Accounting theory and practice, Volume 1 (of 3)

The basic soundness of the method of instruction in Accounting developed in this book has received substantial demonstration throughout five years of test. The Introduction to t...

=Records and Their Functions.=—As far back as our knowledge reaches, records of some sort have been kept and used and they have frequently formed the basis on which our knowledg...

Before discussing the form and content of the balance sheet and some of its major uses, the chief classes of assets, liabilities, and proprietorship or capital will be explained...

=Purpose and Use.=—The balance sheet of a business is designed to show its financial condition at a given time. As previously illustrated, it marshals the assets in one list or...

=Comparison of Net Worths.=—The aim of every business enterprise is to increase its net worth. If James Runyon at the beginning of the year is worth $5,000 and at its close $7,5...

=Fuller Information Needed.=—As indicated in Chapter IV, in the summarization of the business transacted during a given period, it is not usually sufficient to know how much net...

=Type of Information Needed.=—The need and purpose of the information to be furnished by the temporary proprietorship records was pointed out in Chapter V. Without information o...

at the beginning and those purchased since, there be subtracted the goods on hand and unsold at the close of the period. This last item, the goods on hand and unsold, is secured...

=Various Aspects of the Temporary Proprietorship Records.=—The profit and loss statement has been explained as a summary of the temporary proprietorship records kept for the pur...

It is seen, therefore, that the changes in individual assets and liabilities are not so certain an index of changes in proprietorship as those registered by the temporary propri...

=The Goal of Account-Keeping.=—Throughout the preceding chapters constant reference has been made to records or data of the business furnished by the accounting department. Know...

=The Balance of the Account.=—As stated in Chapter VIII, the account is divided into two sections, a left and a right, for the purpose of separating items relating to the same a...

=Double-Entry Bookkeeping.=—Several systems or methods of keeping business records have at various times been in use. The method which at the present time is used by all busines...

=Student’s Use of Working Rules.=—In order to indicate the more usual types of transactions which affect the asset, liability, and proprietorship accounts, a set-up of the vario...

=Proprietorship Accounts Defined.=—Proprietorship accounts are the accounts which record the effects, both temporary and ultimate, of business transactions upon proprietorship....

=Mixed Accounts Defined.=—In the course of business operations certain accounts which at the beginning of the period belong definitely to some one of the three groups, asset, li...

The work preliminary to summarizing the record of transactions for a period and preparing the balance sheet and profit and loss statement is comprised under three heads: (1) the...

=Why Current Records of the Ledger Need Adjustment.=—At the end of the fiscal period the ledger does not present a true record of financial condition. The fixed assets of the bu...

=Insufficiency of the Ledger Record.=—In an earlier chapter a business transaction was defined as an exchange of values, and the ledger as the book in which transactions are gro...

=Inadequacy of the Old Journal.=—As explained in the previous chapter, every business transaction was formerly entered in the journal. This necessitated the making of a formal d...

=Types of Purchase Journal.=—For recording purchases of stock-in-trade, a separate special journal called “Purchase Journal” is used. Sometimes this special journal takes the fo...

=The Cash Book.=—For recording transactions involving cash, two journals are used. One of these records receipts and the other disbursements of cash. They are known respectively...

=Matter Left for Record in the Journal.=—By the use of a cash receipts, a cash disbursements, a purchase, and a sales journal, four principal classes of transactions are taken o...

The books of original entry, i.e., the journals, having been explained, the attention of the student will be directed next to the sources of information on which the entries in...

=Definition.=—When a business transaction takes place, a record or memorandum of its amount and nature is usually made out. Thus, the amount of cash received for a sale may be r...

=Service of the Bank to the Community.=—Practically all business houses at the present time take advantage of the banking facilities to be found in every community where there i...

=The Journal and Ledger Records Differentiated—Posting.=—When a correct and complete record of business transactions has been made in the various journals, practically all the c...

4. In the Journal the debits and credits of each entry are fully expressed, i.e., neither element is suppressed. In posting from this record it is best to transfer all the debit...

=The Trial Balance.=—In Chapter XIV the trial balance was defined as a list of account _totals_, debit and credit, or account _balances_, debit or credit, for all the _open_ acc...

=Accounting Routine Related to Account Classification.=—The basic relationships between the accounts and the statements of financial condition were explained in Chapter IX, wher...

closed, there appear only asset, liability, and vested proprietorship accounts; but during the fiscal period, the temporary proprietorship accounts come into being and certain a...

=Procedure Preliminary to Adjusting and Closing.=—Before tracing the detail of the adjusting and closing entries through the books, explanation will be given of the usual method...

