Part 2

The sales account, with which the student has been made acquainted, exhibits net sales, while a _sales controlling account_ exhibits a summary of all accounts in the sales ledger. The _debits_ to the sales controlling account represent the total debits to customers' accounts as shown by the sales book or the journal. The _credits_ to the sales controlling account represent the total credits to customers as shown by the cash book and the journal. This account is variously styled Sales Ledger Account, Accounts Receivable Account, or Sales Controlling Account.

A _purchase controlling account_ exhibits a summary of all accounts in the purchase ledger. It is called a Purchase Ledger Account, Accounts Payable Account, or Purchase Controlling Account.

These controlling accounts are kept in the general ledger and show at all times the totals of accounts receivable and accounts payable, without the necessity of listing the individual balances. At the end of the month statements of the balances of the accounts in purchase and sales ledgers are made, and the totals of these balances must agree with the balances of the controlling accounts.

The operation of these controlling accounts demonstrates one of the most apparent advantages of the division of the ledger. If an error is made in posting to an account in the sales ledger it is discovered as soon as the statement of the sales ledger is made, and can be located without referring to purchase or general ledger accounts. Without the ledger division and the use of controlling accounts, there would be nothing to assist in locating an error in the trial balance in any particular section of the ledger.

ORDER BLANKS

=7.= In a wholesale business it is customary to have all orders entered on specially ruled order blanks of a uniform size. These orders are filed in a binder designed for the purpose, which takes the place of the old style order book.

These order blanks are furnished to salesmen who send in their orders on them. When an order is received direct from the customer it, also, is transcribed on one of these blanks so that all order records will be uniform. One very appreciable advantage in the use of this loose sheet system of order blanks is that all unfilled orders are kept in a binder by themselves.

=8. Filling Orders.= Each day the orders to be filled should be placed in a temporary binder or holder and sent to the warehouse. The packer will check quantities shipped and return the order, together with the shipping receipt from the railroad or express company, to the bookkeeping department.

The amounts are extended, and the invoice is made out from this order blank. The sale is next recorded in the sales book. Instead of entering each item in the sales book the totals for each department are entered in the proper column. Each sale is numbered in the sales book as illustrated and the same number is placed on the order. These orders are then filed in the binder for filled orders in exact numerical order, which brings them also in the order of the dates of shipment.

SALES BOOK

=9.= The sales book used in this set exhibits some features not heretofore shown. At the right are three columns for the distribution of sales. At the left, in addition to columns for number, date, and folio, are two columns headed cash and sales ledger. All cash sales are entered in the cash column, and all sales on account are entered in the sales ledger column. At the end of the week or month the total of the sales ledger column is posted to the debit of the _sales ledger account_ in the general ledger, while the totals of the sales columns at the right are posted to the credit of the _sales account_ in the general ledger.

INVOICE REGISTER

=10.= A form of purchase book, which also combines an invoice register, is shown in this set. Unlike the forms of purchase book with which the student has been made familiar, this invoice register gives full particulars as to terms, discount, when due, and when and how paid.

The combined footings of the two department columns must of course agree with the footing of the amount column. At the end of the month the total of the amount column is posted to the credit of _purchase ledger account_ in the general ledger, and the totals of the department columns are posted to the debit of the _purchase account_ in the general ledger.

The details of payment are kept in the invoice register as a memorandum only. This provides a convenient record of unpaid invoices, showing when each is due.

CASH BOOK

=11.= In this set we introduce a columnar cash book which also serves as a journal for cash transaction and is known as a cash journal. The principal advantage of a columnar book lies in the opportunity to introduce columns with special headings for accounts to which entries are frequent. Not only does this permit of carrying footings to the end of the month with one posting to the ledger account, but it provides a convenient classification of receipts and expenditures with a complete segregation of items of a given class.

In the form illustrated, columns are provided on the debit side for cash, purchase ledger (subdivided for discount and amount), bank deposits, and sundries; on the credit side, cash, sales ledger (subdivided for discount and amount), cash sales, bank withdrawals, and sundries. At first glance it might appear that this form is a departure from the regular form of cash book, but it should be remembered that the cash columns are the only ones having anything to do with the cash account. A cash receipt is entered in the cash debit column, but the amount is credited to its source through the proper credit column; thus a payment received on account is debited to cash and credited through the sales ledger column. A deposit is credited to cash and debited to bank deposits; the payment of a purchase ledger account by check is credited to bank withdrawals, and debited to purchase ledger account.

The discount columns are memorandum columns only, the net cash being entered in the amount columns under purchase and sales ledger. These columns are included that the total payment may be posted to personal accounts in purchase or sales ledger. The totals of these columns are to be posted to discount and interest columns at the end of the month.

The total amount to be posted to the debit of the purchase ledger account and to the credit of sales ledger account is made up of the totals of the discount and amount columns.

