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·"BOOK KEEPING AND ACCOUNTANCY"

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·The Reference Library of
The Bennett College
"BOOK-KEEPING AND
ACCOUNTANCY”
DT: 38
THE PROFESSIONAL STAFF OF
THE BENNETT COLLEGE
FOR THE USE OF STUDENTS

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·CONTENTS
CHAPTER 1
DETISITIONS AND GOXIR.IL PRINCIPI.IS
Patt
Amounts-Double I'miry-biks used-.Isseis-Capital - Hills
CHAPTER II
THE LENGER
Division of lelger-Ionela and Card Lodrets --Joumil
CHAPTER II
SUNSIDIARY BOOKS USED IXSTT. 1) or Tut:
ORIGINAL. JOURX.JL.
l'urchases Bail-Wales Day Book-Returns Boxes
5
CHAPTER IV
THE CASII BOOK
Discount Reconciliation Statement- l'etty Cash-Imprest System
3G
CHAPTER V
BILIS RECEIVABI..
Bills Receivable Prol-Collection, Segrotiating. Discounting and Dishonour
Pulk-Forcian and Lkxcumentary Bills
9
CHAPTER VI
BIIIS 1.11.1BI.
Bulls Payable look-Cheques--Pot Datet (lejues Prob - Journal grupet.
G1

·Contents
CHAPTER VII
THE FINAL ACCOUNTS
LACK
Stocktaking Balancing--Trial Balance-Trading, and Profit and Loss
Account-Balance Sheet
73
CHAPTER VIII
THE FINAL ACCOUNTS (Continued)
Allocation of Expenses-Profit on Turnover Adjustments Reserves
Depreciation
.
97
CHAPTER IX
THE BALANCE SHEET
Form and Drawing up of-Idjustments in-Reserves--Secret Reserves--
Receipts and Payments Account Income and Expenditure Account
Double Account System
III
CHAPTER X
CONSIGNMENT ACCOUNTS
Del Crcdcrc Commission-Consignor's Books and Procedure Account Sales
Consignee's Books and Procedure-Sale or Return-Joint Ventures
123

·Reference Library of the Pennett College “Book-keeping and Account Chapter 1 DEFINITIONS AND GENERAL 7210? ES 1.-Definition of Book-keeping. Prisi as the art of recording transaction in E:ME... in a systematic manner, showing used transactions, and enabling a tres 24: result of this to be prepared in 2.Principle of Double Eaty. Dr. Fr, nised system of book-keeping careerje this is appropriately called the “Dr. systems, which may generally be cast are . Entry," are conspicuously lacking in co... are the results obtained by the 11 and misleading. It may also be 21 h checks which ihe double mir * : kinds of fraud ard ciror in De ST.IS anomalous “ Single Entn." Dorallo entry booking into luas a twoo!! cffect, viz. (WTED7.5 translated; (2) There is a contro 07h. It is obrious that - 2 Tra: :. transaction cannot b cicar 40 CM of Corb. eiro is tiszt tror fi.T;1.31. 1ru12cm Tiniuse obratiti tri : ...... cleasl; countil it become il te 256 che in:o “AST TV tale: civic tantarum 11:2: 2 Sz: - dai sus, 2.d also II trz.com :+254 Torsi G.1.5.1: Boorper. 172, ai... 2:2). Nisu :: :: 2: **- “ބޮނާ ނ.ޕައަނަސް:: ( :އާ (-rޑް ·Reference Library of the Bennett College: FORM OF LEDGER ACCOUNT AL . + 3 S 01 Particulars of cali!cs received are entered on the left side, in columns I to 7; talics parted with on the righ!, in columns 8 io I. The section on the leit is called the " debit" side of the account, and that on the right the "credit” side, whilst entries made in cach are respectively“ debit entries” and “ credit entries,” the sections Duing headed Dr. and Cr., as shown. Entries are made in the columns (numbered for reference) as follows :-In i, the onth (and rear); 2, the day the transaction took place; 3, particulars of the item ; 4, the page number (or "iolio') of the book in which the transaction was first recorded ; 5, 6, 7, the amount in .s.d. Similarly wizin the credit side of the account. 3.-A Debtor is a person owing something, and a Creditor a person to whom something is owing, and the amounts owing bro or to cach are respectively " debited credited" to their separate accounts in the trader's ledger. It must never be lost sight of, however, that every transaction involves botii a debtor and a creditor, and consequently needs both a debii ard a credit entry in the same set of books. This does not mean that the dcbtor and creditor are necessarily persons; in fact debits and credits frequently affect only non-personal accounts. Thus, when G. Lee supplied the trader with machinery worth 175, the Machinery Account would be debited with 275 and G. Lee's Account would be credited with £75, thereby completing the double entry. -Kinds of Ledger Accounts. Ledger Accounts are therefore regarded as falling into two groups or classes ; (1) Personal Accounts are those relating to persons, e.g. G. Lee's account, Jessrs. Harper and Bean's account, The Alpha Trading Co., Ltd., account. (2) Impersonal Accounts are those relating to possessions (or assets), liabilities, gains, losses, and expenses, e.g. m:chinery, cash, rent, discounts, wages, etc., each of which has a separate account in the ledger. Thiese impersonal accounts are again divided into two subdivisions:- ·Book-keeping and Accountancy." (a) Real Accounts which refer to tmnsactions in material objects, eg. machinery, cash, stock-in-trade, etc. (U) Nominal Accounts which refer to gains, loomes, ani expenses, c.5. Tent, discounts, wages, taxes, etc. Thic transactions with G. Lee will serve as a simple example of how the Ledger Accounts record the position. We will suppose that the machine was supplied on 18th May and that it was paiel for on 20th May. Three accounts are then required in the trader's Ledger, viz. a Personal Account in the name of G. l.ce, and two Impersonal (or Real) Accounts named Machinery Account and Cash Account, as follows: (The three accounts as they appear in tlic trader's (not G. Lec's) Ledger.) G. I.II.'S ICCOUNT - 1024 2. || 1624 5 d. ...3 2011 Cash in nishint of Machinc May 18tty Machine supplieel ( O 23 o o MACHINERY ICCOLXT d. 1934 May 18 To Cont of Machinc from G. Ice 75 0 C.1511 ICCOUXT - 1 19244 May | 20 | By l'ajmen: to G. Lc 75 Tlic twofold aspect and double cntry" of the two transactions, which for reference are marked i and B), is readily seen. Thus the cntry marked A in "G. Lee's Account," being on the 3 ·Reference Library of the Bennett College: credit side, shows ihat he parica with a machine value £75, whilst the entry in the “Pachinery Account," being on the debit side, records ilia: the trader received the machine of that value; the etru iarked B in “G. Lee's Account,” being on the debit side, records that G. Lee rarited £75, and the corresponding entry on the crediit side of the “Cash Account" shows that the trader parieri viih 175 io G. Lee. Those records show how the items appear in the trader's luoks, but now iſ the books of G. Lee were inspected, it would by seen that the eniries would appear on just the opposite sides wine accounts in his Ledger. Thus the cash he received would Deed on ihe debit side of his Cash Account, and on the credit side oi an account in the naine of our trader. From this it must be observed that all transactions have to be considered from the point of view of the proprietor of the business whose books are being kepi, debiting the accounts in his Ledger with what His various accounts receive, and crediting them with amounts paid avar or transferred from them, 5.- Trial Balance. The accuracy of the Ledger entries can not be proved by totalling all the items on the debit side of all ine accounts, and then all those on the credit side, when it will be found, iſ no mistakes have been made, that the two totals agree. This totalling of the Ledger may be done by listing the accounts and showing the io!als of both the debit and the credit sides of each account, or by simply entering in the list the diffcrcuce of the two sides of each account. Whichever method is adopted, the intals of the two sides should agrce, and the list so compiled is callesi 2 "Trial Balance." For example, using the accounts shown above, and adding others to make a more representative Trial Balance, the two forms would appear thus: (I) Using Totals: TRI.IL BILINCE, 315T JIU 1924. Folio. Dr.se TOTALS. Cr. side TOTALS. 36 3 O 3 . 30 35 30 36 . 0:17 ·6 Book-keeping and Accountancy." (2) The same, using difícrcices (or bulances) or:ly:- TRINI. JALISCE, 3111 VE 19:4. Jeront Leilzer Ies) RALAT TALA 6 J. (6. Ire's arcount is omitted as it Pulince ) Marlinery (.xl1 G. Morris 1. Smith Jl. Brown Ernes 73 0 31 37 olol 30 10 39 24 0 to 3 0 2:55.15 «! 4115115 () In citlicr mctlıod the two sides agree, and the bwk-keeper may assume the Lerger is correctly posted. Errors which the Trial Balance does not reveal will be dealt with later. 0.--Advantages of Double Entry. The advantages of double entry, and the deliciencies of single entry book-keeping can now be stated: (1) There is a complete record of the double efiect of cach transaction on both Personal and Impersonal Accounts. (Single entry only deals with Personal Accounts.) (2) Information is readily accessible to show (a) the amount owed by debtors or to crexlitors; (l) the value of the possessions (or assets) of the business; (c) particulars of gains, losses, and expenses. (Singlc entry shows only (a).) (3) The arithmctical accuracy of the books is checked, since thic total of the debits must cqual the total of the credits. (Not available in single entry) (4) The financial position and results of thic business can be casily ascertained by the prepartion of a Profit and Loss Account and Balance Slicet. (This information can be obtained from single entry books only with difficulty and some uncertainty.) :-The Balancing of Accounts. The posting of items to the debit and credit of accounts has been cxplained. At certain times it is necessary to "balance ofi " thic Lolger accounts. "Balancing" an account mcans totalling the two sides of it and inscrting the difference between the totals to make the two sides agree, i.c. to balance; the object being to show low the account 5 ·Reference Library of the Bennett College : stands, and to use the “balance" as a clear basis for further transactions. Thus:- Cr, M. QCEES, OXFORD STREET, H1, . $. d. 1920 June 3819 By Cash . By Discount allowed. O plicihini, TGomes.ph pivolim i Turforslin mi toh:1 15 o 0 £41 0 Lo Gres umpan. $20 1920 July 31 By Cash on Account By Balance carried down 550 Olo 59 81 166 3510 į suppe 76 66 4131 1910 £131|16| 6 14 :: To kore L$s3616 In the above example the account was ruled off on ist June, when the payment made exactly balanced it; but on 31st July 150 was paid off the amount of £131, 16s. 6d. owing, leaving a balance of 181, 16s. 6d. still to be paid. This balance, inserted on the creriit side to make the two sides agree in amount, is ruled ofi, and the 181, 105. Od. so inserted is then brought down, i.e. cnicrei afreski below the ruled lines on the opposite side of the account. Thus the amount owing appears as a balance on the dubit side roariv for any further items which may follow. When balances are inserted in an account prior to ruling it ni, the figure so inserted must be entered again, always on the bike side of the account, below the ruling-off lines, thus opening a k: acount for thic surtlier transactions. Personal Accounts are in actual practice "ruled off" or "balanced" whenever a suitable opportunity presents itself, this Imally being when an account is paid. This system enables anyone to ascertain the balance outstanding at any time with the Inimium amount of trouble, and also avoids the necessity for long oriclitions with ille consequent fear of making an error in casting. 6 ·Book-keeping and Accountancy" Whicre there is insufficient space for inserting " ruling-ofi" totals, or where there are any special circumstances which may render such a procedure undesirable, the account may be left open and then balance at stated intervals of, say, one month. In cramina. tion: work the accounts should be ruled off orly after completing all the entrics Firen in the crercise. Nominal Accounts are ruled off only at the end of the year or otlicr accounting period decided upon (in examination cacrcises it is done at the end of the exercise). 8.-Nominal Accounts, which are debited with losses and credited with gains, differ from Personal Accounts in that, when balance, the balance inserted is not brought downı blow tlic riliny-off lines in the same account, but entered instead in the account designed to receive such balances, i.c. thc Profit and Loss Account. The result is tlint when all the nominal accounts have been so ruled off, and the balance of each entered in the Profit and loss Account, this latter account has lxcome a summary of all the gains and losses which were previously appearing in thic various nominal accounts. When balances or other items are taken from one account to another in this way, they are said to be "transferred." 9-Books Used. So far, transactions have been dealt with to show how they would be recorded if Ledger Accounts only were used, but to facilitate the systein a number of subsidiary Looks are required. The complete set of books which a business ordinarily necessitates for accounting purposes, apart from various usclul Statistical and Memorandum Books (such as Stock Books, Costing Record Books, etc.) are as follows:- (1) The Ledger, or principal book, which contains the accounts. (2) The Cash Book, in which cash and bank transactions are entered. (3) Subsidiary Books (sometimes called Books of Original Entry or Primc Entry) in which all transactions, other than those slown in the Cash Book, are entered. The inost usual are: Journal, Sales Book, Sales Returis Book, Purchases Book, Purchascs Retums Book, Bills Receivable Book, Bills Payable Book, and Petty Cash Book whicli relieves the principal Cash Book of the frequently large number of small itens Thiesc books will be described in detail in the succeeding chapter, as some further important definitions and terms must necessarily be given first. 10.-Definitions. Accurate accounting demands a clear understanding of the significance of transactions, and of the nature of the items involved. Definitions and the limitations of terms 7 ·Reference Library of the Bennett College : in general use follow, and students preparing for examinations should carefully memorise these, and be able to quote examples ; they are often asked for by examiners, and marks should not be lost by giving inadequate answers to such questions. It is particularly important to understand the meaning of capital, and the difference between "fixed" and "floating " assets. II.--Capital. In business, capital is the basis of all transactions, and assumes a variety of forms which have to be recognised by the book-keeper, but the following simple definition is coinplete and comprehensive:- Capital of a private trader or firm is the surplus or excess of assets over liabilities, Assume J. Bull opens a business with £2000, buying fixtures for £250, stock £500, and spending £20 on a decorated sign over the shop window. He then has £1230 in cash remaining for working expenses, etc. His financial position can now be represented in this way: Commencing capital £2000 Fixtures £250 Shop sign. Stock 500 Cash 1230 20 . £2000 £2000 Before lie bought what he required to open the business his capital was £2000 in cash. Which he opened the business his capital was still {2000, but then it consisted of cash £1230 and various things he bought, value £770. After trading for six months assume his financial position was as follows: Assets. Liabilities. He owes £300 Fixtures Surplus of Assets over Shop sign Liabilities (=Capital) 2800 Stock He is owed Cash £250 20 780 950 II00 13100 £3100 It will be seen that although lie owes £300 to creditors he has dubts due to him and other assets to the value of £3100. The surplus or excess of these assets over what he owes is {2800, and this suin is his present capital. This state of affairs is quite S ·Book-keeping and Accountancy” « fixed possible if he made suficient profit and let [800 of that profit remain in the business, so increasing his capital. An excess of liabilities over assets is called a Deficiency. The capital of a joint stock or limited liability company is the amount contributed by the shareholders, and excepi under special circumstances it is an unvarying amount. Further aspects of a limited company's capital account will be considered later. 12.–Assets consist of property, possessions, and valuable rights, e.g. land, buildings, machinery, goodwill, patents, goods, cash, etc. There are two classes of assets :- Fixed Assets, those acquired and held for the purpose of earning profit or producing income, e.g. machinery, buildings, goodwill, copyrights, etc. Floating Assets (sometimes called Circulating Assets), those acquired and held temporarily for the purpose of exchange or re-sale, usually at a profit, although sometimes a loss may ensue, e.g. stock-in-trade, debtors' accounts, etc. The distinction between these two classes is very important in book-keeping, as will be evident when the time for compiling the Profit and Loss Account and Balance Sheet amives. It should be noted, however, that the same kind of asset is or "floating' according to the nature of the business engaged in. For example, motor wagons used for delivering coal by a coal merchant are fixed assets in his accounts; but motor wagons in the showtoorn, or being built in the motor manufacturer's workshops expressly for sale are floating assets. Similarly, stocks and shares held by a stockbroker in the ordinary course of his business are equivalent to stock-in-trade, and are therefore floating" assets, but shares held by a company or trader as an investment are "fixed " assets. The essential difierence is that fixed assets are held permanently for use in the business, whilst floating assets are held orly terr.porarily until they can be converted into money. Three other terms are often used to describe assets from another viewpoint, which does not differentiate between and "floating" assets :- (1) Liquid Assets. Those assets which are available, either at once or on short notice, for making payments, e.g. cash and first-class securities. (2) Wasting Assets. Those becoming less valuable by depreciation, regular exhaustion, or effluxion of time, viz. (a) By wear and tear, e.g. motor lorries, or machinery, which decrease in value with use. (6) By time, e.g. the lease of a building, of which the 9 fixed” ·Reference Library of the Bennett College: value diminishes as the period for which it was granted expires. (C) By being consumed, used up, or exhausted in the course of trade, e.g. quarries, mines, clay-pits. (3) Fictitious Assets. Those of an unrealisable or intangible nature, e.g. the preliminary expenses incurred in the formation of a joint stock company, and which are shown as an asset in the balance sheet until written off; or a trading loss appearing on a company's balance shect; or insurance premiums paid in advance. 13. It is now possible to define some of the terms which are used to distinguish the various forms the capital of a business may assume. Trading Capital comprises all the fixed and floating (or circulating) assets, i.e. every possession used in the business. Working Capital is that portion of the capital which remains available for carrying on the business after the acquisition of the requisite fixed assets. It is the excess of the floating assets over floating liabilities, and consists chiefly of stock on hand, debtors' accounts, and money. Thus, in the case of J. Bull's business (page 8), the working capital in the first instance is £2000 less {270 invested in fixed assets, viz. shop sign and fixtures, while in the second case it is the total cash, stock and debtors (2830), less creditors (£300). Fixed Capital and Floating (or Circulating) Capital are terms sometimes used for the portions of the trading capital represcnted respectively by fixed and floating assets. Thus in the previous paragraph £270 is Fixed Capital, and the balance £2830 is Floating or Circulating Capital. It now remains to explain some of the matters of everyday routine which concern the book-kecper. 1.4.---The Bank. In most businesses it is customary to lodge all cash in a Bank, except such an amount as may be required for daily use, and the money so placed with the Bank is said to be (a) On Current Account, when the trader arranges to draw sums from it by mcans of cheques payable to himself or to any other person, as and when required, without previous notice to the Bank. () On Deposit Account, when the trader arranges to witlıdraw the money only after giving a specified period of notice to the banker (usually seven days). In this case, the Bank generally allows interest at 1 to 2 per cent. below the official" bank rate” fixed by the Bank of IO ·6 Book-kecping and Accountancy” or England. It is not usual to allow interest on current accounts, except in the provinces under special arrangements. Thus money may be received or paid cither by cheque or cash. A cheque is simply a written order to the banker to pay a specified sum on demand to the person named in the cheque or to order, which means to any one else to whom that person requests it to be paid. A cheque may also be made payable to bearer, in wliich case any person in possession of it may obtain payment on demand. Every cheque is of course signed by the trader or any one whom he has authorised to sign on his behalf. Such an authorisation must be notified to the Bank. 15.-Cash, Credit and Discounts. Sales or purchases are cffected for immediate payment or for payment at a later date; such transactions are said to be respectively "For Caslı" "On Credit.” As an inducement for immediate payment, or for a payment within a specified period, an allowance is often made in the form of a percentage of the amount payable. This allowance is called a Cash Discount, or in some businesses "Counting House" Discount. Cash discount must be carefully distinguished from Trade Discount, which is actually a reduction in selling price of the goods, usually as an adjustment of a standard catalogue price. This is especially so where prices are subject to fluctuations, for it enables priced catalogues to be issued, the prices being adjusted by varying the trade discount allowance. By this means, frequent re-issues of new price lists are avoided. The discount sometimes allowed to retailers by wholesale dealers or manufacturers from a standard sale price is a common example. Another form trade discount takes is the" Wholesale" discount which a manufacturer usually allows to wholesalers who buy in bulk for re-sale to retailers. It is possible that both cash and trade discounts may be allowed in the same transactions in fact, this frequently happens—but it should be noted that trade discount is deducted from the amount of the invoice before it is entered in the books, which thus only records the net value of the invoice. Cash discount, on the other land, has to be recorded in the Cash Book when the account is paid, and subsequently also appears in the ledger account along with the amount of cash paid 16.-Bills of Exchange. Instead of paying by cash or by chcque immcdiately payable, there may be arrangements for payment to be made by means of Bills of Exchange, often referred to simply as Bills. A Bill of Exchange is legally defined in the Bills of Exchange Act as an unconditional order in writing, addressed by one person to another, signed by the II ·Reference Library of the Bennett College: person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to, or to the order of, a specificd person, or to bearer." In cffect the wording of a bill is almost like a short letter sent by a person to one of his debtors in the following terms: 18th Maj 192.1. (DEAR Sır), Three montlıs after this date please pay to me or my order Sixty pounds for which you have already received value.--(Yours faithfully), J. BULL. To Mr. A. DEBTOR, Bridge Street, London. If Mr. Debtor agrees to this hc might write across the letter "I agrec," or "I accept the proposal,” sign his name, and return the letter to Mr. Bull. Providing the letter had been stamped with the correct impressed duty stamp, in this case ninepenice, the above would be a valid bill of exchange, and on taking this to Mr. Debtor or presenting it through his bank in three months' time, Mr. J. Bull would collect the sixty pounds. The actual form of a bill closcly resembles such a letter, but for present purposes it will suffice to say that here ). Bull is the drawer" and Mr. Debtor is the “drawce.' When Mr. Debtor signs liis acceptance across the face of the bill he becomes the acceptor." The person to whom the bill is payable is the "paycc." In this case it is the same person as the drawer, viz. ). Bull, but quite legitimately J. Bull might have specified any other person instead of himself as payce," as in the following example :- LOxnox, 18th Mar 1924. 1/- De 2158 July 192.1, Ly, is. 6d. DATE 10 (irgers! lil onths ARTEK DAY J. 7: Smith, OR ORDER, THE: Susor Nincl-face pounds One shilling and superre Value RECOUET), J. Buil. To Jr. I. Dellor, Bridge Street, London. 12 ·<6 • Book-keeping and Accountancy” If he agrees to the terms of the bill as drawn, Mr. A. Debtor Would write across the bill, as below. In Great Britain this is usually written across the face of the bill, but abroad it is written on the back of it; in either case the cffect is the same. Accepted Payable at the United Bank Ltd., A. DENTOR. City Street Branch. Nir. Debtor would then return the bill to Jr. J. Bull. This is then a Bill Receivable so far as J. Bull is concerned, but to A. Debtor it is a Bill Payable. A Bill Payable is one which the person whose books are being kept has to pay. A bill which will, in due course, be paid in cash to the person whose books are being kept, is a Bill Receivable. Thus a Bill Receivable in a trader's books is a Bill Payable in the books of the customer upon whom it was drawn. The period for which a bill is drawn (in the example, two months) is called its 'Tenor," and the payment of the bill is due three days after the expiration of the time specified. These three “Days of Grace are allowed by law in England, and a bill is only due and payable on the last day of grace, unless the bill is specially drawn as Without days of grace," or is drawn as payable on demand, at sight, or on presentation, or on a certain date " fixed." No bill is legally payable on a Sunday or Bank Holiday, and where the last day of grace does fall on such a day the following rules apply :- (a) Where the last day is a Sunday, Christmas Day, Good Friday, or other public fast or thanksgiving day, the bill is payable on the preceding business day; (6) Where the last day is a Bank Holiday, other than those above, on the succeeding business day; (c) Where the last day is a Sunday and the preceding day a Bank Holiday, on the succeeding business day. A bill is not invalidated by reason only of the fact that it is dated on a Sunday, or ante-dated, or post-dated, or even if 13 ·Reference Library of the Bennett College: the date is omitted altogether. In the last-mentioned case a holder may legally insert what he considers to be the proper date. Further aspects of Bills of Exchange will be dealt with in a later chapter. We can now proceed to describe the necessary books and how transactions can be recorded in them according to recognised double entry principles and actual modern practice. 14 ·“Book-keeping and Accountancy" Chapter 1] THE LEDGER 17.-Definition and Description of Ledger. The principal book used for accounting purposes is the Ledger, into which records of all transactions are collected in various accounts.' The form of these accounts has been explained in the first chapter. The Ledger may be defined then as the book in which transactions are recorded in a summarised form easily accessible for future reference, the items being classified into appropriate accounts. The kinds of Ledger Accounts already defined, it will be remembered, are:-- (1) Personal Accounts: (2) Impcrsonal Accounts of two categories : (@) Real Accounts (or Property Accounts). lb Nominal Accounts. In dealing with transactions it is useful to regard each account as if it were an actual person, even though it may only refer to property or something. impersonal. The difficulty of knowing wliat to credit or debit can be minimised in this way. Thus in the case of Personal Accounts there is no hesitation in deciding whcther to place an item to the debit or credit of the account concerned, for what that person receives is debited, and what he gives out is credited ; similarly in Real Accounts the value of acquisitions must be debited, and of anything parted with, e.g. sold or destroyed, is credited. It is in dealing with Nominal Accounts, however, that students sometimes experience a little difficulty, but this may be obviated by thinking of such accounts as “My Purchases Account," " My Expenses Account," etc. From this point of view, purchases being something reccived are debited to the Purchases Account; the value of money spent on expenses is theoretically received by "my" expenses account, and is therefore debited to it, the corresponding credits appearing in the Cash Account. These ideas are crystallised in the following inviolable rules - When dealing with DEBIT. CREDIT. Cash Account. Receipts. Payments. Real Accounts. Value coming in. Value going out. Personal Accounts. The " Receiver Nominal Accounts. Losses and Expenses Profits and Gains. 15 99 The "Giver."

