Chapter XXVII.

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 expense estimate $25. Watchman’s and cleaners’ wages $106. Taxes $300. Prepaid Expenses: Advertising $3,000. Rent $1,250. Insurance $790. Merchants’ Association dues $50. Interest on note payable to the order of the Associated Dry Goods Co. $57.21. Interest on the note due the Merchants’ National Bank $12.50.

Accrued Income: Interest on Liberty bonds $47.50. Interest on the note of Charles L. Sutton & Co. $46.67. Word has been received from the attorneys that the note of the Silk & Dress Goods Exchange, which had been extended and not paid when presented, will be met in full with accrued interest of $42.84. Out-freight for June, $169.70. Charge depreciation as follows: 10% per annum on office and store furniture and fixtures; 20% per annum on delivery equipment. Create a reserve for bad debts equal to ½% of gross sales. Inventories were: merchandise $102,560; office supplies $257.80; shipping supplies $387.60. Charge and credit the partners with interest as per the partnership agreement.

_Instructions_

Do not close the books of the firm nor draw up the formal statements.

Be content for this assignment with the making of the work sheet.

Close the work sheet as usual by the transfer of the net profit from the Profit and Loss columns to the credit column of the balance sheet.

Immediately following and on the same page with the work sheet, provide for showing the distribution of profits and interest and salary adjustments. The following illustration will indicate how this may be done.

============+===============+=============+=============+============= ITEMS | PROFIT & LOSS | X PER 36% | Y PER 44% | Z PER 20% ------------+---------------+-------------+-------------+------------- Net Profit | | | | as above | $18,364| | | | | | | Salary | | | | Allowances |$ 5,400 | $2,400| $3,000| | | | | Partners’ | | | | Drawings | |$3,000 |$3,100 |$1,500 | | | | Interest on | | | | Excess | | | | Drawings | 36| 18 | 3 | 15 | | | | Interest on | 3,000 | 900| 600| $1,500 Capitals | | | | | | | | Balance | | | | Distributed| | | | in Profit | | | | and Loss | | | | ratio | 10,000 | 3,600| 4,400| 2,000 | | | | Balance of | | | | Personal | | | | accounts | | | | to Loan | | | | accounts | |3,882 | 4,897 | 1,985 ----------+---------------+-------------+-------------+------------- |$18,400 $18,400|$6,900 $6,900|$8,000 $8,000|$3,500 $3,500 +===============+=============+=============+=============

The item “Net Profit as above” is taken from the work sheet. The Profit and Loss columns, in conjunction with the detailed distributions shown in the “Partners’ Personal” columns, contain all the data needed for the appropriation section of the profit and loss statement and also for distributing the net profit shown by the Profit and Loss account. By entering the drawings in the “Partners’ Personal” columns, those columns are made to develop the amount of undrawn profits of each partner. They thus contain the same information which the respective personal accounts will contain after the ledger is closed. The work sheet, with this appended analysis of profits and partners’ personal accounts, thus contains all of the information needed both for drawing up the formal statements and for adjusting and closing the books.

XVI

Draw up a pro forma balance sheet and a statement of profit and loss for the six months for Cotten, Wooster & Company. In drawing up the balance sheet, head it as follows:

_Exhibit A_ COTTEN, WOOSTER & COMPANY BALANCE SHEET June 30, 19—

Show the total of all customers’ accounts as “Accounts Receivable (See Schedule A-1).” Attach to the balance sheet a list or schedule of all customers’ accounts to support the title “Accounts Receivable (See Schedule A-1),” carried in the balance sheet. Give to it as a formal heading:

_Schedule A-1_ COTTEN, WOOSTER & COMPANY LIST OF ACCOUNTS RECEIVABLE June 30, 19—

The data for the schedule come from the customers ledger list or trial balance for June 30.

Attach schedules also for the other groups of items appearing in the balance sheet, viz.: Deferred Charges to Operation under which include in addition to the other items listed, the office supplies and packing materials still on hand; Accrued Income; Accounts Payable; and Accrued Expenses.

The use of schedules relieves the balance sheet of much detail and renders it more intelligible; it also makes the detail available if desired.

Set up the net worth section as follows:

_Net Worth_ Represented by: C. Allen Cotten: Capital $........ Undrawn Profits (See Schedule A-6) ........ $........ -------- Scott Wooster: Capital $........ Undrawn Profits (See Schedule A-6) ........ ........ -------- Etc.

Supporting Schedule A-6 will appear as follows:

_Schedule A-6_ COTTEN, WOOSTER & COMPANY UNDRAWN PROFITS, June 30, 19—

============================+=========+=========+========= DISTRIBUTIONS OF PROFITS | COTTEN | WOOSTER | WOOLSEY | 36% | 44% | 20% ----------------------------+---------+---------+--------- Salary for the half-year | $ | $ | Interest on capital | | | $ Share of Profit and Loss | | | | --------| --------| -------- Totals | $ | $ | $ | --------| --------| -------- _Deduct_: | | | Interest on overdrafts | $ | $ | $ Drawings for the half-year | | | | --------| --------| -------- Totals | $ | $ | $ | --------| --------| -------- Undrawn profits transferred | | | to Loan Accounts | $ | $ | $ +=========+=========+=========

The data for this schedule are secured from the “Profits Distribution” section of the work sheet.

In drawing up the profit and loss statement refer to the forms already shown. See Chapters XXVI and XXVII. The Miscellaneous Sales item should be added to the Net Sales short-extended and their total should be full-extended, from which should be deducted Cost of Goods Sold as usual.

After the item, “Net Profit for the period,” set up the appropriation section, showing the shares of each of the partners, somewhat as follows:

Net Profit for the period $........

_Add_: Interest charged to partners on overdrafts: C. Allen Cotten $........ Scott Wooster ........ Landsdowne Woolsey ........ ........ -------- -------- Amount to be distributed as: $........

Salary: C. Allen Cotten $........ Scott Wooster ........ $........ -------- Interest on Capitals: C. Allen Cotten $........ Scott Wooster ........ Landsdowne Woolsey ........ ........ -------- In Profit and Loss Ratio: C. Allen Cotten, 36% $........ Scott Wooster, 44% ........ Landsdowne Woolsey, 20% ........ $........ -------- ------- ========

Excepting for the Accounts Receivable and Accounts Payable schedules, the detailed data for balance sheet and profit and loss statements come from the work sheet drawn up for Assignment XV. Set up the formal statements on letter size (8½ × 11) paper. Typewrite them if possible.

XVII

Using the “Adjustment” columns of the work sheet as a guide, make the adjusting entries in the general journal.

Using the profit and loss statement (including the appropriation section) as a guide, set up the closing entries in the general journal. Use the “Profits Distribution” section of the work sheet as the source of the transfer of the balances of the partners’ personal accounts to the loan accounts.

Post the adjusting and closing entries. Rule the ledger accounts. Take a post-closing trial balance of the general ledger.

XVIII

This set comprises a general journal; a sales journal, a sales returns and allowances journal, a purchase journal, a purchase returns and allowances journal, and the cash journals, for convenience bound together in one book; a note journal to be used as a posting medium for notes receivable and notes payable; and a general ledger, a purchase ledger, and a sales ledger, bound together in one book. Of the subsidiary journal blank, page 1 is for the sales journal, page 2 the sales returns, page 3 the purchase journal, page 4 the purchase returns, and pages 6-9 the cash journals. Of the ledger blank, pages 1-15 comprise the general ledger, pages 16-19 the sales ledger, and pages 20-22 the purchase ledger. The general journal will be used as previously, i.e., for the record of all items not otherwise specially provided for. The sales journal provides for analysis of the sales, the first column being the total or general column; the others, Dept. A, Dept. B, and Out-Freight, respectively. The sales returns and allowances journal makes provision for the same analysis as the sales journal except that there is no Out-Freight column, that not being used; the purchase journal columns are respectively, Total, Dept. A, Dept. B, and In-Freight, with the same column headings for the purchase returns and allowances journal, except as to In-Freight. The cash book columns will be, on the debit, General, Accounts Receivable, Sales Discount, and Harding National Bank; and on the credit, General, Accounts Payable, Purchase Discount, and Harding National Bank. The note journal will be analyzed, summarized, and posted just as the other subsidiary journals.

The deposit account carried with the Coolidge National Bank is an inactive one. For this reason no extra column is provided for it in the cash book.

Daily posting of items affecting customers’ and creditors’ accounts should be made, carefully observing the terms of credit.

The general journal is provided with six money columns, three of which are to be devoted to charges and the other three to credits. The debit columns are to be headed, Accounts Payable, Accounts Receivable, and General, respectively. The credit columns will be headed similarly but in the reverse order, having the General column close to the ledger folio column. All amounts to be posted to accounts in the general ledger should be recorded in the General column, and those affecting a controlling account in its respective column. The latter amounts should be posted to the subsidiary account immediately, but will not be posted to the controlling account until the general journal is summarized at the end of the month. Record will be made of transactions for the last month of the fiscal year, the previous eleven months being summarized in the trial balance given to start with.

The Business Equipment Corporation was organized and incorporated under the laws of the state of New York. Its fiscal year closes on December 31. A trial balance from the general ledger on November 30, 19—, shows as follows:

1 Harding National Bank $ 6,521.25 1 Coolidge State Bank 5,000.00 1 Consignment Accounts Receivable 1 Petty Cash 200.00 1 Notes Receivable 8,419.80 2 Accounts Receivable 146,838.05 2 Reserve for Doubtful Accounts $ 2,574.85 2 Investments 12,750.00 2 Notes Receivable Special 3 Department A, Inventory 78,769.40 3 Department B, Inventory 52,918.25 3 Delivery Equipment 13,000.00 3 Depreciation Reserve Delivery Equipment 8,000.00 4 Store and Warehouse Furniture and Fixtures 4,500.00 4 Depreciation Reserve Store and Warehouse Furniture and Fixtures 2,000.00 4 Office Furniture and Fixtures 1,250.00 4 Depreciation Reserve Office Furniture and Fixtures 500.00 5 Buildings 60,000.00 5 Depreciation Reserve Buildings 15,000.00 5 Land 10,800.00 5 Mortgage on Real Estate 35,000.00 6 Notes Payable 6,472.50 6 Accounts Payable 94,969.17 6 Dividends Payable Common 6 Dividends Payable Preferred 7 Capital Stock Common 100,000.00 7 Capital Stock Preferred 100,000.00 7 Surplus 34,792.80 8 Profit and Loss 9 Department A, Purchases 478,860.00 9 Department A, Purchases Returns and Allowances 15,678.90 9 Department B, Purchases 397,725.00 9 Department B, Purchases Returns and Allowances 12,796.40 10 In-Freight and Cartage 9,642.57 10 Department A, Sales 567,819.60 10 Department A, Sales Returns and Allowances 10,649.30 10 Department B, Sales 471,932.40 11 Department B, Sales Returns and Allowances 7,427.80 11 Salesmen’s Salaries and Commissions 29,942.70 11 Salesmen’s Traveling Expenses 17,897.60 11 Advertising 22,000.00 12 Sales General Expense 23,649.30 12 Out-Freight 472.73 12 Insurance 7,562.40 12 Office Expense 2,890.78 13 Office Supplies 3,697.40 13 General Expense 12,897.48 13 General Salaries 32,894.72 13 Interest and Bank Expense 2,344.52 586.13 14 Sales Discount 15,849.50 14 Bad Debts 14 Depreciation 14 Purchase Discount 10,297.80 15 Taxes 15 Mortgage Interest 1,050.00 15 Consignment 15 Consignment-Out ------------- ------------ $1,478,420.55 $1,478,420.55 ============= =============

_Instructions_

Open all the above accounts in your general ledger, at the places indicated, and enter under date of December 1 the balances given in the trial balance. The number in front of the account title indicates the page on which to enter the accounts. Give each one-fourth of a page, except on page 2, where give Accounts Receivable two additional lines by shortening the space for Investments.

In the sales ledger (which is controlled by the Accounts Receivable account on the general ledger), beginning on page 16, open the following accounts, four to a page, and enter the balances as of December 1:

Alexander, Hill & Co. $ 10,187.60 Automatic Pencil Sharpener Co. 1,279.00 Browne Morse Co. 4,279.85 Clark & Smith 6,798.94 General Fireproofing Co. Hall, Walter & Co. 2,967.09 Franklin Moffit Co. 22,897.42 Peerless Motor Co. John B. Scrivener Standard Truck Co. 217.90 Second Third National Bank 650.00 Willis, Dickson, Inc. 14,679.80 Yonkers Carpet Works Sundry Customers 82,880.45 ----------- $146,838.05 ===========

In the purchase ledger (which is controlled by the Accounts Payable account on the general ledger), beginning with page 20, open the following accounts, four to a page, and enter the balances as of December 1:

American Banking Machine Co. $ 7,894.20 American Duplicator Co. 2,985.75 American Kardex Co. 6,732.84 Automatic Pencil Sharpener Co. 480.00 Apex Office Supply Co. 2,797.90 Dictation Devices Co. 5,724.75 Filing Systems & Cabinet Co. 6,894.80 Library Bureau 7,894.90 Protectograph Co. 2,147.35 Yawman & Erbe Mfg. Co. 10,897.50 Sundry Creditors 40,519.18 ----------- $ 94,969.17 =========== The two accounts, “Sundry Customers” and “Sundry Creditors,” are used to secure volume of transactions without involving too great detail. They should be treated in all respects as personal accounts.

In the notes receivable journal, enter the following notes:

No. 84, made by Clark & Smith in our favor, for merchandise, dated September 18, 19—, for three months at 6%, amount $1,987.50.

No. 87, made by Hall, Walter & Co., in our favor, for goods purchased, dated October 5, at 6% for two months, amount $2,500.

No. 88, draft drawn by the company on Willis, Dickson, Inc., dated October 28, at 60 days, amount $2,750.

No. 91, made by Franklin Moffit Co., in our favor, for merchandise, dated November 15, at 6% for 30 days, amount $1,182.30.

Total the “Amount” column and rule it off as this amount is already in your general ledger “Notes Receivable” account.

In the notes payable journal, enter the following notes:

No. 32, made by the company in favor of the Yawman & Erbe Mfg. Co., dated October 15, for two months for $1,472.50 at 6%.

No. 31, made by the company in favor of the Harding National Bank for discount, dated October 20, at 6% for 60 days, amount $5,000.

Enter these in the notes payable journal and treat as with notes receivable above.

Your books, general and subsidiary, will now show the condition as at the beginning of business December 1.