=Adjustment Entries—Kinds and Place of Record.=—In Chapter XV it was shown that the records as they are usually kept do not reflect the true condition of the business at any tim...

work sheet it was stated that the adjustment columns of the work sheet are used as a guide to making the adjusting entries. As to sequence in the journal, these follow immediate...

=Evolution of Analytical Journals.=--Though the only books absolutely necessary for an accounting record under the double-entry method are the journal and the ledger, even the s...

=Introductory.=--Reference to controlling accounts has been made several times in preceding chapters. It is purposed now to define them and explain their use. The separation of...

the principles on which the controlling account rests, the manner of its construction, its advantages, and with the changed application of the fundamental scheme of debit and cr...

=Partnership Defined.=--In Chapter II, reference was made to some of the features of a partnership--the purpose of its formation, advantages, disadvantages, etc. The laws of the...

From the fact that the law looks upon the partnership as a combination or collection of sole owners, some of the accounting problems arising out of the partnership form of organ...

=Sources of Capital.=—From an accounting viewpoint, the capital of any business enterprise is the excess of its assets over its liabilities. Usually, the main fund of capital is...

=Admission of a New Partner.=—In Chapter XXXIII a distinction was made between buying out an interest in a business and making an investment in a business. In the former case no...

=Ambiguity of Definition of Profits.=—The term “profits” as applied to business is perhaps used with as little uniformity as any term met with. When a concern speaks of its prof...

=Temporary Nature of Partnership.=—Because of its personal character, a partnership has necessarily a limited duration. It must look forward to the time when its business will h...

=Definition.=—The definition of a corporation, given by former Chief Justice Marshall as “an artificial being, invisible, intangible, and existing only in contemplation of the l...

=Corporation Accounting Records.=—The method of recording the ordinary business transactions of a corporation is essentially the same as in the types of business organization pr...

=Relation between the Corporation and Its Owners.=—It should be noted that the owners of a corporation are on a somewhat different basis in their relationships and activities to...

=General Considerations.=—In keeping record of the various properties of a concern, the greatest care is usually exercised in accounting for the asset cash. This is done because...

=Conditions Precedent to the Present Use of Notes and Bills.=—During the twelfth and thirteenth centuries there was much bad money in circulation in Europe because of the widesp...

=The Note Journals.=—Because the general journal does not lend itself to an easy record of the essential data pertaining to note transactions, a separate book is oftentimes kept...

Where the Notes Receivable account in the ledger shows each note separately rather than the totals of the items, good practice countenances the recording of the _credits_ in thi...

=Definition and Kinds.=—A discount is a deduction from a listed or named figure. The manufacturer or wholesaler in making up his catalogue for the trade usually enters his produ...

=The Two Problems of the Balance Sheet.=—There are two major problems connected with the balance sheet: (1) the problem of form, and (2) the problem of content. The form of the...

=Importance of Buying.=—Buying as a major function in a mercantile concern is intimately related to, and dependent on, the other functions of the business. Buying must always ha...

=Some Buying Records and Their Use.=—The chief purpose of the main records kept in business is the securing of control over the activities of the business. The control over merc...

=Importance of the Sales Department.=—Of the major departments into which business activities are commonly classified, the selling department ranks first in point of relative im...

=Definition.=—When goods are shipped to another party to be sold by him for account of the shipper, the transaction is called a “consignment.” In its original sense, to “consign...

=Adventure Transactions.=—Before the day of easy transportation and communication between markets, adventure or venture undertakings were quite common. The inherent willingness...

=Definition.=—An account current in its broadest sense is an account of current transactions. In a technical sense, it is an open personal account, one with an outstanding balan...

joint account was charged and the contributing partners’ accounts were credited with interest, while the managing partner was charged and the joint account credited with interes...

=The “Fool-Proof” Trial Balance.=—Double-entry bookkeeping is never satisfied with anything short of absolute proof of the mathematical accuracy of the work. Often such proof is...

=The Nature of Interest.=—Interest may be defined as the charge made for the use of money. Sprague defines it as the increase in principal due to the lapse of time. The ethics o...

=Different Systems of Bookkeeping.=—Except in small enterprises, the only satisfactory system of bookkeeping is double entry. The system—or rather lack of system—known as single...

=Opening Entries.=—In opening a set of single-entry books, as complete a record should be made as under double entry. If the proprietor begins business with an investment of cas...

Accrued Expenses: Salesmen’s salaries $485. Shipping clerks’ and chauffeurs’ wages $265. Unpaid garage bills $182.50. Freight bills $55.60. Office salaries $287.50. Lighting exp...