·Reference Library of the Bennett College: 18.--Division of Ledger. Although all accounts if not too numerous may be kept in one Ledger, it is usual in practice to sub- This saves divide the Ledger into several separate volumes. having one unwieldy book, and enables the different sections to be entered up more conveniently, and, if necessary, by different clerks. The separate books into which the Ledger is usually divided are: (1) The Sales Ledger, in which all customers' personal accounts are kept. In large businesses this may be again divided into sections, such as “A to K and L to 2”; or“ Town” and “Country"; or“ Home and“ Export," as convenience may dictate. (2) Bought Ledger, in which accounts are kept of transactions with persons from whom purchases on credit have been made. (3) Impersonal or Nominal Ledger for the accounts relating to assets, expenses, etc., i.e. for Real and Nominal Accounts, except those kept in the Private Ledger. (4) Private Ledger for accounts which it is desired to keep more private than is possible in the other Ledgers, e.g. Capital, Proprietors' Drawings, Profit and Loss, and any other accounts which may be considered of a private nature. The Private Ledger is frequently provided with a lock and ker'. (5) The Cash Book, which is really a Ledger containing only the Bank and Cash Accounts, is bound separately because of the numerous entries to be made in them, and the constant need for their use by the cashier and other clerks. Although it is not called a Ledger, nor usually recognised as one, the fact that it is an essential part of the Ledger must not be forgotten. When the Ledger is kept in separate books in this way the balance of debits and credits is not disturbed, for all the separate books combined still constitute one Ledger. The principle that every transaction must have a debit and credit entry does not necessarily mean in the same book, but in the same sct of books used in the business concerned. In double cntry all the books used in operating the system are looked upon as a complete whole, just as iſ all were bound together in one great voluine. 19.-Loose-Leaf and Card Ledgers. The most common way of keeping accounts is in ordinary bound books, but during the last decade there has been a greatly increased use of loose-leaf books and record-card systems. The Ledgers described in the preceding paragraphs are frequently kept in the loose-leaf or card forn, but the double entry system of book-keeping is not altered in 16 ·“ Book-keeping and Accountancy” any way thereby, although there are special features which must be noticed. Loose-Leaf Ledgers differ from ordinary bound Ledgers in that the leaves are loose sheets which are slotted in various ways to enable them to be bound in thick covers, called binders, so making them into a book. The leaves can be inserted or removed from the binders or covers when required, and are held in position by a series of leather thongs or metal rods, so arranged that the thickness of the book may be increased or reduced as the number of leaves necessitates. A lock to the mechanism is provided, and the kcy is, or should be, only accessible to a responsible person in charge of the Ledger. Card Ledgers are not in book form, and instead of leaves, cards are used, these being kept in drawers or trays, generally in a table-cabinet form. The cards are ruled in exactly the same manner as an ordinary Ledger, although much smaller in size. Special Features of Loose-Leaf and Card Ledgers. (a) Advantages :- (1) The Ledger is freed from dead matter, such as closed accounts and filled sheets, as these may be removed and filed in a separate binder; whilst there is no necessity for blank pages, which can be inserted as and when required. In the case of cards, those which do not contain live matter can be filed in a separate drawer. (2) The accounts may be arranged alphabetically, or in any other order desired, and cards or leaves for new accounts can be inserted where required so as to keep that order strictly observed. Whilst this dispenses with the ordinary index, it is necessary in practice to have an index sheet or card for cach alphabetical section, as a folio number is necessary for entry against items in the subsidiary books. But for the need of this it would be possible to dispense with the index altogether. (3) The not inconsiderable labour of periodically opening new ledgers is dispensed with. (4) A folio number once allotted to an account can always be retained for that account. This appreciably facilitates rapid posting. (5) Each account is continuous, not being carried forward or backward as is so often necessary in a bound book; new leaves or cards are added or substituted as required. 17 B ·Reference Library of the Bennett College: (6) If desired several clerks caii use one Ledger simultaneously by dividing the Ledger between them, so that any specific work can be performed quickly, e.g. posting, rendering statements, extracting balances, etc. (6) Disadvantages : (I) Cards or leaves may be lost or destroyed, either wilfully or accidentally. (2) New sheets or cards may be substituted for some already in use, with fraudulent intent. (3) Card Ledgers have these dangers more pronounced than Joose-leaf ones, and although cards are perliaps inore conveniently written on, they are more bulky than paper, and this forın of Ledger does not therefor find much favour. Card indexes for Ledgers have, however, many advantages, and have become popular in many businesses. The strict alphabetical arrangement of names can be maintained, and rewriting is avoided. SUBSIDIARY BOOKS 20.--Need for Subsidiary Books. Double entry bookkeeping is possible by using only the Ledger, without the intermediary of any subsidiary books, transactions being entered direct to the debit or credit of the various accounts concerned. The results so obtained would be the same as if subsidiary books had been utilised, but to record so great an amount of detail in a Ledger is not only undesirable, but impracticable in most businesses, While it would be much more difficult to trace any crrors that may hiave been made. 21.--The Journal. The original means of relieving the Ledger of much detail was the introduction of the Journal, a book which is now used in a modified manner, and frequently in a changed form. The Journal was written up daily from a rough memorandun book, known as the Waste Book, which was often of foolscap size, or even a notebook, kept handy on the desk or counter, and transactions were entered roughly as tlicy occurred. This old style Journal therefore represented a fair copy of the Waste Book cntries, except that the debit and credit aspects of transactions were shown in a form convenient for posting to the Ledger. By “posting" is mcant the entering of an item in the Ledger, and when an item is cntered in the Ledger from a subsidiary book, eg, a Journal, it is said to be " posted. Consider again the transaction- G. Lee supplies machinery value $75 on credit to J. Bull, our trader. The necessary entries could be made in this way :- IS ·“Book-keeping and Accountancy” JOURS.IL Machinery Account G. Lee's Account Deli? Creth 5 75 75 o o and the effect of the transaction is shown correctly. The inconvenience of this method, however, is soon apparent when it is desired to total separately the dcbits and credits; hence the common form of Journal ruling adopted is as follows :- JOURNAL Turirulars, Lelger Tolo. Delit. Credit £ £ 75 2. O Dr. mo Machinery Account To G. Lee's Account For new machine supplied. 26 12 75 0 O 10 O 3 5 10 11 90 > en aon OOOUL VUOOOOOOOO 11 31 This double cash column ruling is generally referred to as Journal ruling." Notice (I) the word "to," which always precedes the credit items in the Journal, and (2) the brief description of the transaction, which is known as a "Narration." The treatment of the following transactions in the above form will serve as an indication of the procedure of journalising. TRANSACTIONS 1924. £ 5. d. Sept. 2. Purchased Goods on Credit from F. Brown 55 2. Bought Postage Stamps 3. Bought Office Stationery for Cash 3. Sold Goods to C. Green 10 15 5. Bought Goods from T. Black 150 0 6. laid Wages IS 9. Banked Cash received during the week (ready money) 12. Received in Cash from C. Green. 96 and allowed him Discount 12. Receised Cheque from D. Browne as payment in advance and allowed him 5% Discount , 27. Bought Goods for Stock from 1. Jones, invoiced at £is less 20% Trade Discount 60 28. Bought Shop Fixtures from 1), Smith » 30. Paid F. Brown by Cheque deducting 21% Discount. 30. l'aid P. Jones Cheque S5o and Cash ki, taking 5 prompt Discount. 30. l'aid D. Smith by Cheque net Bearing in mind the "golden rules of double entry, viz Debit cash received; Credit cash paid, Debit the receiver; Credit the giver, Debit losses and expenses; Credit gains, 19 IO 5 O 0 0 45 53 12 7 O 6 1 60 0 0 0 ·Reference Library of the Bennett College: the above transactions would be journaliscd as below, “ narrations bcing omitted. JOURNAL (say) page 29. Daic. Particulars. Folio. Ir. Cr. 4 1024 d. ti .. d. Purchases Account (Goors) Tof. Brown 0 Dr. 1.1.. 30 1,1.. 11 55 55 o O 2 Expenses lccount (l'ostages) To Cash 3 . Dr.1.1.. 14 1.L. 30 3 0 3 Expenses Account (Stationery) Dr. 1.L. 16 To Cash 5 TO 1.1.. 30 5110 0 Dr. S.... 3 10 15 0 31 C. Green To Sales Account 1.1. 61 1015 Purchases Account . To'r. Black. Dr.1.1. 50 | 150 1.,1.. 6 150 o 0 6 Wages Account To Cash Dr.1.1.. 19 I.L. 30 13 in 9 Bank Dr.1.2. 41 1.1.. 30 60 o To Cash 60 IO 12 Cirsh Discount To C. Green Dr.1.1. 30 1.1. 22 S.L. 3 6 6 5 1015 Dr.1.1.. 30 1.1.. 22 5 12 Cash Discount To D. Bronne 5 6 5 S.I. 9 512 27 l'urchases account. To P. Jones. Dr.1.1.. 50 60 13.1. S 60 o 0 S Fixtures .Sccount To D. Smith Dr.1.1.. IS 1.1.. 12 15 O O 45 . 307. Brown To Bank Discount. 55) O o Dr. P... 11 1.1.. 1 1.1.. 22 5312 6 6 Dr. E.L. S 60 O 301. Jones To Bank Cash Discount. 10 1.L. 41 1.1.. 30 1.1.. 22 O O O 3 2011), Suits To Banli Dr. V... 12 II. 4 45 45 0 158012101580 12 O 20 ·Book-keeping and Accountancy” 22.–Posting. After completing the entries in thc Journal, caclı item is posted to the appropriate account in the Ledger. Those items appearing in the debit column of the Journal are posted to the debit side of the respective Ledger Accounts, and those in the credit column are posted to the credit side of the Ledger Accounts. The page of the Journal is entered in the folio column in the Ledger, and the Ledger Account folio is inscrted in the folio column in the Journal opposite each item, as indicated in the cxample. The letters in the folio column of thc Journal- I.L., B.L., and S.L.--refer to the Impersonal, Bought, and Sales Ledgers respectively. It will be noticed that cash items almost always appcar on the credit side of the Sales Ledgers; but in the Bought and Impersonal Ledgers practically all cash items appear on the debit side of the accounts. Tlic transactions joumalised in the last example when posted in the Ledgers appear as follows, but observe that in business cach account.usually lias a separate page in the Ledger. The Bank and Cash Accounts would be combined in the Cash Book to be describcd later, but are here shown as ordinary Lodger Accounts for convenience, and to exemplify the postings from the Journal : In Impersonal Ledger. PURCHASES ACCOUNT Dr. 5 1924 Sept. 0 0 £ To F. Brown) 29 55 T. Black J. 291 150 1. Jones J. 29 60 O 31 5 27 11 SALES ACCOUNT Dr. $ d 1924 Sept. 2 By C. Green) 29 6 10 15 O EXPENSES ACCOUNT Dr. 5 d. 1924 Sept. 2 J. 29 3 Oo To Cash (Postage) To Cash (Stationery)|. 29 3 5 10 21 ·Reference Library of the Bennett College: In Impersonal Ledger-(contid.). WAGES ACCOUNT Dr. Cr. Sop: 0 To Caslı .1.29 15 0 BANK ACCOUNT fir. 1924 Sepi. 9 To Caslı 6 1.1. 29 60 c. 6 0 s. d. 1924 o Sepi. 30 Br F. Brown... 29 P. Jones 1.1. 29 D. Smith j. 29 53 50 0 . CASH ACCOUNT Dr. C. s, 1924 Supi. 12 ToC. Green 1. 29 D. Brownie. 29 d. 1924 0 Sept. 10 5 6 10 2 By: l'ostage ... 29 3 Stationery... 29 6 ,, Wages 1.1. 29 9 Bank 30 1. Jones ). 29 15 OOOOO J. 291 60 DISCOUNT ACCOUNT Dr. Cri i. |1924 1. .ܐ، 192. Sept. 1: ToC. Green 1. 21) 1). Browne!. 29 Sept. 10 lit. liron.. O l'l lunes 1.1. 24 0 . 0 O FIXTURES ACCOUNT Cr. Suj.:Sroi). Smith J. 01 45 22 ·6 Book-keeping and Accountancy" in Bought Ledger, r. BRONX Dr. 5.29 1924 s. 11. 1924 Sept. 30 To Bank .). 2) 531216 Sere. : Ty Goods Discount ). 29 1 216 25310 O 55 0 0 91 15 255 lo T. BLICK s. 1d. 1924 Sept. 3 By Good, J. 29 5 150 o lo P. JONES Dr. Cr. d. 1924 S. d. o o o Sept. 27 | By Goods . 1. 29 60 1924 Sept 30lo Bank J 29 Cash . 29 Discount J 29 50 7o 17 11 39 0 E60 26010 O D. SMITII Nr. Cr. 1924 1924 Sept. 30 To Bank 6 +3 45 O O onept. 28 By Fixtures 24 O 450 In Sales Ledger. C. GREEN Cr. 1924 Sept. 3 To Goods 1. 29 10 916 19241 101510 Sept. 12 B; Cash 1.29 Discount 1 29 210 150 210 150 23 ·Reference Library of the Bennett College: In Sales Ledger--(contd.). D. BROWNE Dr. Cr. 1924 Sept. 12 By Cash 1. 29 Discount !!. 29 6 S 5 7 23.-Journalising. Although at one time every transaction used to be passed through the Journal to the Ledger in the way indicated above, in modern practice subsidiary books of a specialised form supersede the Journal except for certain classes of entries, such as closing entrics, transfers, etc., as will be explained later. It is, however, very helpful to journalisc mentally every item dealt with, as by this means the principle of every debit having a corresponding credit will be better and more clearly impressed, whilst facility for handling book-keeping problems will be gained. It should be observed that in most parts of Europe, and whicrever the Code Napoleon is in force, the use of the Journal is compulsory, and in many respects, especially from a legal point of view, it is more important than the Ledger. The subsidiary books, or modified forms of the Journal, almost universally used, are described in the next chapter. 24 ·" Book-keeping and Accountancy" Chapter III SUBSIDIARY BOOKS USED INSTEAD OF THE ORIGINAL JOURNAL 24.In every business there are certain classes of transactions of a similar nature taking place frequently, such as purchases, salcs, receipt and payment of monics, and the transfer of items from one account to another, and to save the considerable amount of clcrical work which would be involved in joumalising each item separately the subsidiary books now described are in almost general use. THE PURCHASES BOOK 25.—This book is also called the Purchases Journal, In. voice Book, or Bouglit Day Book. In it arc entered all purchase PURCHASES VOOK (Simple Form) (sas) page 12 Lediger IXatc. l'articulars. Details. Totals. Folio. 1925 May 18 Keeves & Co, 20 Lime St, W.C. 12 bores of laces 11/10! G doz. Atlas l'ancy Covers @ 10 1 gross Plain Covers for 7 3 6 3 Oo 2176 Less 1 rade Discount 20% 13 212 OO 27 10 SO 91 19 Smithson Brothers, 2 Oak St, E.C. 2 doz, Special No. 264 @ 37/6 doz 1 doz Art Sill Squares @11/3 cach I only Indian Rug 5 gross Silk Wraps for 3150 6150 1 TO 3019 Less Trade Discount 5% 3319 214 o 7+ 51 91 31 Wilson & Jones, 12 long lanc, Yorh. 1 Specially designed Kug (nct) 5210 83 52100 - (s.13) Total for Month , 11 73 119 36 25 ·Reference Library of the Bennett College: transactions on credit in the order of their occurrence, day by day. The preceding is a specimen of the simplest form of niling, and or some representative entries which are self-explanaiory, except that it should be noticed the first cash column shows the values of the items of each invoice, and that the total oi these, less irade discount (but not casi discount), is extended into the outer column. It is this last figure which is posted to the cruit of the personal account afiected in the Bought Ledger. The above entries are posted to the various personal accounts in the Bought Ledger, c.g. 410, Ss. would be posted to the credit side of Reeves & Co.'s account, and if this account is on, say, folio 27 in the Ledger, that folio is entered in the folio column as shoun'above, and the page number of the Purchases Book, from which the figures are posted, is shown in the proper column in Reeves & Co.'s Ledger Account. Similarly for every other item, ilius :- (Accounts appearing in the Bought Ledger.) KEEVES & CO.. 20 Lime Street, W.C. 1923 Var IsBy Goods.r... SIO 4 S SMITHSOX BROTHERS, - Oak Siree, E.C. Yr. 19:5 dir 19 By Goods. P.1, 12 51 5 6 WILSON & JONES, 12 Long Lang, York 19:31 Vlay:1 Hy Goods. 1.1, 12 52100 26.-Guard Book. An old-fashioned procedure was to paste the actual invoices in a Guard Book, money columns being proviciu into which the totals of the invoices were extended. This cumbersome metlind has almost disappeared in the present day, 26 ·Book-keeping and Accountancy” 27.-Posting Total Purchases. It will be noticed that so far no double entry has been cffected, and that every item is merely posted to the credit side of the various personal accounts in thic Bought Ledger only: Althougli cvery credit must have a corresponding debit, and vice versa, it is not necessary that cach individual credit should have a separate individual debit, especially if double entry can be effected in a more convenient way. Thus the three credit items shown in the above examplc appear as separate credits in the Bought Ledger, personal accounts, but instead of entering in the Purchases Account in the Impersonal Ledger three corresponding debits, the double entry is equally well, and more conveniently, effected by entering the total of these separate credits in one sum in the Purchases Account. This is donc in practice by totalling the Purchases Journal at intervals (usually montlily), the total being posted to the debit of the Purchascs Account in the Impersonal Ledger, which completes the double entry. The ledger folio is placed against the total in the Purchases Book, The Purchases Account in the Impersonal Ledger appears as follows: PURCHASES ACCOUNT Dr. Cr. s. ld, 1925 May 31 lo l'urchases for the month P.R 12 1141316 It is desirable to explain liere that the Purchases Book total is posted to a "Purchases Account” in the Impersonal Ledger, and not to a “Goods Account," as most text-books state. In practical accounting, the theoretical " Goods Account" of the text-books is replaced by a "Stock Account," a "Purchases Account," and a "Sales Account," the first containing a debit cntry for commencing stock, the second debit entries of goods purchased (from the Purchase Journal), and the last containing credit entries for goods sold (from the Sales Day Book). At the end of thic financial year or trading period these thirce ledger accounts are brought together in the Trading Account, as will be explained later. This method should therefore be followed in examination work. 28.-The Purchases Account is only for Purchases of Goods for Re-sale. If any items refer to goods or articles not for re-sale, c.g. machines, ſuci, stationery, renewals, fixtures, ctc., 27 ·Reference Library of the Bennett College: the amounts for each must be analysed into a summary at the end of the month before the total is posted to the Purchases Iccount. Such items must go into their appropriate expenses or assets account in the Impersonal Ledger, not the Purchases Account, which is reserved entirely for purchases of goods for stock-in-trade. In many concerns, only items rightly chargeable to the Purchases Account are kept in the Purchases Book, whilst items affecting other impersonal accounts are entered in a separate book, or posted direct from the Cash Book after payment. If this distinction were not made the Gross Profit shown by the Trading Account would appear less than it actually is, as will be seen when the Trading Account is described. 29.-Tabular or Columnar Purchases Book. It is often necessary to scparate the purchases made to show how much has been bought for each department of a business, or of each of certain classes of goods dealt in. Such information is essential for finding which departments or which goods are producing profits (or losses), and is useful in many other ways. To facilitate the collection of these figures into appropriate totals, the Purchases Book is often ruled with suitable analysis columns; in fact, from two to fifty columns are in common use, especially in large departincntal stores. In entering up an analysed Purchases Book it will gencrally be more convenient to deduct trade discounts on the invoices tliemselves, so that only the net amount need appear in the appropriate column. The appended example shows an analysed Purchases Book for four departments, but the ruling may be adapted for use in any business by increasing or reducing the number of columus, and, if necessary, these columns may be extended over two or more pages of the book; a specimen columnar " Purchases Account as it would appear in the Impersonal Ledger is also shown. It sometimes happens that entries are placed in a wrong column by mistake, when using columnar books. Errors so made are best corrected cither (I) by passing a rectifying entry through thic Journal, or (2) by transferring the wrongly entered amount in the book concerned, i.e. wlicn the columns are totalled by making a deduction from one column total and adding the same sum to the proper column. The entry should be explained, e.g. Transfer (sav) írom “Costumes " to "Furs," item, May 20. 28 ·(sas) page 25. PURCHASES BOOK (ANALYSEN FORM) Purchases for the month of May 1925. Dite. Hought from Particulars. Lelger Folto. Details. Linen Dept. Glass Dept. Costume Dept. l'ur Dept. Total. £s. £ el o al. o 6 1. 0 So 122 6 1925 Any 18 R. Cross 300 10 to $83 O Brought forward(sas) 24 Shunk Collars to l'ucces Neaner 15 Seal Wraps s Tweel Costumes 10 Surge RI 76 120 49 150 olo 100 00 319 10 o 3191O, O M. Qucen & Co. 20 60 010 D10 + 121 So O 0 So OO 19 S. II, Glass Co gross Vases. 6 solo I doz Glass Jugs B.I. 96 9 150 9 ISO ба 1 Cox ix Co. RL. 78 20 yds. Inish Linen. 5 2 6 31 26 : (say) Total for Month 11. 126 Book-keeping and Accountancy” £55) 10 OL131 11 16 2380 0 17.30 o 161,297716 O The l'urchases Account in the Impersonal Ledger containing only the above items would appear as follows: (say) page 126 PURCHASES ACCOUNT Cr. Linen Glass Dept Comunic Dept. Fur Dept Total. Linen Folio. Glass Dept. Dept. Costume Dept. Fur Dept. Total. Dept. 1925 MAY 31 To Purchases B for month., 25 55,10 0,131716380 L 0 1,297 1716 0 7300 ·Reference Library of the Bennett College : From the example it is clearly scen how much has been erpended by cach department, and also for the departmental figures can be shown separately in the Purchases Account in the Ledger by adopting similar ruling. It should be mentioned, hoirever, that the specimen Purchases Account is in effect four accounts, cach column representing a different set of transactions. Therefore, the same results can be obtained by opening four separate single column accounts, although this arrangement is not so convenient in practice, because it is not so casy to see at a glance the trend of trading, or to compare quickly the relative productivity of the departinents. 30.--Posting to Personal Accounts. It is only the amounts shown in the outer totals column of tlie Purchases Book which are posted to the credit of the personal accounts of the various suppliers in the Bought Ledger. The departmental columns are totalled and carried forward into the corresponding columns from page to page, until the end of the month, when they are then posted to the debit of the Purchases Account in the Impersonal Ledger, as shown on page 29. Cashi purchases are passed through the Cash Book, not through the Purchases Book, and are posted direct to the Purchases Account. THE SALES DAY BOOK 31.-Sales upon credit to customers are similarly recorded, the book used being called the “Sales Day: Book," "Sales Book, or“ Sales Journal. The entries are made day by day as the sales occur, in much the same way as described for the Purchases Book, and, in fact, the ruling of the Sales Book, whether in the simple or analysed formi, is identical with that of the Purchases Book. The reason for this is obvious when it is recollected that purchases were analysed into separate departmental columns for recording what much department received, and by showing sales similarly analysed, the resulting position of cach department can be stated. The amount charged in the Sales Day Book to cach customer is posted to the dcbit of his respective personal account in the Sales Ledger. The corresponding credit to complete the double entry is secured by posting, in one amount, the total sales for the month to the credit of a Sales Account in the Impersonal Ledger. Otherwise the procedure is identical with that of dealing with purchases as already explained. Cish or ready money sales are intered in the Cash Book, not in the Sales Day Book, and are posted from thic Caslı Book direct to the Sales Account, 30 ·“Book-keeping and Accountancy” SALES DAY BOOK (Simple Form) (say) mage 14. Date, Particulars. Ledger Fol:o Details. Totals, d £ s.a. - +26 36 1924 Prought forward (523) July 27). Watson & Co, 13 firmy St., leed, 12 Costumes. ? Fur Collur 72 0 9115 coloo 8115 In'ss 37. 'Trade Discount 1 51. 151 771313 311 Brown, 11 Sidney Grove, W'. 1 doz, Vases 6 Writing Pads 6 212 18 0 S.I., 96 310 6 Total for Month 1.L. 183 £507| 93 The personal accounts in the Sales Ledger would appear as follows: J. WATSON & CO., Grore Street, Leeds Cr 1924 July 27 | To Goods. 5.8.14 6 77133 13. BROWN, 11 Sidney Grovc, W'. 1924 Juls 37 To Goods. 62.14 £ 3 sd. 10/6 31 ·Reference Library of the Bennett College: The Sales Account in the Impersonal Ledger will show the Sales Book total thus :- SALES ACCOUNT Cr. 1924 July 31 Br Sales for the Month.S.E1.507 93 All the above may be kept on the columnar method, as shown for the Purchases Book and Purchases Account. RETURNS OUTWARDS BOOK ΟΥ 32.This is also known as the " Bought Returns Book " Debit Returns Book." It is inevitable in business that some of the goods purchased have to be returned to the suppliers for some reason or other. Some goods are not as ordered, or not up to sample; others may arrive damaged. Such goods must be "charged back," i.e. debited. It is customary to pass the full invoice as received from the suppliers, entering the items in the Purchases Journal without alteration, but making a contra invoice (called a "Debit Note") against the supplier, which will be deducted from his account at the time of payment later on. The following is a specimen Debit Vote : D:::!1! Yo. 34. 29-31 C.1sxos STREET, LOXDOX, E.C. 4, 1677 Varik 1924. Viessrs. Itin & Co. LTD).. Vonvich, Dr. to JAJES, FURXISH & CO.. Outfitters and Tailors. To 6 do:, Linen Collars rcumcd, not up to sample 7 £ o If the suppiier agrees to the retum of the goods, or accepts the coutra charge, he usually signifies this by sending a "Credit Note." The Credit loti resembles an invoice, but is generally 32 ·Book-kccping and Accountancy" distinguished by being printed in rcd, and red ink is used for the written portion also. Credit Note No. 12. 18 JLDO STREFT, NORWICII, 1814 farih 1924. Messrs. JAVFS, FURXI511 & Co., London, I. (. Cr, boy JUDI) & CO. LT!), Manufacturers. S. By 6 doz. Linen Collars returned 2 O Note.--In practice this would all be in red ink. These returns are usually rather numerous, hence the need for a special subsidiary book for kecping a record of them, as shown below:- RETURNS OUTWARDS BOOK (Simple Form) Date. Particulars. Ledger Details, l'olio. Totals. d 18 0 20 1 со BL121 24 0 1975 Brought forward (say) May 18 M. Qucen & Co, Castle Street, W.1 2 Costumes, damaged in transit Costume, wrong size R. Cross, London, E.C. 2 Scal Wraps, bad finish Total for Jonik 21 1.70 30 0 0 11145 £62 0 0 The entries are posted to the debit of the supplier's personal accounts, in the Bouglit Ledger, thus reducing the amount payable to them; whilst the double entry is effected by posting the monthly total of the Returns Outwards Books to the credit of thc" Returns Outwards" Account in the Impersonal 1.cdger. An analysed form as appendeci may be used to correspond with the analysed Purchases Book, and is desirable where that form of Purchases Book is in use. Besides using this book for actual goods returned, it often includes cliarges back," sucli as an overcharge, cases charged and returned, etc., tlus avoiding alteration of invoices. C 33 c?

·RETURNS OUTIIRDS BOOK ( .AI.Y53,0) HOR) Total. Lunst Wstiality [cit. Dept. Dept. ul J. 1 1 ita 4 44 ; } 18 7 Birouhit lurkini May 18 V. (nero) i CO2 Conirs, lam.ru Cir! Str W... in tutkit. I filmie, wions; inc 0 THE 11.1. 121 Srish Wraps, but 1.... 5.,1.799 . O 234 0 Lola 620 65 7 Total for Vontlı 2 1.1.1.18 Tlc im Las in the 1999.11 column su elebitesto Nonnens scrum, uthe L:2010 R. fron's Accome in the Benght Lether. The totala for the months afl' creviterito, " krumny Outwardla:" .Ircount in the Imperial Lyr. Reference Library of the Bennett College: 3-4 RETURNS INIAKIS BOOK (WxSxs sans Fox) Tailler Total. Costic Dept. linen Dept. Relumically Ite. l'articular, Dept. Dept. 6 . 6 $ at f S. 5 0 O 0 Drought forward tillrächel, almers 5.1.151 19.1 July J. Wills, Bredford 5 16 in 10 5 15 5 16 0 1. 31, 10,, L.jon St., E.C. i ''weed Corumc, 01.calen 15 15 o 15 15 4.1,. 90 Total for Month 1.1., 15661 L35 4:21 L15 15 Lun 15 | O 15; Plic totally in the last column arc creditel on Customers' sccounts in tlic Silcs Lerger, sond thic totals for the month arc iciitc : the "Returns Inwarils" Account in the Imperunt l.celger.