The sundries columns are provided for all entries for which there are no special columns and are used principally for transactions affecting general ledger accounts. These columns are sometimes used for ordinary journal entries not involving an exchange of cash, but their use for this purpose is strongly advised against. The cash book should be used exclusively for recording cash transactions. When columnar purchase, sales, and cash books are used, the journal is only needed for adjusting and closing entries, and for this purpose it is best to provide an ordinary two-column journal.

SUBDIVISION OF EXPENSE ACCOUNT

=12.= In every business there are several classes of expense and it is very useful to know the exact amount of each class. When all expenses are charged under one head, it is impossible to determine without considerable checking, whether or not any particular class of expense is more than it should be. It is customary, therefore, to subdivide expense and to open accounts in the ledger for different classes of expense. Some subdivisions in common use are rent (paid), insurance, taxes, interest and discount, in freight, out freight, salaries, labor, fuel, office supplies, telegraph and telephone, postage, general expense, etc. The exact subdivisions used must of necessity be governed by the nature of the business. For instance, the item of telegraph and telephone charges may be of importance in one business, while in another, the number of such charges would be so small that a separate account is not warranted.

PETTY CASH VOUCHER

=13.= A form of envelope voucher for petty cash is illustrated. A strong manilla envelope in what is known as size #10 takes the place of the petty cash book. It is ruled for a record of payments, and a receipt for each payment is placed in the envelope. At the bottom is a space for a distribution of the amounts to the proper accounts. When the petty cash fund is depleted—or at stated intervals—a check is drawn for the amount expended and it is charged through the cash book, leaving petty cash intact. The amount of the petty cash fund is considered as cash on hand, and the voucher envelope accounts for any part of the fund not actually in the cash drawer. Petty cash should be used sparingly, as it is intended only for small expense items when it is inconvenient to give a check. When the books are closed, the petty cash expenditures may be charged through the cash book as cash payments, instead of drawing a check.

TREATMENT OF PROTESTED PAPER

=14.= When a note, draft, or check is protested, the bank will charge us with the protest fee in addition to the face of the paper. The total amount must then be charged to the one from whom the paper was received. Suppose the check of Jones & Laughlin for $100.00 goes to protest and is returned to us with a protest fee of $2.50—the entry will be:

Jones & Laughlin $102.50 Bank $102.50 Check No. 16 given to First Nat. Bank to cover J. & L. check for $100.00, protest fee $2.50.

SAMPLE TRANSACTIONS

=15.= D. A. Hall is engaged in the business of a wholesale dealer in men's and boys' clothing. On Feb. 1st. his balance sheet is as follows:

Balance Sheet, Feb. 1st, 1909. Assets Cash In Bank $1,765.20 In Office 125.00 -------- Total Cash $1,890.20

Accounts and Bills Receivable Bills Receivable 850.00 Henry James, Due Feb. 5 350.00 David Traver & Co., Due Feb. 15 500.00 Accounts Receivable 1,124.00 Frank Weitz 234.00 John Gorham 150.00 George Golden 300.00 Clayton & Co. 275.00 Henry Ames 165.00 -------- -------- Total Accounts and Bills Rec. 1,974.00

Inventory Men's clothing $2,240.00 Boys' " 1,200.00 -------- Total Inventory $3,440.00 -------- Total Assets $7,304.20

Liabilities Accounts and Bills Payable Bills Payable 650.00 Henry Weir & Co., Due Feb. 7 450.00 A. Stein & Co., Due March 1 200.00 -------- Accounts Payable 675.00 -------- D. Meyer & Bro. 150.00 Altman & Sons 350.00 Garson & Co. 175.00 -------- Total Accounts and Bills Payable 1,325.00 Total Liabilities 1,325.00 -------- Present Worth 5,979.20

The following transactions are entered on the books:

—Feb. 1st— Sold to D. A. Marcus & Son 10 overcoats 7.50 75.00 10 men's suits 6.75 67.50 142.50 -------- —1st— Sold to H. A. Branch 15 boys' suits 3.50 52.50

—1st— Rec'd from Geo. Golden Cash on account 150.00

—2nd— Deposited in 1st Nat. Bank 150.00

—2nd— Sold to John Gorham 10 men's suits 7.00 70.00 10 men's suits 6.50 65.00 $135.00 -------- —2nd— Sold to Larson & Anderson 5 boys' suits 2.75 13.75 10 men's suits 6.50 65.00 78.75 -------- —2nd— Sold for cash Men's clothing 37.50

—3rd— Sold to Tallman & Co. 15 men's overcoats 7.25 108.75

—3rd— Paid 1 month's rent, Ck. No. 1 75.00

—3rd— Received from John Gorham Cash on account 150.00

—4th— Bought from Carson & Scott 36 men's corduroy coats 3.00 108.00 12 men's corduroy coats 3.50 42.00 150.00 Terms 2/10, 1/30, n/60 --------