XIX

Make record in the various books of original entry of the following transactions for December, figures at left margin indicating day of month. Where needed, directions appear at the close of each assignment.

Dec. 1. Sold Browne Morse Co., 1/10, n/30, $1,538.40 (A), and $408.75 (B) on which the company prepaid freight and charged to them $58.85. Received on account from Willis, Dickson, Inc. $2,000. Paid cash on account to American Banking Machine Co., $2,000. 2. Bought of the Yawman & Erbe Mfg. Co., 2/5, n/20, $2,989.80 (A), and $3,347.65 (B). Sold Clark & Smith, 2/10, n/60, $3,276.40 (A), and $1,562.32 (B). Received cash on account from Alexander, Hill & Co., $3,500. Paid cash on account to Filing Systems & Cabinet Co. $2,000. 3. Sold General Fireproofing Co., 1/5, n/30, $2,190, (A). Received cash from Sundry Customers $5,547.80. Paid American Kardex Co. $3,500 on account. 5. Sold Hall, Walter & Co., 3/10, n/30, $1,279.60 (A), and $390.45 (B). Received payment on Hall, Walter & Co. note No. 84, with interest. Browne Morse Co. paid their bill of December 1, less 1%. Paid American Duplicator Co., November balance less 1%. Received $2,497.80 from Sundry Customers. 6. Bought of the Automatic Pencil Sharpener Co., 4/10, n/30, $679 (B). Bought from Apex Office Supply Co., 1/10, n/30, $1,497.80 (A), and $896.45 (B). Sold Peerless Motor Co., 1/10, n/60, $2,679.40 (A), and $1,243.70 (B), with prepaid freight charged them $22.90. Received $2,500 on account from Willis, Dickson, Inc. Gave our 30-day note No. 33, at 6%, in favor of Library Bureau, to apply on account, $3,000. Paid Sundry Creditors $8,191.75. 7. Sold Second Third National Bank, 1/5, n/60, $425 (B). Paid Yawman & Erbe bill of December 2, less 2%. Received from Sundry Customers $2,976.80 on account. Sold Browne Morse Co., 1/10, n/30, $1,215.60 (A), and $671.15 (B). Clark & Smith returned goods, invoice of December 2, $127.50 (A), and $16.18 (B). General Fireproofing Co. paid their invoice of December 3 less 1%. Second Third National Bank paid their November balance less 1%. 9. Bought of Dictation Devices Co., 1/10, n/30, $3,784.90 (A), and $1,781.19 (B). Paid cash for insurance $275. In making a deposit at the bank, a $20 note was found to be counterfeit. 10. A note receivable for $2,500 was received from the president, due in six months at 6% in return for a loan made to him by the company. Sold Automatic Pencil Sharpener Co. $896.40 (B), 1/5, n/30. Received cash on account from Franklin Moffit Co. $7,500. Browne Morse Co. paid $2,000 on account. Paid Apex Office Supply Co., $2,500 on account. 12. Bought of the Protectograph Co., n/60, $2,976.80 (B). Sold Alexander Hill & Co., 2/5, n/30, $1,569.70 (A), and $972.80 (B). Hall, Walter & Co. returned goods, invoice of December 5, $92.78 (A), and $121.47 (B). Received balance from Clark & Smith, invoice of December 2, less 2%. Paid Yawman & Erbe Mfg. Co. $5,000 on account; and Dictation Devices Co. $2,500. The Second Third National Bank paid their invoice of December 7, less 1%. 13. John B. Scrivener, the secretary, withdrew for his home use $125.80 (A), and $48.90 (B). Sold Browne Morse, 1/10, n/30, $894.65 (A) and $1,292.45 (B). Returned to Automatic Pencil Sharpener Co. $207 (B) of the invoice of December 6. Paid $890 for changing the partitions in the warehouse. Took from stock a new sofa, $275 (A) for use in salesrooms. 14. Purchased from American Banking Machine Co., 3/10, n/30, $1,472.85 (A), and $4,561.40 (B). Sold Standard Truck Co., 1/10, n/30, $684.90 (A), and $516.75 (B), with prepaid freight charged them $62.81. Received $2,500 on account from Franklin Moffit Co. Paid Protectograph Co. $2,000 on account. 15. Sent a consignment of Department A goods, $1,200 to G. A. Roberts, to be sold on a 5% commission basis. Drew a 30-day sight draft on Alexander Hill & Co. to apply on account, $2,500, which was accepted. Hall, Walter & Co. gave a 30-day 6% note for balance of their bill of December 5, less 3%. The Franklin Moffit Co. note was paid with interest. Received from Automatic Pencil Sharpener Co. in full settlement, the net balance due as shown by their two accounts, advantage being taken of the discounts both ways. Paid Yawman & Erbe note due today with interest.

_Instructions_

December 5. Record the interest received from Notes Receivable in the Interest and Bank Expense account.

December 10. Be sure to enter the note received from the president to the correct account.

December 13. For stock withdrawn for use of business, make entry in the general journal.

December 15. Transfer through the general journal the claim of the Automatic Pencil Sharpener Co. to their account in the sales ledger, taking into consideration the sales discount to be allowed and the purchase discount to be taken. Remember to record these amounts in the proper columns. The balance of the latter account will be offset by the credit from the cash receipts journal.

XX Dec.

16. Bought from American Kardex Co., 3/10, n/30, $629.50 (A), and $350.40 (B). Bought on account of the Yonkers Carpet Works, n/90, carpets and floor materials for showrooms. They charged $890 for the carpets, etc., and $125 for labor in laying them, with freight prepaid by them and charged to the company of $22.80. Returned to the Protectograph Co. $258 (B). Gave Apex Office Supply Co. 30-day note at 6%, for bill of December 6, less 1%. The Peerless Motor Co. paid their bill of December 6, less 1%. 17. Sold Franklin Moffit Co., 1/10, n/30, $987.40 (A), and $1,642.70 (B), with prepaid freight charged them $62.15. Paid in-freight and cartage bills to date $569.47. 19. Bought of American Duplicator Co. $4,897 (A), n/60, with prepaid freight $297.69. Sold Willis, Dickson, Inc., n/10, $892.50 (A), and $274.90 (B). The Clark & Smith note was paid with interest. Browne Morse Co. gave the company a 30-day 6% note for the bill of December 7, less 1%. Drew from stock for completing showrooms, furnishings $2,790 (A), and $650 (B). Hall, Walter & Co. paid the company $100 for the use of one of the motor trucks for the week. Alexander, Hill & Co. paid their bill of December 12, less 2%. Gave Dictation Devices Co. $2,500, 30-day note at 6% and the balance in cash, in settlement of invoice of December 9, less 1%. Paid note due at bank today. 20. Sold Sundry Customers to date receiving full cash payments $2,447.50 (A), and $1,679.35 (B). Sold Yonkers Carpet Works Co., 1/10, n/30, $889.70 (A), and $632.40 (B). Paid American Banking Machine Co. $5,000 on account. 21. Returned to American Banking Machine Co. $289.50 (A), and $186.70 (B), of invoice of December 14. The company accepted the draft, to apply on account, drawn by the American Kardex Co., at 60 days from December 18, for $2,500. Paid Filing Systems & Cabinet Co. $2,500 on account. 22. Bought from Filing Systems & Cabinet Co., 3/10, n/30, $3,695 (A), and $4,272 (B), with prepaid freight charges of $116.74. Sold Clark & Smith, 2/10, n/60, $1,462.80 (A), and $1,937.60 (B). Hall, Walter & Co. paid $1,000 on account. Browne Morse Co. returned goods $197.60 (A), and $59.70 (B). 23. Word was received that one of our Sundry Customers has gone into the hands of a receiver, owing $490, and settlement with creditors was made on the basis of 40% of all claims, cash being received for that amount. Bought of Library Bureau, 1/10, n/30, $2,897 (B). Sold Alexander, Hill & Co., 1/10, n/30, $1,785.90 (A), and $2,476.80 (B). Paid Library Bureau $3,000 on account. Browne Morse Co. paid balance of their bill of December 13, less 1%. 24. The company discounted its note at the Harding National Bank for 60 days at 6%, $5,000. Paid balance on American Banking Machine Co. bill of December 14, less 3%. Bought of Yawman & Erbe Mfg. Co., 2/5, n/20, $4,567.90 (A), and $976.50 (B). Received on cash sales $458.60 (A), and $1,124.70 (B). Received a check from Willis, Dickson, Inc., for $5,000. Paid Yawman & Erbe Mfg. Co. $5,000. Standard Truck Co. gave a 30-day note at 6% for bill of December 14, less 1%. 27. We called to the attention of Willis, Dickson, Inc. an undercharge of $100 in the bill of December 19 in the Department B sale. Returned merchandise to Sundry Creditors $1,910 (A), and $897.50 (B). Sundry Customers returned goods $619 (A), and $1,490 (B). Paid advertising $2,000. Paid cash for purchases $4,209 (A), and $2,010.70 (B). Franklin Moffit Co. paid $5,000 on account. The Willis, Dickson, Inc. draft was given to the bank for collection. 28. The Willis, Dickson, Inc., draft was sent back because of insufficient funds. Protest fees paid by the bank and charged to the company were $2.50. Sold Sundry Customers, n/30, $5,196.40 (A), and $8,927.30 (B). Paid the American Kardex Co. bill of December 16, less 3%. Received payment from Clark & Smith for bill of December 22 less 2%. Paid the Filing System & Cabinet Co.’s bill of December 22, less 3%.

_Instructions_

December 16. Record the purchase made from the Yonkers Carpet Works in the proper column of the general journal. Charge Sales General Expense.

December 19. Credit the income received for the use of the motor truck to Sales General Expense.

December 23. Refer to page 411 of the text as to the handling of the balance of the firm’s claim against the bankrupt customer.

December 24. Cash sales will be recorded in the sales journal and included in the debit to Accounts Receivable account at time of summary. To offset this inflated debit, at the time cash sales are recorded also in the cash book the amount will be entered there in the Accounts Receivable column—not the General Ledger—and will thus be included in the credit to the Accounts Receivable account.

December 27. Record the Willis, Dickson, Inc. undercharge in the sales journal.

The entry of cash purchases is similar to that of cash sales.

XXI Dec. 29. Upon presentation at the office of Willis, Dickson, Inc., the draft due December 27 was paid with the protest charge. Bought from Library Bureau, 1/10, n/30, $3,297 (B), with in-freight $269.87. Made partial payment to Yonkers Carpet Works $300. 30. Bought of Sundry Creditors, n/30, $11,816.80 (A), and $16,519.70 (B). Sold Sundry Customers, n/30, $32,279.90 (A), and $26,819.40 (B). Yonkers Carpet Works paid their invoice of December 20 less 1%. Received cash from sale of old showroom fixtures $1,450. The fixtures cost $2,500 five years ago and have been depreciated at the rate of 10% per annum since that time. Received a check for $317.90 from Standard Truck Co.; and checks and cash from Sundry Customers $53,606.97, less $897.48; to one of whom we issued check for $25 due to inability to make change. 31. Reimbursed petty cash for cash vouchers $116.80, and distributed same: $62.40 to Sales General Expense; $23.10 to Office Expense; and the balance to General Expense. Paid Sundry Creditors, invoices of $29,467.45, less $842.90 discount. Paid sales salaries $4,200; salesmen’s traveling expense $3,872.80; sales general expense $748.45; general salaries $3,764.90; advertising for January $2,000; general expense $1,714.92; office expense $482.70; interest and bank expense $86.80; office supplies $287.95.

The statement from the bank as of December 31 showed the following:

Items not entered on the Business Equipment Corporation books:

Interest credited, $24.79 Collection charges, 2.36

Checks outstanding: #1296, $1,347.60 #1314, 75.80 #1315, 16.82 #1318, 192.47 #1329, 181.64 #1331, 296.70 #1342, 897.60

A check from a sundry customer for $100, deposited on December 30, was returned by the bank as uncollectible. The company had not yet been informed of this.

Balance by bank was $14,848.73.

Reconcile the bank statement with the cash book balance shown previous to the entry in the cash book of any items from the bank statement, and determine the true cash balance.

Summarize all books of original entry. Posting of these summary entries and any other unposted items will be deferred to the next assignment.

_Instructions_

December 30. Refer to pages 416-418 of the text as to the proper record to be made of the sale of the old showroom fixtures. Credit the gain on this sale to the Sales General Expense.

December 31. The amount of check for $25 is included in the amount received from sundry customers.

In summarizing the general journal, first foot all the columns and underline the totals. On the following lines write the summary entry which will appear as follows:

General General ...... General Ledger ✔ ...... Accounts Receivable ...... Accounts Payable General Ledger ........ Accounts Receivable ........ Accounts Payable ........

Since the items making up the “General Ledger” totals have already been posted, these totals will be checked and will not be posted.

In summarizing the sales journal, the cash sales need not be segregated from the credit sales in the summary entry, inasmuch as the inclusion of such receipts in the total to be posted to Accounts Receivable from the cash receipts journal will eliminate the inflation of the claims against customers shown by the controlling account.

The purchase journal will be summarized in the same way as the sales journal.

The items shown on the bank statement but not yet entered in the cash book are to be entered there before summarizing the cash book. See page 562 for instructions as to its summary.

For summarizing the other journals follow the explanations given in Chapter XXXI.

XXII Post completely.

Take a trial balance of the general ledger, recording it on a double sheet of journal paper. When posting customers’ and creditors’ accounts, make sure that the corresponding controlling accounts will receive, either in totals or in items, the same amounts.

Prove your sales and purchase ledgers and record the proof with the general ledger trial balance, i.e., make a list or schedule of the accounts and show the list totals as agreeing with their respective controlling account balances in the general ledger trial balance.

XXIII

Prepare a work sheet for the year ending December 31, 19—, taking the following adjustments into consideration:

Accrued Expenses: Salesmen’s salaries $385. General Salaries $416.90. Amount due on repairs to building $500. Mortgage interest $1,050. Interest on notes: Library Bureau note $12.50; Apex Office Supply Co. note $5.92; Dictation Devices Co. note $5. Accrued freight bills $824.34. Accrued taxes $378. Chauffeurs’ wages $160.60. Garage bills $216 ($100 for gasoline and balance for repairs). Automobile tire $90.

Prepaid Expenses: Interest on note discounted at the Harding National Bank $44.17. Advertising $2,000. Insurance $2,867.90. Prepaid dues to Merchants’ Association $50.