·6 Book-kceping and Accountancy" or RETURNS INWARDS BOOK 33.- This book is sometimes called tric" Sales Returns Book," "Credit Book," and is identical in form with the Returns Outwards Book, but is used for recording (ctails of goods returned by custoniers for any reason. If the "return is approved a "Credit Note" is sent to the customcr, and the amount allowed at the time the account is paid. RETURNS INWARDS BOOK (Simple Form) Dic Particulars Lelger Follo. Details. Total . 915 192.4 July I. 151 16 5 Brought forward a J. fills, Ifradford, i l'ur Jacket, damaged 311. Mo, Lion St., E.C. i luced Costume, moth-eaten. Total for Month 1515 o 1.1.. 136 £41115 0 Thc cntrics for each customer arc posted to the credit of his personal account in the Sales Ledger, thus reducing the amount Inc has to pay: whilst the double entry is completed by posting the monthly total of the Returns Inwards Book to the debit of a "Returns Inwards" Account in the Impersonal Ledger. The corresponding analysed form is shown on the previous page, and this form should be used when the analysed form of Sales Day Book is adopted. Allowances to customers, besides amounts crcdited for rcturned goods, are sometimes passed tlırough the same book, If not, a similar book has to be kept for “Allowances." 35 ·Reference Library of the Bennett College: Chapter IV THE CASH BOOK 34.-Cash Account. The transactions which involve cash receipts and payments are so numerous that the Cash and Bank Accounts which would ordinarily appear in the Ledger are kept in a separate book, i.e. the Cash Book, and this will now be considered before the remaining subsidiary books. The Cash Book must be regarded as serving in a double capacity, firstly, as a book of prime cntry, like the other subsidiary books just described ; secondly, as a Ledger Account bound separately for convenience because of the numerous entries to be made in it, not only day by day, but frequently during each day. Money received is debited, and money paid away is credited, and at any time the difference between the debit and credit sides of the Cash Book should be the same as the amount of money in the trader's possession, In its simplest for the Caslı Book shows no difference from an ordinary Ledger Account :- CASH BOOK Recording Cash only) Cr. Da!c. Particular, Lelger lolio, Amount. Date, Particulars. Ledger Folio. Amount. £ s. 1920 sid. 1920 Jan. To J. Bro:sil (Cash Re ceivesi) Jan. 2 By B. Black (Cash paid away) 9.1. I? 9 1.1.. 52 Io 6 35.-Bank Account. In addition to those paid in actual cash, many transactions are settled by means of cheques, i.e. by the Payment of money from the Bank, whilst cash and cheques received are also paid into the Bank from time to time. Bank items cannot be conveniently entered in the same account as cash items, and if the Cash Account is kept, as shown above, then 30 ·Book-keeping and Accountancy” another account would be required in wlich to record bank transactions, tlius :- CIH BOOK (Showing Bank transactions only) Cr. 1)tc. L'articulars, Ledger Tolio. Dute l'uruculars Iuliv 1921 Jan. 1 To lancent Bank. To B. Blich. 15 A. Dare 29 5. d. 1921 Jan. 69 913 66 500 10 7 10 56 716 2 21 76 OC illy Jones Iron Clicjucon Account. 2+ 10 By Rent paid by Cheque. 76 11 Ny Telephone 'c mid by Chequc . 31 13) Balance arricd down 17 . 5 26 J1 380173 2518 73 15518 731 1'eb. ! To Balance brought down 4380173 36.—Double Column Cash Book. By combining the two accounts, however, bank and cash transactions can be dealt with inorc conveniently. This is cffected in practice by having a Cash Book, with double moncy columns on cach sidc, as shown on page 39 In the first column on cither side all cash items are cntered, and in the sccond all bank items, so that the difference between the totals of the first column on the dcbit side and the first on the credit sidc represents the amount of casli on hand ; similarly, the differencc between tlic totals of the second columns on the dcbit and credit sides shows the amount still lying at the Bank (or overdrawn if the credit side is greater than the debit side). It must never be forgotten that the two accounts still remain separate and independent of each other, cach recording its own separate class of transactions, i.c. cash or bank, and cach liaving its own balance. The following transactions are recorded in the specimen double column Cash Book illustrated : 37 ·Reference Library of the Bennett College: £ • 19... May s. Bilince of Cirsh in the Office 1. Balance at Banki. 3. Received Cash for Ready Money Sales 1. Paid Jones Bros. by Cheque 2. Received Chesuc from B. Black, and baked it 2. Received Cash from 1. Daire 10. laid Rent by Cheque 10. Paid Wages by Cash 12. Paid Casi to Bank 15. Drus Cash from Bank for Vitice Cash 350 I. 10 56 7 IO 9 7 6 6 56 10 OOOOOOOOO 12 10 . . 20 To show the resulting balance of cash at the office and at the Bank the Cash Book is balanced off on 15th May, and the balances carried down. It will be noticed that when cash is paid into the Bank from the office cash two entrics must be made, (I) in the “Cash" column on the credit side, (2) in the “ Bank" column on the dcbit side. Conversely, when cash is drawn from the Bank for use in the office the amount must be credited in the “Bank" column on the credit side, and debited in the “Cash Cash" column on the dcbit or left-hand side. In the folio colunin on each side the letter "C" is entered, mcaning “contra," as these iteins are not posted to thic Ledger, the double entry being complete in the two accounts in the (aslı Book. The reason for these contra entrics will be obvious if it is considered that a transfer from Cash to Bank incans that il "payment" of cash has been made to the Bank; and thus Cash Account is credited and the Bank Account debited with the same amount in the appropriate columns as indicated. The ruling of the Cash Book, as shown opposite and on page.fi, generally extends across two opposite pages of the Cash Book, so that the debit entries occupy the whole of the page on the left and the credit entries that on the right, but both bear the same folio number. 38 ·C.ASH BOOK (sas) page 19. Dr. Cr. Dzle, l'articulars (of Cash received). Ledger l'olio. Cash. Bank. Date, Tarticulars (Tuynients). Ledger Folio. Cash. 1:17h. £ 5. d € 1.u. S. 192+ Way d. 1924 May By Jones Bros. 08 1 To Balance brought down. 50 - 25 oo 380 o 0 IO Rent 56 70 11 1 To Ready Money 11 11 Sales. 15 too 10 Wages 8: 11 10 O 0 2 To B II.uch 76 IO 93 Cash banked 1 2 IO O ! 10 39 " Book-keeping and Accountancy" .1 Date 26 7 616 15 Cash from Bank 0 n 1 c. PT 12 Cash Banhed! C. 1 2] 10 0 11 15 Balance carried down. 42 06 230 11 Cash from Bank 20 13 0 o 7 £6+1664402193 164 10 6 C402 1913 1927 Vus 13 in Balance brought clown 6 2 |6250 szol 119 ·Reference Library of the Bennett College: 37.-Cash Discount. There is a custom in most businesses of allowing Cashı Discount when accounts arc paid. The trader probably allows discount to his customers to encourage prompt payment, whilst he himself expects, and usually securcs, similar Viscounts from his suppliers. These discounts are usually much smaller than trade discounts, and as a rule they arc percentages of the amount payable, e.g. per cent., 25 per cent., 3i per ceni., or 5 per cent., which are the Cash Discounts most usually niet with Discounts such as these are recorded in the Cash Book as and when the corresponding item of cash is entered, whereas Trade Discounts "are only shown as deductions in the Purchases or Sales Book, or deducted from the invoice, and ignored in the books. Caslı discount allowed is entered on the same side (Dr. or Cr.) of the Cash Book as the cash entry. Cash Discounts are entered in additional columns, as shown in the following complete form of Cash Book, in which are recorded the appended selected transactions : 66 17 17 > May 1. Balance of Cash in hand £25, and at Bank A380 1. l'aid Jones Bros. Account 560, deducting 5% Cash Discount (53). 2. Received from B. Black Chequc £10, gs. 3d., and allowed him 255, Odi. Discount. 2. Received from A. Dare Cash £7, 6s. 6d., which with Discount 3s. 6d. clears his Account. 3. Paid Bull & Co.'s Account £10, less 2.!% Discount. 12. Buhed Office Cush $12, 105, 13. Paid 1:. Brown Cheatre $11, 8s., Discount deducted being 12s. 15. Received Cash from S. Smith £8, 11s., allowed Discount 95, 38.-Discount Columns. \Vhilst the balances of the Cash and Bank columns are carried down, the Discount columns are merely totalled as tlicy stand, and cachi total is posted separately to the same side of a Discount Account in thc Impersonal Ledger, the reason being that the columns in the Cash Book arc considered as memorandum columns only. The Discount columns in the Cash Account couli, of course, bc balanced like any other nominal Iccount and the dificrence transferred to the Profit and Loss lccount direct, but it is always considered better to have the summarised records in the duplicate account in the Impersonal Ledges for purposes of reference. It must be specially noted that the discount allowed and received appear in proximity, and on the same side as the cash It'crived and paid respectively. Each individual item is posted, along with its corresponding money payment or receipt, to the portivna prsonal ccount in the Bought or Sales Ledger, as sliuwi un pagi 42. 40 ·C. Srl HOOK (sas) page 26. Cr. Date, l'articulars Ledger Folio. Discount allwel (1 6. 3 touch. Cash (reccused) Blank (pavi in). Due. Particular Ledger Follo. Discount reces! (le Bank Гри? Cacli (mall YACHT Huller. or pofit). drun). 1914 Miny 1. Halute e lir furminat 1924 6 day 38 olo s By Jone Pro 8. L. 98 s. 16s. 3oo Y. 3 42 10) 131 31 Pull & C., R.L. 36 11 Slo 21170 " Book-keeping and Accountancy" 12 Casli to Dinh 9 C, 11 13,00 33 * I. Brown 39 120 Va 17 15. Valances carried dun ? IS1216 34 113 21.01 (402123 431171717169403193 1.L 32 ·Reference Library of the Bennett College The numbers in thic last column are for reference to the receipt vouchers kept on a file, a corresponding number being marked on cach voucher. This facilitates reference to the receipted account when desired. Tlie posting of the items in the preceding example is shown in the following Ledger Accounts: (a) In the Sales Ledger (items from the Debit side of the Cash Book, hence posted on the Credit side of the Ledger): 1. BLICK, King Street, Bootle Cr. 4 1924 Mar : By Cash 26 Discount. 26 10 9 5 3 6 1. DARE, Cross Street, Leeds Dr. Cr. £ 1924 Vlay 2 5. 6 20 By Cash Discount. 26 . 6 6 3 S. SHITII, Lion Road, London Dr. 19. May 13}y Cash . 26 Discount. 20 8 9 (") in the Bought Ledger (posted from the Credit side of the Cash Book, hence appearing on the Debit side of the Ledger) :- JONES BROS., Bradford lironi. 1: # P.

·“Book-keeping and Accountancy” BULL.CO, W211.ILC?, Lerpwl Dr. 19:4 Mas 31o Cash 26 Discount. 26 9 150 30! 11 (similarly for F. Brown's .lccount.) (c) In the Impersonal (or Nominal) Ledger. (Notice Discounts arc entered in totals only, and that tliesc appear on the same side of thic Ledger as they occur in thie Cash Book) : DISCOUNT ACCOUNT Cr. T24 £ s. 1924 M.18 15 1o Discount May 13 By Discount allowed .C.1.2011 1810 received . CI. 2611 3 170 It is interesting to observe that items posted from the Cash Book to the Ledger appear on the opposile side of the Ledger Accounts to the entries in the Casli Book, whercas those from tlie Journals are entered on the same side of the Ledger corresponding with tlic columns of the Joumals, i.e. items from the debit column of the Journal are posted to the dcbit side of the Ledger, but items from tlic debit side of the Cash Book are posted to thc Crailit sidc of the Ledger Accounts. The reason for this is, as previously explained, that the Cash Book is in reality a Ledger Account itseli, and the act of posting it is simply making the counter-balancing entry to complete the double entry, whereas the Journal is only a subsidiary book showing on which side of the various Ledger Accounts cach transaction is to be entered. 39.-Cash Book Balances. The diffcrence between the total of the credit and debit columns in the Cash Book relating to cash receipts and payments represents the amount of cash in the hands of the cashier. In a similar way the balance of tlic Bank columns should represent the amount of money lying at the bank, but it frequently happens that the balance as shown by the Bank Pass Book does not agree. The Bank Pass Book is a small book in which the banker enters, in the order in which tliey occur, all payments by him as authorised by the trader, i.c. cheques drawn, and on the opposite page all receipts, i c. monies paid in from time 43 ·Reference Library of the Bennett College: to time; it is, in fact, a copy of the trader's banking account as it appears in the Bank's own Ledger. The Pass Book must be obtained from the Bank at frequent intervals, and checked with the trader's own records. Assume that the Pass Book has been brought from the Bank on the first of the month. It will bc noticed that it has been totalled, and the difference between the amounts received and amounts paid is the amount of cash still in the Bank's possession (or if the account has been overdrawn, the amount owing to the Bank). It rarely happens that this balance agrees with the balance shown by the Cash Book because :- (i) Cheques drawn, although entered immediately in the Cash Book, may be several days in the hands of the payee, or otherwise delayed before reaching the Bank, and naturally these do not appear in the Pass Book until they have been cleared, i.e. paid by the Bank. (ii) Certain charges, or periodical payments such as annual subscriptions, made by the Bank may be shown in the Pass Book, although not yet recorded in the Cash Book. (iii) Sometimes cheques received by the trader and banked are not credited by the Bank until it has collected the amounts from the Banks on which the cheques are drawn. To bring the Cash Book balance into agreement with the Pass Book balance a memorandum "Reconciliation Statement” is made by the cashier, this being entered in the Cash Book at the end of the week or month, after the Cash Book has been "ruled or “balanced," as a rule in red ink, thus :- off" or . 2 BANK RECONCILIATION STATEMENT, 31ST JANUARY 1920. Balance as per Bank Pass Book £2764 3 3 Idd cheque on Dublin paid in 29th January not yet collected by Bank 32 6 £2796 5 9 Less cheques drawn but not yet presented for payinent :- Jan. 7. Brown & Co. £9 3 6 26. G. Lee. 75 0 30. A. Darc 25 IO 31. S. Dawson 7 0 II6 13 Balance as per Cash Book . £2679 12 3 0 . 0 6 44 ·6 Book-keeping and Accountancy.” Diffurences due to Irason (it) alle would be entered up in the Cash Book before ruling off and balancing, and should therefore never appear in the Bank Reconciliation Statement. 40.-Petty Cash Book. In addition to the larger money transactions, there are many small payments made every day which, if entered in the main or Gencral Cash Book, would occupy more space in that important book than is justifiable; and furthermore, that coursC would mcan many trivial entries in the ledgers, unless these small items were summarised at the end of cach month, and posted in totals to the appropriate accounts; but cvcn this would result in somc loss of thic casliier's time which could be more profitably spent. To deal with these petty caslı transactions more satisfactorily a Petty Caslı Book is used, and the kecping of it is relegated to a less important employec, wlio acts as petty cashier, under the supervision of the Cashier. The Petty Cash Book is usually ruled with a number of analysis columns, as shown in the folloiring specimen, the object of this being to group together all items which come under agreed headings corresponding to various ledger accounts in the Impersonal Ledger. In cffect, the analysis of thesc pctty payments is made as cach entry is recorded, by simply entering the figures in the appropriate column. This avoids tedious analysis at the end of each week or month, and by adding up the items in each column the totals can be then posted to the appropriate ledger accounts. The use of the Petty Cash Book will be more readily under. stood by reference to the specimen shown on page 46. The only receipts which affect the Petty Cash Book are the amounts handed to the petty cashier for disbursement. These are entered on the debit side, as shown. Payments arc, however, numerous, and as each is made the petty cashier enters the date and particulars of the payment and then places the amount paid away in the column concerned, each column being leaded with the name of the appropriate account. The columns named in the example are merely representative, and each business has its own special requirements in this respect, not only as to the hcadings but also as to the number of columns used. It is, however, dcsirable to have a "Total" column, placed last as in the specimen, or first, i.c. immediately after the “Details of Payments" column. The great value of this column is that the difference between the total of it and that of the debit side represents the amount whichi should be found in the petty cashier's box It also serves as a check on the accuracy of tlic cntrics and the casting of the analysis columns, as the totals of these columns added together should agrec with the total of the “Total” column. -+5 ...

·PETTY CATSII BOOK Cr. I.cuger. l'artic::a:. Details of l'azyments. l'oxlases, tic. Dair. Carnage an Curtage. Dilc. Ilvcrtice 110nts, Sundries. Cleaning Total. Vo:clics Vuniber. 1. ul. L . 0 .. S... 5 1 Series Touch 30 Oprilly Sutton & Co. Poslige Stamps 1...11.S. Rail. winy Traveller's Es penses Brown & Co., Bristol. D. Telegraph Telegram Olice Cleaner l'arcc! Post 7 Smith Bros., Lime Street, W.C. Stationery Olo 91 Reference Library of the Bennett College: U S 9 3 S... OS . 10 **3 13 O 1.1. Rent 310 o 12 100 23 12 3 11719 ES O G 114103 610617 19 1.1.29 1.L. 38 1. L. 12 5.L.IS 1.L. 22 192.1 Sept. 7 By Bilance cd 3 99 (20 oo 4200 0 142 Sepu. S TO Balance b/ To Cash 25 019! 1.103 ·6 and " Book-kceping and Accountancy” The columns shown are self-explanatory, with the exception of that lieaded "Ledger." This particular column is useful wherc a payment has been made which is not appropriate for any of the otlicr columns, and which requires to be posted indirilmally into a Ledger Account. Such items may not be numerous, but they can be more casily dealt with when they do occur il sticla column is 115cd. The" Ledger "column, it will be noticed, luas a ſolio column adjacent, in wliicli arc entered the lediger folios of the accounts to which tlic iteins are posted. The otlicr columns are totalled at thic end of, say, cach week or month, and only the total of each is posted to tlic appropriate Ledger Accoumt, the ledger folio being shown below cach. Notice that no folio appears below the" Total Ledger” columns, as these totals are not posted to any account. 41.--The Imprest System. Petty Cash is usually kept on what is known as the Imprest System. Instead of handing the petty cashier an agreed regular sum of money for his caslı box, :1 sun considered sufficient (in tlic csample shown £20) is given into liis charge, and at the end of the weck (or other period) the total of liis (lisbursements is ascertained, and this amount is rcfunded to liiin by' tlic chicſ caslıicr, thus raising the sun left in the cash bos to its original figure. In the example, tlic petty cashier started with £20, at the end of tlic week he had parted with £14, . 3)., leaving £5.95, 9d. cash in land. On commencing the second wcek he is refunded the £14, 1os. 3d. by the cashier, thus starting again with £20. This system provides a uscful check, it is in very common usc, and is much recommended. As in the cause of the principal Cash Book a column is provided for vouclicr nu bers, which are particularly useful for reference wlion there are a large number of receipts to be filed. 42.-Erasures. Under no circumstances whatever should crasures be made in a Cash Book; clerical errors are sometimes corrected by book-keepers by erasing entries for the sakeof ncatness, and whilst this is sometimes overlooked in other books, from an auditor's point of vicw it is nghtly considered highly dangerous and improper in Cash Books, and corrections sliould never be made in this way. It is better to rule out neatly the wrong entry and re-write it correctly, or sometimes d correcting contra entry can be inade. .24 47 ·Rcference Library of the Bennett College: Chapter V BILLS RECEIVABLE 43.---Treatment of Bills Received. Indebtedness is sometimes discharged by incans of a Bill of Exchange, and when one is 5. Cuired from a debtor particulars of it should at once be recorded in the Bills Receivable Book. The details to be entered in conlection with Bills Receivable are more numerous than for other forms of payment, as it is necessary to know who are the parties liable on the bill, and when and where it is to be paid. -Form of the Bills Receivable Book. The Bills Receivable Book may be ruled in a variety of convenient forms which vary considerably in practice according to the class of trade, eg. whether inland, castern, or colonial, whilst modifications are often desirable to suit different foreign currencies and to record difierences in foreign exchange, etc. For present purposes the usual forn of Bills Receivable Book is given on page 49. It is recommended that this form be memorised, together with that of the Bills Payable Book given later, as these rulings are very frequently asked for in examinations. The date on which the bill is received is entered in the first column, and often lias little relation to the date when the money it represents is due or collected. Bills are usually given a distinguishing number, hence the second coluinn provides for this; whilst a "Remarks" column is iridied for keeping a record of useful notes regarding the fate, or any special treatment, of the bills. The name of the person whose account has to be credited is enterol in the column“ From whom received," and as a general rule the "Acceptor” whose name appears in the next column is the same person, i.e. the debtor. Similarly, the "drawer" is most often the proprictor of the business to whom the" acceptor is indebted, as exemplified in Bills No. 28 and 30. In the casc of Bill No. 29, this was drawn by J. Clark and accepted by Mason Bros., and probably was ihen negotiated by J. Clark either directly to F. Joss & Co. or through other indorsers, from the last of whom F. Moss & Co, received it. F. Moss & Co. then indorsed the bill and passed it on to our trader in settlement of an amount owing. This explains the apparently irrelevant names recorded. IS ·BILLS RECIDIV.IBLE BOOK D Date Keren!.. Iron om Keccuel. .Icceptor. Drawer. licte l'agable. Date Drann. Tenor. Due Date. Ledger Folio. honorks, I roight forward 65.14 211 100 1925 May 18 28. Queen & Co. M. Queen & Co Sches Cits Banh, Jury St 16 5 33 months.uk. 19 1. 1311 after te 10:5 (910 6 2013 29 1. Nous Co. Vason Bros. J. Clark Coral Co., Kingsway 23/5 25 Smutlist. 26 | S.L. 97 Efter att 1925 263 53 Cash received 19,9/-5. Dccount with l'aria 25 : charge {: 7 40. ! ות 2 200 010 jo 1. 115 T. Timis Selses Lloyuls Ilank, 30 5 25 .tex 2 S.L. 152 Bamsley 1925 31 Burzy al... Ikink of Brazil, Bank of Brazil. Bank of Brail, 29'4/23 90 lays Sept. 1S.L. 271 1ป4 London Haha Londlun niter 1925 100 00 65 lccepted Lonilor 31/5/25 for p Ceile of Boller: for collection 20/1:724. “ Book-kceping and Accountancy" Total for month I.L.72; 28:41 S 1923 June 11 32 ID Lines, Velline Ilank of lustralia, London Jank of Tustralasia, Mcllxurne Lloyds Biak, o's 25 Lonilon 2011. Sept. 11 S.L 2021 Egono 1925 .lccepie London 100 25. f! cerlofiller In collectie. Ilies are inlls drawn ly the collecting Hunh altoaut. The original lil sent for collection to Crpland in Decemler at 11 211i11. and the sum collecteel less charges was sent to London to the god's draft enterel liete, the go days sutining from the one of acceptance by the Bank's London Office In many cases, however, such remittances to landon arc sent by sight" drafts on Lomon suyal le at once. Sonk. --The indivual amounts of the Inlls are panied to the Sales Lelget to the cre!. of de Accounts of the finis named in the first The total for the month is lehted to the Bulls Recenalle .lccount in the Impx'tsanal Ledger, lit. £844, S. (htly lone locale. I burun are sliokn in de specimen Cash Look and falls Receivalie Accounts on in 51-53; berce balls Nos. 31 and 33 which fall duc in najelor cla not appear the ruin.