—4th— Deposited in 1st Nat. Bank 187.50

—4th— Sold to Harris & Rogers 12 men's corduroy coats 3.75 45.00 5 overcoats 8.00 40.00 85.00

—4th— Received from Frank Weitz Note at 30 days, 6% 234.00

—5th— Sent to D. Meyer & Bro. Ck. No. 2 $150.00

—5th— Received from Henry James Cash to apply on note 200.00 Cash for interest 1.75 $201.75 New note 30 days, 6% -------- 150.00

—5th— Bought from Adler & Co. 50 men's suits 6.25 312.50 Terms 3/10, 1/30, n/60

—5th— Paid salesman's salary Ck. No. 3 25.00

—5th— Drew for personal use Ck. No. 4 50.00

—7th— Sold to Henry Ames 20 men's suits 7.50 150.00 10 boy's suits 2.75 27.50 177.50 -------- —7th— Sold to Ackley & Son 10 boy's overcoats 3.00 30.00 10 boy's suits 2.75 27.50 57.50 -------- —7th— Received from Clayton & Co. Check to apply on acct. 200.00

—7th— Deposited in 1st Nat. Bank 401.75

—7th— Paid our note to H. Weir & Co. Check No. 5 450.00

—8th— Sold to H. J. Andrews 10 men's overcoats 8.00 80.00 12 men's corduroy coats 4.50 54.00 $134.00 -------- —8th— Paid express on shipment from Carson & Scott, Ck. No. 6 .90

—8th— Received from Henry Ames Cash on account 165.00

—8th— Sold for cash 1 job lot boy's clothing 87.50

—9th— Deposited in 1st Nat. Bank 252.50

—9th— Received from bank, check of Clayton & Co., protested for non-payment. Amount of check 200.00 Protest fees 2.50

—10th— Sold to Harris & Landis 10 men's overcoats 7.75 77.50

—10th— Sold to Frank Weitz 12 men's corduroy coats 3.75 45.00

—10th— Paid Carson & Scott Check No. 7 147.00 Discount 2% 3.00

—10th— Paid electric light bill Check No. 8 3.75

—10th— Received from Clayton & Co. Cash to redeem protested check $202.50

—10th— Inventory at close of business, Feb. 10 Men's clothing 1,898.75 Boy's clothing 1,247.75

Journal entries are to be made to get the accounts, as shown on Feb. 1st, recorded on the books. The transactions are properly entered in journal, cash book, sales book, and invoice register, and posted to ledger. The accounts in the general ledger are closed into trading, and profit and loss—the net profit is credited to proprietor's account—a trial balance is taken after the ledger is closed, and a balance sheet is made. Statements are prepared from sales and purchase ledgers, which agree with the balances of their controlling accounts. All accounts in the general ledger are properly ruled and balances carried forward.

EXERCISES

=16.= The following transactions are recorded on the books of Parker and Hoadley, Omaha, Neb., wholesale dealers in tea and coffee. In recording these transactions use is made of the books and forms illustrated in this section.

January 2nd, 1909

A partnership is formed on this date between K. J. Parker and D. C. Hoadley for the purpose of conducting a wholesale tea and coffee business, in the name of Parker & Hoadley, the principal place of business to be Omaha, Neb. Parker invests $3,000.00 cash. Hoadley invests $2,000.00 cash. It is agreed that profits are to be shared on the basis of capital invested, capital to draw interest at 6%, and interest at 6% to be paid on withdrawals. The books are to be closed monthly and the profits divided between the partners. Hoadley is to assume the entire responsibility for the conduct and management of the business, for which he is to receive a salary of $150.00 per month, payable in installments of $75.00 on the 15th and 31st of each month.

Deposited in Western National Bank $5,000.00.

Withdrew from bank, Ck. No. 1 petty cash $25.00.

Bought from Leggitt & Co., New York, 30 chests Japan tea, 1,455# at .37½, 20 chests Oolong tea, 972# at .40; terms net 30, 2/10, f. o. b. N. Y.

Bought from Laughlin & Co., Chicago, 20 sacks Rio coffee, 1,020# at .22½, 20 sacks Java coffee, 985# at .25; 20 sacks Mocha coffee, 970# at .25; terms net 30, 2/10, f. o. b. Omaha.

Paid rent of store 1 month to James Roberts, Ck. No. 2, $60.00.

—3rd—

Sold to Ames & Johnson, 92 12th St., on account, 3 chests Japan tea, 149# at .48; sack Rio coffee, 50# at .28; 1 sack Java coffee, 52# at .32.

Sold to Landis & Snow, So. Omaha, on account, 2 chests Oolong tea, 101# at .52; 1 sack Mocha coffee, 47# at .32; 2 sacks Rio coffee, 98# at .28.

