but the principles are the same whether there are two partners or more than two, and whether the investments are equal or unequal. INDEX PAGE Abbreviations vi Acceptance, definition of 164 Account, or accounts analysis of 18-20, 30 closing, by balance 52 C.O.D. accounts . . . 221,222,248 definition of 15 division of assets 254 liabilities 254 proprietary 254 income 254 expense 254 how to open 15 kinds of real 243 nominal 244 open 30 in full of account 5 on account 4, 8 to apply on account 4 Accounts payable advantages of 225 definition of 63, 224 Accounts receivable advantages of 225 definition of 63, 224 Assets, definition of 31 Balance sheet definition of 31 form of 32, 228 Bank commercial 96 definition of 96 opening an account with .... 96 Bank account, monthly statement of, 100, 113 Bank charges for notes and drafts . 220 Bill, definition of 60 Bills of lading definition of . . . 180 description of 178-180 how drawn 180 illustrations of 179, 180 order 213 Book of final entry ii Book of original entry ii Bookkeeping definition of i double-entry cardinal principle of .... 33 definition of i in journal form 11 purpose of 31 single entry i RY X PAGE Book value defined 227 Business statements, discussion of . . 31 Business transactions, definition of . 1, i Calendar year 120 Capital, definition of 30, i Cash definition of 3 how proved 104 Cash account, balancing the . . . 52, 53 Cashbook closing of 74 entries of, journalized 72 explanation of 71 illustrations of, 72-73. 1)0-91. 128-129, 198-199 posting of . 74, 198-199 Charge, meaning of ii Check book checking stubs in 115 comparing, \\ith monthly state- ment 178 description of 98 illustration of 99 Check marks 23, 70 Check record illustration of 98 how kept 97 Checks cash 133 definition of 61 use of 98 Closing the ledger delivery equipment, how closed . 229 direct method 167-170 insurance, how closed 229 journal method 36-44 Collection and exchange, when charged. 218 Commercial terms defined iii Commercial year Hi* Copartnership. See Partnership Correction of errors 55-56 Credit 5, 6, 10. 14, 15, 134, 172 Creditor, definition of 10 Dates in fractional form 144 Debit . . . . 5, 6. 10, 14, 15, 72, 134, 172 Debtor, definition of 10 Deposit ticket .... . . 97, 218 Deposits 97 Drafts bank check to purchase 162 entries for 163 form of 162 indorsement of . . 163 xvm PRINCIPLES OF BOOKKEEPING PAGE Drafts commercial definition of 155 indorsement of 156 parties to two-party draft . . 155 parties to three-party draft . . 159 principles for entries . . 157, 166 relation of parties 159 use of 155 sight drafts for collection of debts . . . 155 entries for .... 157, 160, 161 form of two-party .... 156 form of three-party .... 160 payable to a bank 158 payable to a person or a firm, * 156, 160 with bill of lading attached . 222 time drafts acceptance of . . . . 164, 166 entries for 165 manner of accepting .... 165 method of handling .... 164 payableafter date .... 164 payable after sight . . 164,166 triangle illustration 159 Drawing account closing of 138 debit and credit of 134 form in financial statement . . . 138 why used 134 Entry compound 64 simple 64 Erasures, avoidance of 9 Errors, correction of 55 Exchanges applied to labor, or service . . . 1, 2 applied to promises 1, 2 applied to property 1 applied to use, or hire 1, 2 Expense, definition of ..'.... i Face of ledger account 22 Financial statement discussion of -31 form of 32 Formation of a partnership .... 235 Forms of statement, discussion of . . 57 Freight and cartage out 223 Fuel account, credit of 36 Fundamental principles 1 Indorsements definition of 118 forms of 113,118,119,163 object of 118 Insolvency, definition of 31, i Insurance policy 209 Interest how computed 119 definition of i entries of 120 legal rate 119 Interest earned 65, 66, 69 Interest paid 65, 66 Inventory definition of 28, i fuel 36 merchandise 30, 79 office supplies 36 how recorded 28 sundry expense .... 48, 63, 171 how taken 28 Invoice checking of 109, 110 definition of 60, ii illustrations of . . . 60, 62, 102, 109 of purchase 24 of sale 24 terms of 132, 136, 212 Journal analysis of 13-14 definition of ii illustrations of 12-13, 89 Journalizing definition of 6 rules for 14, 15, ii Ledger analysis of 18, 19, 20 definition of 15, ii illustrations of .... 