·days of Reference Library of the Bennett College: The place where payablu " is copied from thic acccptance written across the bill, and the actual date appearing on the hill is entered in the next column. The date in the column licaded “Duc Date" includes thic grace, if any'. 45.Posting to the Ledgers. The amount of each bill is posted froin the Bills Receivable Book to the credit of the debtor's account in the Sales Ledger, and the total of the Bills Receivable Look is posted to the debit side of a special Bills Receivable Account in thic Impersonal Ledger, completing the usual double entry, 46.-Collection of Bills. Payment of the bill, unless it be at sight" or on demand," is receivable on the third day ifter it falls due, and the place of payment is usually indicate on the bill itsell. It is customary to pay bills into the Bank two or three days before the day on which payment is duc, thic Bank taking the responsibility of making the actual collection of the moncy, which it will then credit in the pass-book. Bills so passed to the Bank for collection are known as Short Bills, * and they should not be entered in the Cash Book until the actual due date, although in the mcantime a note should be made that the Bank has the bill for collection ; such a note is sometinics made by centering the item in the Cash Book, but instead of extending the amount into the Bank column, writing it short," i.e. to the left of the money columns. After the bill has been entered on the debit side of the Cash Book it is posted from there to the credit of the Bills Receivable Account in the Impersonal Ledger lo complete the double cntry. The balance of the Bills Recciyable Account must thercforc represent the ainount of Bills Ruccivable still remaining to be collected. Thus the items in the example on page 49 would be recorded in the Cash Buok and Ledgers as follows: (1) In the Sales Ledger, JURGAY CO., Bahia, Brazil Cr. is .. 1923 ay! By Bill kecrivable duc H.R. 21 100 * This form is also frequently used to refer to bills slinse currency or tenor is not more kion lu le d., as distinct from Long Bills, comuto six months or more, 50 ·“ Book-keeping and Accountancy 11. QULON & CO., Orror] Stret, 1. 19:3 May 18 My Bull Ris rivalde due controls SIMIS BROS., Main Strect, Melbourne Dr. Cr. 1925 June's Dy Bill Raw ccivable due 3923 P.R. 21 50000 F. MOSS & Co., City Road, Liverpool 5925 £.d. May 26 By Bill Receivable due 26/10/25 .R.K. 21 2013 53 T. TILSIS, Church Street, Leeds Dr. Cr. 1923 d May (30 ly Bill Reccnsable duc 3'8'23 IR. 21, 200 00 ki (6) In the Cash Book. These cntrics would be made on the duc date of the bills. (Debit side only shown.) $ 1.1-72 olo 1975 Aug! 3 To !!!! Receivable (1. 'limm) 1910 BI Rescisalli (n. Qucento) • JL. 72 20 To !! Recusable disa counteel (r. Joss & Co) 11.72 Olio'r 2633) 5.3" • Discount of L2, 75 d. i!! le entered in Bank column credit side, 51 ·Reference Library of the Bennett College: (c) In the Impersonal Ledger. BILLS RECEIVABLE ACCOUNT Dr. Cr. ayl: 'To Sundri is [":T Billa Ruivable Douli £ s. d. 1925 Jug. 3 By Cash (T. Timis) C.D. 76 2000 19 By Cash (11. 15.1.238445 9. Queen&Co.) (c.1. 767 69 106 26By Cash (F.; Moss & Co.'s acceptance discounted).C.1.76 2631 33 76 47.---Negotiation of Bills, As a bill is a negotiable instrument, it may be transferred from one person to another. and the latter is not prejudiced by any defect of title on the part of the transferor or any previous holder if he takes it for value and without notice of anys such dcfect; in other words, he acquires all the rights in the bill and can suc upon it in his own name. li a bill is payable to bearer it is transferred by mere delivery, as also is a bill to order, indorsed in blank; i,e, where the holder to whom it is payable indorses his signature without specifying an incorscc. A bill which is payable " to order " 3Bay be negotiated to some one else by the holder indorsing it to that person, i.e. by adding his signature on the back. In this way the bill may be negotiated from one indorsce to another until the day of payment arrives. Every indorser becoines a person contingently liable on the bill, alihough the acceptor is always the party primarily liable, an indorser being liable to pay the amount of the bill to the holder at the time of maturity only in the event of the acceptor and all previous indorsers being unable to meet the obligation. Hence when a holder of a bill desires to use it as a means of payment to another party he negotiates the bill as described. Indorsements are of four kinds:-- (1) Indorsements in blank, where the holder to whom a bill is piyable indorses his signature on the back of the bill without specifying an indorsce. In this case the bill is payable to bearer, and can be negotiated again by mere delivery (2) Special imorsements, where the holder indorses thic bill to the order of another personi, in addition to signing his • Indorrr, rt, my lv spell Emor:e; Hoth forms are used. 54 ·41 pay Tom " Book-keeping and Accountancy" name, c.6. Pay Tom Jones or order. The bill may be ſurther negotiated by the indorscc, but lic must also indorse the bill first. (3) Restrictive indorsements, i.c. where the holder indorses in such a manner as to terminatc or limit the negotiability of the bill. The first two kinds of indorsements Icavc the bill still negotiable at the option of tlıc indorsce or liolder, but a restrictive indorsement proliibits this, as, for example, "pay Tom Jones only." or Joncs for tlic account of j. Brown. It should be observed that a blank indorsement may be changed into a special indorsement, but a restrictive indorsement cannot be changed, except by the party who so indorsed the bill. (+) A fourth form of indorsement is often used by persons who are obliged to indorse a bill in a representative capacity, such as agents, who desire to climinate their personal liability; this is the indorseinent sans recours," which implics" without recourse to me.' If the number of successive indorsements occupies the whole of the space on the bill, a piece of paper may be gummed on to receive further signatures. This is called an allonge. The first signature on it should extend partly on to the original bill for safety. 48.--Entries to be made on Negotiation. The date of negotiation and name of indorsec arc recorded in the "Remarks column in the Bills Receivable Book. The creditor to whom the bill is indorsed is debited with the amount of the bill, and the Bills Receivablc Account is credited. In actual practice such transactions are usually first recorded in a special Journal. 49.--Discounting Bills. It sometimes happens that a trader requires cash for a Bill Receivable before the arrival of the due date, and, provided the acceptor's or the trader's own credit is known to be sufficiently good, the bill can generally be sold to a banker, who will advance its value less an agreed amount of discount. The rate of discount, which varie's according to the class of bill, is calculated on the facc value of the bill from the date of purchasc until maturity. For example, a buil for £100 received on ist July due to be paid on 4th September, and sold to the Bank on 4th July, at 5 per cent. would cost a trader 17s., i.c. 62 days' interest on {100 at 5 per cent per annum. Wlien a Bill Receivable is discounted in this way the fact should be noted in the "Remarks "column of the Bill Book. The other entries to be made are simple The face valuc of the bill (100) is usually credited by the Bank in the trder's 53 ·Reference Library of the Bennett College: current account, the discount (175.) being debited; therefore corresponding entries must be made in the trader's Cash Book (Bank column). That is, the full value of the bill is debited in the Bank column of the Cash Book, and the discount is entered in the Bank column on the opposite side. The net result is an increase in the Bank balance of £99, 3s. These items are then posted from the Cash Book; the £100 to the credit of the Bills Receivable Account in the Impersonal Ledger (because the bill Value {100 has been parted with); and thc Igs. to thic dcbit of thic "Discounting Charges " Account, or sometimes in practice 10 "Bank Charges,” or “Bank Interest Account," in the same Ledger. These discount charges should not be cntered in the Discount column of the Cash Book, otherwise they would be confused with ordinary cash discounts which are posted in total to thc Discounts Account in the Ledger. The discount deducted which a bill is so cashed at the Bank is more in the nature of loan interest, and has 110 rclation to either “Cash or " Trade" discount. The correct entry is in the Bank column on the credit side of the Cash Book. 50.--Dishonoured Bills. If for any rcason a bill should be returned unpaid, i.e. dislionoured, tlic entry made in the Cash Book on the duc date must be reversed by making a contra entry of the amount on the credit side of the Cash Book, in the Bank colunin. This contra cntry is then posted to the debit of the customer's account. Any charges or expenses incurred through the dishonour of a bill are usually charged to the debtor's personal account. Dishonour must immcdiatcly be notified to the drawer and any intermediate indorsers. 51.-Noting. Before returning the unpaid bill thic collecting Blank, in the absence of definite instructions to the contrary, will usually have the bill “ Noted” by a Notary Public. This means that thic bill is given to thic notary, wlio re-presents the dishonoured bill, and is thus able to confirm tlic dishonour and the reason for non-payment. He then attaches a Noting Ticket to the bill, XOTING TICKET P'ERCY LAW & Co, Xotaries, Gresham Chambers, London, E.C. Xoting Charges, 7;6. inablr in pay this montlı. YA ·Book-kecping and Accountancy" stating his charges and thic reason for dislionour. Conimonly quoted reasons are Refer to Acceptor," "No Instnictions," and Yo Funds." Voting is not essential for an Inland Bill, but is advisable as a preliminary to a subscquent "protest" in the case of an acceptance or payment "for honour,"ie. when somic onc not liable on the bill accepts or pars it as a friendly act for the honour of the drawer or indosser. Forcin bills wasi, liowever, always bcnntul as well as protestel in case of disljonour, otlicrwise the drawers und indorsers arc discharged (but not thic acccptor). 52:-A Protest is a more formal legal declaration in writing inade by a notary public attesting to tlic dishonour. It contains a copy of the bill, states at whose request the bill is protestol, tlıc place and date of protest, the reason for dishonour, and the notary's signature. It must be stamped to the same value as tlıc bill itself, but not exceeding is. The protest must be made on the same day as dislionour, or on thic following day if the bill was presented and returned lot post, unless it has been noted, in which case protest can be made or the following day, in which casc thc protest may be extended as of the day of noting (Bills of Exchange (Time of Noting) Ad, 1917); Tlic chiarges for protest arc much heavier than for noting, and sometimes run to several pounds. It is usual to pay these charges at once, and then to charge thein to thic party dishonouring the bill. 53.—Entries necessary on Dishonour. (i) Il sent for collection through thic Bank :- Crcdil tlic Bank in the Cash Book with thic full amount of the bill, and with thic charges incurred. Dcbit the customer's account by posting this annount to his account. (This does not apply to l'oreig Billy sent for collection, which has not lcunentered in thic Cash Book or Ledger ur par. 63. page 5*} (ii) If the bill las been negotiated to a creditor or banker, and is subscqucntly dishonoured :- Credit his personal account with the amount of the bill and charges; and Debit thc account of the party from whom thic bill w.s received. This would be cffected by a Journal entry, c.g. 1. Brown's acceptance (Bill So. ) for £150, Fleered 12th Jan, was indone and sent to C. White on 29th Jan At the due date 31st Jan, C. Whitc retumeel the bill which was dishonourel, claiming (150, plus 75 (d. noting charges paid by liim. 55 ·Reference Library of the Bennett College: JOURXIL Dr. S. f S. d. f 150 d. 6 Jan. 31 + P. Brown To C. White S.L. 10 D.L. 21 150 7 6 P. Brown's acceptaice (Bill No. 2.) distonoured. Noting charges 5.4.--Foreign Bills. A forcign bill is a bill drawn in one country and payable in another, or according to the Bills of Exchange Act, Section 4, it is any bill which does not fall within llie definition of an Inland Bill. 55.–Bill in a Set. It lias long been customary to draw foreign bills in sets of three, but there is a growing tendency for them to be drawn in sets of two since postal and shipping services have become quicker and more reliable. Each copy of tlie set is called a “viu," and bills are so drawn in order that the scparato vias can be sent by different mails. This ininimises the chance of delay and risk of loss, as each via states that it is to be paid providing that the others remain unpaid. A bill drawn in a set of three is usually worded as follows: No. 301. (150, 105, Oct. Lornox, 31st Juliary: 192.4. Vindly days after sighl pay this l'irst of Exchange (Sicon u Tirit of the same date and tenor impaid) to the Bank " London and Imeriin or order, One: hreid and fifty As lon shillings and sixpence, Value received. J. BULL & Co. To Mr. F. Kelley Kingston, Jamaica. The second and third vias would be altered accordingly. For another very frequently used form, including an Exchange Clause, see Fixample I, page 59. 56.–Sola Bill. Sometimes it is considered unnecessary to draw a bill in a set, especially where there is a frequent and rapid postal Service, t... to France, Holland, ctc., in which case the Woning is “ Thirly' durs after sight pay this Sola of Exchange to the Bank of London or order 50 ·Book-kceping and Accountancy” 57.-Thc Currency in which Bills are drawn las to be considered. A bill drawn in foreign currency usually involves a kain or a loss in exchange to the trader in England who drew the bill, but a bill drawn in sterling produces tlie cxact amount dmumi (less charges), and any gain or loss aficcts only the drawec abroad. A bill in sterling sent abroad for collection usually contains some instruction or other as to the rate of exchange at which thc inoney collected must be remitted to England, for altlıough drawn in sterling it is paid in the currency of the country, and the rates for sending a retum draft in sterling to England vary: A clause is tlicrcfore added, as for example in the specimen bill No. 1 shown on page 59. Another forin of wording of such a clause is" payable at the rate of exchange as per indorsement" (or as per first London indorsement), in which case instead of the drawee paying at the mate prevailing on the day of payment, le pays at thc stipulated mte, and lic knows in advance exactly liat amount of currency lic will have to provide to meet the bill. 53. Documentary and Clean Bills. Sometimes forciun bills are drawn and despatched for acceptance with shipping and other documents attaclicd, such documents being delivered to the drawce only on the fulfilnient of a stipulated instruction stated on the bill itself, c.g. documents on acceptance" or "documents on payment," which means the documents will only be handed over wlien the drawcc " accepts or pays thc bill as the case may be. Such bills are known as “ Documentary Bills." If no documents are attached bills are called "Clean Bills." 59.--Usance is the period of timc fixed by custom for the paynient of bills, and it varies between different countries. Thus between London and Boinbay it is thirty days; between London and New York, sixty days; between London and various towns in South America, nincty days. Bills made payable" at usance on the abovc places would be due after thic times indicated. Bills drawn for a tenor different from usincc, for a special rcason or by arrangement, arc not governed by customary usance. 60.-Hypothecation. When a merchant draws bills for goods shipped he frequently secures an advance from hus banker against them (usually so per cent.) or discounts the bills before they go abroad for acceptance and payınent At the present day such advances may be made upon the good credit of thic merchant, but the banker sometimes requires a "Letter of Hypothecation which places the documents and gools at the disposal of the bank in case of the bill being dislionourer! Hypothccation is much less frequent now than it was formerly. 61.–Rebates. If the dmwee pay's a bill before the due datc it is customary to allow him a caslı discount, or rebate, at 57 12 ·Reference Library of the Bennett College: . 9 IS. the current or an agreed rate per cent. per annum for the unexpired period of the bill. 62.- Stamp Duty. Every: bill, whether Inland or Foreign, must be stamped with the proper duty if payable or negotiated in the United Kingdom, or if drawn in the United Kingdom and payable abroad, in accordance with the scale below. (1) Payable on demand, or at threc days after date or sight, 2d. impressed duty stamp (blue) or il postage stamp may be used, whatever the amount of thic bill. (1) Payable at more than three days after date or sight, the duty is ad calorein: Up to 110 2d. impressed duty stamp (red). Over £10 and not exceeding £25 3d. ditto. 25 £50 6d, ditto. £50 £75 gd. ditto. $75 £100 ditto. Every additional (100 or part thercof is. ditto. Only, one via nccd be stamped when a bill is drawn in a sct. Bills drawn in England must be stamped before being signed loy any party, they cannot be stamped after except by paying a penalty of fio. (3) Pills drawn abroad and payable or negotiated in the United Kingdom must be stamped with an adhesive bill stamp as follows: Cp to £50 as stated above. Over £50, but not exceeding £100 6d. For every: (roo or fraction tlicrcol 601. 63.--Foreign Bills sent for Collection. Particulars of bills sent for acceptance and collection are recorded in a memorandum book, but otherwise 110 cntry is made in the books until the proceeds of the bill are received. If these proceeds are received in the form of a sight draft or chcquc the full amount of the bill is then entered in the Cash Book, from wlience it is credited to the customer's personal account, whilst any Bank charges, forcign stamp cluties, or loss clue to the exchange arc cntered separately on the other side of the Cash Book and posted to the proper nominal account in the Impersonal Ledger. Should there be a sain on exchange more cash would be received, and the difference would be posted to the credit of the nominal account. Sometimes, however, the rełkru draft for the proceeds is not payable until some period of usance clapses, as, for example, thosc from Soutlı America (payable after ninety days from acceptance in London), and often those from Australasia and South Africa (which may be parable at sight, thirty, sixty, or ninety days after sight, according 58 ·6 Book-kecping and Accountancy." to arrangement). In such cases these bankers' remittances should be treated as bills receivable. As such bills are issued b: banken abroad upon the London offices they are "fine" bills, and can be discounted at more favourable rates than trade bilis. Two such retum remittance bills are shown in the example on page 6 64.--Specimen Bills. The following examples of foreign bills are representative of those in common use:- 1.-Clean Bills: (1) bill suitable for collecting money abroad for kynnat to some one clse in tlie samc country. Xo.co. $750. Loviny. 1.1&ri? 19:4 . On derir mago this Firs: of Excl.ing (tle oric! sume terror and Liebung unpaid) to .> or mix orer, the sun of Sacr kurred and fourts Sarling at th:: curint talc of Exchange 03 day of payment, Value received. .1. L. LTD. To The Imerican ency, Bueros lines This bill would be indorsed on the back by A. B., Ltd., to the person to whom they desire to pay the money collected. It is a form often used by bankers for effecting payments abroad, the drawee being their agent or branch office. (2) Form suitable for drawing on Colonial customers to provide for fluctuations in the Sterling Exchange which have been marked during the last few years. specially in lustralasia and South Africa. It is equally suitable for foreign countries when the goods are invoiced in sterling instead of local currency. No. 261 1200. 135. Lusov 2nd Ari 19:4 Stam Imprese! Sixty dns after sizl: of this First of Ercha.Sicert of same teror and date unpaid) pis to The Jo Bart of {ustralasia or onder the sun ni Tabundred put is free skılırgs, Value received. Payable ar the enterung bank's elling rate on day of payment for dem.dr.* drafts on London. J. BULL & CO. To lesen. Culorial & Co.. Jelboume. * Or "for crity or a cery days szbt drabs os Lorden lette tecer ... by means of which the proceeds !l be replied in London 52 ·Reference Library of the Bennett College: This bill would be handed to the Bank in London to be sent for collection and when paid at maturity to the Bank in .lustralia, the proceeds would be remitted to England by another bill payable at sight, thirty, sixty, or ninety days after reaching London, according to the requirement of the clause inserted in the bill sent out. B.- Documentary Bills :- (3) A " Documents on Payment ” Bill. را .(S 3 LONDON, zri april 192.4. linely days ifter sight of this first of Exchange (icond and Thin of same date and tenor unpaid) pay to us omnis spingisc.ngos? Por our order the sum of Three inred pounds, Value relived against B.C.L. | 52.56-5 cases of Leather Goods per S.S. "Castle" and place to account as advised. Documents against payment. A. SIIPPER & Co. Tu Mers. J. Botha (U., Cape Town, The Exchange Clause shown in the preceding example is often included also. This bill would be indorsed thus:- Pay to the Bank of Africa or order A. Shipper & Co. (4) A“Documents on Acceptance" Bill with interest clause:- Yo, 20% £500, 10s. 3 LONDOX, th:1pril 1944 sy Thirly days after sight of this first of Exchange (Second of the same date and tenor impaid) pay to tie order of The (hintereil linnk of India thesum of Fire lundred pounds for Shillines Sterling payable at the dwing rate of the Charlrc/ Bark of ludia for demand drafts on London, with interest at SA'Vt per cent. per annum added thcreto from date hercol to approximate due date of arrival of remittance in London, value received. Documents against acceptance. A. Sull'PER & CO. To Vir:58. Wijer Bros., Kirchi. The documents usually attaclied to documentary bills are: Invoice, Statement of Account, Bill of Lading, Marine Insurance Policy, and (less frequently) ir Letter of Hypothecation to the Bank, 60 ·· Book-keeping and Accountancy” Chapter VI 1) BILLS PAYABLE 65.--Methods of Settling Accounts. It is customary in some trading concerns to settle accounts for purchases by means of Bills Payable, although in many kinds of business, except for forcign transactions, this mode of settlement has diminished considerably in favour of the more ubiquitous cheque. Where, however, a trader effects payment by means of a bill, his creditor draws a bill upon him and sends it for his" acceptance, or hc himself may draw a bill in favour of his creditor, write his "acceptance " across tlie face of the bill and send it to the creditor, who will sign it in just the same way as if lic lad drawn it himself. On " accepting " a bill the trader undertakes to pay the bill on the due date according to its tenor, and full particulars must be entered in the Bills Payable Book immediately on acceptance, and before the bill is returned to the payec. 66,-The Form of the Bills Payable Book is rather similar to that of the Bills Receivable Book, and the specimen ruling on page 62 is the form in most general use. in the first two columns tle date of acceptance and bill number are entered. The next three columns show:- (1) The Creditor. (2) The Drawer. (3) Thc Payce. The first name entered is that of the creditor whose account lias to be paid, and this person's account is debited with the amount of the bill by posting it from the Bills Payable Book. The second name column is for the name of the drawer, and is usually the same as that in the first column, viz. the creditor. The next column states the payee's name, and this aguin is generally the sunc as the drawer, i e. the creditor. Sometimes, lowever, it is a third person; thus instad of the creditor drawing the bill in this way: -- Three months after datc pay me or my order one hundrel pounds, Valuc received. .1. Darr (thic Creditor). TO J. Bull (thic Debtor) Liverpool 61 ·BILLS PAYABLE ROOK l'ayec. Where l'apılle. Dic of 1ll. Ton 11:01 Bitch. 17211er. Tenor. Icilger Folio of icrorint ocbiteri. 1:0 Darc. .mount. kemarks, Girnilal. Bill. ܪܐܐܐܐ Mar 1 (J. Ross J. Ross J. Ross 10-5 City: Bank Jas 12 month July. 2.1. 12.1 utier datej 1925 67 18 M. Ruites .11. Reales T. Black 17 250 ۱) او 3 m'. 1.10. 201.1:. 527 1925 62 Reference Library of the Bennett College: 13 .. Dare .. Dare F. Brown 18 1,1.. 7.1 13 29 I month June 21 1925 E. Bolto. E. Bell & Co. E. Bell &: Co. 30 5 m,'s 200 1.1.. 32 19 0 0 Voi, 2 1925 Total for month 1.... 83 £500 15,3 The grand total is posted to the credit of the Bills Payable Account in the Impersonal ledger; and the amount of each bill to the debit of the persons named in the first column, in their respective accounts in the Bought Ledger.

·“ Book-keeping and Accountancy" fic mught desire the amount to be paid to some one else to whoin he is indebted, in which casc hic wouki dimail thic hill thus :- Three months after date pay fr. F. Droi'r or order onc lmnureil pounds, Valne received. A. DARE (Crelitor). To J. Bull (Debtor) Liverpool. In this instance F. Brown's name would be entered in the third or" Payce" column. Thic remaining columns are self-explanatory, For thic present it is only necessary to add that a day or two before the bill is due for payment tlic Bank slioukl be notified and instnicted to meet i.e. to pay) tlıc bill on presentation. 67.-Posting the Bills Payable Book. Each individual item in the Bills Payable Book is posted to the debit of the creditor's personal account in the Bouglit Ledger. The double entry is completed by posting the total of the Bill Book to the credit side of the Bills Payable Account in the Impersonal Ledger. On the duc date of cach Bill Payable the Bank having paid thc amount, it must be entered in the “ Bank" column on the crcdit side of the Cash Book, from whence it will be posted to the dcbit of the Bills Payable Account in the Impersonal Ledger. The entries in the Cash Book and Ledgers of the items shown in the specimen on page 62 are as below:- (1) In the Bought Ledger. J ROY, 10 kg Street, Lecds 1925 Mayl: 'To Bill Paye able. • 1.. +31 67 126 ITO KLLITI Portland Street, Sicffield 10:3 May (18/'Io Bill l'aj. able. P.1. 45250 oloi 03 ·Reference Library of the Bennett College : 1. R., 3 kez on Sreci, Live! Dr. mon 1923 Y IS TO Bill i E HELL, C. Castle Square London 1925 *** las To Bill 1:1. able. () In the Cash Book. The items would actually appear on difierent folios as each daie of payment falls due. (Showing credit side of book only.) -- June 21'ls Bible1.1. Tres .1.1. S3 U. Kans! 1.1. Rub.i. Sz Vox, Uprato.) 1.1.S 45 a 6 .SR ܚܐ.ܐ 230 (c) In the Impersonal Ledger. 111.1.S 1.11.1BIE ICCOUNT ... 1423 Jigs . Hy sanities, 12:50) C. Pilaille . : ....STO. Riziis) ir 70 3300 T: (1.. 1:30:1, Cilie 200): ( sies Xo:-!.:!:shown and, iesing to the biils puid :17: 31::!.. 77it is irrä сmici crni radio izle is rich monn aithonia 04 ·1 may be Book-keeping and Accountancy 68.--Cheques. A chequc is legally defined as a bill of exchange drawn on a banker payablc on demand, and most of the provisions as to bills on demand apply also to cheques. When a chcquc is drawn the name of thic payce must be entered on the credit side of the Cash Book, the amount bcing placed in the "Bank column. Any discount allowed by the payee is entered on the same line in the " Discount " column. fliesc cntries arc thien posted to the debit of thic appropriate account in the Ledger. Cheques received arc entered in the Cash Book on the debit side, from which they are posted to the credit of the account concerned. Where they are paid into Bank on the day of receipt the entry is made in the Bank column of thic Caslı Book, but where this practice is not observed the Caslı column should be debited first, and then when the cheques are paid into Bank the Cash Account is credited and Bank Jebited. In practice, tlic first nethod should always be adoptel. 69.-Negotiated Cheques. Cheques received used for payment of accounts by negotiating them to a creditor, instcad of their being paid into the Bank, but such a procedure is very rarely followed. When a cheque is so dealt with, however, it is cntered in the Cash Book in the Cash column on the debit side, and again on the credit side, also in the “Cash" column, specifying the name of the transferec, wliose account is dcbited as in the case of a cheque drawn. If the chequc is payable "to bearer no indorsement of it is necessary, but if payable " to order" it inust be indorsc and signed before being sent to the transferee. A cheque which has been restrictively indorsed, or crossed in a manner to make it no longer negotiable, cannot, as a rule, be used in 70.-Crossed Cheques. An uncrossed cheque can be cashied over the counter at the Bank, but a crossed one will not be paid to any one but a banker, i.e. through an account with the Bank. Crossing may be done in various ways, but for a general crossing the necessary feature is the drawing across the cheque of two parallel lines, whether or not the words " & Co.," "Not 'negotiable," or "Account payce only " are added. A cheque is crossed specially if the name of a Bank is written across the cheque, with or without the parallel lines, and with or without the words mentioned in the previous paragraph. 65 < 3 tliis way.

·Reference Library of the Bennett College: EXAMPLES : General Crossings :- Co. !!0t negotiable ac lace only 1100 negotiable it'e Pilyec only Special Crossings :- Rank of Liverpool The Midland Bank Ltd., Leeds Lloyds Bank Ltd., Hull not negotiable National Bank Lid. ac Pryce only Bank of lustralia not negotinble Thc crossing is a material part of a cheque and cannot be removed or altered except that (1) A general crossing may be altered to a special one, by a holder; (2) "Xot negotiable” may be added to any crossing ; (3) Either crossing may be crossed again by a banker specially to himself, or to another banker, for the purpose of collection only. A special crossing can never be altered to a general crossing, and any alteration, except as above, makes a cheque void, unless initialled by the drawer liimself. Money orders and postal orders can be crossed, although they are not negotiable instruments, and any such crossing necessitates their being paid through a Bank. 71.-Indorsements are not necessary on bearer cheques, but they are essential on all order cheques. An indorsement should be written on the back, exactly as the name appears on the face of the cheque, even if misspelt, adding, if desired, the proper signature. EXAMPLES: Pirror. Birbys, 1:. Ir:dorsemer:t. Jolin Pull or J. Ball. T. Poberts (surume only is insufficicnt). E:he1 Roberts or ti. Robortis 66 ·Book-keeping and Accountancy” >> Mrs. John Roberts, R. Smythe (misspelt for E. Smith). Jr. and Mrs. Robert Ves, Bull.Vn L'ull & Co., Ltd. Ir?r?front. Lihci Roberts wile or foli Rolytis. I Sythe A Smil.. John Robarts Loch som Ethel Kolytaj Hull Son. Tur Bull Co, Lid., Tom Jore, Secretary (or her official authorised), Sianture of the draer(») Tom Jones recusor of J. Bull; or For Sclf and co-executors of J. Bull, Tom Jones, For J. Bull Tom Smith Trustees. Fred Brown (.111 the trustees to sign) Sul or Sulses J. Bull (nos decuaxu). 'Trustees of J. Bu!l. 72.-Dishonoured Cheques are those returned unpaid for any reason, such as for: irregular indorsement; irregularly drawn, e.g. words and figures disagree; indorsement irregular; alteration not initialled ; cheque mutilated : post-dated or payment stopped; NA--no assets; S, E-no effects; RD-refer to drawer; I.F.-insufficient funds; no account or account closed; stale cheque (ie. usually one which is, say, more than three months old). Such cheques must be entered in the Bank column of the Cash Book on the credit side to agree with the passbook, and so that the amount may be posted to the debit of the customer's account as a contra to the amount credited when the clicquc was received. 73.-Revocation of Banker's Authority to pay takes place by countermand of payment, by notice of his customer's death, insanity, or bankruptcy, and on receipt of a gamishec order, which ties up the whole account until the order is discharged. POST-DATED CHEQUES BOOK 74.-It not infrequently happens that a post-dated cheque (i.c. a chcquc bearing a later date than the current date) is received in scttlement of an account Payment cannot be obtained until the date of the cheque, and therefore such cheques should 67 ·Reference Library of the Bennett College: not be entered in the Casb Book until due date. Where many such cheques are received a Post-Daied Cheques Book is desirable, 2 suitable ruling oi which is as follows: CA Photo ! 1 510 S130 1923 21 DaxCod July 29 5.1.62 192 Berkca 2S 36: 297,24 ، تا .::::: u. 3.5.1.23 1924 102/100 Toalíc Sodh £110 011179 106 1.1. SS is in the case of Bills Receivable, each item is posted to thecredit of the customer's personal account in the Sales Ledger; the total of the " Discount column is debited in the Discounts Account, and the total of the "Amount" column is debited each month to the Post-Dated Cheques Account in the Impersonal Ledger. ils ille cheques fall due they are entered in the Bank” column un ilic debit side of the Cash Book, and from there credited to Hic Post-Dated Cheques Account, in exactly the same way as the Bills Receivable entries are treated. By recording the date cheques are banked, in the Remarks" column, ibe risk of overlooking the paying-in of cheques at the proper date is reduced. Where post-dated cheques are not numerous they may be entered in the Cash Book short” of the money columns, and on due date re-entered, extending the amount into the “ Bank column of the Cash Book. Where this procedure is adopted there is no need for a Post-Dated Cheques Account in the Impersonal Lcuror, and the debtors' accounts are credited direct from the Casli Book in the ordinary war. 75.Stamp Duty. Cheques are defined by the Bills of Excinnge Act as bills drawn on a banker payable on demand, and they must bear a twopenny stamp. Doubts have been expressed as to the validity oí a post-dated cheque for an amount exceeding 10, owing to ihes:ampon i being only tropence. The mere fact that 2 cheque is poat-daitd dos not invalidate it, for Section 13 of the Bills of Exchange ct authorises a bill or cheque to be ante-dated, ·Book-keeping and Accountancy” post-dated, or dated on a Sunday, but it is argued by some that a post-dated chequc for an amount over £10 should bear an ad valorcın stamp. It should be noted, however, that a bill or choquc cannot legally be stamped after execution, i.c. after being signed. without liability to a penalty of £10, except that the twopencc duty on a chcquc may be affixed by a banker only, and the appropriate British bíll stamp may be affixed to a bill or cheque which las been drau'il abroad when it arrives in this country. Owing to the fact that no cause for action can arise on a post-dated chequc until the stated date arrives, and as the cheque would then be properly stamped, the legal difficulty as to stamp duty does not seem to arise. THE JOURNAL PROPER 76.--The use of the Journal, as the sole subsidiary book in which practically every transaction was entered for posting to the Ledger, has been described in a previous chapter. In this country that method of using the Journal has practically disappeared, although on the Continent the system is compulsory, and there the Journal is recognised in the Courts as the most important account book. The Journal proper is retained, however, in modern accounting, but only for such entries as are not suitable or convenient for any other subsidiary book of prime entry, for tlıc uniquc value of the Journal is that it can be used for recording any transaction whatcver, however complicatcd or unusual. Thic present use of the Journal is for recording the following classes of entries :- (1) Those necessary for opening up a set of books at thic comincncement of a new business (2) Adjustincnts and corrections of figures appearing in the Lodgers. (3) Transfers of items from one Ledger Account to another, or between Ledger and Ledger. (4) Transfers of the Balances of nominal accounts to tlic Trading and Profit and Loss Accounts, and other similar items which fall under the general description of " Closing Entnes," and which are made at the end of each financial yair or accounting period. (s) Any items which cannot be conveniently entered in tlic other books of prime entry. It should be noticed that all the above entries could be made directly in the Ledger concemed, without the use of the Joumal ; in fact, in many businesses to-day this special use of the Journal 69 ·Reference Library of the Bennett College: is ignored, but nevertheless it has important advantages which make it a desirable adjunct to any set of account books. Thus, the mixed class of entries which transfers and adjustments involve are not easily referred to, or traced in the Ledger once they have been made, whereas by passing them through the Journal they are preserved in compact form, and in the order of date in which they occurred, this being information which is valuable in many unexpected ways. Examination candidates must always use the Journal for the purposes specified above, unless time does not permit. The appended example will show the method of making (tries, and two points should be noticed. Firstly, a brief narration" should always be given for every entry in this special Journal, so that its purport may be readily understood at a subsequent date. Secondly, where a transaction involves several credit entries counterbalancing a single cntry or several on the debit side, or vice qersh, such entries are preceded by the Word Sundries," as shown in the specimen Journal entries of the following items. ITEMS TO BE JOURXALISEN (l'he nature of the items, and the procedure for arriving at them are dealt with in the next chapter.) July 1. J. Queen commenced business with the following Assets : Cash 1900 ; Stock-in-trade $525 ; Dohtors' lccounts, F. Moss £25; 11. Wells 530; Bills Receivable $100. (In all 11580.) .Ind took over Liabilities: :lccounts owing-S. Dawson (200; 1. Dire 126 : Bills Payable £134. (In all £360.) (X07. The clifierence between the Assets and Liabilities above is ... Queen's Capital, viz. f1220. July 7. 11. Wells' Account proves to be a bad debt and {30 is to be written off. Nuri --- Bad Bebts.Iccount must be debited srith this loss and 11. Wells' Account must be credited, thus balancing his account.] Dec. 31. The fullouing balances of luminal Iceounts to be transferred: (1) In the "Trading lecel": Purchases Account 1225 (Dr. balance); Sales crunt 1050 (fr. balance). Also Opening Stock 15-5 (I)r.) and Closing Stock 1550) (Cr.). (ii) to like " Profit our loss account": (a) Crirlit lakavicos.com Blincount: 149; the balance of the Trading lccount 1450, representing Gruss l'rufit. (7) Dehil 1.?ances-Salaries (150; Espent's account 150 ; Bad Debts.lccount (30. Dec. 31. Transfer the momt of Vet l'rulit (201), as shoun ly the Profit and 1.1- Acant, to the Capital Account i.e. debit Profit and Lorsikcional, artit Capital. 70 ·"Book-keeping and Accountancy” JOURXIL 4 3. u. J. 5251 100 o o 19:4 Jay 10 Sundries. To Sundrin Cash Stock Account f. Mas II. Well, Bills Receivable S. Dawson A. Dare Bills Payable Capital Account Por issets, Liabilities, and Cap. ital on starting business. July 7 Bad Debts Iccount To H. WILS For amount written off bung irrecoverablc. Duc.13! Trading Account To Sundrics :- Purchases Account Opening Stock 18th Jay For balances transferred. INO 0 2010 13:00 122nloo mo 750 ( (3 225 525 1202010 Sundnes. To Tradin .lccount. Sales Account Closing Stock 3-4 Dec 1944 I or balances transferred. O (> 55"; 150 I'rofit and lurruunt. To Sundnes Salaries L'xpenses Bad Debt For balance tr ferrel. 300 prololo 450 ( Sundnes. To Profit and lins.Iccount Trading Account Discounts Account For Gross Profit and Di-counts transferred. Profit and Loss Account To Capital Account For Net Profit for penod ending 31st Dec. 1924 transfemd to Capital Account. colo, 54549 01 +445471010 71 ·Reference Library of the Bennett College: The use of ihc Joumal proper is of particular importance when the Ledgers are kept on the “self-balancing” system to be explained later. The chief features of the most usual books used in double entry book-kecping have now been described, and in the next chapier the method of arriving at the results of all the transactions recorded in the subsidiary books and ledgers will be dealt with. 72 ·Book-keeping and Accountancy" Chapter VII THE FINAL ACCOUNTS. 77-The transactions which take place day by day arc enterer! with regularity in the appropriate subsidiary books as already described, and from tliese are posted into the ledger accounts concerned. By this procedure a full and classified account of all thic transactions is recorded, whereby the trader can ascertain low inuch each of his customers owc him, and the amount lic owes to cach of liis creditors; in addition a record of his various expenses, losses, and gains is also made available for his information. The preceding chapters explained how these classified accounts arc built up, and the present cliapter describes how the trader may learn the combined result of all the transactions in relation to lis own financial position, and see wlicther lic has added to liis capital or not, and whether he has made a profit or a loss on his trading. Such information as this could be supplicd at any timc, but as a rule it is only required at fixed intervals; sometimes monthly or quarterly, but more usually every six or twoke montiis, as in large concerns the labour involved is very considerablc. In order to learn tlic result of carrying on a business during any selected period Trading and Profit and Loss Accounts ille prepared, and these are known as the fival Accounts. The financial position of the business at the end of that period is shown in a summarisc statement called the Balance Sheci. 78.–Stocktaking and Balancing the Books. On thc last day of the selected period the actual value of the remaining stockin-trade must be ascertained carefully. This will be done by the management as a rule, the resulting valuc being given to thic accountant or book-keeper to be brought into the accounts. One important point may, however, be mentioned here. The stock should be valued at cost, or at present market values, whichever is the lower, the reason being that it is not sound finance to anticipatc profits, c.g. when market prices are lugher than cost prices, whereas probable losses should be reserved against. Having made sure that every item has been entered in the subsidiary books and posted to the Ledger, the first thing for the book-keeper to do is to extract a Trial Balance in order to verify 73 ·Reference Library of the Bennett College: ile arithmerical accuracy of the accounts. If the Trial Balance areas, the compilation of the Trading Account (which rereals the gross profit or gross loss) and of the Profit and Loss Account (which shows the nei profit or net loss) may be proceeded with. 79.--"Closing the Books. At the end of the selected accounting period, usually the end of the financial year, the .iccounts are closed," which simply means that all items to be taken into consideration have been duly entered, and the accounts which concern the Trading and Profit and Loss Accounts are closed by iransierring the balance of each io the latter accounts. After these transfers have been made the Balance Sheet can be prepared. These matters will now be dealt with in order. SO..The Trial Balance. The balance of each account is Hicred in the Trial Balance, the debit or credit balances in the itser appearing in the same position in the Trial Balance. The advantage of using balances only for the Trial Balance, instead of ibe totals of the orbits and credits of each account, is that the Telative position of the accounts is more readily seen, and the figures are more easily dealt with when preparing the Closing Entries and Balance Sheet. Where accounts have been ruled off and show no balance, the name of those accounts need not be included in the Trial Bilance In addition to the balances of the ordinary Ledger Accounts it will be found that the balance of cash in the office and at the Bimb, as shown by the Cash Book, must be included to secure an agreed Trial Balance, thus emphasising the fact that in reality the lish Buok is but a separately bound Ledger Account. Unless sperial adjustments have been provided for, to make dhe Ledgers " self-balancing ” (to be described later), it will be noticed thai all the accounts must be included in a single Trial Balance, irrespective of which Ledger they appear in, thus demonsirating the complete inter-relationship of all the accounts and the compleitness of the double entry system for providing a valuable check on the aritimetical accuracy of the books as a whole It will be useini liere to demonstrate the procedure of extracting the Trial Balance of a set of accounts as presented below: III:slion, The accounts of J. Bull. (a) For convenience it has been assumed that the books have not bien closed since 31st December 1923, and that all the transactions between then and Ist December 1924 are shown as wvials brought down in the form of ances on that date.