Sold to J. C. Peters & Son, 267 Roberts St., 3 chests Oolong tea, 146# at .52, 5 sacks Rio coffee, 252# at .48.

Bought for cash from Harris & Co., 1 office desk and chair $45.00, gave Ck. No. 3 in payment.

—4th—

Paid freight on coffee from New York by Ck. No. 4, 12.93.

Sold to Wright & Noble, 146 7th St., 2 sacks Java coffee, 99# at .32; 2 sacks Mocha coffee, 101# at .32.

Sold to Horgis & Co., 84 Jackson St., 5 chests Japan tea, 248# at .48.

Sold to Winters & James, 92 Hastings St., 4 chests Japan tea, 201# at .48; 3 chests Oolong tea, 138# at .52; 2 sacks Java coffee, 97# at .32.

Sold for cash 1 sack Rio coffee, 47# at .28; 1 chest Japan tea, 45# at .48.

—5th—

Sold to Cobb & Willet, 892 Park Av., 2 chests Japan tea, 92# at .48; 1 chest Oolong tea, 47# at .52; 1 sack Rio coffee, 44# at .28; 1 sack Java coffee, 45# at .32; 1 sack Mocha coffee, 43# at .32.

Sold to Young & Criger, 62 Watson St., 5 sacks Mocha coffee, 205# at .32; 3 chests Oolong tea, 127# at .52.

Bought from Japan Importing Co., San Francisco, 60 chests Japan tea, 2,700# at .36, f. o. b. Omaha, net cash; gave our note at 10 days without interest in payment.

Paid account of Leggitt & Co., less 2% discount, Ck. No. 5.

—6th—

Ames & Johnson paid their account, less 2% cash discount.

Deposited cash received to date.

Sold to Wade & Francis, 92 Bluff St., 10 chests Japan tea, 448# at .48.

Paid for telegram—petty cash—.40.

Received check from Landis & Snow in full settlement of their account.

Sold to J. C. Peters & Son, 5 sacks Java coffee, 231# at .32.

Sold for cash 3 sacks Rio coffee, 127# at .28; 2 sacks Mocha coffee, 89# at .32; 3 sacks Japan tea, 131# at .48.

—8th—

Deposited cash on hand, also check of Landis & Snow.

Sold to Ames & Johnson, 2 sacks Mocha coffee, 91# at .32; 2 chests Oolong tea, 87# at .52.

Sold to Wright & Noble, 3 chests Japan tea, 129# at .48; 1 chest Oolong tea, 42# at .52.

Paid for fuel by check No. 6 to Rogers Coal Co., 12.00.

Paid clerk's salary, check No. 7, 10.00.

Paid for labor, check No. 8, 16.50.

—9th—

Sold to Watkins & Fish, 64 Prairie Av., 5 chests Oolong tea, 207# at .52.

Bought from Western Grocer Co., Chicago, 50 chests Oolong tea, 418# at .39; 20 sacks Rio coffee, 876# at .22¼; 10 sacks Java coffee, 434# at .25; 15 sacks Mocha coffee, 653# at .25; terms 30 days net, 2/10, f. o. b. Omaha.

Received from Wright & Noble cash in payment of our bill of Jan. 4th, less 2% cash discount.

—10th—

Received from bank, check of Landis & Snow protested for non-payment, protest fees added 1.90.

Sent Laughlin & Co. our check No. 9 in payment of account

—11th—

Sold to Raymond H. Moss, 182 Spring St., 5 chests Japan tea, 217# at .48; 5 sacks Rio coffee, 214# at .28.

Sold to Watkins & Fish, 10 sacks Mocha coffee, 424# at .32.

Cobb & Willet paid their account in full, deducting 2% for cash.

—12th—

Deposited cash on hand.

Sold to Cobb & Willet, 5 chests Japan tea, 213# at .48.

Sold for cash, 2 sacks Rio coffee, 88# at .28.

—13th—

Paid our note to Japan Importing Co., check No. 10.

Paid sundry office expenses from petty cash 3.60.

Sold to Wade & Francis 3 sacks Rio coffee, 123# at .28; 2 sacks Mocha coffee, 86# at .32.

Paid clerk's salary, ck. No. 11, 10.00.

Paid for labor, ck. No. 12, 16.50.

—15th—

Paid ½ month's salary to D. C. Hoadley, ck. No. 13, 75.00.

1st. Balance cash, first charging petty cash expenditures as a cash payment.

2nd. Post purchase book, sales book, journal, and cash book.

3rd. Take a trial balance.

4th. Credit interest to partner's accounts.

5th. Take an inventory of stock on hand. The records show quantities purchased and quantities sold. When the same goods have been purchased at different prices, use the last price paid in figuring inventory.

6th. Close accounts into trading and profit and loss accounts.

7th. Distribute net profits to partners' capital accounts.