Accrued Income: Interest on following notes: notes receivable special $8.75; Hall, Walter & Co. $3.77; Browne Morse Co. $3.73; Standard Truck Co. $1.46. Bank interest on inactive deposit with Coolidge State Bank $24.36. Upon analysis, $387.86 of the freight bills was found to be out-freight. Take into account depreciation at the yearly rates of: 3% on buildings; 20% on delivery equipment; 10% on office furniture and fixtures. No depreciation is to be charged on the store and warehouse furniture and fixtures just installed. Create a reserve for doubtful accounts equal to 1/2% of net sales. Inventories showed the following on hand: Department A $79,897.80; Department B $51,764.32; office supplies $296.45. In-freight was apportioned between the departments on the basis of net purchases. Charge 90% of insurance expense to selling expenses.

In answer to our request, G. A. Roberts submitted the following information regarding his consignment:

Sales to customers $800.00 Expenses paid by him: Freight and drayage $58.22 Insurance 12.54

A formal account sales will not be rendered till completion of sales of entire consignment. The quantities of unsold articles reported showed, upon pricing, a valuation of $600. Word was also received that a check for the amount due on sales as above would follow immediately after certification by the bank. It was decided to defer one-half of the above expenses reported by the consignee as applicable to the remainder of the consignment.

The Board of Directors declared the regular semiannual dividend of 4% on the preferred stock, payable January 25, and a 4% dividend on the common stock, also payable January 25.

Analysis, based on vouchers and invoices, showed the following content of the Sales General Expense account before adjustment:

Garage rent $1,800.00 Chauffeurs’ wages 8,969.34 Shipping clerks’ wages 2,775.13 Gasoline and oil 2,491.68 Licenses, Trucks 96.00 Repairs 895.46 Stationery, supplies, and postage 1,237.29 Tires and tubes 714.78 Crates, boxes, and shipping supplies 1,374.30 Light and heat 3,775.37 Carpets and labor for showroom 1,037.80 Sundries 330.80 Profit on sale of old storage and warehouse furniture and fixtures 200.00 Renting of truck 100.00

Likewise, a similar analysis of the General Expense account before adjustment showed the following distribution:

Cleaners’ and watchman’s wages $4,369.75 Repairs to buildings 2,174.65 Changes in partitions 1,215.79 Auditor’s fees 1,500.00 Legal fees 2,500.00 Contributions 1,000.00 Light and heat 1,869.43 Merchants’ Association dues 100.00 Sundries 824.08

_Instructions_

Refer to Chapter XLVIII of the text as to consignments. In this case make use of the Consignment Accounts Receivable account for recording the claim against the consignee, and be careful to charge the proper amount of expenses against the income to be taken into the earnings for this period. Handle the deferred expense items on the consignments in the Out-Freight account. Do not forget to adjust the memorandum accounts so that they will show the value of goods still out on consignment, and take the latter amount into consideration when setting up the final inventories on the books.

XXIV

Using the work sheet as a guide, draw up pro forma balance sheet and statement of profit and loss for the year ending December 31, 19—. Show the gross profit on the sales of each department. Support both the balance sheet and the profit and loss statement with properly set-up schedule.

_Instructions_

Balance Sheet. Where the number of accrued and deferred items is small, they may be shown on the face of the balance sheet or in attached schedules as preferred. See page 577 for form of schedules.

Profit and Loss Statement. Where the record of the period’s business has been made by departments, it is desirable that the summary for the period show departmental results, at least so far as the gross profit stage. To get rid of the detail on the face of the statement, schedules may be appended showing such items as Cost of Goods Sold, the group of Selling Expenses, the group of General Administrative Expenses, etc. Such a statement of profit and loss, supported by schedules, is called a condensed profit and loss statement. Such a statement for a departmental business is shown by the following illustration. Only Schedule B-1 is given; the other schedules are merely lists with their totals shown.

_Exhibit B_ JACKSON EDWARDS COMPANY STATEMENT OF PROFIT AND LOSS For the Year Ending December 31, 19—

Department Department Total A B Sales $100,000.00 $150,000.00 $250,000.00 _Less_—Returns and Allowances 5,000.00 6,000.00 11,000.00 ----------- ----------- ----------- Net Sales $ 95,000.00 $144,000.00 $239,000.00 Cost of Goods Sold (Schedule B-1) 60,000.00 90,000.00 150,000.00 ----------- ----------- ----------- Gross Profit $ 35,000.00 $ 54,000.00 $ 89,000.00 =========== =========== Selling Expenses (Schedule B-2) $ 35,000.00 General Administrative Expenses (Schedule B-3) 20,000.00 Financial Management Expenses (Schedule B-4) 5,000.00 60,000.00 ----------- Financial Management Income (Schedule B-5) 2,000.00 58,000.00 ----------- ----------- Net Profit $ 31,000.00 ===========

_Schedule B-1_ JACKSON EDWARDS COMPANY COST OF GOODS SOLD For the Year Ending December 31, 19—

Department Department Total A B Inventory, January 1, 19— $12,000.00 $ 18,000.00 $ 30,000.00 Purchases 60,000.00 87,500.00 147,500.00 In-Freight 3,500.00 5,000.00 8,500.00 ----------- ----------- ----------- $75,500.00 $110,500.00 $186,000.00 ----------- ----------- ----------- _Deduct_: Purchase Returns $ 2,000.00 $ 3,000.00 $ 5,000.00 Inventory, December 31, 19— 13,500.00 17,500.00 31,000.00 ----------- ----------- ----------- $15,500.00 $ 20,500.00 $ 36,000.00 ----------- ----------- ----------- Cost of Goods Sold $60,000.00 $ 90,000.00 $150,000.00 =========== =========== ===========

In preparing the schedules of expenses, refer to the previous assignment for the analysis of the Sales General Expenses and General Expense accounts.

Analyze the Interest and Bank Expense account into expense and income, and show these items separately in the statements.

XXV

Adjust and close the ledger through the general journal in accordance with the data given in Assignment XXIII.

XXVI

1. The sales of the Radcliffe Company last year January to June, amounted to $752,465. It is estimated that the price level for the current year will be 10% lower than a year ago. Due to plans for increased publicity and sales effort, it is expected that the _volume_ of sales for the corresponding period this year will be 15% larger than last year’s. The average rate of turnover is 3½ and the mark-on is 35%.

What will be the average amount of capital required to finance the merchandise stock?

2. In establishing a buying quota for a three-month period, the Gotham Novelty Company has available from its records the following data: present inventory at retail $79,800; sales corresponding period last year $316,000; estimated sales volume this year same as last but 15% less in value. It is thought that the rate of turnover can be increased. It is therefore decided to reduce the stock carried so that at the close of the period there will be on hand a stock 20% less in volume.

Assuming that the price level is 15% less at the end of the period and that the mark-on is 40%, determine the company’s buying quota for the period.

3. The sales representative of the Natty Uniform Company is making his regular call on the Salem Dry Goods Co., whose buyer has just secured the following data from the accounting department:

Salesroom stock on hand at beginning of period $32,000. Additions to salesroom stock to date $45,000. Sales to date $52,000. Stocks in transit and on present order $15,000 There is no stock in the warehouse. Planned sales for the period are $75,000 but a revised estimate calls for a 10% increase. Stock planned to be on hand at the end of the period is $25,000.

Is the buyer open to buy and, if so, how much?

4. Your Notes Receivable account shows $25,000 of customers’ notes on hand. Being in need of cash you discount $10,000 of these at the bank, receiving therefor a credit of $9,750 in your bank account. Fifteen days later the bank notifies you that $4,000 of these notes have been paid by their makers at maturity, but that a note for $1,000 signed by J. B. Grant has been charged back on account of non-payment.

Make all the entries, in journal form, to record the above.

5. On April 1, 19—, Jones of Trenton, N. J., ships an invoice of goods to Smith in New York. The goods are valued at $2,000, and the consignor pays freight amounting to $40, and insurance $30. The consignee pays cartage amounting to $50, and storage $40. On April 2, Jones draws a 30-day draft against Smith for $500, which is duly accepted on April 5. The goods are sold for $2,700. Smith’s commission is 5%.

Set up the necessary accounts both on the books of the consignor and on those of the consignee properly to reflect the above transactions.

6. Prepare the closing entries for the following consignment sale. The consignment was received July 8, account of William Nevins & Co., showing an invoice value of $3,750. You paid freight and cartage $87.50, and insurance $18.75. Sales were made July 16, $1,000, and July 25, $1,525, on a 5% commission basis. On July 31, upon closing your books, you inventory the unsold balance of the consigned goods as $2,500.

7. From the following data, relating only to customers and creditors, prepare as of December 31, 19—, Accounts Receivable and Accounts Payable accounts. Indicate in folio column the book of original entry from which each item is obtained.

1. Accounts receivable, balance January 1, 19— $1,200.00 2. Accounts payable, balance January 1, 19— 1,350.00 3. Sales 4,000.00 4. Purchases 2,500.00 5. Return sales 200.00 6. Return purchases 100.00 7. Cash received from customers 3,200.00 8. Discount allowed customers 100.00 9. Cash paid creditors 1,800.00 10. Discount allowed us 50.00 11. Customers’ notes indorsed to creditors 500.00 12. Notes received from customers 600.00 13. Freight paid by us for customers 40.00 14. Cash received from creditor for overpayment 20.00 15. Customer’s check deposited returned by bank 300.00 16. Customer’s note indorsed to creditor (see item 11) dishonored and returned 250.00 17. Protest fees on above 5.00 18. Allowance for damages on goods purchased 30.00 19. Cash returned to customer for overpayment 10.00 20. In item 3 (Sales) included in total sales was one to creditor 100.00

XXVII

1. An investment company purchased for investment $100,000 of 6% 10-year municipal debentures at 96, and $200,000 of 5% industrial bonds, 15 years to run, at 104.

How would you treat the discount and the premium in the accounts? Give the journal entries.

2. The authorized capital stock of a corporation is $500,000, divided into 5,000 shares, par value $100. Of this amount $400,000 has been subscribed and paid for in full. The corporation purchases ten shares of a dissatisfied stockholder for $75 a share, and five other stockholders each donate five shares to the company. Five shares of the purchased stock and all of the donated stock are sold for $50 a share.

(a) Draft proper entries and show the ledger accounts and balances. (b) How would the balances of the accounts in (a) appear in a balance sheet? (c) Give the entries and show the ledger accounts and balances if the capital stock were of no specified par value, but 5,000 shares had been issued at $80 and the other conditions remain as stated in the first paragraph. (d) How would the balances of the accounts in (c) appear in a balance sheet?

3. J. B. Brown and L. C. Smith are partners, and in order to raise more capital and to preserve the organization they decide to incorporate. A company was duly incorporated under the name of The Eclipse Company, with an authorized capital of $800,000 divided into 8,000 shares of the par value of $100 each.

The partners agreed to sell for the sum of $800,000, payable in capital stock of the corporation at par, all rights to and title in the net assets of the partnership, exclusive of the cash, which was divided between the partners in proportion to their several interests at the time of the sale of the property.

According to the articles of partnership, Brown and Smith were equally interested in the assets, but the profits and losses were on a basis of 60% and 40% respectively.

The partnership balance sheet at the time of the sale was:

_Assets_ _Liabilities_ Land and Buildings $200,000.00 Notes Payable $100,000.00 Cash 10,000.00 Accounts Payable 40,000.00 Inventories 100,000.00 Brown’s Capital 210,000.00 Accounts Receivable 150,000.00 Smith’s Capital 210,000.00 Machinery and Equipment 100,000.00 ----------- ----------- $560,000.00 $560,000.00 =========== ===========

For the purpose of providing working capital, the partnership donated $300,000 of the capital stock to the corporation, which was sold at $50 per share.

You are required to:

(a) Close the partnership books, showing ledger accounts of partners only. (b) Open the corporation books. (c) Prepare a balance sheet of the corporation before sale of donated stock. (d) Prepare a balance sheet after sale of donated stock.

4. Before making the charges referred to below, the Profit and Loss account of a corporation for the year shows a credit balance of $60,000. The accounts receivable are $40,700, and the plant and machinery account is $55,000. The 6% preferred stock is $50,000, and the common stock $150,000. It is decided:

1. To provide out of the above-named profit and loss balance 7½% depreciation on plant and machinery. 2. To write off as uncollectible $1,500 of the accounts receivable, and to make a reserve of 2% of the remainder of the accounts receivable to provide for possible losses thereon. 3. To provide for the preferred stock dividend for the year. 4. To provide for a bonus of $7,500 to the employees. 5. To provide for a dividend on the common stock of 15% for the year. 6. To carry the balance then remaining on the Profit and Loss account to an Undivided Profits account.

Draft entries to comply with the above provisions.

5. A has $5,000 invested in a business. He sells B a half-interest for $3,000 and keeps the money. Make the entry.

6. Jones and Johnson form a copartnership, January 1, 19—, each investing $10,000. April 1, Jones pays in an additional $2,500, and Johnson draws out $1,500. August 1, Johnson pays in $3,000, and Jones withdraws $1,000. The profits for the year ending December 31, 19— are $5,000.

Prepare statements showing each partner’s investment and portion of profits, the profits being divided in proportion to capital invested and the time it is employed.

7. A, B, and C agree to start in business with a capital of $200,000, of which A is to furnish $100,000, and B and C $50,000 each. A is to have one half-interest in the business, and B and C each one-quarter. Interest at 5% is to be credited on excess, or charged on deficiency of capital. A contributes $100,000; B $45,000; and C $40,000.

How would the capital accounts stand on the books after adjusting the interest at the end of the year?

8. A and B are partners sharing losses and gains equally. A invested $3,000, and B invested $4,000. They are ready to wind up the business. The firm owes $5,000, of which $1,000 is due A and $500 is due B. They have $7,000 in cash.

Prepare the accounts showing the closing.

XXVIII

1. The cash book of the Chicago Grocery Company on December 31, 19—, shows a balance of $10,280.72 on deposit with the National City Bank of New York. The bank statement received by the firm as of the same date shows a credit balance of $9,707.15.

The firm finds that the following checks had not cleared:

Check 1264 $ 4.00 1329 52.80 1499 1,080.70 1510 108.07 1511 2,500.00 1512 3,281.70 1513 2,223.77 1514 100.80 1515 150.17

The bank statement also shows the following items not entered in the company’s cash book:

_Charges_: Telegram $ 1.80 Collection charges (5 items) 1.17 Check of Central Wholesale Grocery Co. 80.79

_Credits_: Interest on daily balance for December 8.18

The company had mailed to the bank a note, due December 31, payable to the National City Bank of New York and had taken credit for it in the sum of $10,000. The bank had not yet credited the item.

Prepare a reconciliation statement.