·C.ISH BOOK (The hcarlings are not usually inserted) Dr. link Discounts allouer! Dite. I'ayments. Cavi. Icount Kercima! Date Receipt 1924 192+ Iec. PU TOUUOOOOO 22; 10 O 1 To Balces 10 I turc (on Account) 15 Toll Recenable ( Ven) 20 To Bank to taste Wilson .. Mucenia 28. II Wells win. Tini Disukus in the 6 39,10. Darc ► 1 1509) Olo “ Book-keeping and Accountancy" O 75 2 5 ? '| 1007 $ 5, Dee B'y J. Nach II 1.. 2 l'ages 122 Sartage on Vateral S 33 31 o! 1710 .. Ilella lo 6 Othce Stationery hl. 17 150 Triclling 1.xpenses 3 S: 13 · Wares 0 10 L. 91 ...Voss & Sons 22/1610 151520 RI 11.4 20. Vull fraxing a c) 1.3 > 3..11 link to all . 5 6 Wages Potre 1.L 17 5! OO lleu Co. 12 TOO Kell lwyable (!, Thorne & Sons) Ily lire Insurance 1.1, 30. Traselling I'xxcom iliy 1. i retor a Car RI. 16 30169 Salaries 5.1.6 Curtiwe. I. 6 107 6 }lank Clarges II.SI Balances 3 G 14+ 10 4200), 2:6, s. 17, 11111091435), 201233757 L03) 11.1. (13) 1 Jio 1.1. 09: 32 ) titolo 2106 25] 7 ) 2010 1 1925 Jan., to dla mnie 10 j 1530 3 *** ·Reference Library of the Bennett College: (1) The totals of the subsidiary books for the month of December were :- £ s. d. Bill, Parablc Beuk. 190 0 Bills Ricciablc Book 6 Nctums Outwards Book 22 19 0 Sales Booli 1700 0 Ritums Inwaris Bok 25 IO 6 Purchases Bool: 34 3 Post-Dated Cheques Book 50 IO 6 850 9 0 The postings of these totals are shown in the proper accounts; the individual items in each of the above books are assumed to have been already posted. (c) The Cash Book entries for December were as stated on the previous page; the postings of these are shown in thic accounts concerned. PRIVATE LEDGER J. III. C.VITAL ACCOUNT 11r. Cr. 1924 Hec, By Balance brought fortard. 111.0001 1516 onoi 156 1. BL1), DORINING .ICCOUNT Cr. - 1 1 1 1 1 1 . Carthy 100 150 6.1. 99 FREEHOL) PREMISES, 119 lion Street, E.C. Dr. Cr. lo B2C is:O:::::: d. 10 AUS- ·“ Book-keeping and Accountancy.” STOCK ACCOUNT Dr. Cr. ! s. 19:41 Jan. To Rilince (Stock 31/12/23) > 2 1,10 5 IMPERSONAL LEDGER I'URNITURE IND IUITINGS 192 Dec. Lo Riune 18 106 BILLS P.IX.IBLE Dr. £ 1924 sid 252 192. Dec. 23 in Cash (F. Moss Sons) 을 KP 9) oo By Balance Sundries | as per Bills | Payabia Imxol 190 Oo BILL-RIC LNB Cr. 후 1924 £194 Ilic, illo Bilance 573 Ol) 8 (ah 31 Sundries 11. 111 13 per Billy Kecelable Jlook PK 399 850) ·Reference Library of the Bennett College: Impersonal Ledger (contd.). POST-DATED CHEQUES Dr. Is... 192.1 Dec. 31To Sundries 225 per P.1). (1091101.1),!:. Bouki 20 50 101) TURCHASES ACCOUNT Mr. Cr. licc. 11 31 To Balance 911 |136 Sundries as per Purchaises Book 1.11, 741 434 310 RETURNS OUTROS Dr. . 1924 Dec. By Lalance. 131 Sundry Keturus R.11.2+ 97 99 22 190 SUES ACCOUNT 1924 })cc. il By Balance 3,3619 1 Sundries iles Sales Book $.1., 71,70010 }{1}{SS UNIJIRIUS Cr. jo 1012 lir. Toliance Simdi is por Rea ItiIIS 2.4 11.2023 loo 78 ·"Book-kceping and Accountancy” JASURICTURING J5Gs Dr. 1024 Nee, To Malance 11 3. Cash * s. d. 02 tot 131 00 10 > Oo 31 01 17 C.R. 99 C. 13.) .C.1!. ) C.I.) 10) $7 +) D 1 11 5.1LIRIIS 1921 Dec. 1To Balance 31 Casli 03:) 231 21 DISCOUNTS Cr. G.. 411816 192.1 Dec.31 To Sundnes 25 per Cash Book. 1924 Dec. 1 B Balance 31/1g Sundries as per Cash Boxcih 1 (B9) +7 10 11 10 9 CIRIIGI. (IXW.IRIS) 1924 Ikc '10 Balance Cash 331 33 u! 210 5 COX) 71 (IRRIIGI (OUTHIRD ) Cr. 1921 Inc. le Coh to o 79 ·Reference Library of the Bennett College: Impersonal Ledger (contd.). GENERIL EXPENSES Cr. Dr. 192., Ik to Balance (ishi 1231100 10 010 (l'ostage) 5 BAD DEBTS ACCOUNT Cr. 192) Dec. 28To ll. lleuls e Son 1. 21 BANK CHARGES Dr. Cr. 1924 Dec. 33 To Cash C.B. 99 INSURANCES Cr. 1024 Dec. 2170 Cash C.1.99 71016 TRAVELLING EXPENSES Dr. 1}.c.) Sto Cash well, 99 C.1.99 1016 So ·“Book-keeping and Accountancy” REPAIRS ACCOUNT Cr. #sld. 1924 Dec. To Balance Too! o SALES LEDGER M. QULEN & CO., 19 Fernaorthy Road, Devonport Dr. Cr. 1924 Dec, hos.de To Balance SB 70 34 15. Goods 123) ojo is d 1924 96011213 Icc. 12 By Bill New ceivable, duer 700 olo 15'1,25 39 R.! 16 By Returns 20 CIL Cash CI Discount P1 23.106 609 716 90 15126 91 P H. WELLS & SOX, ; Moor Lane, 1°C. Dr. Co. 1924 Dec. 1 To Balance s. 1d 1924 100 OoDec 28 By Cash, Final Dividend 5 C.L in the $ 9) By Transfer to Bad Debts j 1'c 21 23/ oo 5 75] O o $1000 410000 O F 81 ·Reference Library of the Bennett College: Sales Ledger (cont..) :- 1. DARE, 173 Great Ox?ord Street, E.C. 102 Dec. 1 to balance 37 00 s. 16.1927 2010 o|Dec 10 By Cash and Discount on C.N. lccount 99 C.E. 09 CR, Discount 99 ? 30 By Cash 2071310 5 616 5250010 525000 STA 10211 Dcc. 23 To Goods 70 szolo 1924 0.Dec. 11 By Post-Dited Cheque due 11:1923 150 | 10 | WILSOX & CO., King Stresi, Slough Dr. Cr. 10.45 Del. To balance c. c. 1924 Szoo Dec. 23 By Cash S2S1510 99 CI, 99 92 Discount I 1 510 850100 18500 O SMITU DROTHERS, Shrersbury Dr. Cr. D)... To Rilinc: s. 2. 1924 725 916 Dic 211By Bill Re ceivable duer.K. 219:5 3957231916 To listen 2100 ·“Book-keeping and Accountancy” F. HOWARI), High Street, Liverpool Dr. Cr. 1924 Dec. 1 To Balance 1.4. 4751 Olo - BOUGHT LEDGER 1. FACTOR & CO, City Raid, ".. Cr. 1924 Dec. 29 To Cash £s. d. 1924 585 183|Dec. 1 By Balance 520 OG C.B. 99 CR 99 Discount 30 1619 Goods 3 » 19 no 2016 56161510 661615) 19241 Dec. 2o By Goods - 71 ( 4207, 66 J. BLACK, Moorgate, r.C. Dr. C.B. s.4.1924 1921) Dec. 3 To Cash 25 | 26|Dec. By Balance 35 F. MOSS & SONS, 16 Central Raud, C.C. Dr. Cr. 1924 CE s. ld 1924 Dec. 12 To Cash 99 2211610 Dec By Bilance 24100 Discount 1 199 7) o 524 olo 4241010 T! 72420) o 0 1974 1924 Dec 23 To Bill Pay. Dec 29 By Goods able duc BP. 20/1/1925 22 £19000 S3 ·Reference Library of the Bennett College: Sales Ledger (contd.):- A. DARE, 175 Great Oxford Street, E.C. Dr. 1925 Пес. i To Balance 37 OO £s. d.1924 2500 ol Dec. 10 By Cash and Discount on C.B. Account 99 C.B. 30 By Cash 99 C.B. Discount 99 20711316 51 616 3 > 525000 $250 00 S.B. 192. Dec. 23 To Goods 701285010 1924 o Dec. 11 By Post-Dated Cheque duc 11/1/1925 £50 10 6 WILSON & CO., King Street, Slough Dr. Cr. 19243 Duc. To Balance £ s. 4. 1924 S3010 Dec. 23 By Cash € Sid. $28 150 C.B. 99 C.B. 99 Discount 21 510 £850100 £850 00 SMITH BROTHERS, Shrewsbury Cr. Det To Balance £ s.l.1924 £s. d. 251916Duc. 21 By Bill Receivable duc P.R. 24/3/1925 .39 €7251916 30 Tos Guous 7-1415010 0 82 ·66 Book-kecping and Accountancy" F. HOWAKI), High Street, Lincool Dr. 1934 Dec. 1 To Balance +751 oo BOUGHT LEDGER A. FACTOR & CO., City Raid, W.C. Dr. Cr. 1924 £ s. 12.||1924 583 18 Dec. 5 By Balance 590 06 CN. Dec. 29 To Cash 99 C.R. Discount .99 30 1619 3. Goods 70 2G1416 5616|15) 6610150 P.I'. 1924 Dec. 20 By Goods 7420786 J. BLACK, Moorgate, E C. Dr. Cr. 1924 Dec 3 To Cash C.N. 99 sis. ld 1924 25 26 Dec. 1 Ily Iance F. MOSS & SONS, 16 Central Road, C.C. Dr. Cr. 1924 Dec 12 To Cash £ s. 1d.|19241 22:60 Dec. 5 24100 1 By Balance C.B. 99 C.11, 99 Discount I40 131 634 00 Ezilole 192. 19241 Dec 23 To Bill Pay- Dec. 29 By Goods able duc BP. 26/1/1925 22 5190 00 72,2 20000 83 ·Reference Library of the Bennett College : Bought Ledger (contd.) BELL & CO., Manchester Dr. € € 1924 Dec. R.O. 24 s. d.1924 22 19 Dec. 1 By Balance s. d. 275 1016 3 To Returns C.B. ܕܕ ܪ Cash 99 2116 C.B. Cash 99 4 237 100 C.B. Discount .99 2 Ioo £275 1016 £275 1016 Making a Trial Balance of the above accounts in the Ledgers, and using only the balance of each account, the accuracy of the figures posted is established as shown opposite. It is customary in practice, before extracting the Trial Balance, to total each account and show the deduction of one side from the other in small figures in the date column on the greater side of each account; the balance is thus more readily extracted. It is usual to write these figures in red or green ink, in order that they may be more readily distinguished. [NOTE._ In examination exercises the various Ledger Accounts are not usually grouped as shown above and in the Trial Balance opposite; they are presented as if all the accounts appeared in one combined Ledger. This is, of course, quite immaterial. The present example is dealt with in the manner usually followed in actual practice, except that it is customary to extract the balances of all the accounts in each of the Ledgers into separate lists, the totals only of which are then shown in the Trial Balance, instead of burdening the latter with the numerous detailed balances of each Ledger.] 84 ·" Book-keeping and Accountancy" TRIAL BALANCE, 31st December 1924 (Thic Accounts arc entered in the order in which they arwar in the Ledgers. The folio of each should be shouti, although omitted Introw.) lolger Account Private Ledger. $ d. $ (: 56 J. Bull, Capital Account J. Bull, Drawing Account Freehold Premises Stock Account 125 6 0 1.920 5 Impersonal Ledger 180106 2 1,199110 50/70/61 1,31816) 1201 819 5.00 :19 56 3 0 Furniture and Fittings Bills Payable : Bills Receivable Post-Dated Cheques Purchases Retums Outwards Sales Account Returns Inwards Janufactunng Wages Salaries Discounta Cartage (Inwards) Carriage (Outward) General 11pensas Bad Debts Account Bank Charges Insurances Travelling Expenses Repairs 455130 345117 42 S 3 4215 IO 124010 75 o IS ---- I(X Sales Ledger 7 6 1. Queen & Co A Dare Smith Bros F Howard 855 74919 1501 -75 Bought Ledger A. Factor & Co. F Hors & Sons Cash Book. Cash at Office Cash at Bunk 411,852 + 1,411052 * II Having thus verified the arithmctical accuracy of the records, the book-keeper can proceed to construct the Trading Account S5 ·Reference Library of the Bennett College : Bought Ledger (contd.):- BELL & CO., lanchester Dr. R.O. . £ 192: Dec s. 1924 22 |19) Dec. By: Balance s .. 275 106 31 To Returns Cash C.E. 99 M16 * C.P. Cash 99 237 IO O C.B. Discount 12 Joo 99 . 4275 106 £275 106 www Making a Trial Balance of the above accounts in the Ledgers, and using only the balance of each account, the accuracy of the figures posted is established as shown opposite. It is customary in practice, before extracting the Trial Balance, to total each account and show the deduction of one side from the other in small figures in the date column on the greater side of each account; the balance is thus more readily extracted. It is usual to write these figures in red or green ink, in order that they may be more readily distinguished. (Nor.-In examination exercises the various Ledger Accounts are not usually grouped as shown above and in the Trial Balance opposite; tey are presented as iſ all the accounts appeared in one combined Ledger. This is, of course, quite immaterial. The present example is dealt with in the manner usually followed in actual practice, except that it is customary to extract the balances of all the accounts in each of the Ledgers into separate lists, the totals only of which are tlien shown in the Trial Balance, instead of burdening the latter with the numerous detailed balances of each Ledger.] SA ·“Book-keeping and Accountancy” (2) The balance of an account may be incorrectly conicl into the Trial Balance, i.c. in amount, or on the wrong side. (3) An item debited in one account and the correspxndling crcdit cntry having been inadvertently postel to the dcbit instcad of the credit of the second account or rico tersa. In such mistakes the difference shown loy the Trial Balance will be donble the amount of the wrongly posted item; licnce it often pays to look for an item of half the amount of a difícrence. (4) An item may be wrongly posted to the Lediger from a subsidiary book, c.5. a dcbit of $20, IS, Sd. postel as {21, 8s., making an excess of debits of 1, 6s. 4d. A lit so posted would cause a difference of A1, 6s. 1d. short on the debit side, or, in other words, an excess on the creclit side. (5) A wrong addition in a Ledger Account or subsidiary book, or a mistake in the subtraction of one side of an account from thic otlier. (6) An item or items not posted at all owing to having been overlooked. Omissions of this kind and also incorrectly posted figures are usually traced by " calling back" the postings. 83.- The Trading Account. The next step is the preparation of the Trading Account, which revcals thic gross results of trading for the period under review. In other words, except in the unusual occurrence of gross trading receipts plus the stock in liand at tlie end of the period cqualling the gross trading cxpenditurc plus the stock in hand at the beginning of the period, the Trading Account slows the amount of Gross Profit or Gross loss. Tlic Trading Account does not include gains and expenses connected with gencral management, nor any expenses except those affecting the direct cost of the goods dealt in The principle underlying the Trading Account may be illustrated in this way : 5 Assume the commencing stock to be dal value at cost of goals purchasedl dunng the pertexi (allouing for retums). 1228 79 3148 129 Deduct actual stoch left on hand at the end of the trading penol (ay) 152S 2 Then the cost value of stock disposed of is the difference, i.e. Assuming the total sales (less retums) to be 5005 There is a Gross Profit of 13354 10 6 IO2) 5 0 . 1620 70 O 0 6 87 ·Reference Library of the Bennett College: and Profit and Loss Account. It is advisable to notice here, however, that the agreement of the Trial Balance is not proof of complete accuracy in the Ledgers, because there are classes of error which it does not reveal, as follows: 81..Errors not revealed by the Trial Balance. (1) There may be “Compensating errors"-e.g. f15 posted as £50 on the debit side of an account would not be revealed if, say, two other accounts showed a cortesponding excess credit amounting to the difference, £35; as, for instance, £20, Ss. posted as £28 in one, and £52, ISs. posted instead of £25, IOS. in another. The crrors compensate or balance each other. (2) Omission of either a debit or credit entry might be balanced by the effect of other figures omitted or posted wrongly, in the same Ledger or another book. (3) Amounts may be posted to the wrong account, or in the same transaction the amounts may be posted to the wrong sides of the two accounts concerned, and such crrors would not interfere with the total balances of the Ledgers. (4) An crror in a subsidiary book, e.g. £ro short cast in the Sales Book, may be set off by an error in another subsidiary book, c.g. £10 short in addition of the Purchases Book, or £10 overcast on another page of the same Sales Book. (5) Transactions omitted entirely, i.e. from subsidiary books and ledger accounts. In none of these cases would the Trial Balance reveal any crror, but if the Trial Balance show's no difference it is usually assumed that the books are accurate and the closing transfers can be proceeded with. 82..The Discovery of Errors when the Trial Balance does not agree. Unless there is an crror in the accounts the Trial Balance must show an exact balance of debits and credits, and the book-keeper should not proceed further until agreement has been secured by the discovery and correction of any error. difference of a few pence may be the result of serious unrevealed mistakes of large amounts. In case of a difference, the following are some of the sources of crror which should be investigated when searching for mistakes-- (1) The omission of the balance of an account, more particularly the balances from the Cash Book. 86 ·Book-keeping and Accountancy" (2) The balance of an account may be incorrectly copiei into the Trial Balance, i.e. in amount, or on the wrong side. (3) An item debited in one account and the corresponding creclit cntry leaving been inadvertently posted to the dcbit instead of tlic credit of the second account or site vcrsa. In such mistakes the difference shown by the Trial Balance will be double the ainount of the wrongly posted item; hence it often pays to look for an itern of hall the amount of a difference. (4) An item may be wrongly posted to the Ledger from a subsidiary book, c.g. a dcbit of $20, IS. 81. posted as £21, Ss., making an excess of dcbits of £r, Os. fd. A credit so posted would causc a difference of 1.6.4d. short on the debit side, or, in other words, an excess on thc crcdit side. (5) A wrong addition in a Ledger Account or subsidiary book, or a mistake in the subtraction of one side of an account from the otlicr. (6) An item or items not posted at all owing to having been overlooked. Omissions of this kind and also incorrectly posted figures are usually traced by "calling back the postings. 83.---The Trading Account. The next step is the preparation of the Trading Account, which reveals the gross results of trading for the period under review. In other words, except in the unusual occurrence of gross trading receipts plus the stock in hand at the end of the period cqualling the gross trading expenditurc plus the stock in hand at thic beginning of the period, thic Trading Account sliolis the amount of Gross Profit or Gross Loss. The Trading Account does not include gains and cxpenses connected with general management, nor any expenses cxccpt tliose affecting the direct cost of the goods dealt in. The principle underlying the Trading Account may be illustrated in this way :- Assume the commercing stock to be 1dl value at cost of goods purchaseu during the permalfallossa 1228 ) ing for returns) 3145 1: Deduct actual stock Iclt on hand at the end of the trading periodi (ay) Then the cost value of stock diapsed of is the difference, 1.e Assuming the total sales (less retums) to be ܝ / 1972) 50 15AS 2 5*'s There is a Gross Profit of 87 ·Reference Library of the Bennett College: Put into the form of a Ledger Account this statement might be shown thius:-- TRADIXG ACCOLXT for the rear cndcd 31st December 1924 Dr. Cr. 5 log24 ܐܙܚܬ 1,920 510 fan. 11 To Commencins Stori: il.c 31 To Goods parchased (less turis) To Gross Profit 1924 Dec. 31 Dy Sales (less retums) By Final Stock. 5,005 1,528 : 1,228 79 3,3841016 . 3 £6,533) 33 £6,533 33 If the total amount of sales be less than the total cost of the stock sold (i.e. less than £1620, Ios.) there would be a gross loss; whilst if these two figures are equal it is obvious there is neither a gross profit nor a gross loss. To show these results in the books the procedure is to bring together into the Trading Account the balances of those accounts which concern directly the cost of the goods, as well as the total net sales and final stock, It is necessary, therefore, to transfer by means of the Journal:- (a) To the debit side of the Trading Account. (1) The opening stock at the beginning of the period. The balance of the Purchases Account and of those accounts which directly add to the cost of the goods, e.g. manufacturing wagcs, cartage inwards. (3) The balance of the Returns Inwards. (In practice this is shown as a deduction from the total sales on the credit side-sce example on page 92.) (b) To the Credit side of the Trading account. (1) The balance of the Sales Account. (2) The balance of the Returns Outwards. (In practice this is deducted from the Purchases on the dcbit side.) (3) The actual value of stock in hand at the end of the trading period. This amount must at the same time be debited to Stock Account to complete the double entry. SS ·Book-kecping and Accountancy* L'sing the Accounts of shich the Tral Balance is sloun on page 83, and taking the final stock as (1525, s. gl., the closing entrics in the Joumal would appear thus :- JOURNAL Dr. 192 . $. ! 1.9.0 5 4 Dec.31 Trading Iccount To Stock Account For transfer of opening Stock. P.L. 91 P.L. 76 2.925150 19 Trading Account P.L. 91 To Purchases Account IL 22 For balance transferred. 1,345166 1.34516 6 5.000 Z Sales Iccount To Trading Account . For balance transferred. 1.L 331 P.L. 97 5.06 1 9 P.L 16 1.5251 219 1,525 2,9 Stock Account To Trading Account . P.L.91 For Closing Stock on 37,'13'24 25 per Stock list. Trading Iccount PL 91 To Retur. Inwards. L 20 Tor balance transferred. 562 3 55 1 3 120 89.j Return Outwards Account I.L 24 To Trading Account P.L. 97 For balance transferred. 3201 9 Trading Account P.L. 91 509163 To Sundries: Manufacturing Wages 1.l. gli 455 10 6 Cartas 1.L. 9! Tor balances transferred. 110.535 12 311610.5352 3 The above cntries, when posted, close the Purchases, Silts, and Returns Accounts, but leave on the Stock Iccount the valuc of the Closing Stock as 2 debit balance, where it remains until the next stocktaking ; that is, it becomes the commencing stock for the succeeling accounting period. The Ledger Accounts affected by the above entries are shown in the following pages, these entries having been posted :- 89 ·Reference Library of the Bennett College: LEDGER ACCOUNTS OLANUFACTURING WAGES £ 26 s. lo. 192. Dec. To Balance. 402 s. d.1924 1016 Dec. 31 By Transfer to Trading alc. 3 Cash 1 UI Oo J. 9 458 1016 3 IO 14 o 91 C.R. 99 C.B. 99 C.I. 99 C.R. 99 17 12 17 2. 15 Olo £458 10 6 £458 1016 CARTAGE ACCOUNT Dr. Cr. 192. 11cc. s. Id. £ 33 ܒܐ 1 To Balance. 5.4.192.4 33] Dec. 1311 By Transfer I to Trading 216 alc. 13.9 C.P. 99 Cash 5 .. 9 4259 £4359 £42 5 9 PURCHASES ACCOUNT Dr. Cr. 192. lloc. £ se de 31 To Dalante. Sundries as per l'ur. 1.8. chises Book s. 2. 1924 91.1 136 Dec. 31 By Transfer to Trading alc. +3.41 310 £1,34511616 1.9 1,348 1616 1,348166 90 ·" Book-keeping and Accountancy" RETURNS OUTIYAN nr. 1924 Dec 31 To Transfer to Trading alc s. 14.119:4 c. Vis Balince. 97 2:51 J.9 120 s 11 Surdin 24 221) £12089 0120 SALES ACCOUNT Dr. £ s. 12. 1924 Iec. 3.361 19 1924 Dec.31 To Transfer to Trading a/c 31 lly Balance. Sundries as pro Salcs. Book 5.00119 1.700 ola 115,0679 15.0619 KITURNS IYWARDS Dr Cr. 1924 Dec. 30 s dig: 1091) 301y Trinair In 'Tradına alc 1o 1 To Balance. 31 Sundries As per R.I.TR.1 Book 20 91 56 25 £56 156 13 Im1 STOCK ICCOUNT Dr. Cr 1934 Jan. 1 To Bilance Stock 31/12/23 5. 2 45,9:05 1924 Dec 131 By Transfer to Tradır: a's 11,920 5 10 1923 Jan To Ilalance Stock 31/12/34 | 3.7 41,5282 ? 91 ·Reference Library of the Bennett College: Ledger Accounts (conid.):- TRADING ACCOUNT for the rear ended 31st December 1924 f £ s. d.1924 131110 Stock 1/1, 24 ..o 1,920 30 Dec. 37 By Sales 5,061 I 91. 9 Purchases Less £1,349 16 61.9 Returns Less Inward 56 1 3 3.9 Retums Outward 120 S 91. 9 1,228 29 By Stock as per List 5,005 1,5281219 458106 42 59 Manufacturing Wages. To Cartage 1.2 Bilince, being Gross Protit trans- Stirred to Profit and }, Lussac 11 2,883 1413 $6,533 343 £6,5331 33 It should be noticed that Returns Outwards are deducted from the Purchases, which is better than showing them as a credit on the other side of the account, although the latter procedure would give the same result as far as the figure of gross profit is concerned. The same applies to Retums Inwards which are dicclucted from Sales. S..In manufacturing concerns sometimes a Manufacturing Account and a Trading Account are drawn up instead of only a Trading Account as above; the object being to find the gross results or manufacturing as distinct from actual trading. For this purpose all the items directly affecting the expense of manufacturing are separated from those appertaining to trading, just as the latter are separated from items which concern only thie Profit and Loss account (see infra). This subdivision of the Final Accounts will be dealt with in greater detail latcr. $5.-The Gross Profit arrived at as above represents the amount by which the total sales exceed the total cost of the goods sold; bui ont of this Gross Profit various expenses, c.g. those connected with management, clerical work, and incidental to effecting sales, have to be paid. Any balance then remaining is 92 ·“ Book-kccping and Accountancy" Net Profit, or, if these expenses are greater than the Gross Profit, the adverse balance is a Net Loss, The next step therclore is to find the Net Profit (or let Lows) by compiling a Proſit and Loss Account. 86,--Profit and Loss Account In the first place, the Gross Profit (or Gross Loss) must be transferred to the l'rofit and Loss Account, and the same must be done with the balance of every account relating to expenses, losses, and gains, cacepting those which were dealt with in connection with the Triding Account. When making these transfers it will be found that (a) Expenses and losses appear on tlic dcbit side of the Profit and Loss Account ; (0) Gains appear on the credit side. The transfers slould be made by mcans of Jounal entries, as shown for transfers to the Trading Account, and wlien these have been posted the Profit and Loss Account will appear as shown on the next page. The balance of the Profit and Loss account represents cillier a Net Profit or a Net Loss, as tlic case may be, and in the books of a private trder this figure is transícrred by a Journal entry to the Capital Account. In the books of a joint stock company thic balance is dcalt with differently as will be explain hereafter, The balance so transferred incrcases or decreases thic proprictor's capital as shown by the Capital Account, and thic resulting balance of the latter account, less any sims withdrawn during the year, represents the trader's worth at the date of his new Balance Sheet. The final entrics in the Journal and Private Ledger Accounts are as follows:- JOURNAL d. 1024 s. 4 d. s. 2,883) 14 P.L. 91 P.L.SI 2,883 14 3 Dec. 131 | Trading Account To Profit and Loss Account For Gross Profit for the year 1924 transferteci. Profit and low Account To Capital Account For Set Profit for the year 1924 translerne. Capital Account 1o Drawing Account 6 PL 51 P.LI 0.236 17 2,236 | 170 . 125 15 6 P.LI PL 17 125 15 15.2467 3 $15.246 713 93 ·Reference Library of the Bennett College: PROFIT AND LOSS ACCOUNT for the year ended 31st December 1924 Dr. Cr. 4+2 J. Ir . s. 7. 1924 325170 Dec.31 By Gross Profit trans- 140100 ſerred from Trading Account. 3.11 2,883 1413 By Discounts J. TI S6) 913 9 . To 38 12 7 1. 11 17 106 16 1924 Dec. 31 To Salaries To General Expenses (J. II To Bad Debis. II Discounts), 11 Bank Charges To Insur ancus. To Travelling Expenses 3.11 To Repairs .J. 11 Carriage.3.11 To Balance, bring Net Profit for the year ending ist Dec. 1924 iransferred Capital a'c.1.1 1136 100 4 10 916 . to 2,236176 12,970 316 £2,970 36 J. BULL, DRAWING ACCOUNT Cr. 1024 im To Bilance it 100 5.4. 1924 1510 Dec. 31 By Transfer to Capital alc. C.. 99 J. II Cash 125 11516 125 1516 £125 136 94 ·“ Book-keeping and Accountancy” BULL, CAPITAL ACCOUNT Dr. 1924 Dec. 31/To Drawing alc To Balance carried down € s. 1d1924 £ s. d. Jan. Dy Balance 125 1516 brought dow73 6,000 156 8,1111716 Dec.31 By Nct Profit for thejear 1924 J.12| 3,23612716 8,237113 £8,237230 1925 Jan. 1 By Balance brought down (8,1111176 Having completed the Final Accounts in the manner just outlined, a complete statement of the trader's financial position may be made in the form of a Balance Sheet. 87.–Balance Sheet, This is a summary of the balances of the accounts which remain in the books after the final accounts have been completed, and is a statement of the trader's position on the last day of the period for which the accounts have been completed. The only balances remaining are those representing assets and liabilities, and these are shown in a summarised form as in the case of the specimen on page 96 It will be noted in particular that the balances of crcditors' ledger accounts in the Bought Ledger are shown in a total as "Sundry Creditors," and those of debtors' accounts in the Sales Ledger appear in one sum as Sundry Debtors." The assets are shown on the right-hand side and the liabilities on the left-hand side. It is specially emphasised that a Balance Sheet is not an account, but merely a schedule of a statement of ledger balances as on the date specified, hence the usual prefixes To and " By" are omitted. Further, whilst the Trading Account and Profit and Loss Account are headed, for example, " For the year (ut other penod) ended 31st December 1924," the Balance Sheet must be headed on (or as at) 31st December 1924." because it does nut seler to any period but simply states the position on the date named. 95 ·Reference Library of the Bennett College: The following illustration, based on the accounts just dealt with, is a simple form of Balance Sheet. J. BULL BALANCE SHEET on 31st December 1924 Liabilities. S. 42 £ d. 2178 410 2 Sundry Creditors Bills lavable. J.Bull, Capital Account. 2 Assets. a. 6 Frechold Premises Furniture Stock in 'Trade 6 Sundry Debtors Post-Dated Cheques Bills Reccivable Cash at Bank in hand 8,III 17 S. 900 0 180) 10 1,528 2 2,309 11 501 10 1,199) 19 2,490 IO So 3 8 6 1 . £8,7391 S 2 £8,739! 8 2 Tlic further consideration of the Balance Sheet must be deferred until the provisions for reserves and depreciation have been dealt with. 96 ·“Book-keeping and Accountancy" Chapter VIII THE FINAL ACCOUNTS (Corili SS.-The Final Accounts were described in the simples: som? in the last chapter, and it is connecessary to consider the in greater detail, togethez with the trutment of adjusies vir generally have to be trade. 89. The Distinctions between the Final Accounts tas be stated as follows: TRIDING ACCOLXT PEOITT LIT IDSS ICCOLAT (3) This dea's ribbe pecharias 27 Da's been Easy) the racer, 21-re, esordsfors, frizba :d :-) girae.. practive way, ire Zv, TV ssed in2 peze. ro:eszd 213 cod (1) k sbos them 1 مهر بیرح درس 1 ( When manufacturing is treated separately from trading, the following distinction is made :- TPIDING .CCOLT WANITACTURING ACCOUNT Del's only wanted the rest Indescone's من که همه ره ج : ' : هیی = i ع پر میرا تیر Fecha froso, as ve" 23 the pro site of these are The Le 17. Eccc 2-0! is - acock is transferred fross the yo. *Tr.. Apart from the ordinary accounts, Cost Accounts are usually kept in businesses engaged in manufacturing, ard although cost accounting forms a separate subject the following distinction should be noied: TRADING .ICCOLIT COST ACCOLAT Ides 2e erresory laces the b'e che e cribT** (2 TTS bester c: 2 spie Brac docere: Die co's *, is out tert); tog hefur fem bom man's chess on the works, et ce sa AS, Bich. Und ris. 23 This 2 pica ccc.es ఓం ఇందుగా, 12:8 of 5 mi: a TES 2014, cursos de rose This 22000: cuprises ::: ch. Erzica ctben! G 97 ·Reference Library of the Bennett College: 90.--Allocation of Expenses. The appended comparison of some representative items chargeable to the respective final accounts cmphasises the distinction in their treatment. If a separate Manufacturing Account is not kept the items shown under that heading must be debited to the Trading Account. There is, however, no hard and fast rule, and the special purpose or circumstances must be considered when allocating expendiiure. The following summary shows the normal allocation of the items named; the list is, of course, not exhaustive: . arc ITENS DERITED TO ITEMS DEBITED TO ITENS DEBITED TO VOXUFACTURING TX DIXG ACCOUNT PROFIT AND Loss ACCOUST ICCOUNT tock in trade at start. Kaw material stock at start. Wages and salaries of office Ilages of a productive stafi, travellers and man- Hork in progress at start. nature which inagement. CUSTC up to the time Sage's directly incurred in the goods are finished Duty, dock charges, and inanufacturing for sale, c.g. handling freight on goods sold. between works and warc- Duty, dok charges, and house, Carriage and cartage on frights on raw materials goods outward (sold). inwards, Duty, dock charges, and freight on finished goods Office rent, rates, and taxes. Cariage un raw matcrials. purchased for sale, Office lighting, heating, and Chirues and expenses Carriage and cartage on other expenses. cliructly concerned with goods inwards (bought). manufacturing Packing cases and materials General warehouse used in sending goods Votive power foruts, oil, penses. sold. electricity, and watcr) and factory fucl. Warchouse rent, rates, and | Discounts allowed. taxcs. Kayalties. Interest paid on overdrafts, Special packing costs be bills, etc. Cost or all raw materials fore goods are ready for used in manufacturc. sale. All management and cstablishment cxpenses. Cost of goods from the factory and of goods Bad debts. purchased for sale. ex- For most exercises, especially in the intermediate examinations, it is not necessary to separate Manufacturing and Trading Account items. They should all be included in the Trading Account unless specially asked for otherwise. 91.--Percentage Comparison of Profits on Turnover. The value of the results shown by the Final Accounts just described is enhanced by computing the percentage of profit on turnover, IS ·Book-keeping and Accountancy" for by this means the relative results of successive yours can be thic more rcadily compared. 92.--By Turnover is meant the total sales during a given period. It does not mean Output, whicli refers only to the quantity manufactured or produced. Thus it will be seen that percentage profit being calculated on turnover is based on selling not cost price. 93.—To calculate the percentage of Profit The Gross Profit as shown by the Trading Account, multiplicd by 100 and divided by Tumover, gives the percentage Gross Profit. Treating the Net Profit as shown by the Profit and Loss Account in the same way the percentage Net Profit is found. In formula form we have :-- Gross Profitx 100 (i) Net Profitx 100 Turnover (ii) Tumover. These percentages are sometimes slown in brackets opposite the figures of profit in the Trading and Profit and Loss Accounts, and students sitting for examinations are recommended to insert them when these accounts are asked for, if time permits. (Sec example on page 110.) 94.--Adjustments for the Final Accounts. In preparing the Profit and Loss Account as described in the last chapter no provision was made for outstanding liabilitics and accruing revenue, nor for the apportionment of various items of income and expenditure received or paid in advance. Provision must be made for these however, as well as for depreciation of assets and for Reserves for expected losses, gains and other purposes. 95.-Apportionment of Amounts received or paid in advance. Expenditure made during the financial period under revicw, part of which properly belongs to the succeeding period, must be apportioned so that these periods each bear their proper share. Such adjustments are usually necessary, for instance, in conjunction with rent, insurance premiums, telephone rent, rates and advertising expenditure, etc. Thus an advertising scheme paid for in the financial period may be intended to extend over and benefit two or three years, and therefore the expenditure should be apportioned and charged in the Profit and Loss Account for each of the years concerned. Again, six months' rates paid on Ist October in a financial year which ends on 31st December must be apportioned so that that year and the onc following each bears three months, i.e. half the amount each. There are two methods of doing this: (I) by means of a Journal Entry, the Rates Account may be credited with the proportion paid in advance and a Rates Paid in Advance Account debited; or (2) the amount 99 ·Reference Library of the Bennett College: 1 to be borne by the succecding period may be entered on the credit side of the Rates Account, and at the same time re-entered on the debit side, two or three lines below the last entry. The space left is for the total which will be inserted when the account is ruled off.” This latter method is the more usual, as well as the safer, and is shown in the following example: TEINS.ICTIONS.~-Rates paid for six months in adrance on ist April $48, and on isi Oriobur 144, 105. Advertising agent was paid $450 on 2nd June, which it is desired to write ofi in amounts of $150 at the end of each year. RATES ACCOUNT Dr. Cr. £ 192. Jan. To amount brought forward April 1To Cash Oct. C.B. 62 C.P.28 s. d.1924 Dec. 31 By amount prepaid, carried 48 forward , By Transfer to Profit and Loss Account роо OOO 22 50 1 21 J. 34 94 50 £1161010 £116 10 1925 Jan. To Rescruc brought forward ADVERTISING ACCOUNT Cr. 192 June 2|To Cash s. d. 2 -- i £ s. d. 1924 C.S. 404 450,00 Dec. 31 By amount Carricd forward By Transfer Profit and Loss Account 300 Olo J. 34 150 [450 00 1925 4450 o To Halince brought 100 ·“Book-keeping and Accountancy Amounts received in advance should be similarly apportioned, so that the period only benefits by the proportion duc to it. 96.-Provision for Outstanding Items. Items due and not paid within the financial year must be similarly provided for by cither of the methods mentioned in the last paragraph, wlicther due to or from the trader. Provisions so made are called Reserves. The method is best shown as below:- EXAMPLE_At the close of the financial ser the folloring amounts were duc but not paid : Cartage for December, 625. Traveller's Commission accrued, 522. There was also sir months' rent, 136, due to the business but not set roocired. Items paid during the year are shown in the accounts: CARTAGE ACCOUNT Dr. .C.8.6 10 £ s. d.1924 4710) Dec 31) Bs Transfer 86 10 6 to Profit 52 O o and Loss Iccount 1924 ipnl 5 To Cash C.P. 36 July (31 Nov. 29 C.B.81 Reserse for amount due to date cla Dec 31 » J. 37 211016 23 oo (211 211016 1925 Jan By Reserve bya | solo TRAVELLER'S COMMISSION Dr. 1924 June 30 To Cash CT. 53 Dec. 31 Reserve Joramount accrued ca !'s. d. 1924 54,00 Dec 31 By Transfer to Profit and Loss Iccount ) 22100 J. 34 76 olo 147610 476 1925 1 By Resere bd 123 olo TOT ·Reference Library of the Bennett College: REXT RECEIVABLE ACCOUNT Cr. Dr. d. 1924, sod 360o C.3.32 1924 Dec. 31To Transfer to I'rofit and loss Account June 30 By Cash Dec 31 By amount accrued not ceived O J. 3-4 72 1 36 1925 12n. I To Reserve brought forward £36 Many other accounts may have to be similarly treated. 97.-Reserves for Estimated expected losses and gains have also to be made, particulariy for Bad and Doubtful Debts, and for Discounts to be allowed or received. Reserves for Discounts are sometimes made because the total amount of the debtors' balances will usually be subject to reduction by settlement discount when paid ; as will the total of sundry creditors. Hence thic usual rate of discount allowed to debtors is calculated on the total of sundry debtors, as per the balances extracted from the Sales Ledger, and a Reserve created for the amount by debiting Profit and Loss Account and crediting a Reserve for Discounts Account. A similar reserve is calculated on the total sundry creditors' figure, and credited to Profit and Loss Account, the Reserve for Discounts Account being debited. 98.-The Reserve for Bad and Doubtful Debts requires careful study: Debts wholly irrecoverable are written off straight away, or before the books are closed, by transferring the amounts to the debit of a Bad Debts Account, the total of which is transferred to the Profit and Loss Account; but in addition tlie debtors' accounts may include some which are doubtſul, or which it is known will Blot ly likely to be paid in full, There are two methods of making the necessary reserve for such probablc losses : (1) By actual estimate, obtained by examining each account in the ledgers and estimating the likely loss upon any doubtful accounts, the total so obtained being debited to Profit and Loss Account, and credited to a "Reserve for Bad and Doubtful Debts Account," by a Journal entry: thus immo 102 ·“Book-keeping and Accountancy" JOURX.r. 13r. Cr. 1.1, 21 Golo o 1974 Dec. 31) Profit And Loss Account To Reserve for Bad and Doubtful Del Account Being Reserve for Doubtful Iub:s as per list. (if not numerous the items may bu entered in this narration) 1.1.1 (2) By « fixed percentage of the total debtors' balances extracted from the Sales Ledger, after the actually bad debts have been written off. The percentage will vary according to the class of business, but 5 per cent, is a usual figure, and using this percentage the procedure is to take 5 per cent. of the total debtors, debit Profit and Loss Account and credit Reserve for Bad and Doubtful Debts Account as before. The following ycar 5 per cent. of the total debtors' accounts at that date is again calculated. Then if the new Reserve is more than the one created in the previous year the difference only is dedited to Profit and Loss Account and credited to the Reserve Account. If the new Reserve lappens to be less the following year, the diffcrence must be credited to Profit and Loss Account and debited to the Reserve Account, thereby reducing the Reserve to the desired amount. The important point to remember is that the Reserve is not increased ycar by year to the extent of 5 per cent. on the total debits, but that the figure must be maintained at 5 per cent. of the then cxisting total debtors' balances; hence, it is only the difference between the old Reserve and the news' which must be added to or deducted from the previous year's Reserve, as shown below :- 1x,131PLE, -After having written off wholly lad debts the total debtors' lalances are as follows: December 31, 1924. Total Debtors, £2,000. December 31, 1925. Total Debtors, Le 3,000. December 31, 1926 Total Debtors, 2,300. Lach year a Resene of 5 per cent to be made for Dad and Doubtful Debts on the total debtors' balances then on the books The Reserve at the end of 1924 will be {100; at the end of 1925, £150; at December 1926, £115. Hence in 1924, Profit and Loss Account is debited with £100, and Reserve Account credited. In 1925 the Reserve has to be increased by £50, which amount is debited to Profit and Loss Account, leaving the Rescrve at £150. In 1926 the Reserve fias to be only £115, therefore £35 150 less £115) must be transferred to the credit of Profit and Loss Account. 103 ·Reference Library of the Bennett College: The entries are as follows: JOURNAL Dr. Cr. £ P.L. 21 Ioooo 1924 Dec.31 l'rofit and Loss Account To Reserve for Bad and Doubtfui Dchts Account For Reserve of 3% on Sundry Debtors at this date, I.I.. 91 100 o P.I.. 22 500 1925 Dec 131) Profit and Loss Account To Reserve for Bad and Doubtful Debis account. For Reserve of 5% on Sundry Debtors at this date Loss Old Reserve IOO 1,... 92 Sooo £150 11726 Dec. 31 35 01 o 1.L. 97 P.I. 93 . Reserve for Bad and Doubtful Debts Account To Profit and Loss Account For Reserve of 5% on Sundry Debtors at this date £115 Ol Reserve 150 35 00 The Reserve Account and Profit and Loss Account would appear as follows after the above entries have been posted :- RESERVE FOR B:D) IND) DOUBTFUL DEBTS ACCOUNT store € The; Tol'rofitand Loss lemnunt - recensil of Reserve overs. 51 on 2300.91 36 1001010 £ s. 1924 Dec. 31 By Profit and Loss Account--5% on ). $2000 5lolo 1923 11zjolo|Dec. 31 By Profit and Loss Account to complec 5 % on. 13000 63 To Balance, ololo 5010 1150010 1920 Dec. 31 By Balance, bid £135010 telfusbol 104 ·“Book-kceping and Accountancy" PROFIT ID LOSS 1CCOUNT (Shoxing only Pad and Doub:ful citries) 1924 1924 Dec. 31 To Reserve for Bad Dcbts @ ). 36 100 lola 5% 1925 1925 Dec. 32/To Reserve for Bad Debts @ 5% £150 J. 100 63 Less 1924 50 oo 1926 1926 Dec 31 By Reserse for Had Debisa 5% 1925 - £130. Less 1926 113191 2011 35 oo All these Reserves must be provided for also in the Balance Sheet, as will be shown in the next chapter. 99.--Provision for Depreciation of Assets. This is an adjustment whereby Assets are "stitten down," i.c. the book value is reduced to allow for the estimated annual depreciation or to spread the original cost of purchasing the asset over a number of years by charging a proportion against the profits of cach year concerned. The need for this is obvious in the case of a lease, which at the end of its term becomes of no value. Similarly machinery or motors depreciate in value through wear and tear or obsolescence, and each year should bear some proportion of the loss, instead of the whole being borc by the business in one heavy sum when the asset is of no further use. There are six methods commonly used for making the necessary provision for depreciation which will now be considered :- (a) Fixed Instalment Method.-A percentage fixed rate of reduction is calculated on the original cost of the asset, and thus an cqual amount is written off the Profit and Loss Account cach year, so that at the end of the period provided for, the account stands at nil, or at bruk-up value. It is a method best used for short leases, although it may be used in connection with plant and 105 ·Reference Library of the Bennett College : machinery, providing that the machinery is classified into groups of about the same effective life periods. An example appears on page 107 (6) 'Reducing Instalment Method.—A fixed rate per cent. on the diminishing value of the asset is written off each year, so as to reduce the asset to break-up value at the end of the estimated terin of its life, repairs and small renewals being charged to revenue. It is a simple method commonly used for plant and machinery, fixtures, etc. The advantage of the method is that in the earlier periods when the depreciation is heaviest the repairs charges are small; later the repairs charges naturally become heavier, whilst the amount of depreciation progressively diminishes, thus keeping the total amount chargeable to revenue fairly level each year. Sec example at page IOS. (c) The Annuity Method. This is the most scientific method when investinent is not desired outside the business. It is most suitable for long leases, but not usually for plant, since additions from time to time would necessitatc further calculations. The inctliod is to regard the asset as earning a fixed rate of interest on the diminishing value, which is debited to the Asset Account and credited to Profit and Loss Account. After debiting this interest a fixed amount is written off the balance of the account, the amount being calculated so that the asset will be reduced to nil at the end of its estimated life or period of usefulness. The fixed amount so written off is debited to Profit and Loss Account, (d) Insurance Policy Níethod. This is a means of providing the sum requircd for the renewal of a lcase. A policy is taken out with an Insurance Company for the estimated cost of renewal, this sum being assured for payment at the end of the required period, in consideration of the annual premiums paid. Each year thus bears a proportionate charge in the form of the premium which is debited to Revenue. This system is a particular form of the Depreciation Fund method next described, but it has the advantage of eliminating risk of loss on the realisation of gilt-edged securities. (c) The Depreciation Fund Icthod. This method is advantageous where it is secessary to replace an asset at the end of its life, and to provide inoney ontside the business for the purpose. An cqual sum is debited to profit and Loss Account cach year, and credited to a Deprcciation Fund Account. An equivalent amount is then invested in gilt-edged securities and allowed to accumulate at compound interest in order to produce the required sum at the end of the desired period. The advantage is that no disturbance of finances is made 106 ·Book-keeping and Accountancy" when the time comes for renewing a costly asset, and ach year bears an equal burden, o The Revaluation Melhod.—This is useful for arriving at the depreciation of loose tools, live stock, copyrights, and rapidly or erratically depreciating plant. The difference between the book value and the revaluation, if the latter is less, is dcbited to Profit and Loss Account. In the case of loosc tools it is sometimes found they have appreciated in value owing to addi. tions from revenue. If such additions represent wages and materials for tools made by thc firm's cmployees, their cost will have already been charged to Trading Account, hence the appreciation may be legitimately credited to Trading Account. For the purposes of the intermediate examinations it is gene tally only necessary to able to descrit thiese methods, it is desirable however to be able to deal with methods (a) (6) and (). and the following examples will show the procedure: EXANPLF.-- (0) The Fixed Instalment Method. Machinery installed cost £500, and it is decided to depreciate this at the rate of 10 per cent on the original cost cach year until completely written off. Show the Machinery.lccount giving effect to this. Dr. MACHINERY ACCOUNT 1924 *** Jan. 1 To Cost of JC.B. Machinery. 12 5000 s. 121924 Dec. 31 By one year's J. 500100 Depreciation 26 В Xalance carried for Sard, 49000 £500! £500 0 0 010 1925 Jan. 2 1925 To Balance . b'd £450101Dec. 31 By one year's s. Depreciation 32 By Balance £50010 3000 TT £150010 6450010 1926 Jan. 3 1926 To Balance . b'd £4001010 Dec. 31 By one year's . Depreciation 38 By Balance cld 19 57 £50 0 0 35000 £400/0/0 £4001010 1927 Jan.ro Balance . ba £350010 And so on until there remains no balance. XB.--Each instalment will be debited to Profit and Loss Account 107 ·Reference Library of the of the Bennett College : EXANIE (1) The Radusing 11:51alment Method. Machinery cost £500, and it is diccided :o write ofi 10 per cent. on the diminishing balance of the account each var. Show ihe Machinery account, making this provision. Dr. VACHINERY ACCOUNT Cr. 4 £ 192 Jan. To Cost of C.. Machinery. 12 5000 s.4.1924 Dec. 31 By one year's J. 50000 Depreciation 26 By: Balance carried for ward. . 4500 £500100 £500 0 0 1925 Jan. 1 1925 To Balance . bla $450 010 Dec. 31 By one year's J. Depreciation 32 By Balance . Jcd £450 0 405 00 44501010 450.00 1926 Jan. 1 1926 To Balance . b/d £403 010 Dec. 31 By one year's J. Depreciation 38 By Balance cla £40100 +100 364 + £405 010 £40500 1927 Jan. I To Balance . bal}£3641100 and so on until the assct reaches its break-up raluc. Examel: () The Realuation Method. Loose tools purchased 1st January 1924 cost $500. On 31st December 1924 these vere valued by the Works Engineer at $460; on 31st December 1925 at $400. Prepare the Loose Tools Account showing the necessary depreciation. LOOSE TOOLS ACCOUNT Cr. 192. £ s. 1924 J:1n. To Cost or c.r.. Dec. 31 | By Deprecia- J. 1.oose Tools 5000 tion. 26 400 By Balance ca 460o पर 300010 £500010 Jan. 1923 To Balance: .bd 46000 Dec. 31 By Deprcciais. 32 By Billance C: ion. 1000 o 4000 5.16000 £16010 1926 Jan. To balance.blo 1.100 100 IOS ·Book-keeping and Accountancy.” ExtVPLE:--) The innuils Methos. A lase for smien skars com Calculate amount to be written off annually in etsinguish the Isase lccirat in sesen sears, and charging 5 pkt cent interest under the Annuity Sethed From Annuity Interest Tables it will be found the amount for Er for seven yar at 5 per cent, is '172819. Then €5000X.172819- £864095 256$, 15. 1. This amount will be the depreciation for each year. Interest at 3 jxet crn! will: debited year by scar on the rcdlucing balance, and by the end of the scriuh year thic 45000 svill luare bcen completely written off. Example ---(e) The Depreciation Fund Jethod. lease for seven years con: 25000. Write this off by the Depreciation Fund aethol and ruir a funil for a simular amount at 4 per cent, compound interest for the purpose of replacırz thic lease at the end of the period From Sinking Fund Tables it will be found that the amount to be insestadi jurly at 41 par cent to produce ti in seven years is :124701. Then to produce £5000 there must be iniested yearly £5000X :124701 * £,623 503 -£623, 1os. 1d. The Profit and loss Account must be debited and Depreciation Fund Acrount credited with this sum each year. Interest on the im estment receised annually will be credits to Depreciation Fund Account, and this amount of interest is added to the £623, tos. 14. (a previous jear's balance), and the new total is then invested similarly ) car by year for seven years. A Depreciation Fund Investment Account is debited each sur with the depre ciation plus interest, and by the sesenth sear this account will amount to 65000. In examination exercises students are usually asked to make provision for depreciation or reserves, and as a rule simple fixed percentages are stipulated. The required provisions must not be overlooked. Although there are no fixed schedules for depreciation, the percentages generally adopted are, to per cent off plant and machinery; 5 per cent. off furniture and fittings : 25 per cent. off buildings. The usual Reserve for Bad and Doubtful Debts is 5 per cent. It must be remembered that when a sum for rescrie or depreciation is credited to an Asset Account, the same amount must alway's be debited to Profit and Loss Account, excepting the case of apportionments which liave been carried forward in the respective accounts. The Balance Sheet must also be adjusted by shioning the reserve or depreciation as a deduction from the iten concerned, as shown on page 11f. 100.--Example. The following specimen of Final Accounts will seri'c to illustrate the matters just described, and to show those accounts in a useful fon; their treatment in the Balance Sheet will be dealt with in the next chapter. IOG ·Reference Library of the Bennett College: TRADIXG IND PROFIT AND LOSS ACCOUNT for the year ended 31st December 1924 Dr. s. 1924 21,690 olo 4,40000 turns L 3.000 100.Dec 31 By Sales, less Re- 9.000 100 By Stock in Trade' -0010 93 an. To Siock in Trade Occ:31 Purchascs, iess Re:urns To Poxer :lanufacturing Wages To Cartage Balance, being Gross Profit (36.1 %). 6.900 100 1500 O O cid $150 . Dec 31 To Rent Less paid in advance 7.8.40 426,090 00 426,09000 Dec. 31 By Balance from Trading Account ball 47,840100 By Discounts groolo £1000 700 SS 154 go 30 ооооо ооооо . To Salarics Lighting Heating Raresand Taxes Traveller's Commission To Discounts 12:50 Plus Reserve 140 157010 39900 20000 ** To Insura:iccs Adreriis. ins 1.450 Liss Roscrie 300 . o 1500 ?? 253 52 244 322 OOOO оооо 1 6S OO TO General Exprenses To Posiago, cic. Freight: Carnage Bad Dcbis 650 Plus Reserve IS .To Depreciation : Machinery Loose Tools Furniture To Balance, hcir 8 ct Pro fit (234) go 40101 1010 OOO 5,08010 o $8,150 48.150 0)=23 It will be noticed the gross profit is 7,840 X100)=36-1 p 21,690 cent., and the net profit is í 5.080 X 100)=234 per cent. of sal 21,690 These percentages are useful for comparison with preceding a succeeding years. IIO ·Book-keeping and Accountancy Chapter IX THE BALANCE SHEET 101.- Remaining Balances. The completion of the Profit and Loss Account, and the transfer of the Set Profit (or Loss) to Capital Account having been made, it will be noticed that the balances remaining on the various accounts in the ledgers consist of assets and liabiltics. If a new final Trial Balance now be made it will be found that the total of the debit balances oquals the total of the credit balances. By grouping and totalling together thosc balances of a similar nature this Trial Balance can be reduced to a short summariscd statement; and iſ now the debit and crcdit sides be transposed the Balance Sheet is obtained, although the items will not be arranged in any of the recognised forms. 102,—The Form of the Balance Sheet. Without cntering into the controversy as to the leadings used for the two sides of the Balance Shect, it is sufficient to state that in Great Britain the left-hand side is headed "Liabilitics" and the other side Assets, In America the positions of Assets and Liabilities in tlic Balance Sheet are reversed, but this is not of much importance. The order in which items should be entered in the Balance Sheet is established by custom, and depends largely upon the type of business, but two arrangements which are commonly used may be noted. (a) Items arranged in the Order of Realisability and Liquidity. --The assets are set out according to the degree of facility with which they could be converted into cash should occasion arise; the liabilities according to the order in which they would have to be paid : BALANCE SHEET. Liabilities assets. Bills Payable. Cash in hund. Loans. Cash at Bank Sundry Creditors. Iniestments. Expenses Outstanding, Bulls Kecewable Amounts received in advance. Sundry Ichtors. Idvances by Partners (if a Stock in Trade. Partnership). Machinery and Plant Capital Account Furniture and Fittings. Land and buildings, Goodwill. III ·Reference Library of the Bennett College: This order of arrangement is that particularly favoured and adopted by banking and similar concerns which desire to emphasisc the strength of their position in liquid assets. (6) llais arranged in the Order of the Degree of Permanence of issets and Liabilities. This arrangement is the reverse of that in the previous paragraph, and is used by the inajority of trading concerns. 103.--Drawing up the Balance Sheet. The compilation of the Balance Sheet frequenily gives trouble to students, but there is no reason why this should be so once the Trial Balance has been agreed. The difficulties usually arise froni mistakes or omissions when dealing with the incorporation of the various reserves and apportionments which may have to be made after the Trial Balance has been agreed." For this reason some accountants prefer to make a Final Trial Balance after inclusion of adjustments and completion of the Profit and Loss Account. 104.-Two useful “Rules" to be observed when making the Balance Sheet are : (1) Items appearing in the Trial Balance must only be used once, i.e. either in the Profit and Loss Account or otherwise in the Balance Slieet; they cannot show in both. (2) Items given for inclusion in the accounts, but which are mentioned outside the Trial Balance must be dealt with twice, i.e. both in the Profit and Loss Account, and also in the Balance Sheet. These items outside the Trial Balance are reserves, adjustments or apportionments, and stock at finish. (The stock at start is always shown in the Trial Balance.) 105.-The explanation of these two rules is that in the case of items appearing in the Trial Balance, double entry has already been eficcted, and that the act of debiting these in the Trading and Profit and Loss account is simply a process of transferring from existing expense accounts to the Final Accounts. Those items outside the Trial Balance have not already been dealt with in the books at all, hence in debiting or crediting them, to complete the double entry, a corresponding credit or debit must also be made for cach. From another point of view it should be noticed that debiting in the accounts items of expense shown outside the Trial Balance as a charge against protits docs not effect payment of such accounts; they still hare to be paid, and therefore are liabilities to be shown in the Balance Sheet. 106.-How to make the Adjustments. This can best be shown by dealing with an actual example, and full treatment is given, because this type of exercise alniost invariably appears in xamination papers.