16-17, 92-93 index of 225 lists of accounts in, order of, 63, 79, 114, 137, 224 model for closing 40-41 Ledger titles 208 Letters of remittance .... 211-212, viii ordering goods 209-210 Liabilities, definition of 31 Losses, how sustained 33 Memoranda of orders 239 Memorandum 10 Merchandise, definition of . . . . 3, 19, i Merchandise accounts, closing of, 37-39, 167-169 Merchandise discount 144, 216 Merchandise inventory account . . 19, 79 Merchandise purchases account ... 20 Merchandise sales account 19 Monthly statement of depositor's account 100 of open-ledger account . . 177, 225 Negotiable paper, maturity of ... 120 Net loss, definition of 31 Net profit, definition of 31 Notebook definition of ii illustration of 196-197 proof of 226 Notes, promissory acceptance 164 cancellation of 122, 146 discount of 182 RY INDEX xix Notes, promissory explanation of 6, 7, 103 interest-bearing 103, 181 joint 181 joint and several 181 kinds of 181 partial payment of 183 prepayment of 146 as property 30 renewal of 183 written forms 6, 103 Notes payable, definition of .... 6, i Notes payable account balance of 19 credits and debits of 19 Notes receivable, definition of . . . 6, i Notes receivable account balance of 18 debits and credits of 18 Office furniture 66 Omission of cents 15 Opening double-entry books illustration of 194 principles of 193 Opening journal entries . . . 64, 76, 84, 230, 231 Operating statement 31 Partnership, or copartnership arrangements 256 articles of ix clauses 128 definition of 128 dissolution consequences of 252 notice of 253 essential elements 233 formation of xv in Set IV, May 128 in Set V, August 233 Pass book 97, 98, 100 Pencil footings 18 Personal accounts credit balance shows 19 credits show 18, 33 debit balance shows 19 debits show 18, 33 definition of 18 monthly statement of . . . 177,178 noncollectible 33 Posting definition of 15, i of model journal 20, 21 omitting ditto marks in .... 23 Power of attorney x Present worth, definition of . . . . 30, i Price lists, 59, 75, 106-107, 130-131, 200-204 Principles of debit and credit, sum- mary of 14 Profit and loss, determination of . . 29 Profit and loss accounts, summary of 33 Profit and loss statement form of 32 results of . 31 PAGE Profits, how realized 33 Proprietary interest 19, 30, 31 Proprietor's account closing of 44, 170 definition of 19 Protest certificate of xi notice of xii Purchase book definition of 86 entries in 214 entries of, journalized 86 form of 89 how record 197 illustration of 89 posting of 93 Receipt definition of i form of 4, 102 Rechecking 23 Red ink, uses of 52 Rent paid account 20 Resources, definition of 31 Reverse stub 98 Salary account 20 Sales book definition of 86 entries of, journalized 86 illustration of 90-91 posting of 93 Script illustrations balance sheet 32 bank draft 162 bills of lading 179, 180 cashbook ....... 72-73, 90-91 check 61, 77 check to purchase bank draft . . 162 commercial drafts entries for . 157,160, 161, 163, 165 payable after date 164 payable after sight 166 sight draft . . . 156, 158, 160. 161 time draft 104.16(5 correction of errors 56 daily cash proof ....'... 104 deposit ticket 97 discount memorandum . . . . 219 financial statement 32 forwarding by balance .... 53 forwarding by footings .... 53 indorsements .... 113.118.110 invoices 60. 62, 102, 109 ledger accounts that balance . . 28 ledger rulings 37 model check book 99 model journal 12-13. 89 model ledger .... 16-17, 92-93 model ledger closed 40-41 model trial balance 22, 91 monthly statement of account . 177 notes 6,61,75,103,112 profit and loss statement .... 32 purchase book 89 XX PRINCIPLES OF BOOKKEEPING Script illustrations receipts 4, 102 rechecking 23 sales book 90, 91 signature card 96 working sheet 58 Signature card 96, 97 Solvency i Statements financial 31-32. 228 profit and loss 31-32, 227 Suggestions for ruling .... 8, 9, 37 Summary of principles 14, ii Sundry expense inventory .... 48, 63 PAGE Telegrams, use of xiii Term of discount 219 Trade discount 184 Trading statement 227 Trial balance of balances 22, 91 definition of 22 to find errors in 106 of totals 22 Voucher, definition of , Writing business forms 127, 148 RY UNIVERSITY OF CALIFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. 'U Form L9-32m-8,'58(5876s4)444 Library UNIVERSITY OF CALJFOR1 AT !> mil nil inn mil mil in mi A 000178592 2