2. John Doe commenced business with a cash capital of $15,000. At the close of the first fiscal period the ledger accounts (except Cash and Capital) were: Accounts Receivable $4,312.50; Merchandise, debit balance $5,062.50; Accounts Payable $5,375; Expense $900. Doe’s net loss for the period was $2,775, and his sales were $50,000.

Prepare a statement of assets and liabilities and the profit or loss.

3. From the books of Messrs. Deas & Alexander, which are kept by single entry, the following balance sheet as at June 30, 19— was taken:

_Assets Liabilities_ Cash in Bank and Accounts Payable $10,300.00 on Hand $10,800.00 Capital Accounts: Accounts Receivable 16,032.00 Deas $ 3,263 Inventories 29,980.00 Alexander 51,249 54,512.00 Buildings and ------- Equipment 8,000.00 ---------- ---------- $64,812.00 $64,812.00 ========== ==========

It was agreed that the partnership would be dissolved as at October 31 of the same year, but that Alexander would continue the business. It was further agreed that Deas would be paid the balance to his credit at June 30, 19—, together with a sum of $5,000 to cover his interest in the good-will of the business and his profit up to October 31, which latter was estimated at $1,200. From this amount, however, his drawings, amounting to $800, were to be deducted.

The following balances were shown on the books at June 30 of the next year: Cash in Bank and on Hand $8,310; Accounts Receivable $12,203; Inventories $29,143; Buildings and Equipment $8,103; Accounts Payable $8,706.

You ascertain that on April 30 of this year, merchandise valued in the books at $500 was destroyed by fire. As this loss was not covered by insurance, Mr. Alexander reduced the book value of his inventory to take care of the loss.

The additions to the buildings and equipment during the year cost $503, but the book value of these assets was reduced by the sum of $400 to take care of depreciation.

Alexanders personal drawings during the year amounted to $2,500.

You are instructed to prepare a balance sheet for Alexander as at June 30, 19—, a year after the balance sheet first given, together with statement showing profit or loss for the year and the distribution of same. You are also required to write up Alexander’s capital account for the year to June 30, 19—.

No value is to be placed on the good-will.

4. A machine costing $12,000 was estimated to have a life of twelve years with a residual value of $1,500. At the close of each year a charge of $875 was made to depreciation, and a like amount credited to “reserve” for depreciation. Just prior to closing the books at the end of the twelfth year the machine was discarded and sold for $2,000 (cash) and a similar machine was bought, costing $16,000. Show the journal entries you would frame to make the proper record.

5. What is the equated time for the payment of the balance of the following account (30 days to the month and 6% per annum)?

HENRY M. DOREMUS ========================================+======================= 19— | 19— Mar. 16 Merchandise, 4 months $444.57 | July 1 Cash $400.00 30 Merchandise, 60 days 376.82 | 20 Cash 375.00 Apr. 20 Merchandise, 30 days 712.19 | Aug. 16 Cash 700.00 May 17 Merchandise, 4 months 628.75 | 30 Cash 600.00 28 Merchandise, 4 months 419.31 |

Henry M. Doremus desires to settle the above account on September 13, 19—. What amount of money shall he pay?

APPENDIX C

MISCELLANEOUS PROBLEMS FOR SUPPLEMENTARY WORK

CONTROLLING ACCOUNTS

1. From the following data prepare controlling accounts. Indicate beside each entry its source book. Balance and close the accounts.

Sales $10,000. Purchases returns and allowances $200. Credit given customers for cash received $5,000. Purchases $16,000. Sales discount $180. Notes payable issued to creditors $8,000. Customers’ notes dishonored $100. Credit received for cash paid to creditors $4,000. Notes received from customers $1,000. Purchase discount $80. Bad accounts charged off $100. Freight prepaid on sales $60.

2. Journalize the following transactions:

(a) In our accounts receivable ledger there appears a debit balance in the account of John Smith amounting to $200, and in our accounts payable ledger there is a credit balance to him of $500. We send him a check for the balance due him, taking into consideration the cash discount allowed by us of 2%, and that granted by him of 3%. (The general ledger contains controlling accounts for these two ledgers.)

(b) Henry White owes us on open account $1,000, which is subject to 5% cash discount. He settles his account by giving us a note, which has included in its face interest for six months at 6%.

3. Draw up rough forms of a general journal, sales journal, sales returns and allowances journal, purchase journal, purchase returns and allowances journal, cash book, and note journals, as used in a controlling account system, and make entries of the following transactions therein:

(a) John Norman dishonors a note for $700 which you left at the bank for collection. The bank charges $1.50 protest fees.

(b) Amos Clark returns $50 worth of goods and asks for an allowance of $30 on goods retained. You accept the returned goods and grant the allowance.

(c) C. Cohen is both a customer and a creditor but you desire to carry his account in the creditors ledger only. You sell him a bill of goods, $350.

(d) An error was made last month in crediting customers’ remittances. James Jones was credited for $40 that should have been credited to John Jones. Correct the error.

(e) Settled your account of $800 with D. Flynn, a creditor, by returning goods $60, an allowance for defective goods $30, transferring a note you received from D. Morgan $570, and your check for the balance.

PARTNERSHIP—FORMATION

4. A has $5,000 invested in a business. He sells B a half-interest for $2,000, and places the money in the business. Make the entry.

5. X and Y bought merchandise to the amount of $12,000. X contributed $7,500; Y $4,500. They afterwards sold Z a one-third interest for $6,000. How much of this amount should X and Y receive respectively in order to make X, Y, and Z equal partners, assuming:

(a) Money paid into the business with no good-will. (b) Money paid into the business with good-will. (c) Money not paid into the business.

6. A and B carried on business in partnership and divided profits and losses in proportion to their capital, three-fifths and two-fifths, respectively. On January 1, 19—, A’s capital was $52,500, and B’s $35,000, as shown by a balance sheet of that date. They agreed to admit C as a partner from the same date on the following terms:

1. Assets and liabilities and capital to be taken as shown in the balance sheet. 2. $12,500 to be added to the assets for good-will. 3. The amount of good-will to be added to A’s and B’s capital in the proportion in which they divide profits. 4. C to pay to the partnership such a sum as will give him a one-fifth share in the business.

(a) State what amount of capital C has to bring in. (b) Set out the capital accounts of each partner in the new partnership. (c) State in what proportions the profits will be divided in the future, A and B, as between themselves, sharing in the same proportion as before.

7. New, Knott, and Moore are partners, sharing profits in the proportion of their investments. On December 31, 1920, the balance sheet of the partnership is as follows:

_Assets Liabilities and Capital_ Cash $18,000.00 Accounts Payable $ 1,000.00 Other Current Assets 23,000.00 Moore, Capital 24,000.00 Fixed Assets 20,000.00 New, Capital 24,000.00 Knott, Capital 12,000.00 ---------- ---------- $61,000.00 $61,000.00 ========== ==========

Moore decides to retire from active business and agrees to sell his interest to the other two partners for $26,400, taking $14,400 in cash and the balance in three equal instalments payable July 2, 1921, January 2, 1922, and July 2, 1922, evidenced by notes payable.

The business is very prosperous, but it becomes increasingly evident that more capital is required, especially in view of the approaching maturity of the first note given to Moore. New and Knott decide to admit John Less as partner as of date July 1, 1921, at which time the current assets have increased by $16,000, accounts payable by $10,000, and the partners’ capital accounts by $6,000. They value the good-will at $12,000.

Less buys a one-third interest, but stipulates that all he pays must remain in the business and that the good-will shall not appear upon the books.

How much must he pay for the one-third interest? Present the balance sheet of the firm of New, Knott & Less as of July 1, 1921. (Ignore accrued interest on Moore notes.)

PARTNERSHIP—OPERATION

8. A, B, and C are partners. A is to receive a salary of $2,000 per annum, B $2,500, and C $3,000. The balance of profits, after payment of salaries, is to be divided as to the first $20,000, 2/3 to A, and 1/6 each to B and C; and profits above $20,000 are to be divided equally among the three. A retires from active business, and gives up his right to salary for 19—. The profits for the year, before charging salaries, amount to $35,000. To what extent are A, B, and C, respectively, affected by A’s concession?

9. A and B, partners, finding themselves in want of further capital in their business, and both being possessed of real property, A deposited deed with the bankers of the firm as security for a loan of $2,000 to the firm. B arranged on some of his own property a mortgage for $1,500 with a private friend and paid the proceeds into the firm’s bank account. The bankers were eventually obliged to realize the security held by them which produced, after payment of all expenses, the sum of $2,850.

Prepare entries recording these transactions in the firm’s books.

10. In making an audit of the books of the partnership of A and B, you find that the agreed division of profits was to be on the basis of the capitals and of the time that they were left in the business.

The books show as follows: A’s account paid in January 1, $6,000; March 1, $2,000; June 1, $4,000; November 1, $1,000; withdrew April 1, $3,000; October 1, $2,000.

B’s account, paid in January 1, $4,000; February 1, $1,000; August 1, $3,000; withdrew May 1, $2,000; December 1, $1,000.

Prepare a statement showing method of arriving at correct profit distribution.

11. Bull and Bear entered into partnership, Bull contributing $100,000, and Bear $75,000. Profits and losses were to be divided, Bull 60% and Bear 40%, and interest was to be allowed on capital at the rate of 6% per annum. The profits for the first two years (after charging interest on capital) were $19,600 for the first year, $22,400 for the second; and the drawings of the partners in excess of their salaries were, Bull $1,800 first year, $2,000 second year; Bear $2,000 first year, $2,400 second year.

At the end of the second year, Peak was admitted to partnership, and put into the business capital equal to Bull’s capital at the time, on the same conditions as to interest. Profits were to be divided on the basis of capital.

The profits for the third year were $30,000, and the partners’ drawings in excess of salaries were: Bull $2,000, Bear $2,500, and Peak $1,500.

Set up the capital accounts of the partners for each of these years, showing balance of each at the end of the third year.

PARTNERSHIP—DISSOLUTION

12. A, B, and C are in partnership. A invested $11,000; B invested $5,000 and C invested $1,200. Their agreement provides that profits or losses shall be divided as follows: A, ⁴/₉; B, ³/₉; and C, ²/₉.

The partnership has become insolvent and has therefore decided to dissolve. The cash value of assets is $10,000. The deficit is, therefore, $7,200. How should the assets be divided and how much money will each partner receive?

13. A, B, and C engage in business. A contributes $10,000 capital; B contributes $5,000; while C in lieu of any capital contribution agrees to undertake the active management at a salary of $3,000 a year, to be paid monthly.

After allowing 5% interest on capital, they are to divide the net result in the proportions of 5, 3, and 2 respectively.

At the end of eighteen months they ascertain the position to be unfavorable and decide to wind up. The assets realize $12,500; there are no liabilities except for capital and interest thereon and one month’s salary, due to C.

Make up the partners’ accounts showing the amount to be received by each.

14. Thompson and Murray are partners, sharing profits and losses equally. The partnership is dissolved December 31, 19—, at which time Thompson’s capital investment is $20,000, and Murray’s $7,000. Total liabilities are $55,000, included in which is $5,000 due Wilson on open account, and $7,000 due Murray on account. The whole of the assets had been disposed of for $60,000 cash by July 1 of the next year. Close the partnership books.

CORPORATION BOOKS

15. On June 1, 19—, the Home Manufacturing Company is incorporated under the laws of the state of New York to acquire and conduct the business of the firm of R. O. Browning and H. E. Johnson. The authorized capital stock of the company is $250,000, par value $100 per share. The company has agreed to take over the net assets of the partnership at the following valuation, and to issue in payment 1,000 shares of stock to each of the two partners: real estate $120,000; tools and equipment $60,000; raw materials $20,000. A bill of sale is executed and the stock duly issued. E. O. Kitchell and R. K. Taylor subscribe for 100 shares each. On June 10 the stock subscribed for by Kitchell and Taylor is paid for and issued. On June 14 Browning and Johnson each donate 100 shares of stock to the company to be sold for the purpose of securing additional working capital.

From the foregoing data, make: (a) the entries on the books of the partnership for the sale of the assets; (b) the opening entry of the new corporation.

16. A corporation is organized with an authorized capitalization of 5,000 shares at a par value of $100 each. One-half of the stock is subscribed for at 90 and paid for in two instalments. R. K. Reymer, in return for 1,000 shares of stock, transfers to the corporation his shipyard valued at $80,000. A. R. Paine receives 100 shares of stock for his services in organizing the corporation.

Make the necessary opening entries on the books of the corporation for the above.

17. F. H. Cole and R. D. Harris have patented an improved electric meter and have borrowed $1,500 on their note with which to complete the invention. They organize a corporation with a capital of $50,000, shares $100 each. Cole and Harris each receive $20,000 worth of stock in return for the patent rights transferred to the corporation. The corporation also assumes the payment of the $1,500 note. A. G. Emery, an attorney, is given five shares to pay for services in fulfilling the incorporation requirements. Cole and Harris each donate to the company $10,000 worth of stock to be sold in order to provide working capital; 160 shares of the donated stock are sold for cash at 50% of the par value.

Make the entries on the corporation books for the transactions given above.

18. The Bristol Manufacturing Company issued and sold on the 1st of January, 19—, to A and B (50 to each at the same price), first mortgage bonds of $500 each, bearing interest at 4% per annum, and received $48,000 in cash.

What records of the transactions should be made and in what books?

19. A corporation has an authorized capital stock of $100,000, of which $75,000 is outstanding.

This year’s profit and loss shows a profit of $4,125. The previous surplus balance is $20,150. They declare and pay an 8% dividend.

Show in journal form the entries covering the above.

20. A corporation’s profits for the year ended December 31, 19—, amount to $451,000. The by-laws require a reserve equal to 10% of any dividend paid to common stockholders, and any surplus remaining after such dividend has been paid is also to be applied to the reserve, until such reserve account amounts to $250,000. The reserve at December 31, one year before, was $156,020. The capital is $2,000,000, one-half cumulative preferred 6%, and one-half common, all fully paid. On December 31, 19—, the date first mentioned, the preferred dividend is two and one-half years in arrears. On December 31, one year before, the Profit and Loss account was in debt $202,000.

Set out your treatment of the profit for the year between these dates.

21. On April 1, 19—, the Healey Manufacturing Company is incorporated with an authorized capital of $100,000 common stock, and $50,000 preferred stock. The preferred stock is subscribed for and paid in full. One-half of the common stock is subscribed for, less 10% discount, the subscribers paying one-half in cash, the balance to be paid in two months. On June 1, the balance on the common stock subscribed for on April 1 is paid, and the remainder of the authorized common stock is sold for cash at 10% premium.