·Book-keeping and Accountancy." LXANIPLE-T1 followir; p.011510m lust to be madenlira sterung! - Fel! Accounts and Balance Sheet 09 31st December 19:4 from the Trial Varech follows. Reser. T:ni.. Depre . 5, Loonc Paid £goo. Amot al cuprises stock at 31st Decembar 1921. £9000. £150. TRIIL BILINCI .ADJUSTMEXTS Dr. tr. f} 25,00000 3,000 oo Capital Sundry Creditors: Debtors Machinery Loose Tools Freehold Premises Fumiture and Fittings. Stock, ist January 1924 Purchases Sales Discounts 5,100 101 4.50000 &loo 0,000) Quool 11,000 oo 31,000 oo cccc осса 45 1,000|oo 57,000 oo 12100 25000 1000 Rent. 30000 1 2000 30000 TOO 10 3000 4000 53 93 20000 4,00000 500, Rates and Tares. Insurance Bad Debts Reserre Resene Fund Investments Bills Receivable. Bills Payable General Experiscs (grouped). Cash at Bank Cash in hand 6,000|0|0 1,50000 3000 Tololo 13,00000 5,600 Olo 130 Olo £90,25000 £90,250 00 Iinal Stoch Loom The preparation of the Profit and Loss Account is left as an cxercise for the student, who should be careful to include the adjustments specified, as explained in the previous chaptcr. In making the required Reserves and provisions it will be found a considerable aid to place the calculated adjustments opposite the account conccmed, in two columns marked " and " deduct," as shown above. It is not suggested the Trial Balance should be curritten to do this; the" add "and" deduct 113 add" II ·Reference Library of the Bennett College: items may be written at the side of the one printed in the question paper. By this means there is less likelihood of omitting any adjustment from the Profit and Loss Account or the Balance Sheet. Assuming the Final Accounts to be completed as described in the previous chapter, the Balance Sheet must be prepared, including the adjustments as follows. The adjustments which have been incorporated in the accounts, and which must also be shown in the Balance Sheet, are printed in italics. BALANCE SHEET as at zist December 1924 £ s. d. s.ld. Liabilities. ܐܒ Capitalis at 1/1/24 $25,000 Add Yct Profit S..40.4 Assets. Freehold Premises 49,000 Liss Depreciation 2.9% 225 8,775 010 33,40100 Sundry Creditors £3,000 Add Rent unpaid General Earpinsi's ontstanding 150 Machinery £4,500 Less Dipreciation 10% 1150 100 1,0500 o Soo . Loose Tools Less Depreciation 3,25000 3000 0 4,000 o 0 Bills Payable. Ro rve lund 50 7500 0 £900 Furniture and Fittings Less Depreciation 5% 45 85300 Sundry Debtors £5,100 Less Resores: for Bad Dilts £255 Bir Dis. counts 121 376 4,724 0 0 Unexpire Rates £30 Do. Instrani 40 nooo Investments Less arritten of .£6,000 500 5,5000 1,500 9,0000 Bills Receivable Stock, 31st Dec. 1924 Cash at Bank t.coo in hand 130 0 5,7300 £40,95+ 0 0 £40,95+ 0 0 I14 ·"Book-kceping and Accountancy' 107.–Common Errors and Difficulties. In preparing Final Accounts and Balince Slects the following possible sources of citor and pitfalls should be observed :- (a) The Period covered by the Accounts must be par, ticularly noted. Sometimes exercises cover only six montlis' figures, and wlicn an adjustment of, say, Depreciation or Interest on Capital has to be madc al a rale per cent. per annum, bc careful to include only half the annual charge. Where the period is not actually stated it can usually be found by noticing the date of the stock at the beginning, and that of the stock at thic cnd; of necessity these tho dates must be known. If not given a completc year must be assumed. In the case of adjustments concerning Reserves for Bad Debts and Discounts on Sundry Debtors, the full percentage must be reserved whatever the period of the accounts, but in the casc of interest, c.g. on capital or loans, it must be calculated for the period of the accounts only. (0) Stock. It is not the stock shown in the Trial Balance which appears on the Balance Sheet, but the final stock, which is usually mentioned amongst the adjustments, or at any mte outside the Trial Balance. (c) Omission of Adjustments. This can be avoided by adopting the method recommended on page 113, providing that they are all notcd in the way the accounts. Interest . (d) Interest on I are sometimes shown in and no other reference ments to be made. If the accounts cover a whole year, thic other six months' interest must be provided for, and a note made at the foot of the accounts that a fralf-year's dividend on prefercnce shares is unpaid. This also applies to items like rent, mtes, ctc., for which payments covering a full year have not been made. (C) Items Paid in Advance. Any proportion of expenses paid in advance must appear as Assets in the Balance Sheet, and similarly Revenue received in advance must be shown on the Habilities side. Students provide for these in the Final Accounts, but often forget to include them also in the Balance Sheet, and conscquently a "balance” is not obtained. U) Depreciation. Students often make the necessary deductions for depreciation from Assets in the Balance Sheet, but forget to include this as a debit in the Profit and Loss Account, and of course thic Balance Sheet again will not agree. This is the posltion -- outside the Triut Bulance. of Plant" (or other asset) jis figure of depreciation appe. . 115 ...n du į ·Reference Library of the Bennett College: . slivuld jul be shown as a deduction from the particular asset, as this will have been done already. In this case, if it is desired to show the deduction, the depreciation shown in the Trial Balance inust be first added back to the Asset figure. (g) Bad Debts. This is an item that must be very carefully considered. (1) If "Bad Debts" appear in the Trial Balance, they have already been deducted from the Sundry Debtors' figure which also appears in the Trial Balance. Hence they must not be deducted again in the Balance Sheet. (2) If Bad Debts appear outside the Trial Balance, the instruction being to write them off, it is obvious they must be debited in the Profit and Loss Account; but also, and this is often overlooked, this figure must be deducted from the Sundry Debtors in the Balance Sheet. ESANPL.F.---In the Trial Balance appears “Sundry Debtors, 415080,” Among the adjustincnis it is stated that 580 Pad Debes have not yet been written ofi, and a Roscric of 3 par cent. has to be inade: show the Balance Sheet entry: (2) Correct method : Debtor's £5080 Loss Bad Debts 80 £5000 Less Reserve 5 per cent. 250 £4750 (6) Incorrect : Debtors £5080 Less Bad Debts Reserve 5 per cent. 254 £4826 It should be noticed, however, that if the £So Bad Debts and Sundry Debtors £508o both appeared in the Trial Balance method (6) would be the correct one. (3) The Bad Debts Reserve is often a cause of disagreement between the Balance Sheet totals, generally due to one of two mistakes. Either the wrong Bad Debts Reserve (the old onc) has been deducted from Sundry Debtors; or else the difierence between the old Reserve and the new (i.c. the difference which has to be dcbited to Profit and Loss Account) has been entered as the deduction from Sundry Debtors, instead of the new Reserve being deducted. Thus:- ExIII!.. Dilxors, 31st Dec. 19-4, 42000. Required Reserve 5 per cen=£100. Dilxorn, viene De. 1925. 4:00. Kejuired Reserve 5 per cent. = $150. Give the Dance Sheet entry fur 1925. 116 ·" Book-keeping and Accountancy . 100) The Profit and Loss elccount 1925 soull be držited with 450 thus: New Reserve 1925 2150 Less Old Rescrie 1924 Amount charged against profits 150 Then in the Balance Shect the correct entry "ould be Correct | Sundry: Debiors (3000 | Less Rescrve for Bad Debts 75 £2830 but frequently the following mistake is made (i.c. dwucting the same amount as was debited to Profit and Loss Account). Incorrect (Sundry Debtors £3000 Less Bad Debts Rescrve 50 . £2950 which would prevent the Balance Shect totals froin agreeing to the extent of £100. (1) The Balance Sheet Heading. Many students fnll into the common error of lieading the Balance Sheet for the ycar ending whercas the correct heading is "Balance Sheet as at 31st December 1924." Thic Balance Shect is a statement of the financial position at any particular date, and docs not refer to any period whatsoever, as does thic Pront and Loss Account. The latter, however, is correctly licaded For thic period ended 31st December 1924," and the period covered should always be stated. li) Reserves for Discounts. No Reserve should be inade in respect of Reserve for Discounts on Sundry. Creditors, unless a Reserve is also macie against discount on outstanding debtors. 108. -Reserves and Special Funds. The balances of these accounts appear in the Balance Shect, except in the casc of secret reserves (see below). The following classes of Reserves sluuld be noted : (a) Reserves or Reserve Accounts are amounts charged against profits, and may be specific or general. A Specific Reserve is one set aside to provide for a stated tinantot Ines eg Bad Debts, Discounts, shown in the Balance which they appertain. of profits set aside tu strengthen the financial position vi the firm, anul proindes 117 .. - ·Reference Library of the Bennett College: against unknown or for general contingencies; it is thus available for cqualising dividends and increasing working capital. Unlike specific Reserves the General Reserve is shown as a separate item on the liabilities side of the Balance Shcet, not as a deduction from any particular asset. (1). Reserve Funds. A Reserve Fund is either gencral or specific, and is generally recognised as differing from a Reserve or Reserve Account in that a corresponding sum of money is invested in realisable assets outside the business, whilst General or Specific Reserves are not, i.e. they are retained in the business. The term is loosely uscd often when no such outside investment exists, but this is deprecated by some authorities, and it is desirable to preserve the distinction. A Gciicral Reserve Fund is similar to a General Reserve in purpose, but is invested outside the busincss, usually in some easily realisable asset such as Government Stocks or Bonds. - Specific Reserve Fund provides for some definite purposc, and that purpose gives the fund its name. Thus instances are: Depreciation Fund-made to replace any depreciating assets, c.g. buildings, plant, etc. Sinking lund usually created for redeeming somc dcfinite liability duc for redemption some time hence, c.g. debentures. These Reserve Funds appear as separate items on the liabilities side of the Balance Sheet, and on the opposite side there is usually a corresponding cntry, e.g. Reserve Fund Investment ccount, which represents the assct in wliich llic fund lias been invested, generally gill-edged stock. (c) Secret Reserves. Where these exist they are not discloscil on the face of the Balance Shect. 109.--How Formed. Secret Reserves may arise or be formed in several ways: (1) By charging expenditure of a capital nature to Revenue, thus reducing profit instead of increasing the book value of some asset. (2) By making excessive reserves for Bad Debts, Discounts, etc. (3) By writing down assets below thicir actual value, e.g. premises, machinery, investments, (4) By allowing assets to remain at an original figure when actually they have considerably appreciated in value, (.g. city land and buildings. (5) By omitting assets altogether. This is often due to such assets having been written down year by year until 118 ·Book-keeping and Accountancy” the account stands at nil, as for instance tlic preminen of the Bank of lingiand. This is oftest dune ili conulta tion with Goodwill, init it is always desirable to leavcat Imst a tokon valuc to reveal thc cxistence of an assct. 110. Objections to Secret Reserves sometimes raised are tot: (1) The practice leads to manipulation of protits, and in the case of Companics to improper ſcalings in the shares by the Directors, (2) The profit will not be properly disclosed by the Accounts, and may thus affect dividend declared. (3) The Balance Slicet does not reveal the truc position as it should do. III.-In favour of Secret Reserves it is advanced that: (1) If the motives are bona fide they are advantageous in giving strength to tlıc financial position. (2) Many financial authorities approve of them within reasonable limits. (3) In any casc many items in a Balance Shext are only estimated, and there must be some variation in such estimates due to different points of view of business men. Somc cstimates may be too figli, and therefore it is argued that it is better to create Secret Reserves to play for safety and financial strength. (4) They are particularly advantagcous to, and are largely created by Banks, 53 that dividends can be maintaimer without inlent fluctuations. This safeguards the cssential guod credit of Banks by ai oiding disclosure of any extraordinary losses. Tlic value of premise ouned by English Banks are notonously understated, and those of the Bank of England arc omitted altogether. 112.-A Statement of Affairs is an account or statement showing the financial position of a business or other concem, but apart from its particular meaning in connection 17th Bankruptcy' affairs thus Statement of Aftairs conveys the idea to accountants that the books are not kept on the Double Entry' sistem 113.----Receipts and Payments Account and Income and Expenditure Account. These are usually adopted by nontrading concerns, such as Clubs and Huspitals, and often by professional men. They are not infrequently erronconsly called Balance Sheets," which of course they are not. 114: -An Income and Expenditure Account deals with the whole of the income and expenditure for the year under review, regardless of whether the items have been actually received and paid, or not. It thus excludes capital items, but prurides for 119 ·Reference Library of the Bennett College: against unknown or for general contingencies; it is thus available for equalising dividends and increasing working capital. Unlike specific Reserves the General Reserve is shown as a separate item on the liabilities side of the Balance Sheet, not as a deduction from any particular asset. (b). Reserve Funds. A Reserve Fund is either general or specific, and is generally recognised as differing from a Reserve or Reserve Account in that a corresponding sum of money is irivested in realisable assets outside the business, whilst General or Specific Reserves are not, i.e. they are retained in the business. The term is loosely used often when no such outside investment exists, but this is deprecated by some authorities, and it is desirable to preserve the distinction. A General Reserve Fluid is similar to a General Reserve in purpose, but is invested outside the business, usually in some easily realisable asset such as Government Stocks or Bonds. A Specific Reserve Fund provides for some definite purpose, and that purpose gives the fund its name. Thus instances are :- Depreciation Fundm-made to replace any depreciating assets, e.g. buildings, plant, etc. Sinking Fundm-usually created for redeeming some definite liability due for redemption some time hence, e.g. debentures. These Reserve Funds appear as separate items on the liabilities side of the Balance Sheet, and on the opposite side there is usually a corresponding entry, e.g. Reserve Fund Investiment Account, which represents the asset in which the ſund has been invested, generally gilt-edged stock. (c) Secret Reserves. Where these exist they are not disclosed on the face of the Balance Sheet. 109.-How Formed. Secret Reserves may arise or be (orined in several ways :- (1) By charging expenditure of a capital nature to Revenue, thus reducing profit instead of increasing the book value of some asset. (2) By making excessive reserves for Bad Debts, Discounts, etc. (3) By writing down assets below their actual value, e.g. premises, machinery, investments. (4) By allowing assets to remain at an original figure when actually they have considerably appreciated in value, c.g. city land and buildings. (5) By oinitting assets altogether. This is often due to such assets having been written down year by year until US ·" Book-kecping and Accountancy." the account stands at nil, as for instance the prunis of the Bank of England. This is often done in connection with Goodwill, but it is always desirable to leavcat least a token value to scral the esistusice of an asst. 110. Objections to Secret Reserves sometimes sained (1) The practice leads to manipulation of profits, and in the case of Companies to improper dulings in the shares by the Directors. (2) The profit will not be properly disclosed by the accounts, and may thus affect dividend declared. (3) The Balance Sheet does not reveal the true prition as it should do. 111.In favour of Secret Reserves it is advanced that:- (I) If the motives are bona fide they are advantageous in giving strength to the financial position, (2) Many financial authorities approve of them within reasonable limits. (3) In any case many items in a Balance Shet are oily cstimated, and there must be some vanation in sucks cstimates due to different points of view of business men. Some estimates may be too luiglı, and therdote it is argued that it is better to create Secret Raye to play for safety and financial strength. (4) They are particularly advantageous to, and are largas created by Banks, so that disidends can be maintaini Without julent fluctuations. This safeguards is essential good credit of Banks by avoiding disclose of any extraordinary losses. The value of premio owned by English Banks are notonously understated, and those of tlie Bank of England are omitted altogether. 112.-A Statement of Affairs is an account or staienet showing the financial position of a business or other concern, bui apart from its particular meaning in connection wit: Bankrigar 1 affairs this Statement of Affairs conveys the area to ai countants that the books are not kept on the Double Entry statem 113:--Receipts and Payments Account and Income and Expenditure Account. These are usually adopted by me trading concerns, such as Clubs and Ilimpitals, and often b. professional men. They are not infrequently erroneously called Balance Sheets," which of course they are not. 114.-An Income and Expenditure Account deals with the whole of the income and expenditure for the year under review, regardless of whether the items have been actually recalled anel paid, or not. It thus excludes capital items, but pe fur 119 ·Reference Library of the Bennett College: outstanding liabilities, and for income due but not paid for any particular year. The balance of the account represents a surplus or deficit for the year. Income usually appears on the credit side and expenditure on the debit side of the account, as in a Profit and Loss Account. 115.-A Receipts and Payments Account is a classified summary which includes only those items actually paid and actually received within the period of the Account, whether of a capital nature or otherwise. It may therefore include payments not only for the current year or period, but also for the previous and succeeding years. The balance of this account does not therefore represent the surplus or deficit for the year, but the amount of cash in hand, or overdrawn, i.e. the cash position. Receipts are shown on the debit side and payments on the credit side, as in the Cash Book. It is, however, possible to compile from this an Income and Expenditure Account, which will show the result of operations for the period, by ascertaining the outstanding assets and liabilities at the beginning and end of the period. Illustration.--A Receipts and Payments Account drawn up from the Cash Book of the Winner Cricket Club for the year ended 31st December 1924 RECEIPTS AND PAYMENTS ACCOUNT Dr. Cr. + s. d. jo 0 0 £ go 46 62 131 II2 IS19 10 10 0 6 To Balance ist Jan. 1924 Gate Receipts Entrance Fees » Subscriptions Playing Members, 1923. 1924. Honorary Members, 1923 1924 1923 To Dividends on Investment. To Net Proceeds from Catering Pavilion. 52110 1515 350/10 26 5 M. By Rent Rates I'rinting Wages Stationery and Postage ,, Repairs to Pavilion and Fences. o By Extension of Pavilion. Nei Motor Vower Players' Traveiling Ex- 6 penses By: Bats, Balls, etc. . 6 Balance 51 200 7012 6 20 10 бо 9 6 22 0 123 2 673 O 1800 5 6 £800 5 6 With a view to compiling an Income and Expenditure Account it is found on examining the invoices and other records that: Rates have been paid in advance to the amount of £9; Rent for one quarter is still due. Accounts unpaid are, Printing, 46; Bats and Balls, £18; Wages, £13. Playing Jembers' Subscriptions for 1924 are in arrears £12; Honorary Members 450. 120 ·“Book-keeping and Accountancy." Fron this informatius an lucome and lypenditure scount for the year ended 31st December 1924, showing the surplus income over expenditure for that yar, can be prepared tiius:- THT WIXXER CHICKLT 01.11 Inrur and Isrprenditute .retrunt fur idu saat und 311 I. Prin!-4 19:1. Apenditure. In thi. d. d. '1 Kent. £90 30 131 1 22 21 6 120 . 0 Kates Less £46 Jy Gate Recipes Cattin Kireises (no) Intrance Fes Subscriptions 1 Liying Memixys Honorary Memir-tk 1 Dividends on Invest 1111its. 6,10 min DO 10 I'rintin 15 502 ( 2011 6 0 61 Wants 1dd £112 100 11 13 125 100 18 rolo 51 Oo 1 Stationery and Postage Repairs Travelling Expenses Maths, Balls, etc. £7: Add 18 19 19 00) Bulance, errors of In come over Lynnditure 677915 6779115 It will be noticed that the capital expenditure on the pavilion and mower have been excluded, also subscriptions which belong to the previous and succeeding yurs.. Tie adjustments are shown in the example as additions and deductions to show the procedure, but in practice only the figures in the cash columns should be shown. 116.--Note on the Double Account System. The phras Double Account must not be confused with the term Double Entry. The Double Account System is one used by companies formed generally under special Acts of Parliament, such as Railway Companies, which operate undertakings of public utility involving heaiy capital expenditure of a permanent nature. Thie system of book-keeping is precisely the same in both, i.e. Double Entry, but the distinction between the Duable Account Sistem 121 ·Reference Library of the Bennett College: and the Single Account System (i.e. the ordinary Double Entry System; the term must not be confused with single Entry) is only apparent in the Final Accounts. 117.-The object of the Double Account System is to show what Capital has been raised and what Capital has been expended, and herein lies the principal difference between it and the ordinary Double Entry Single Account System. The latter shows the present value of assets, the former shows the total amount spent on assets. 118.-The Balance Sheet in the Double Account System is divided into two parts; (1) The Capital Account showing on the credit side Capital Receipts to date, and on the debit side Capital Expenditure to date. (2) The Balance Sheet proper, to which is carried the balance of the Capital Account, and in which are shown floating assets and liabilities, revenue balances and reserves, etc., as in an ordinary Balance Sheet. By this means total Capital raised and the manner in which it has been expended is clearly shown; any provision for depreciation is not made in the usual way, but instead all repairs and renewals and replacements are charged up to revenue, the idea being that thereby the capital value is thereby maintained. For present purposes it is only necessary to know the principles of the Double Account System; the treatment of Capital Losses, Depreciation Funds and Deferred Revenue Expenditure must be dealt with in the subject of Advanced Accounts. T ·" Book-keeping and Accountancy." Chapter X CONSIGNMENT ACCOUNTS 119.-Consignments. A merchant or trader sometimes sends a consignment of goods to another person for the purpot of sile on his behalf. The agent or person receiving such goods is ciljer the consignce; the goods do not become his property, but are held by him until such time as he may be able to sell ther. It unable to find a buyer, the consignice muy return the souls to his principal, thic consignor. A consignment is therefore not a sale, nor is it the same as “Goodis on sale or return." In the latter case the goxxis are sent to a prospective purchaser, who has the option of accepting and paying for the goods or of returning them within a reasonalile period; but the person receiving a consignment is not a purchaser, lic is the agent of the consignor for the purpose of finding a purchaser and cffccting a sale, in return for which he receivis a commission. Consignments are usually sent to some place abroad, but not necessarily so. 120.-Del Credere Commission. In an onlinary cursin. front the consiglior lius tu bar all the exprene" in connertion with the shipment. Ile also bears the risk, when the goxwly are sold on credit, of duly running payment from the puse last thic consignee, being only an agent, is not fiable. llowever, the iffent may undertake to pay the consignor whether lie lusel receives payment from the purchaser or not, and in seturn for this undertaking he may receive a lrger or extra tommason such extra payment is known as “ Del Crexlere" commission, and is usually shown separately from the ordinary agony commission. 121.--A Consignment Outwards is the depth of fools To the from one place to another (usually abroal) frissule agent receiving thiese goods for sale the consignment in a Consignment Inwards. The book-keeping in eich case requises scparate consideration. THE CONSIGNOR'S BOOKS AND PROCEDURE When 122.-How to record Consignment Outwards. making a consignment the value cannen bre djelostere! 111 the ordinary 12 ·Reference Library of the Bennett College: 66 >> Sales Book to the consignee, because he is not a debtor to the consignor, nor have the goods been sold to him. A special " Consignment Day Book” is generally used, and the amounts entered therein are debited to a special Consignment Account. This account may appear in the Sales or Impersonal Ledger, or if there are many consignments, a special Consignment Ledger may be kept. Each consignment requires a separate account, which may be headed in any appropriate manner, e.g. Consignment to John Jones.” Consignment to Montevideo.” Consignment No. 762.” The total of the Consignment Day Book must be credited to a Consignments Outwards Account (or “Goods on Consignment Account'). As the goods so consigned still represent part of the collsignor's stock unsold, even though sent to another place, the amounts charged in the Special Day Book should be at cost price. A pro forına invoice is usually sent to the consignee, giving full particulars of the goods, shipping marks, packing, weight, and measurements. 123.--Expenses of Consigning the Goods. These are incurred by the consignor and generally include railway carriage and cartage, freight, marine insurance, dock dues, etc. Such expenses must be debited to the consignment account concerned. The expenses which have to be disbursed when the goods arrive are paid out by the consignee, e.g. dock dues, wharfage, cartage, storage, rent, fire, insurance, etc. In his own books the consignee debits these expenses to the consignor's personal account, but until the consignor receives an account from the consignee at the end of the transaction no entry for these expenses can be shown in the consignor's own ledger. 124.-Financing the Consignment. The consignor has several alternatives : (1) To wait for payment from the consignee until he has sold and received payment for the consignment. (2) To obtain an advance from the consignee against the shipment. This should be credited to a separate personal account in the name of the consignee lot to the Consignment Account, as the amount is a liability until the goods are sold, and if a sale is not effected eventually, the advance would have to be repaid to the agent. (3) To draw a Documentary Bill of Exchange on the consignee for, say, 50 per cent. to 80 per cent. of the value of the shipment, and discount this at the Bank, thus securing the use of the money until a sale is effected. 124 ·0] the Bill Book-keeping and Accountancy Whien the Bill and documents rech the the banker's agent, le pays the Bazz the chance? thes secures the Bill of Lading and come ha sorts. Bu peying an instalmat :o the Bank he was taken awam the docks piecemeal if he so desires; it's CEO is als might obtain complete delivery, mely 0.2 milis When the shipper disco-ints such a B:ll the discount (1) debited to Discountinz Charges Account, il: tam.. itern as a general expense of the business, (C-bar : 1.0 Consignment Account, trating the it as a cemente The credit entry corresponding wall be made in the GPS 125.-Account Sales. When a sale bas baie cornsignee sends a detailed statement called an do Szlas, showing the proceeds and expenso he has disbursed, thos:-- ACCOUNT SALES I EO C25 CIT. J. 37. Laddare Ss. CaczbJr.-. Our T.J.J. Loxtos 35 62363 10 25 Canes 113 3251 0 is oo Less Class 22 Ern Det dze. 10 Cosmico 2 D? Czech 5 3 33 ::o teszne EXO E diz1:53 13 br Waar?;), 2-3113,9 On receiving this statement the consento mais al entris as follows: (1) Débits consign with gross proceeds as con bio Account Sales, and Credits Consignment iconat with several (2) Credits consign with his experts and commission, ani Débits Cousimmat Accom: with the 2 125 ·Reference Library of the Bennett College: If the Account Sales is rendered in foreign currency, the amounts must be converted into sterling, the conversion rate being the rate ruling the day the account is received. 126.--Closing the Consignment Accounts :- (a) The balance of the Consignment Account on complction is transferred to the Profit and Loss Account. (If any of the consignment stock remains unsold the cost or actual value at that date should first be shown on the credit side of the Consignment Account together with a proportionate share of the consignor's expense, and brought down as a balance on the debit side below the ruling off.) (6) The balance of the Consignment Outwards Account should then be transferred to the credit of the Trading Account, the former being merely in the nature of a Sales Account. (c) Bills Receivable Account (or Cash Account as the case may be) must be debited with the amount received in settlement and consignee's account credited. EXAMPLE, Jan. 9. Consigned 69 Cases of Cloth to J. Jones, Montevideo, value $460. Jan. 9. Paid: Railway Cartage and Carriage 612, Insurance £8, Freight and Dock dues £22. Jan. 10. Drew Bill on J. Jones at 90 days' sight (sighted Feb. 1) for £250 as an advance against the consignment; discounted this for $246. July 26. Received Account Sales from J. Jones showing that 60 cases had realised £675, his expenses and commission being £41, 6s. 3d. The 9 cases unsold were valued at cost at $58. Received go days' sight draft on London for 6383, 135. od. from J. Jones. Make the necessary entries in the consignor's books to record these transactions. JOURNAL Dr. Cr. 1924 £ s.a. £ s. d. 24 | 1600 19 Jan. 9 Consignment Account To Consignment Outwards Account (or Goods on Consignment Account). Value of 69 cases shipped to J. Jones, Montevideo. 25 46000 July 26J. Jones, Montevideo To Consignment Account Gross proceeds of sale of 60 cases as per Account Sales. 26 675 00 24 675lolo 126 ·“ Book-kecping and Accountancy." JOURYAI. Conheurd C. 20 July 20 ronsignment Account To J. Jones Expx'tises and Comission : IKT anun! Sales 11) 4100 31 Consignment Outwards Account To Trading Iccount Being sales on consignment. Consignincnt Jerount To l'rofit and Loss Iccount l'rofit on sales of consignment 230)60 11 2.126) CASII BOOK 1924 Jan. 10 To Bill Recenable discounted £4.1924 Jan, 9 H Consignment 32250010 Iccent Cartage and carriage 2.1 12 OJO Insurance 8lolo Freight, etc 21 22 olo 10 Discount on Bill 24 fole BILIS RECEIVABLE HOOK Rex Terat. Imount of PNL DC Bate. rom #hon received Discount. I'ate. Nool 1ol. Dounta 10'1,21 26 1924 Jan. 10 2 Jones (ughted Montevideo Feb, 1) July 26 3 ). Jones 250 ol olgod's Way 4 1914 39313) 9900/s Ot33 1921 26 127 ·Reference Library of the Bennett College: If the Account Sales is rendered in foreign currency, the amounts must be converted into sterling, the conversion rate being the rate ruling the day the account is received. 126.-Closing the Consignment Accounts : (a) The balance of the Consignment Account on completion is transferred to the Profit and Loss Account. (If any of the consignment stock remains unsold the cost or actual value at that date should first be shown on the credit side of the Consignment Account together with a proportionate share of the consignor's expense, and brought down as a balance on the debit side below the ruling off.) (6) The balance of the Consignment Outwards Account should then be transferred to the credit of the Trading Account, the former being merely in the nature of a Sales Account. (c) Bills Receivable Account (or Cash Account as the case may be) must be debited with the amount received in settlement and consignee's account credited. EXAMPLE.-- Jan. 9. Consigned 69 Cases of Cloth to J. Jones, Montevideo, value £460. Jan. 9. Paid : Railway Cartage and Carriage 612, Insurance £8, Freight and Dock dues £22. Jan. 10. Drew Bill on J. Jones at 90 days' sight (sighted Feb. 1) for £250 as an advance against the consignment; discounted this for 6246. July 26. Received Account Sales from J. Jones showing that 60 cases had realised £675, his expenses and commission being £41, 6s. 3d. The 9 cases unsold were valued at cost at £58. Received go days' sight draft on London for £383, 135. 9d. from J. Jones. Make the necessary entries in the consignor's books to record these transactions. JOURNAL Dr. Cr. s... Is. d. 24460 jo & 1924 Jan. 9 Consignment Account To Consignment Outwards Account (or Goods on Consignment Account). Value of 69 cases shipped to J. Jones, Montevidco. 25 460 Olo July 26 J. Jones, Montevideo To Consignment Account Gross procecds of sale of Go cases as per Account Sales. 266750 24. 675lolo 126 ·" Book-keeping and Accountancy." JOUR.V.11.- Continued Dr. 3. Juls 20 Consignment Account To ), Jons Eixrxenses and Coninli-ion as pkt Iccount Sales. 34 Consignment Outwards Iccount To Trading Account Being sales on consignment, 232 Consignment Account To l'roſit and Loss .lccount Profit on sales of consignment. H. 33260 CASII BOOK Dr. 19:41 Jan. (IoTo Bill Receivablc discounted £s. 1924 Jan 32125000 9 By Consignment Account Cartage and carriage 24 Insurance Freight, etc 25 IO Discourt on B33 12010 8oio 2200 24 ta BILLS RECEIVABLE BOOK Term Duc Date بیانRe Imount of Bill I'rom whom reccisel. Itate, Discount. Fol. 12.6.d. 250 o olso d/May 4 Thiscounted 1011/24 26 1924 1924 Jan. 10 : J. Jones, frighted Montevideo Feb 1) July 26 3 J. Jones 38313 god/s Oct 23 26 19:44 1.7 ·Reference Library of the Bennett College: LEDGER Cz. Dr. CONSIGNMENT TO J. JONES, Montevideo at £ s.a. 675 00 21 12 12 0 s. 1d.||1924 4600 o July 26 By J. Jones Stock (Unsold) £5800 ladd S 58 X42 for 460 Expenses, say £5 60 09 o 1924 ). Jan. 9 To Goods 21 Cash C.B. (Carriage) To Cash (insurance) To Cash (Freight) 10 To Cash (Discount Bill) To Expenses and Commission July 26 Profit and Loss a/c . (Profit) 31 2200 On 63610 410 Carried down 41163 190 1919 738 610 £738/6lo 1924 July 26To Balance . bla £63610 CONSIGNMENT OUTWARDS ACCOUNT (or Goods on Consignment Account) Dr. Cr. € 1924 July 31 To Trading J. a/c £ s. 1d.1924 Jan. 9 By Consign). 46ololo ment a/c 21 21 4600 0 Dr. J. JONES, Montevideo Cr. £ s. d. 1924 £ s. d. 1924 Juls 26 To Consign-. ment a/c 675010 2500 0 Jan. 10 By Bill Received 6 July 26 By Consign- }. ment a/c By Bill Receivable 6 21 4163 383 1319 £67510 £675 0 0 I28 ·• Book-keeping and Accountancy" Ilse JCCOUST C. FI slobo . 11. l. lete mollelle oplary sisseliels PROFIT XT) LOSS .CCOL'ST Dr. C 1924 Juls 3113 Com.. tunity (Nc: I'r.) 127.–Summary of Procedure in the Books of the Consignor:- DEDIT. CREDIT. ITT » CONCENT (1) Consimmets alc Comin't! (utward, 2 (r: Irk for finds on ann met: (2) 13:10. (asli, Bank, or, if not paid, ) 1.4 vs roumd in CCM the prisonal ac of the rin whom the noun: , due (1) Bills Receivable al lor lict's z'c. Arty ads are plate it. Caslı, if i'ah) n mittel). (4) Consigner's alc. (onment a'c. Gry's roca's fat to (3) Consignment a'c Cinsigner's ac Lup! .vir my 11.09 (6):. Profit and Losa's (-) 17: Kerable acromizer'de Cor Cash Cash - mittel). (s) Cromarmen: Outwards ! Irulina 2'c. alc (9) Bring down on dcbit side of the Connemen! Insold. This amount mos le the asi alive cice is the low ct, plus a due frenimimm ef b. 129 ·Reference Library of the Bennett College: 128.-An Account Current between the consignor and consignee is sometimes adopted, whereby each party allows interest to the other on payments made in advance of the final date of settlement, as explained in Vol. II, Chap. I, pp. I et seq. THE CONSIGNEE'S BOOKS 129.--Procedure on Receipt of Consignment. When the consignment is received, together with the pro forma invoice, usually no entry is made in the Account Books, but details should be recorded in a Memorandum Book which may be named “Consignment Inwards Stock Book," or Consignment Inwards Book.” Alternatively, the Consignment Inwards Account might be debited and consignor credited with the full amount of the consignment, but this is not usual. Expenses paid in connection with unloading, carting and storing the goods should be debited to the consignor's account, crediting Cash Account. If an advance is remitted to the consignor in the form of a sight draft (=cash) or a Bill Payable, his account must be debited, and cash or Bills Payable Account credited. 130.--Procedure on Sale of Consignment. On selling the whole or part of the goods for cash, debit cash with the amount received, and credit the consignor; if sold on credit, debit the amount for which sold to the purchaser's account in the Sales Ledger, and credit consignor through the medium of the Journal. Selling commission should then be debited to consignor's account, and credited to the consignee's own Commission Account; as also should any Del Credere commission if responsibility for due payment by the purchaser has been accepted. The net amount remitted to the consignor should be debited to his account, and credited to Cash or Bills Payable Account. An Account Sales may then be made out and sent to the consignor giving full details as previously explained. EXAMPLE.-Received 69 cases of goods on consignment from T. J. Murray, valued on pro forma invoice at $460. Paid dock dues and other landing charges, £s, 105.; Warchousing, 67, jos. ; Fire Insurance, 63. Accepted and paid bill for 6250 drawn by 'T. J. Murray as an advance. Sold 35 cases to A. Byer & Co. for £350, and 25 cases for cash, 325. Scnt Account Sales to T. J. Murray with sight draft for balance due, 383, 135. gd. The Stock unsold was valued at £158. Make the necessary entries in the consignce's books. Commission on Sales, 23%; Del Credere Commission, 11% on Total Sales (often this is payable only on credit sales). 130 ·Book-keeping and Accountancy 17 (a) Usual Method. JOURNAL Nr. 350 A. Ilyer & Co. (i'urchaser) "Yo t. J. Murray (Consimor) Silc of 35 cases of Comsignificat ls.rds. 25 T.). Murray (Consimor). "To Commission on 2071 Del Credere da 11/on 2675 163 7 CASH BOOK € s. d. s To l. ). Jiurray (r. clinci for aish stic) 325 O o 5 By T.J. Murray 1onser: landing Charge Warehousing Insurance y T.). Murray ment in adnan) ty 1. J. Murtis ftur final draft) 3 7.30 2 LEDGER 1 J. MURRAY, London C - $ 3/10). 0 ، ) ا ر ا 10 landing Cha Yarcanising Insurance 11.2. tom11011 230 o O To Del (Reader 11% Io Cash (to stik) 319 9 1075 o (6) An Alternative Method, wlich value of cuitsigteilis debitel to a Consignment Inxudsb di immeditly on sexe spot (stine example).