Make the entries required for the above transactions.

22. In auditing the accounts of a corporation for the current year, it was found that for the previous year the inventory had been undervalued $2,000; accrued wages $3,150, and rent receivable earned but not yet due $750, had not been taken into consideration. The surplus at that time, $25,000, is increased during the current period to $40,000. During the current year a piece of real estate owned by the corporation was sold at a profit of $5,000; a fire resulted in a loss of $10,000; accounts receivable that had been charged off as worthless were collected to the amount of $1,000. Dividends amounting to $15,000 were declared.

Bring the above transactions onto the books.

CASH AND PETTY CASH

23. On June 7, 19—, when balancing cash you found that you were over $153.75. Part of it was due to the following, which you corrected:

Duplicated an entry on the credit side for $12 paid for postage; an error of $10 in addition on the debit side, decreasing the total.

Not being able to locate any more errors, you make necessary entry to balance the cash book.

On June 15 you recalled a cash sale of merchandise $14.50 made on June 7 but not recorded.

On July 7 A. B. Potter returned your statement, saying he paid $75 on account June 7 which you had failed to credit him with.

Make the necessary adjusting entries.

24. (a) Show by journal entry the proper booking of the following transactions, indicating any items not to be posted:

1. Creation of a petty cash fund of $100.

2. Petty cash disbursements summarized: Office stationery and printing $35. Stamps and postage $30. Delivery expense $10. General expense $5. Repairs to furniture $15.

3. The petty cash fund is replenished.

(b) Set up the petty cash account in the ledger and show all postings to it.

25. The following balances are found on the books of a trading concern at the end of its first fiscal year:

Inventory Merchandise $ 4,312.09 Salaries 4,622.89 Capital Stock 10,000.00 Real Estate, Buildings, and Fixtures 17,500.00 Sales 8,469.10 Notes Payable (Merchandise Creditors) 5,000.00 Mortgage Bonds Issued 15,000.00 Customers’ Accounts 5,423.23 Accounts Payable (Merchandise Creditors) 2,436.28 Notes Payable, Bank 5,000.00

Total merchandise purchases as per invoices on file, less inventory, show the cost of merchandise sold to be 97% of sales. The cash at bank and in hand amounted to $1,302.14.

From the foregoing construct Cash account.

NOTES AND DRAFTS

26. Lang is in need of funds. Connelly, an associate of Lang, induces Moore to accommodate Lang. Accordingly, Connelly introduces Lang to Moore, for which Lang pays $500. Moore discounts for Lang a note for $15,000 due in three months and turns over to him $14,500.

Frame journal entries covering their interest.

27. X, a branch, buys from Y. Y draws on X for $2,000 at 60 days. The draft is accepted and is later discounted 40 days from maturity at 6% per annum. In addition to the above acceptances, Y holds a total of $15,000 acceptances from other customers; $12,000 of these are used as collateral for a loan of $10,000 at the bank.

State all necessary entries.

28. A corporation had discounted $25,000 of notes receivable that are not due until December 31, 19—. How should this be dealt with in preparing a balance sheet at November 30, 19—? One of the above notes for $5,000 was not paid at maturity but was protested, the protest fee amounting to $15. The company drew its check for the amount to take up the note.

State the entries required to be made on the books to record the transactions.

29. Previous to examining the accounts of a corporation at the end of its first fiscal year, you find that notes receivable stand in the financial statement prepared for the banker at $5,500.

Upon investigation it is disclosed that $20,000 of notes from customers were received during the period, and that $10,000 of these notes were duly paid in full by the customers to the company at maturity, and $5,000 of the notes were discounted at the bank. Of the notes discounted, a note for $500 given by Brown & Company was not paid when due, and has been charged back to the Notes Receivable account. Notes to the amount of $1,500 are not yet due at the bank.

Partial payments have been made to the company to the extent of $500 on notes still due, and these payments have been credited to an account called “Partial Payments on Notes Receivable.” This item is listed in the financial statement as a liability.

A customer’s note of $1,000 is found to have been given as collateral for the payment of a note of the company discounted at the bank.

A 30-day note given by an officer of the company for $200 is treated as a cash item. The note is 60 days past due.

You are asked to give the journal entry or entries for obtaining the proper account or accounts to record the above facts.

DEPRECIATION

30. An engine installed in a factory December 31, 19—, at a cost of $1,000, is replaced four years later by one of larger capacity costing (second-hand) $2,800. The discarded machine was sold for $900. The cost of making the change was $200. It has been the practice of the company to charge off 10% depreciation annually (on the diminishing basis), carrying the credit to a Depreciation Reserve account.

Make the necessary journal entries.

31. A manufacturing concern has annually for the past six years made provision at the rate of 10% per annum for depreciation of its plant and machinery, crediting the amount of such depreciation to a suitable Reserve account. During the year an engine which cost originally $5,000, was replaced by an improved engine costing $6,800. The cost of the new engine was charged to Machinery account at time of purchase. $300 was realized from the salvage of the old engine, this amount being credited to “Scrap Sales,” when received, and later closed to Profit and Loss.

Draft the adjustment entries which you consider necessary and explain the principle upon which these entries are based.

MERCHANDISE INVENTORIES

32. The average gross profits on sales of the Blank Corporation for the past five years have been 50%. During 19— the sales were $60,000. Purchases during the period were $50,000. In-freight and cartage was $3,000; returned purchases amounted to $2,500. At the beginning of the year the inventory was $20,000. It is estimated that current market prices are 10% above those at time of purchase.

What will be the cost of replacing the amount of stock on hand at the end of the year?

33. In examining a business for the two years ending December 31, 19—, it is found that an item amounting to $750 had been omitted from the initial inventory of the first year; that an error had been made in the footing of the final inventory of that same year, by which that inventory was overstated to the amount of $1,250; and that in pricing the final inventory of the second year, an error was made by which that inventory was understated to the amount of $1,500.

State fully the effect of these errors on the profit of each of the two years.

34. A certain trading corporation desires to prepare its financial statement as of September 30, 19—, but takes no inventory at that date. It has no perpetual inventory records, but the management states that the ratio of gross profit to net sales has remained substantially the same for many years, namely, 25%, and that the rate will remain the same for 19—.

The following information is given and you are asked to prepare a statement showing estimated inventory on hand September 30, 19—:

Inventory January 1, 19—, $6,100. Purchases $28,450. Freight-in $985. Freight-out $1,200. Allowances on sales $2,360. Sales $44,500. Discounts on purchases $960. Buying expenses $2,500. Sales salaries $3,000. General office expenses $4,000.

35. The ledger accounts of Henry James on December 31, 19—, showed: Accounts Payable $16,125; Accounts Receivable $13,188; Expense $2,450; Debit Balance Merchandise account $15,187. He started in business January 1, 19—, investing $45,000 cash. His total loss for the year was $8,074.50.

Prepare a statement of assets and liabilities and the profit and loss.

CONSIGNMENTS AND JOINT VENTURE

36. Indicate by journal entries how the following transactions should be recorded upon (a) the books of the consignor, and (b) the books of the consignee:

1. Shipment of goods costing $12,000 which are expected to be sold for $16,000. 2. Sale of three-fourths of such goods to sundry customers for a total of $15,000, only $5,000 of which is received in cash. 3. Return by customers of $55 of goods sold as defective in quality. 4. Advance of $4,000 to consignor by consignee, and payment of $100 freight, and $150 warehouse expense by the latter. 5. Settlement of all customers’ accounts except items totaling $200, which are written off as uncollectible. 6. Remittance to cover balance due consignor after consignee has deducted commission at the rate of 3% on the selling price of goods sold. (Account sales is rendered only when consignment is sold.)

37. On April 30, 1921, St. John & Company and Carpel Brothers enter into a joint venture agreement. They each contribute $4,000, with which they pay for goods that are shipped on May 1 to John Doe of San Francisco. St. John & Company advance $400 to defray freight and incidental expenses. John Doe, the consignee, is allowed 10% on the cost of the goods and is to sell them at whatever price he can obtain for them.

On June 1, 1922, on the strength of a report sent by wire, Carpel Brothers draw at sight on John Doe for $4,000 to the order of Carl Peter of New York. On July 1, 1922, St. John & Company receive from the consignee a check for $11,200, all the goods being sold; on the same day St. John & Company settle with Carpel Brothers. Interest at 6% is allowed on all transactions affecting the partners in the venture.

Prepare all the ledger accounts brought about by the above on the books of St. John & Company, including a joint venture account. (Construct your ledger accounts in such a manner that they will explain fully what took place and make a cross-reference possible.)

SINGLE ENTRY

38. The books of the Butter, Egg & Cheese Company, with an authorized and outstanding capital stock issue of $25,000, are kept by single entry.

It annually inventories all its assets and liabilities and from such inventory prepares a financial statement. At December 31, 19—, this inventory is as follows:

Office, Cash $ 1,584 Balance, Bank A 10,824 Accounts Receivable 29,521 10 shares in competing company 1,000 Plant and Equipment 64,938 Merchandise Inventory 21,737 Prepaid Expenses 5,081 Overdraft, Bank B 5,003 Accounts Payable 19,747 Mortgage Payable 25,000 Notes Payable 20,000

From a comparison of the financial statements at the beginning and the end of the year, you find that the item of “Plant and Equipment” is stated in an amount less by $11,460 than it was at the beginning of the year, plus additions during the year.

The financial statement for the beginning of the year showed a surplus of $35,703.

From your analysis of the disbursements and unpaid accounts at the beginning and end of the year, you find total purchases amounting to $661,910, and expenses for salaries, wages, supplies, repairs, etc., amounting to $120,115.

The purchases, however, included $450 paid out for John Smith, an employee, for which he has not reimbursed the company; and the total expense of $120,115 included $250 in the hands of a buyer as a working fund.

The inventory of merchandise at the beginning of the year was $18,125 and of prepaid expense was $2,653.

There was canceled on the customers ledger during the year $3,206 of uncollectible accounts.

There was paid for interest and discount on notes payable $1,061, and for interest on mortgage $1,500.

A 10% dividend was declared but not paid.

From the foregoing prepare: (a) a balance sheet as at December 31, 19—; (b) a profit and loss statement exhibiting net sales, cost of sales, and gross and net profit for the year.

INTEREST, DISCOUNT, AND PROPORTION

39. What single rate of discount is equivalent to the series 20%, 20%, and 15%? 50%, 25%, and 15%?

40. An invoice amounting to $1,000 reads: “Less 30%, 10%, and 5%. Terms 2/10, n/30.” It is dated January 19, 19— and paid January 28, 19—.

Explain and distinguish between these reductions of the list price. Give the amount of the check sent in payment of the invoice.

41. Keene owed Sharpe $2,000. Sharpe offered a discount of 5% cash. Not having the ready money, Keene discounted his note at the bank for 60 days at the rate of 6%, the note producing the sum required to discount Sharpe’s claim.

Calculate the amount of this note and make the necessary journal entries to take care of the entire transaction.

42. Equate the following account and find the cash balance due October 1, money being worth 7% per annum, 30 days to the month.

CHARLES L. BROWN =================================+================================== 19— | 19— Apr. 6 Mdse., 60 days 2,850.00 | Apr. 14 Cash 800.00 15 ” 90 days 1,475.00 | Returned Mdse. 125.00 28 ” 30 days 3,000.00 | July 6 Cash 1,000.00 | 17 Note, 30 days 1,000.00

43. A note for $2,500 dated September 15, 1920, bearing interest at 6%, had payments indorsed as follows: November 28, 1920, $750; May 6, 1921, $500; August 12, 1921, $300; January 18, 1922, $600.

Find the amount due May 8, 1922.

44. In a manufacturing concern the total value of property subject to insurance was $500,000, distributed as follows: assembling station $100,000; finished goods warehouse $200,000; raw materials warehouse $100,000; and the remainder on building. The annual insurance premium amounts to $18,890 per year.

Find the insurance burden chargeable to each department if the assembling room rate is 2½ times the raw materials warehouse rate; the finished goods warehouse, 80% of the rate of the assembling room and the manufacturing building rate, three times the assembling room rate.

INDEX

A ACCEPTANCE (See “Trade Acceptance”) ACCOUNTING, Function of, 4 Fundamentals, 7 Place of, in business, 3 Purpose of, 5 Relation to economics, 6 Relation to law, 7 Terms, 7 ACCOUNTS, 67-84 (See also “Classification of Accounts,” and special kinds, as “Controlling Accounts,” “Customers’ Accounts,” “Notes Receivable Account,” etc.) Analysis of, 477 Form, 478 Necessary to determine values, 40 Arrangement in ledger, 220 Asset, balance of account, 73 Averaging, 486 Balancing, 72, 107-110, 477-484 Capital stock, 338 (See also “Capital Stock, Account”) Chart, 75, 217-220 Current, 468-476 Form, 470 Adjustment, 469-471, 473, 476 Form, 470 Bank account as, 472-476 Date of value, 469 Defined, 468 Entries, 469-472 Interest charges on, 468, 469 Partnership, 469 Liability, Balance of account, 73 Mechanism of, 69 Mixed, 97-105, 215 Adjustment of, 237 Nominal, 216 Number of, 71 Real, 216 Sections, 69 Statement of, 190 Surplus, 338 (See also “Surplus Account”) “T” account, 528 Title of, 68, 72 Transferring, 110 Form, 112 ACCOUNTS PAYABLE, Controlling account, 269, 276 Debit and credit of, 89 Liability, 14 Relation to purchases and cash, 61 Summary, under controlling account system, 276 ACCOUNTS RECEIVABLE, Asset, 12 Balance sheet items, 26 Controlling account, 264, 276 Customers’ account as, 264 Debit and credit, 85 Ratio to sales, 65 Relation to sales and cash, 61 Summary, under controlling account system, 276 Valuation, 409 ACCRUED EXPENSES (See “Expenses”) ACCRUED INCOME (See “Income, Accrued”) ACCURACY, PROOF OF, Preliminary to closing entries, 221 ADJUNCT ACCOUNT, Defined, 103 ADJUSTMENTS, 115-131 (See also “Summarization”) Accounts current, 473, 476 Book entries, 237-244 Accrued expenses, 242 Accrued income, 241 Bad and doubtful accounts, 240 Deferred expenses, 241 Deferred income, 243 Depreciation, 240 Illustration, 245 Inventories, 238 Preliminary work, 221 Work sheet methods, 223, 224-230 Corporate, 359-365 Made in journal previous to ledger, 237 Trial balance, 483 ADMINISTRATION, 3 ADVENTURE ACCOUNTS, 460-467 Joint, 460 Accounting, 461-467 Interest charges, 468 Relation of parties, 460 Single, 460 ADVERTISING, Expenses, 47 AGENCY LAW, APPLIED TO CONSIGNMENT, 447 AGENT, 448 ALLOWANCES GRANTED TO CUSTOMERS, 45 Credits and returned goods invoices, 188 Debit and credit, 87 Journal, 253 Sales analysis of, 435 ANALYSIS, Account marked for, Form, 478 Ledger, 477-483 Procedure, 478 Sheet, 479 Form, 480 ANALYSIS PAPER, Used for work sheet, 221 ANALYTICAL JOURNALS, 163, 251-257 Form, 164 APPRAISAL (See also “Estimates,” “Valuation”) Defined, 103 Single-entry bookkeeping, 500 APPROVAL SALES, 442-444 ASSETS, Account, 213, 214 Adjusted at close of fiscal period, 215 Analysis of, 123 Balance of account, 73 Chart, 217 Debit and credit applied to, 85-90 Fixed assets, debit and credit to, 88 Classified, 11-13 Comparison, 34 Current, Balance sheet items, 26 Ratio of, to current liabilities, 27 Valuation, 407 Decrease covered by credit entry, 82 Described, 11-13 Fixed, Balance sheet items, 27 Capital and revenue expenditures, 104 Comparison, 35 Debit and credit to account of, 88 Depreciation account, 102, 123 Valuation, 124, 408, 413 Increase covered by debit entry, 82 Increase in value of, 94 Not subject to depreciation, Valuation, 413 Sale of in liquidation, 324 Subject to depreciation, Valuation of, 414 Valuation, 29, 407-419 ASSETS AND LIABILITIES, Balance sheet arrangement, 25 Changes in value of, 57, 77 AVERAGING OF ACCOUNTS, 486 Cash balance, 490 Compound equation, 489