·Book-keeping and Accountancy” JOURNAL Dr. Cr. S. d. £ S. d. £ 460 0 0 Consignment Inwards a/c . To T. J. Murray, London Goods received on consignment, 460 0 350 o . 350 0 A. Byer & Co. To Consignment Inwards Sale of 35 Cases. Consignment Inwards a/c . To Commission a/c. Selling @ 2% Del Credere @ 11 Commission both on total Sales. 25 6 3 16 17 . 6 9 8 8 CASH BOOK (NOTE.--Antoit's the same as in first method, the entries only. differing in description.) Dr. Cr. £ s. d. £ To Consignment Inwards a/c 325 0 0 By Consignment Inwards alca Landing Chgs. Warehousing Insurance. By T. J. Murray 5 10 7 10 3 250 OO 383 139 LEDGER CONSIGNMENT INWARDS ACCOUNT Dr. Cr. s. d. 1 460 £ 0 By Cash A. Byer & Co. Stock Unsold cla 325 350 33 OOO 58 . 5 10 10 0 To?. J. Murray Expenses (cash)- Landing Warehouse Insurance Cuminission Do. Del Crederc Balance transferred to T. J. Murray's alc. 3 16 1716 >> SS 9 231|13| 9 £733 0 o £733 0 To Balance bla £5810 132 ·Reference Library of the Bennett College: '1', !, JUR111, I stucket 1) Cash 250161 03 ('impianti Balance Stuck cla 5510 Chinnoint Intan's al Jyllt! tela 131.-Goods on Sale or Return. In the calcul gods 0. sale or return the goods arc ieturiable at the option of the The ceiver of them, provided they are returned witlin al spurifice or reasonable time. The following is a suitable ruling for it bxxk to reces suels transactions : GOOS ON SALE OR RETURY (0 3 3 4 6 7 Iate. Nie and! Address. (roxxls Kent. Valur flate fruit frustiet Procedure.-(1) Wher goods are sunt u wjyjusid this.nl arc entered in columns 1 to 1, and no other entry in made in the books until the foxis fe returned out notified as kopit. (2) Goods returnel arc cntcrul in column 6 Buth (unnt and column 6 are memoranda olumns only, all de not affect the double entry's (3) Goods sold are extended into culum 7. Julrom brdo posted to customer's acculint in the Sulin Larsen total of column 7 must be posterl (y monthly) tu the crcdit of Sales Account. (4) Gonds outstanding at a given slidte fe full by ttir. difference between the total of att 133 ·Reference Library of the Bennett College : (together) and column 4. This value must be reduced to cost when brought into the stock figure in the final Accounts and Balance Sheet. 132.-Joint Ventures. When two or more persons contribute capital to and agree to share profits and losses in a particular speculation or venture, without the use of a partnership name, such a partnership is called a Joint Venture. By such an arrangement special facilities or advantages possessed differently by the parties are in a sense pooled for their common benclit, whilst responsibility is not incurred beyond the scope of the venture. Such Joint Ventures may be in connection with a joint consignment of goods or some other form of speculative enterprise. 133.-Joint Venture Accounts :- (1) Each party may open a special account for the joint venture, recording only those transactions in the venture with which he himself is concerned. A general account or statement is prepared later in which all the transactions of each party engaged in the venture are incorporated, and from which the profit (or loss) is ascertained. Each party then debits the Joint Account in his own books with the profit due to him, and credits Profit and Loss Account. If there remains a debit balance on his Joint Account this amount is due to him from the other parties ; or if a credit balance he will have to pay it to them. The payment of this balance by one party to the other will finally close the Joint Venture Account, and the Joint Account in each party's books. (2) Usually one of the parties undertakes to manage the Joint Venture, and he does the buying, selling, etc., and keeps the general Joint Venture Account. For this service he generally takes a commission in addition to his share of the profits. The Joint Venture Account is debited with the cost of the goods, and each party contributes his agreed share of this cost, which amounts are credited to their personal accounts in the managing party's books. The Joint Account is also debited with all expenses, credited with sales, and the balance is the profit (or loss) divisible. The Joint Accounts are sometimes kept on an Account Current basis, bringing interest into account. (See Vol. II, Chap. I.) 134 ·1) “ Book-kecping and Accountancy L.XAVY: --11:Ils anel lloliln initseel a jar: St. 12 .;'!. lucu at tro, and received whers from lol'm walun! a: Garson 17 armertim with which llobib mid £10, 10%. fijari, llub'x cu 112 1- Lee Wella puill freight and other chariots D18; he wild all the was there has belesi 4230%), and had to play the latter I pPCTcrimsriver the front forts I're jure : Joint Venture .Iccount, and the joint pour lr; lis Welian! xir tie ir own iwws. Wells sont n chipue to lubi to utile th.c acavir, il.ru Nuering Tilly in prufits of lenses. JOINT VENTURI: JCCOUXT (ulle morandum .Jaunkop 11) £ Oo Diy Siles 12,500 Less Broker 25 18 oo 2,475 0 19 s. la Cirxxl (111) 800 (Hobby) 1,400 00 Ircigla (Wells) Toverenss(Ilubis) 10 10 l'rofit (joint) c' 246 100 142,475 00 To Wells £133 50 Hobby 123 510 (:,131 , 1:10.0.0 lis l'rout b's! 1 1 £24611010 £336/10/0 JOINT ACCOUNT WITH HOBIS (In VR links) C. s. doo 0 0 li> Clerue from Broker (> 2,750 18 0.0 To (ixxis Prought and Cluirges Bill (dren by How's) I'roſit (! Slure) 450 123 0,0 50 11 50 11,391 To ILink (Cheyue to! Hlubbs to settle) 1,0535,0 12,475 00 12,4751 o 135 ·Reference Library of the Bennett College: JOINT ACCOUNT WITH WELLS (In Hobbs' Books) Cr. Dr. £ £ To Goods Expenses Profit ( sluare) 00 1,400 OJO 10 | 100 123 50 450 By Sight Bill (on Wells) By Bank (Cheque from Wells). 1,083 150 £1,533 150 £1,533 1510 EXAMPLE II.-Bell, Horne and Jones entered a Joint Venturc, Beil managing affairs for a commission of 5 per cent. on sales, and all sharing equally in profit. Bell bought goods value $750, and supplied $450 from his own stock. He paid freight and other charges £6, 1os. He received cheques of £400 each from Horne and Jones for their share of the cost of goods. Gonds on joint account sold for $1650 prompt cash. Sent cheques to Horne and Jones for their share in the profits. Write up all the entries in Bell's books. JOURNAL S. de £ s. d. £ 450 0 Joint Venture a/c . To Goods a/c For goods from stock for joint account. 450 o 82 10 8210 O Joint Venture a/c To Commission For 5 per cent. on £1650 sale of joint stock for joint account with Horne and Jones. CASH BOOK Dy. Cr £ s. d. 42 s. d. 4000 0 67 100 To Horne, share of cost To Joncs, share of cost To Cash for sal of Sock) 400010 By Joint a/c expenses By Goods for Joint a/c By Hornc Jones 750 -500 500 1,650 Olo 136 ·Book-keeping and Accountancy LEDGER JOINT VENTURE ACCOUNT (arith Ilorue and bonºs) Dr. ܀ s. 1. 75000 +50 oo tiy (fur Sule of point 1,650" 67100 Tu Cash fiori Casli (Freight Charges) 10 Comme : sien son Sales 170 Bilice, being profil 1300- Iloric Jones) I'rofit and Loss a/c 62100 100 00 o'o 100 Ico 00 (1,650 00 $1,650100 HI, HORNT 3 03 00 أداروا 500) 0 0 By Cash ► Junt a's porust) TO) 0,0 1.500 450000 J. JONES ( JON ct Po 10 Cash 500 Oo 17 (! profit) J (1 65000 137 ·Reference Library of the Bennett College: GOODS ON JOINT ACCOUNT Dr. Cr. £ 2t, 11. To Transfer to Trading ac By Joint alc with Hornc and Jones. £450010 £45o lolo TRADING ACCOUNT Dr. £ lela By Goods on Joint a/c £45o lolo PROFIT AND LOSS ACCOUNT C. 42 sla. By Joint a/c with Horne and Jones, By Commission 100 82 ·" Book-keeping and Accountancy" INDEX TO VOL. I Isus! Laai, Acceptance for honour, 35. Acceptance of bills, 12, 13. Acceptre, 12 Accrint. Sul, 123, Accounts, form of, 2. his ol, -, 3- nature of, r. Adjustments in Mindl Accounts, et Tr: lax!! 1.1..1..1. to nie?. 3:. J**:-10, 13. Ad valorem Duty, fx „Umke, 53 Winstance Bewoh. 15 inte-datel bull 13 tronments in Final.Iccorints, agen Isscts, 9.11. in Talance sheet. 05. circulating, e. fictitious, IO. fiscal, 9. fouting. O Itquid, 9. wastong, 9. iclute (1.32 h, in ... 19 ***** Starli tone, 3 INI, Bilis sayalile, 13. 003 lisy Arpit in cel. 01 14 Receivablets ไปตุนธร 5 : Thath Bichcherping detrit. Bochun) chimins of June . 1. Had dcts in Balance sheet, 2016 Balance shect, compulation, 73 95 112 definition, 95 double account 124 examples of 90, 114 form of, 114 heading of, 95 Order of items in, II Halinong accounts atstochtaking. 73 Bunk account, 19. 36 17tcres, 10 Bill of l. xchange, bearer, 5: clean 57, 59 collection of go currency of 57 days of grace, 13 ciefinition 11 discounting. 53. 123 dishonoured, entne fut SH documentan, clases 171, sis, 57 5 (0. clocuments on acril ance 57 documents on payment 57 ) (unul Iccount ** cinult 11 Weinit 01 17 181 183 fattung 10 millal (19/47111 t 118 othing 14 Us Indici JA 1 exigit, t, 1 113, 17 di-that-tofi 1. Bloxth in it! tolle PE .. 57-** - MIL.. !