B BAD DEBTS, Adjustment of entries, 240 Expense account for, 125 Expense item, 47 Handling of, 125 Valuation, 410 BAILMENT, DEFINED, 447 BALANCE SHEET, 22-37, 589 (See also “Trial Balance”) Forms, 23, 230, 232 Accounts receivable items, 26 Accrued expense item, 27 Arrangement, 24 Assets and liabilities, 25-30 Capital stock items, 344 Cash items, 25 Comparative, 32-37 Content and form, 35 Confusion of items, 58 Content, 22, 29 Corporation proprietorship, 20 Current assets, 25 Current liabilities, 26 Deferred charges item, 27 Equation of, 74-76 Fixed assets, 27 Information on, 24 Information lacking in, 39 Interrelation of, and profit and loss statement, 60-64 Investment items, 26 Not a part of books, 230 Notes receivable items, 26 Partnership proprietorship, 20 Preliminary to closing entries, 221 Problems, 403 Proprietorship, 8-10, 19, 40-43 Purpose, 22 Ratio of items, 64 Single-entry bookkeeping, 500 Statement of profit and loss, 41 (For other references see under “Statement of Profit and Loss”) Terminology, 23 Treasury stock on, 354 Valuation, 403-419 Based on correct analysis of accounts, 404 Rules, 407-409 BALANCING METHODS, 72, 73, 107-110, 477-484 Form, 109 Cash book, 151 Check figures in posting, 482 Errors, 482 Ledger analysis, 477-483 Form, 478, 480 Sheet, 479 Postings, 481 Red ink for, 108 Rulings, 108 Trial balance, 477 BANK, Account, Handling of, 370, 472-476 Interest on, 491 Opening of, 192 Agent for C. O. D. shipments, 190 Cash records, 366 Check book, 192, 194, 371 Deposit ticket, Form, 193 Discount, Calculation of, 492 Defined, 392 Draft, 180 Loans, 195 Methods, 192-198 Pass-book, 192, 194 BANKRUPTCY, CAUSE OF DISSOLUTION, 322 BETTERMENT, VALUATION, 416 BILL OF EXCHANGE, FOREIGN DRAFT, 181 BILL OF LADING, 188 C. O. D. shipments, 190 BINDINGS, LEDGER, 263 BONDS, Accounting, 355-357 Discount and premium, 355, 356 Interest payments, 356 Maturity, 356 Payable, liability, 15 Sale of, 355 Sinking funds, 357 Valuation, 412 BOOKKEEPING, Double-entry, 78 Single-entry, 495-512 Accrued and deferred items, 500 Balance sheet, 500 Books required, 496 Cash book, 497 Change to double, 502 Compared with double, 501 Debits and credits, 498 Inventory and appraisal, 500 Journal, 496 Ledger, 497 Net profit, 511 Opening entries, 504-511 Profit and loss statement, 499 Profits, 501 Proof of posting, 499 Proprietorship accounts, 498 Use of, 497 BOOKS (See “Journal,” “Ledger”) BRANCHES, Cash,372 Sales to, Handling of, 437 BROKER, DEFINED, 448 BUILDINGS, ASSET, 13 BUSINESS ORGANIZATION, 2, 16 BUSINESS PAPERS, DEFINED, 185 BUSINESS TRANSACTION, Accounting classification for, 216 Analysis of, 80, 98, 132, 251 Defined as to debit and credit, 79 BUYING (See “Purchases”)

C CAPITAL, Account, changes in, 93 Balance sheet, 19 Borrowed, account, 303 Defined, 15 Expenditures, 104 Invested, 15 Changes in, 93 Partnership, Accretions through profit, 301 Adjustments of, 297-300 Agreements concerning, 297, 558 Averaging investment, 292, 301 Interest on partners’, 294, 297-300, 316 Loans as distinguished from, 302, 317 Profit-sharing basis, 292 Sources, 297 Working defined, 26 CAPITAL STOCK, Account, 338-348 Certificate book, 337 Common, 338 Entries for, 346 Defined, 15 Discount and premium, Balance sheet item, 345 Entries for, 343 Donated (See “Treasury Stock”) Entries, Discount and premium, 343 On balance sheet, 344 On journal, 340 No-par value, 339 Entries for, 347 Preferred, 338 Dividends, 339 Entries for, 346 Subscriptions, Book and ledger, 336 Entries, 338-348 Instalment payments, 345 Payment by property, 348 Transfer book, 337 Treasury stock, 352-355 Valuation, 412 CAPITALIZATION, PARTNERSHIP, 297-304 CARD LEDGER, 263 CASH, Account, Cash journal replaces, 150 Debit and credit, 85 Asset, 11 Balance sheet item, 22 Bank account handling, 370 Branch funds, 372 Discount, Form, 400 Accounting, 156, 396-402 Defined, 392, 537 Elements of, 395 Entries, 398 Handling, 156, 396-402 Journal entries, 155 Trade acceptance and, 402 Handling of, 366-375 Internal control, 373 Paid for merchandise, determination of, 61 Payments compared to draft, 178 Petty cash account, handling of, 367 Petty cash book, 368 Form, 369 Received from customers, determination of, 61 Record, Bank, 366 Double, 366 Safeguarding, 373 Sales, handling, 436 Short and over, 151 Statement, 375 Total available balance, determination of, 473-476 Valuation, 409 CASH DISBURSEMENTS JOURNAL, 148 Form, 159 Analysis, 154 Columnar analysis, 161 CASH JOURNAL, 138, 147-161 Form, 149, 158, 159 Analysis, 154 Analytic, 255 Balancing, 151 Cash discounts, 155 Cash purchase and sales, 152 Cash short and over, 151 Check entries, 371 Posting from, 150 Replaces cash account, 150 Ruling, 151 Single-entry bookkeeping, 497 Summary, Form, 281 Under controlling account system, 280 CASH RECEIPTS JOURNAL, 147 Analysis, 154 Illustration of, 157-160 Posting from, 200 CERTIFICATE OF INCORPORATION, 332 CERTIFICATES OF STOCK, 337 CHARGE ACCOUNT, Handling of, 437, 444 Sales tickets, 187, 444 CHARTER, CORPORATE, 332 CHARTS, ACCOUNTS, 15 CHECK BOOK, 192, 194, 371 CHECK FIGURES IN POSTING, 482 CHECKS, Cash book entries, 371 Cashing of, 372 Classified as cash, 11 Described, 181 Handling of, 370 Spoiled, 371 CLASSIFICATION OF ACCOUNTS, 213-220 Assignment of account, 216 Basis of, 214 Business transaction, classified, 216 Chart, 217-220 Detailed, 217 Divisions, 213 Fundamentals of, 215 Purpose, 214 Three-group, 213, 216 Two group, 216 CLOSING Entries, Accuracy of proof preliminary to, 221 After adjusting, 245-250 Consignment sales, 456 Corporate, 359-365 Illustration, 247 Preliminary work to, 221 Profit and loss account, 249 Summarizing, 117-123, 214, 221 Work sheet, 221-230 Journal, 163 Journal entries, 167 Ledger accounting, 129-131 Merchandise records, 116, 121 C. O. D. SALES, 442 C. O. D. SHIPMENTS, 189 COLLATERAL, NOTES RECEIVABLE AS, 390 COLUMNAR, Adjustments, work sheet, 228 Cash books, Forms, 158, 159 Analysis, 154-161 Errors, 483 Journal, Form, 164 Analytic, 163, 251-263 Summary entries, 278 Form, 279 Purchase journal, 253 Sales journal, 251 Sales records, 434 COMMERCIAL DISCOUNT, DEFINED, 392 COMMERCIAL DRAFT, 180 COMMERCIAL PAPER (See “Negotiable Instruments”) COMMISSION AGENTS, 448 COMMISSION MERCHANT (See “Factor”) COMMISSIONS, Expense item, 47 Income from, 46 Salesmen’s, 445 COMMON STOCK, 338 Entries, 346 COMPARATIVE BALANCE SHEET, 32-37 Content and form, 35 COMPENSATION, PARTNERS, Out of net profit, 313 COMPOUND INTEREST, 485 CONDITION OF BUSINESS, Balance sheet, 25 Statements showing, 48 CONSIGNEE, Defined, 447 Inventory by, 456 CONSIGNMENT, Account, Account sales, 450 Closing of books, 456 Entries, 452-459 Expenses charged against, 450 Profit and loss, 453 Separate from others, 438, 449 Accounts by factor, collecting of, 452 Advantages, 452 Defined, 447 Goods in or out on, 431 Handling by, Broker, 448 Factor, 448-459 Inventory, Consignee’s, 456 Consignor’s, 454 Law, 447 Lien against, 450 CONSIGNOR, Defined, 447 Inventory by, 454 CONSOLIDATION, PARTNERSHIP, 310-312 CONTROL OF BUSINESS BY ACCOUNTING, 38 CONTROLLING ACCOUNT, Accounts payable, 269, 561 Summary, 276 Accounts receivable summary, 276, 561 Advantage of, 264 Cash journal summary, 280 Forms, 281 Credits, 268 Customers or accounts receivable, 265 Debits, 266 Defined, 264 Equilibrium of ledger changed by, 265 Errors, 483 Introduction of, into a system, 272 Journal summaries, 276-280 Forms, 279, 282 Note journal summary, 277 Posting, 270 Purchase journal summary, 276 Sales journal summary, 273, 278 Form, 279 Subsidiary ledger accounts, 282 Summaries, 265, 273-280 Forms, 278, 282 Withdrawals of stock-in-trade, 273 CORPORATIONS, Accounting, Closing books, 359-365 Current records, 351 Opening entries, 340-344 Advantages, 331 Bonds, 355-357 Books, 337 Minute book, 337 Stock certificate book and ledger, 337 Stock transfer book, 337 Subscription book and ledger, 336 Capital Stock, Account, 338 Common, 338 No-par value, 339 Preferred, 338 Certificate of incorporation or charter, 332 Closing of books, 359-365 Control by stockholders, 359 Defined, 330 Directors, 334 Disadvantages, 331 Dividends, 339 Growth of, 330 Incorporation, 332 Liability of stockholders, 351 Officers, 335 Opening entries, 340-344 Organization, 18, 331-336 Organization expense, Entries for, 340, 343 Partnership changed to, 348-350 Proprietorship, 335, 338 Balance sheet, 20 Surplus account, 338 Treasury stock, 352 Accounting, 353 CORRECTIONS, HOW MADE IN BOOKS, 243 COST OF GOODS SOLD, Analysis of, 436 Determining, 40-43, 117 Ledger adjustments, 117 Listed on statement of profit and loss, 50 COST VALUe, 404 CREDIT (See also “Debit and Credit”) Cash discount for goods sold on, 395 Returned goods as, 188 CURRENT ASSETS (See “Assets”) CURRENT LIABILITIES (See “Liabilities”) CUSTOMERS’ ACCOUNTS, Accounts receivable as, 264 Controlling account, 264 Debit and credit, 86, 266-269 Ledger, 265 Proving, 269 CYCLE OF OPERATIONS, 25

D DATA, LEDGER, 132-135 DATE DRAFT, 180 DATE DUE, AVERAGE, 486 DATE OF VALUE, 469 DEBIT AND CREDIT, 78 Accounts receivable, 85 Allowances granted to customers, 87 Asset account, 85-90 Cash disbursements journal, 148 Cash receipts journal, 147 Controlling account, 266-269 Customers’ accounts, 86, 266-269 Discount, 87 Fixed asset accounts, 88 Illustrations determining, 82-84 Journal entry, 134 Liability account, 85-90 Merchandise account, 87, 99 Mixed account, 97-105 Notes, 384 Notes payable account, 89 Posting from journals, 200 Principle of, 81 Proprietorship accounts, 91-96 Schedule, 82 Single entry bookkeeping, 498 Use of, 81 Work sheet adjustments, 221-230 DEBTS (See also “Bad Debts”) Listed on balance sheet, 25 DEFERRED CHARGES, Adjustment of entries, 241 Asset, 12 Balance sheet items, 27 Estimates of, 126 Single-entry bookkeeping, 500 Valuation, 408, 413 DEFICIT, PARTNERSHIP DISTRIBUTION, 318 “DEL CREDERE” AGENCY, 452 DELIVERY, Goods for future, 432 Accounting for sales at, 441 Goods ready for, 432 DELIVERY EQUIPMENT, ASSET, 13 DEMURRAGE COST, 550, 569 DEPARTMENT STORES, Approval sales, 442-444 Charge system, 444 Sales, 442 DEPARTMENTS, BUSINESS, 2 DEPLETION, 413 DEPRECIATION, Account, Fixed assets, 102, 123 Reserves, 103, 123 Adjustment of entries, 240 Assets not subject to, valuation, 413 Assets subject to, valuation, 414 Calculation of, 414 Expense item, 47 DIRECTORS, CORPORATE, 334 DISCOUNT, Bank, Calculation of, 492 Defined, 392 Cash, Form, 400 Accounting, 156, 396-402 Defined, 392, 537 Elements, 395 Entries, 398 Handling of, 156, 396-402 Trade acceptance and, 402 Cash journal entries, 155 Commercial defined, 392 Debit and credit of, 87 Defined, 392 Expense item, 47 Income from, 46 Note, Face value, 215, 382 Loan through, 195 Notes receivable, 384-387 Trade, Defined, 392 Methods, 393-395 Not recorded, 393 DISCOUNT AND PREMIUM, Bonds, 355, 356 Capital stock, balance sheet item, 345 Capital stock sold at, entries for, 343 DISSOLUTION, PARTNERSHIP, 321-329 (See also “Partnership”) DIVIDENDS, 339 Declaration of, 359 Liquidating, 567 Paid out of profits, 360 DOUBTFUL ACCOUNTS, Adjustment of entries for, 240 Estimate of, 124 Handling of, 125 Reserve for, handling, 410 Valuation, 410 DRAFT, Accepted discounted, 384-387 Bank, 180 C. O. D. shipment, 190 Commercial, 180 Compared with cash payments, 178 Date, 180 Defined, 175 Domestic, 180 Foreign, 180 Handling of, 176-179 Kinds of, 179 Sight, 179 Time, 180