·Reference Library of the Bennett College: 1) 13 1) 9 3) 91 > . 99 > Discount, trade, 11, 10. Chcques, 11, 65, 661.07. wholesalc, 11. crossed, 65. Discounting charges, 54, 125, crossing, forius oſ, 65, bls. Doublc Account System, 121. definition, I1, 65. dishonoured, 07. Doublc Entry, principles of, 1. advantages over single indorsements, 66, mutilated, 67. entry, 1, 3. negotiation, 65. Drawing Account, examplc, 94. post-dated, 67, 68. books, 6S. Endorsements, 52. See ludorsewents, revocation of banker's author Erasures in books, 47. ity, 67 Errors, investigation for, $6. in trial balance, Só. stale, 67 Stamp Duty, os. Expenses, allocation of, 9S. Closing entries in journal, 71, Sa, 93. Code Napoléon, 24. Final :lccounts, 73. 87, 9-, 97. common crrors, 115. Commission, 1-3, 130. Del credere, 123, 1 jo. Gools ccount, -7. Compensating errors, S6. on consignnient, 123. Consignee, 130. books of, 123, 130. on sale or return, 123, 133. Guard Book, 25. Consignment Account, 124, 128. closing, 120. books, 123, 124. llypothecation, letter of, 57. Day Book, 12.1. Income and Expenditure Accout, 119. discounting bills on, 1?5. Indorsement of bills, 52, 53. example, 120. cheques, 66. cxpenses, 124, Invoice Book, 25. financing, 124. Impersonal Accounts, 2. inwards, 123, 130. subdivision of, 3 outwards, 123, 124. Imprest system, petty cash, 47- procedure on sale, 130. procedure summarised, 129. Joint ventures, 13+. Consignments, 123. Journal, 18, 69. Cost Account, 97 on Continent, 69. Counting-house discount, 11. narration in, 19, 70, Credit Boob, 35. specimen, 71. Crcdit note, 32. Journalising, 24. Creditor, 2. Current Account at Bank, 10. Ledger, 13. Accounts, 15. Days of grace, 13. Bought, 16. Debit note, 32. division of, 16. Debit Returns Book, 3-. Impersonal, 16. Debtor, 2. Loose-Icaf, 16, 17, 18. Deficiency, 9. Nominal, 16. Deposit Account at Bank, 10. Private, 16. Depreciation : Sales, 16. Annuity method, 100. 100, Loss, gross, SS. Dcpreciation Fund method, 100, 109. Fixed Instalment method, 103, 109, How dealt with, 105, 113. Manufacturing Account, 92, 97- In Balance Shect, 113. Vemorandum Book, 7. Insurance Policy method, 106. Methods of providing for, 105. Yominal Accounts, 3, 7, 15. Reducing Instalment method, 106, 10S. balancing. 7. Reserves for, 117. Revaluation methiol, JOS. Omissions from books, 86, 87. Discount, cash, 11, 40. Outpui, 99. counting-liousc, il. Outstanding itens, provision for, 101. 140 1 9 > net, 93.

·6 Book-keeping and Accountancy" 3, Himal.1.rar. p. Su Arrrr!,!. 1). .. Payment in une, "" fronal accounts, is kulincir: 44,5 II. 3. 3. 33. 35 rrity cash. 45 45. Impregarem, 17. triin, 15, 21. rules lac, . Itoiz ani lens.ccount. 7, 93, 97, 15 Itott, ftom, 88. 9: not, 23. hurma inince, 124. l'urcia** .lcccrunt, 27 Book, 25 Columsur, :S Xrling, 7 Returns Bexh. 3: <;, , crrelit, e tolit, . Is Ivay lib. 331. 3:. Jourral. 3 Sintin: Fund, 118 Sola bil!.36 Statement olar 119. Saatat call Stirbtilingandlulerne. 73 Sunularyolni Sjopreme Acrk119 >> . 2 . . el act outs. I 5. lineipitsand Plyments.Iccount, 17, 120, Rocation state prill, Bunk, f1. Reven for lxul anu doubtlul dclits 10: depreclition, 105 discounts, 10! 157 estimata) linser o fun, 102. rends, gencral 117 spcrial. 117 secret, ris. 124 Reserve, 117 Returis Tooh, an iyul 34 Bought 34, 34 Trading count, 87.8,97. cajutal, ro. Thirr an accounts To lisce, 71.55 uiments, 113.271 discinery oferta TTU nor riri, progutalicom ul. 4. Tummer (2 frorentar ut <0. 29.) Ione.nullului,