E ECONOMICS, RELATION TO ACCOUNTING, 6 EMPLOYMENT DEPARTMENT, 3 ENTRIES, Accounts current, 469 Adjustment, 237-244 Basis of, 116 Illustration, 245 Merchandise records, 115-123 Necessity of, 115 Capital stock, 340-348 Cash discount, 155, 398 Cash receipts journal, 147 Closing, 116, 221-250 (See also “Closing Entries”) Illustration, 247 Consignments, 452-459 Corrections, 243 Cross-indexing for posting, 201 Form, 202 Draft, 177 Journal, 133 Adjusting, 167-172 Closing, 167-172, 359-365 Opening, 165, 340-344 Memorandum, 340, 341 Note journals, 379-383 Opening, Corporate, 340-344 Single system, 504-511 Purchase journal, 139-144 Sales journal, 144-146 Single, 495-512 EQUATING ACCOUNTS (See “Averaging of Accounts”) EQUATION, Balance sheet, 74-76 Ledger account, 74-76 Proprietorship, 8-10, 74 ERRORS, Cash short and over, 151 Columnar books and controlling accounts, 483 Corrected when discovered, 237 Posting, 200, 481 Transplacements, 211 Transposition of numbers, 209 Trial balance, 205-212 ESTIMATES (See also “Appraisal,” “Inventories,” “Valuation”) Depreciation reserve, 103 Doubtful accounts, 124 Prepaid and accrued expenses and income, 126 EXPENDITURES, Capital, 104 From petty cash fund, 367 Revenue, 104 Writing off, 407 EXPENSE ACCOUNT, Bad debts, 125 Chart, 219 Debit and credit to, 92-94 Proprietorship, 92 Treated as purchases, 254 EXPENSE BILL, Freight, 189 EXPENSE INVOICE, Entry and posting, 254 EXPENSES, Accrued, Adjustment of entries, 242 Balance sheet items, 27 Estimates of, 126 Liability, 14 Advertising, 47 Bad debts, 47 Classification of items, 58 Deferred, Adjustment of entries, 241 Estimates handling of, 126 Depreciation, 47 Discounts, 47 Incurred and unpaid, Handled as purchases, 254 Kinds of, 46 Liquidating, 324 Maintenance and repairs, 47 Non-operating, 46 Listed on statement of profit and loss, 52 Operating, 46, 94 Chart of accounts, 219 List on statement of profit and loss, 51 Organization, entries for, 340 Prepaid, handling estimates of, 126 Purchasing, 47 Rent, 47 Salaries, 46 Traveling, 46 Unpaid (See above under “Accrued”) EXPRESS MONEY ORDERS, 182

F FACE VALUE, Notes, 215, 382 FACTOR, Accounting, 448-459 Collecting of accounts by, 452 Compensation of, 452 Defined, 448 Duties, 449 Expenses, 450 Lien on consigned goods, 450 FEES, Income from, 46 FINANCE, 3 Purchasing and, 421 FINANCIAL STATEMENTS (See also “Balance Sheet”) Fiscal period for making, 48 Periodic, value of, 230, 236 Summary of results, 214 FISCAL PERIOD, Accounts at end of, 214 Financial statements, 48 FIXED ASSETS (See “Assets, Fixed”) FIXED LIABILITIES (See “Liabilities, Fixed”) FIXTURES, Asset, 13 FOOL-PROOF BALANCE, 477 FREIGHT BILL, 189 FREIGHT CLAIMS, 560 FREIGHT CHARGES, 565 Apportioning, 493 FREIGHT NOTICE, 189 FUNDS (See “Sinking Funds”) FURNITURE, Asset, 13 FUTURE DELIVERY, Accounting for goods sold at, 441 Inventory of goods sold at, 432

G GOOD-WILL, Dissolution of partnership, 328 Valuation, 418 GOODS (See “Merchandise”) GROSS PROFIT, Listed on statement of profit and loss, 50

H HORIZONTAL RULINGS, 434

I INCOME, Account, proprietorship, 92 Accrued, Adjustment of entries, 241 Single-entry bookkeeping, 500 Valuation, 413 Classification of items, 58 Deferred, Adjustment of entries, 243 Defined, 44 Estimates of, handling, 126 Kinds of, 44 Non-operating, 45 Listed on statement of profit and loss, 52 Operating, 44 Sources of, Commissions, 46 Discounts, 46 Fees, 46 Interest, 46, 127 Rentals, 46, 127 Sales, 45, 61 INCORPORATION (See “Organization”) INDEXING, Posting, 201, 552 Form, 202 Work sheet entries, 224 INDORSEMENT, Negotiable instruments, 183 INK, Use of red, 108 INSTALMENTS, Accounting, 439-441 Capital stock subscriptions, Entries for, 345 Contracts, 439 Distribution of proceeds by, during liquidation, 327 Sales on, 439-441 INSURANCE, Paid and deferred expenses, 126 INTEREST, Account, 128, 129, 383 Average due date, 486 Averaging of accounts, 486-490 Cash balance, 490 Compound equation, 489 100% method, 488 Balance sheet item, 26 Bank balances, 491 Bank discount, 492 Calculation, 195-198 Compound, 485 Cost, separate account for, 129 Date of value basis, 469 During construction period, Charged to assets, 407 Expense item, 47 Income from, 46, 127 Nature of, 485 On accounts current, 468, 469 On bonds, payment of, 356 On notes, 382 On partial payments, 491 On partners’ investment, 294, 297-300, 316 Partners’ loan, 317 Rate on partnership investment, 314 Simple, 485 INTERNAL CHECK, 373 INTERSTATE COMMERCE COMMISSION, Bill of lading, 188 INVENTORIES (See also “Estimates”) Consignee’s, 456 Consignor’s, 454 Entries, Adjustment, 238 Transferred to purchase account, 239 Goods for future delivery, 432 Goods in or out on consignment, 431 Goods in transit, 430 Goods ready for current delivery, 432 Goods received but not yet booked, 431 Mark-on, 425 Methods, 424 Perpetual formula, 424 Records for, 48 Retail system, 424 Single-entry bookkeeping, 500 Stock control card, 429 Form, 430 Valuation, 411 Methods, 239 INVESTMENTS, 550, 558 Asset, 12 Balance sheet items, 26 Partners’ interest on, 294, 298 Valuation, 294 INVOICE, Charge and cash sales, 187 Credit for returned goods, 188 Defined, 185 Expense, 254 Purchase, 186 Purchasing procedure, 422 Sales, 187 Charge account, 444 Statement of account, 190

J JOINT VENTURE, 460-467 JOINT-STOCK COMPANY, 288 JOURNAL, Form, 135 Analysis in, depends upon classification in ledger, 434 Analytic, 163, 251, 256 Form, 164 Cash, 138, 147-161 (See also “Cash Journal”) Closing, 163 Columnar records, 163, 251, 278 Form, 279 Defined, 133 Entries, Adjustment, 167-172, 237 Capital stock, 338-348 Cash discount, 398 Form, 400 Closing, 167-172 Debit and credit, 134 Opening, 165 Explanations, 163 Nature of, 133, 162 Note, 111, 255 Form, 113 Opening entries, 165, 340-344 Posting from, 163, 199-203 (see “Ledger, Posting”) Purchase, 138, 139-144 (See also “Purchase Journals”) Rulings, 251-257 Sales, 138, 144-146 (See also “Sales Journal”) Single-entry bookkeeping, 496 Special, 137 Subdivisions, 136-138 Subsidiary, 138, 144-146, 200, 251 Summary entries, Form, 279 Columnar books, 278 Use of, 162

L LAND ASSET, 13 LAW, Principal and agent, 447 Relation of accountancy to, 7 LEDGER, Accounts, Form, 70, 112, 113 Accounts payable, 269 Accounts receivable, 265 Arrangement of, 220 Classification, 213-220 (See also “Classification of Accounts”) Construction of, 74 Controlling, 264-271 Customers’, 265-271 Defined, 68 Equation of, 74-76 Subdivision, 257 “T” account, 528 Adjustment of current entries, 115-131 Analysis, 257, 477-484 Analysis sheet, 479 Form, 480 Balancing, 107-110, 477-484 Bindings, 263 Capital stock subscription, 336 Card, 263 Cash account, cash book replaces, 150 Changes in assets and liabilities recorded, 77 Closing, 129-131 Cost of goods sold, 117 Data, sources of, 132-135 Defined, 67 Entries, 111 Adjustment of, 237 Loose-leaf, 263 Open account, 204 Periodic work on, 106-131 Posting, 133, 199-203, 560 Form, 202 Cash journal, 150, 200 Check figures, 482 Controlling account, 266, 270 Cross-indexing, 201, 552 Errors in, 200 Expense invoices, 254 Explanatory matter, 203 Profit and loss account, 249 Proof by slip or reverse method, 481 Proof, in single-entry bookkeeping, 499 Purchase journal, 143, 200 Sales journal, 145, 200 Time for, 199 Profit and loss account, 129 Record, Insufficiency of, 132 Original or first, 132 Trial balance usage, 204 Rulings, 108, 111, 261 Form, 258-260, 262 Sales account, Posting, 160 Rulings, 434 Single-entry bookkeeping, 497 Subsidiary, 257 For controlling accounts, 283 Self-balancing of, 271 Trial balance, 106 (See also “Trial Balance”) Transferring accounts, 110 Form, 112 True financial condition reflected after adjusting entries, 244 LIABILITIES (See also “Assets and Liabilities”) Accounts, 213, 214 Balance of account, 73 Chart, 218 Debit and credit, 85-90 Classified, 14 Comparison, 34 Contingent, transfer of note, 384 Current, Balance sheet items, 26 Ratio of, to current assets, 27 Decrease covered by debit entry, 82 Described, 14 Fixed defined, 28 Increase covered by credit entry, 82 Note discounted as, 215 Valuation, 29, 419 LIEN, Factor’s on consigned goods, 450 LIQUIDATION, Partnership, 321-329 (See also “Partnership, Dissolution”) Value, 404 LIQUIDATOR, 324 LOANS, Accounts, partners’, 302 Bank, 195 Borrowed capital, 303 Capital accretions as, 302 Partners, 302, 317 LONG-TERM LIABILITIES (See “Liabilities, Fixed”) LOOSE-LEAF LEDGER, 263 LOSSES, Distributing a deficit, 318 Distribution of in partnership dissolution, 325

M MAINTENANCE EXPENSE ITEM, 47, 405 MARK DOWN, 425 MARK-ON, 425 MARK-UP, 425 MARKETING, 3 MEMORANDUM ENTRY, 340, 341 MERCHANDISE, Account, Adjustments, 115, 123 Analysis of, 100, 117 Assets subject to depreciation, 102 Content and significance, 87 Debit and credit, 87, 99 Mixed, 97-105 Summarization, 117-123 Adjustment of inventory entries, 238 Asset, 12 Average stock to be carried, 426 Cash paid for, determination of, 61 Control, 424, 426 Goods for future delivery, 432 Goods in or out on consignment, 431 Goods in transit, 430 Goods ready for current delivery, 432 Goods received but not yet booked, 431 On hand, balance sheet item, 26 Stock control card, 429 Form, 430 Valuation, 411 Withdrawal, entered in sales journal, 273 MERCHANDISE TRADING ACCOUNT, 364 MINING PARTNERSHIP, 289 MINUTE BOOK, 337 MIXED ACCOUNTS, 97-105, 215 Adjustment of, 237 MONEY (See “Cash”) MONEY ORDERS, 182 MORTGAGES, PAYABLE, LIABILITY, 14

N NAME OF FIRM, On balance sheet, 24 On statement of profit and loss, 49 NEGOTIABLE INSTRUMENTS, 173-184 (See also “Notes Payable”, “Notes Receivable”) Checks, 181 Draft, 175-181 Indorsements, 183 Kinds, 175 Money orders, 182 Trade acceptance, 181 Uses and requisites, 174 Warehouse receipts, 182 Writing of, 183 NET PROFIT, Determination of, 55 Under single-entry system, 511 Distribution of, 53 NET WORTH (See also “Proprietorship”) Balance sheet expansion, 40 Comparison, 32, 40 Shown under single-entry system, 500 NOMINAL ACCOUNT, 216 NO-PAR-VALUE STOCK, 339 Entries for, 347 NOTE JOURNALS, 111, 255, 379 Form, 113, 380 Entries, 379-383 Summary, under controlling account system, 277 NOTES, Accounting of, 379-391 Contingent liability incurred by, 384 Discounting, 384-387 Face value, 215, 382 Loan through, 195 Dishonored, 387-390 Face value, always entered at, 382 History of, 376 Interest on, 382 Liquidity of, 378 Relation of open account to, 377 Renewal, 390 NOTES PAYABLE, Account, Form, 113 Debit and credit, 89 Posting, 203 Rulings and entries, 111 Credits record, 384 Defined, 377 Liability, 14 Partner’s, 302 NOTES RECEIVABLE, Accepted draft, entries, 177 Account, Debit and credit, 85 Posting, 203 Rulings and entries, 111 As collateral, 390 Asset, 11 Balance sheet item, 26 Classification of, 390 Credits record, 384 Defined, 377 Discounted, 384-387 Dishonored, 387-390 Partial payments, 390 Use of, 173 Valuation, 409

O OBSOLESCENCE, 414 OFFICERS, CORPORATE, 335 OFFSET ACCOUNT, DEFINED, 103 100% METHOD, AVERAGING ACCOUNTS, 488 OPEN ACCOUNT, 204 (See also “Accounts, Current”) Liquidity of, 378 Relation of note to, 377 OPEN-TO-BUY ESTIMATE, 427 OPENING, Corporate books, 338-350 Entries under single-entry system, 504-511 Journal entries, 165 ORDERS, PURCHASE, 422 ORGANIZATION, 2 Corporation, 17 Expenses, Entries for, 340 Sale of stock charged to account, 343 Writing off, 406 Partnership, 17 Single proprietorship, 16 Types of, 16

P PARCELS POST, C. O. D. SHIPMENTS, 190 PARTIAL PAYMENTS, INTEREST ON, 491 PARTNERS, Compensation out of net profit, 313 Deceased, 323 Liability, 284, 287 Loans, 302, 317 New, admission of, 295, 305-310, 320 Nominal, 289 Notes payable, 302 Ostensible, 289 Profits, closing of, 318 Salaries, 316 Secret, 289 Silent, 289 Withdrawing, 319 Liability of, 321 PARTNERSHIP, 17 Accounts current, 469 Bankrupt, dissolution of, 322 Capital, Accretions through profit, 301 Adjustments of, 297-300 Averaging investments, 292, 301 Interest on partners’, 294, 297-300, 316 Interest rate on, 314 Investment, original, 294, 550, 558 Valuation of original investment, 294, 550, 558 Capitalization, 297-304 Consolidation, 310-312 Defined, 284 Dissolution, 321-329 By liquidation, 323 By mutual consent, 322 Causes of, 321 Deceased partner, 323 Distribution by instalments, 327 Distribution of losses, 325-327 Distribution of proceeds, 324 Good-will, treatment of, 328 Liquidation expenses, 324 Methods of, 323 On account of war, 322 Problems of, 322 Withdrawal of partner to admit new, 321 Illegal, dissolution of, 322 Incorporation, 348-350 Interest of new partner, 295 Joint adventure accounts, 460-467 Limited, dissolution of, 322 Liquidation (See above under “Dissolution”) Loans, Distinguished from capital, 302, 317 Interest on, 317 Mining, 289 New partners, methods of admitting, 295, 305-310 Organization, Characteristics of, 285 Classification of, 287 Contract, 286 Joint-stock company, 288 Nature of, 284 Partner’s loans accounts, 302, 316 Profit and loss account, 314-316 Profit-sharing, 290-294 Closing to partners’ accounts, 318 Distributing a deficit, 318 Interest on partners’ investment, 294 Investment average as a basis for, 292 Principles governing, 290 Ratio, 292, 301 Profits, 290-294, 313-320 Defined, 314 Determination upon admitting new partner, 320 Net, 314 Reserved, 317 Proprietorship, balance sheet, 20 Sale or transfer of, 322 Special, 287 Profit-sharing basis, 292 PERSONAL ACCOUNT, Changes in, 93 Posting, 203 Rulings and entries, 111 Form, 113 PERSONNEL DEPARTMENT, 3 PETTY CASH, Account, Handling of, 367 Vouchers, 367 Book, 368 Form, 369 P. M.’S, 446 POSTAGE, EXPENSE ITEM, 47 POSTAL MONEY ORDERS, 182 POSTAL SERVICE, C. O. D. SHIPMENTS, 190 POSTING (See “Ledger,” “Journal”) PREFERRED STOCK, 338 Dividends, 339 Entries, 346 PREMIUM (See “Discount and Premium”) PRINCIPAL AND AGENT, 447 PRODUCTION, 3 PROFIT (See also “Gross Profit,” “Net Profit”) As reserves, 360 Capital accretions through, 301 Corporate, handling of, 360 Defined, 313 Determined by single-entry system, 501 Dividends declared before distribution, 359 Dividends paid out of, 360 Net, 314 Net operating, 52 Partnership, 290-294, 313-320 Closing to partners’ account, 318 Defined, 314 Determination upon admitting new partner, 320 Distributing deficit, 318 Reserved profit, 317 Reserved, 317 Surplus, retained in the business, 301 Undivided, defined, 16 PROFIT AND LOSS (See also “Statement of Profit and Loss”) Account, Appropriation section, 318 Closing, 249 Closing profits to partners’ accounts, 318 Consignments, 453 Opening, 129 Partnership, 314-316 Posting, 203 Transfer of reserve profit, 317 Determination, 38-56 Liquidating partnership, 324-327 Relation to financial element, 57 Summary, 44-56 PROFIT-SHARING, Average investment as a basis for, 292 Partnership, 290-294 Ratio, 292, 301 PROMISSORY NOTES (See “Draft,” “Negotiable Instruments,” “Notes,” “Notes Payable,” “Notes Receivable”) PROOF, Postings, 481 Single-entry bookkeeping, 499 PROPERTY ASSET, 13 PROPORTION, 492-494 PROPRIETORSHIP (See also “Net Worth”) Accounts, 213, 214 Capital account, 93 Chart, 218 Debit and credit, 91-96 Defined, 91 Expense, 92-94 Income, 92 Ledger adjustments, 129 Personal account, 93 Single-entry bookkeeping, 498 Temporary, 129, 214 Vested, 93, 214 Balance sheet, 8-10, 19, 40-43 Corporations, 335, 338 Double-entry bookkeeping, 78 Equation, 8-10, 74 Kinds of, 15 Single, 16 Temporary records, 40, 42, 57 Valuation, 419 PURCHASE ACCOUNT, Adjustment of, 239 Transfer of inventory to, 239 PURCHASE DISCOUNT, 395 PURCHASE INVOICE, 186 PURCHASE JOURNAL, 138, 139-144 Analytic, 253 Expenses handled through, 254 Posting from, 143, 200 Summary, under controlling account system, 273 PURCHASES, Analysis of, 436 Buying, Average stock to be carried, 426 Buying quota, 427 Control methods, 426 Department, 421 Estimates, 426 “Open-to-buy,” 427 Financing, 421 Function, of buying, 420 Orders, 422 Policies, 426 Procedure, 422 Records, use of, 426 Requisition, 421 Returned, 436 Stock control card, 429 Form, 430 Successful buying, elements of, 423 Cash disbursements, journal, 152, 154 Cash paid for, 61 Expense item, 47 Transaction, analysis of, 139 PURCHASING AGENT, 422

R RATIO, Accounts receivable to sales, 65 Balance sheet and profit and loss statement, 64 Profit-sharing of special partnership, 292 Proportion, 492 Turnover, 64 REAL ACCOUNT, 216 RECEIPTS AND DISBURSEMENTS, STATEMENT OF, 375 RECONCILIATION OF BANK BALANCE, 472-476 RECORDS, Functions, 1 Kinds of, 39 RENEWALS, 405, 416 RENT, Expense item, 47 Income from, 46 Paid and deferred, 127 REPAIRS, Expense item, 47 Valuation, 405, 416 REPLACEMENTS, Defined, 405 Valuation, 416 REQUISITIONS, PURCHASES, 422 RESERVE, Account, Depreciation, 103, 123 Doubtful accounts, 125 Created from profits distinguished from valuation accounts, 318 Defined, 16 Depreciation, 103, 123 Doubtful accounts, handling, 410 Out of profits, 360 Reserve profits, 317 Sinking fund, 358 RETAIL TRADE, INVENTORY SYSTEM, 424 RETURNED GOODS, 45 Analysis of, in sales, 435 Crediting of, 188 Debit and credit of, 87 Journal, 253 Purchases, 436 REVENUE EXPENDITURES, 104 REVERSE POSTING, 481 RULINGS, Balancing an account, 108 Cash book, 151 Cash journal, 157-160 Form, 158, 159 Horizontal and vertical, 434 Journals, 251-257 Ledger, 261 Forms, 258-260, 262 Note accounts, 111 Form, 113 Personal Account, 111 Form, 113

S SAFEGUARDS, 373 SALARIES, Expenses, 46 Partners, 316 SALE VALUE, 404 SALES, Account posting from journal, 160 Analysis, 98, 434 Allowances, 435 Cash sales, 436 Consignments, 438 Instalment sales, 439 Returned goods, 435 Sales to branches, 437 Use of ticket in, 435 Approval, 442-444 Branches, 437 Cash, Handling of, 436 Receipts journal, 152, 154 Charge accounts, handling of, 437 Classification, 433 C. O. D., 442 Consignment, 438, 447-459 (See also “Consignment”) Department, 433 Department stores, 441 Discount, 155, 395 Income from, 45, 61 Future delivery, 441 Instalment, 439-441 Quota, 424, 427 Ratio of, to accounts receivable, 65 Returned goods, analysis, 435, 560 Ticket (See also “Invoice”) Charge and cash sales, 187, 444 Use of, in analysis, 435 SALES JOURNAL, 138, 144-146 Columnar analysis, 160, 252 Methods of recording, 252 Posting from, 145, 200 To customers’ accounts, 266 Returns and allowance journal, 253 Rulings, 434 Summary, Form, 279 Under controlling account system, 273, 278 Withdrawal of stock-in-trade, entered in, 273 SALES LEDGER, RULINGS, 434 SALES PRICE, TRADE DISCOUNT, 392, 393-395 SALESMEN, Commission, 445 Records, 446 SCHEDULES, Balance sheet, 577 Profit and loss, 589 Cost of goods sold, 590 SECURITIES, VALUATION, 412 SELF-BALANCING LEDGER, 270 SHIPMENT OF GOODS, Bill of lading, 188 C. O. D., 189 Freight notice, 189 Freight or expense bill, 189 Traffic department, 190 SIGHT DRAFT, 179 SIMPLE INTEREST, 485 SINGLE-ENTRY BOOKKEEPING, 495-512 (See also “Bookkeeping”) SINGLE VENTURE, 460 SINKING FUNDS, ACCOUNTING, 357 SLIP OR REVERSE POSTING SYSTEM, 481 SOLVENCY, HOW JUDGED, 27 “SPIFS,” 446 STATEMENT, FINANCIAL (See “Balance Sheet”) STATEMENT OF ACCOUNT, 190 STATEMENT OF PROFIT AND LOSS, 41, 44-56, 589 Forms, 49, 231, 234 Arrangement, 50 Operating expense section, 51 Trading section, 50 Confusion of items, 58 Content, 50 Equation, 52 Interrelation of, and comparative balance sheet, 60-64 Not a part of books, 230 Preliminary to closing entries, 221 Ratio of items, 64 Single-entry bookkeeping, 499 Title, 49 When drawn up, 229 STATEMENT OF RECEIPTS AND DISBURSEMENTS, 375 STATIONERY, EXPENSE ITEM, 47 STOCK (See “Capital Stock”) STOCKHOLDERS, Control by, 359 Liability of, 351 STOCK-IN-TRADE (See “Inventories,” “Merchandise”) SUBSCRIPTION BOOK, CAPITAL STOCK, 336 SUBSCRIPTION LEDGER, CAPITAL STOCK, 336 SUMMARIZATION (See also “Adjustments,” “Closing”) Accounts receivable and payable, Under controlling account system, 276 Book entries, 244-250 Cash journal, Form, 281 Under controlling account system, 280 Columnar books, 278 Form, 279 Merchandise records, 117-123 Note journals, Under controlling account system, 277 Preliminary to closing books, 221 Purchase Journal, Under controlling account system, 273 Purpose of, 214, 244 Sales Journal, Form, 279 Under controlling accounts system, 273, 278 Work sheet for, 221 SURPLUS, Account, 338 Defined, 16 Donated (treasury stock), 352-355

T TELEPHONE AND TELEGRAPH, EXPENSE ITEM, 47 TEMPORARY PROPRIETORSHIP RECORDS, 40, 42, 57 TERMS, 7 (See also “Discount, Cash”) TICKLER FILE, APPROVAL SALE, 443 TIME DRAFT, 180 TITLE, ACCOUNT, 68, 72 TRADE ACCEPTANCE, 181 Compared to cash discount, 402 Distinguished from notes, 377 TRADE DISCOUNT, Defined, 392 Methods, 393-395 Not recorded, 393 TRADING ACCOUNT, 364 TRAFFIC DEPARTMENT, DUTIES, 190 TRANSFER OF STOCK, BOOK, 337 TRANSFERRING AN ACCOUNT, 110 Form, 112 TRANSPLACEMENTS, ERRORS IN, 211 TRANSPOSITION OF NUMBERS, ERRORS OF, 209 TRAVELING EXPENSES, 46 TREASURY STOCK, 352 Accounting, 353 Purchase and sale, 353 TRIAL BALANCE, 106 Adjustment account, 483 Arrangement for work sheet, 224 Basis for balance sheet, 221 Classified, 220 Errors, 205-212 “Fool-proof,” 477 Methods, 204-212 Post-closing, 250 Work preliminary to, 107 TURNOVER, Rate, 64, 420

U UNPAID EXPENSES (See “Expenses, Accrued”)

V VALUATION, Account defined, 103 Accounts receivable, 409 Assets, 407-419 Subject to cost, 413 Subject to depreciation, 414 Bad debts, 410 Balance sheet, 403-419 Rules, 407-409 Betterments, 416 Bonds, 412 Cash, 409 Current assets, 407 Deferred charges, 408, 413 Doubtful accounts, 410 Fixed assets, 124, 408, 413 Good-will, 418 Income accrued, 413 Liabilities, 419 Merchandise or inventory, 411 Notes receivable, 409 Proprietorship, 419 Repairs and replacements, 416 Securities, 412 Stock, 412 VALUE, Cost, 404 Liquidation, 404 Sale, 404 VERTICAL RULINGS, 434 VESTED PROPRIETORSHIP ACCOUNT, 93 VOLUME OF BUSINESS, Records necessary to show, 39 VOUCHER SYSTEM, 254 VOUCHERS, PETTY CASH, 367

W WAGES, Expenses, 46 Paid and deferred expenses, 127 WAR, As a means of dissolving partnership, 322 WAREHOUSE RECEIPTS, 182 WORK SHEET, 221-230, 576 Adjustment entries, 223, 224-230 Analysis paper for, 221 Columnar adjustment, 228 Defined, 221 Illustration, 222-224 Indexing, 224 WORKING CAPITAL, Defined, 26 Turnover, 65