Chapter C: E. Knoeppel

Specialist in Cost
Analysis and Factory Betterment.

Author of "Systematic
Foundry Operation and Foundry Costing,"
"Maximum Production through Organization and
Supervision," and other papers.

HARRINGTON EMERSON, M. A.
Consulting Engineer.

Director of
Organization and Betterment Work on the
Santa Fe System.

Originator of the
Emerson Efficiency System.

Author of "Efficiency
as a Basis for Operation and Wages."

ELMER H. BEACH
Specialist in
Accounting Methods.

Editor, _Beach's
Magazine of Business_.

Founder of The
Bookkeeper.

Editor of _The
American Business and Accounting
Encyclopedia_.

J. J. RAHILL, C. P. A.
Member, California
Society of Public Accountants.

Author of
"Corporation Accounting and Corporation
Law."

FRANK BROOKER, C. P. A.
Ex-New York State
Examiner of Certified Public Accountants.

Ex-President,
American Association of Public Accountants.

Author of "American
Accountants' Manual."

CLINTON E. WOODS, M. E.
Specialist in
Industrial Organization.

Formerly Comptroller,
Sears, Roebuck & Co.

Author of "Organizing
a Factory," and "Woods' Reports."

CHARLES E. SPRAGUE, C. P. A.
President of the
Union Dime Savings Bank, New York.

Author of "The
Accountancy of Investment," "Extended Bond
Tables," and "Problems and Studies in the
Accountancy of Investment."

CHARLES WALDO HASKINS, C. P. A., L. H. M.
Author of "Business
Education and Accountancy."

JOHN J. CRAWFORD
Author of "Bank
Directors, Their Powers, Duties, and
Liabilities."

DR. F. A. CLEVELAND
Of the Wharton School
of Finance, University of Pennsylvania.

Author of "Funds and
Their Uses."

GENERAL SALES OFFICES, SWIFT & CO., CHICAGO, ILL.
]

Foreword

With the unprecedented increase in our commercial activities has come a demand for better business methods. Methods which were adequate for the business of a less active commercial era, have given way to systems and labor-saving ideas in keeping with the financial and industrial progress of the world.

¶ Out of this progress has risen a new literature—the literature of business. But with the rapid advancement in the science of business, its literature can scarcely be said to have kept pace, at least, not to the same extent as in other sciences and professions. Much excellent material dealing with special phases of business activity has been prepared, but this is so scattered that the student desiring to acquire a comprehensive business library has found himself confronted by serious difficulties. He has been obliged, to a great extent, to make his selections blindly, resulting in many duplications of material without securing needed information on important phases of the subject.

¶ In the belief that a demand exists for a library which shall embrace the best practice in all branches of business—from buying to selling, from simple bookkeeping to the administration of the financial affairs of a great corporation—these volumes have been prepared. Prepared primarily for use as instruction books for the American School of Correspondence, the material from which the Cyclopedia has been compiled embraces the latest ideas with explanations of the most approved methods of modern business.

¶ Editors and writers have been selected because of their familiarity with, and experience in handling various subjects pertaining to Commerce, Accountancy, and Business Administration. Writers with practical business experience have received preference over those with theoretical training; practicability has been considered of greater importance than literary excellence.

¶ In addition to covering the entire general field of business, this Cyclopedia contains much specialized information not heretofore published in any form. This specialization is particularly apparent in those sections which treat of accounting and methods of management for Department Stores, Contractors, Publishers and Printers, Insurance, and Real Estate. The value of this information will be recognized by every student of business.

¶ The principal value which is claimed for this Cyclopedia is as a reference work, but, comprising as it does the material used by the School in its correspondence courses, it is offered with the confident expectation that it will prove of great value to the trained man who desires to become conversant with phases of business practice with which he is unfamiliar, and to those holding advanced clerical and managerial positions.

¶ In conclusion, grateful acknowledgment is made to authors and collaborators, to whose hearty coöperation the excellence of this work is due.

Table of Contents

VOLUME V

WHOLESALE, COMMISSION, AND STORAGE _By James B. Griffith_[1] Page [2]11 ACCOUNTS

Wholesale Business—Controlling Accounts—Sample Transactions— Order and Sales Record—Abstract of Sales—Sales Expense—Trial Balance Book—Commission and Brokerage Business—Merchandise Broker—Manufacturer's Agent—Shipments—Agents' or Factors' Account—Principal's Account—Commission Account—Produce Shipper's Books—Commission Merchants' Books—Consignment Ledger Account—Storage Accounts—Special Records

SINGLE ENTRY BOOKKEEPING _By James B. Griffith_ Page 91

Distinctive Features—Books Used—Debit and Credit—Posting— Proprietor's Account—Proving Work—Model Set—Determining Profit—Closing Books—Changing to Double Entry—Trial Balances and Comparative Statements—Comparative Statements—Proof without Trial Balance—Book Inventories—Demonstration of Proof—Reverse or Slip Posting—Special Accounting Forms—Cash Books—Cash Journals—Tabular Sales Books—Pay-Roll Records

TRUSTEES' AND EXECUTORS' ACCOUNTS _By James B. Griffith_ Page 163

Executors' Accounting—Inventory—Intermediate Account—Final Account—Schedules—Form of Account—Sample Accounts—Accounts with Trust Provisions—Exercise—Realization and Liquidation Account—Statement of Affairs—Resources and Liabilities— Balance Sheet—Affairs of a Bankrupt—Appraiser—Statement of Affairs—Deficiency of Account

STOCK BROKERS' ACCOUNTS _By Chas. A. Sweetland_ Page 195

Grain Purchases—Bulls and Bears—Broker's Commission— Securities—Transfers—Clearing House—Ring Settlement— Commodities Handled—Cornering Market—Value of Wire— Settlement of Contracts by Offset—Adjustment of Balances or Settlement—Commission Allowed Brokers—Books and Forms Used— Glossary of Board of Trade Terms

BILLING AND ORDER RECORDING _By Geo. C. Russell_ Page 235

European Methods—Machines for Manifolding—Development of Billing Machines—Loose-Leaf Sales Sheets and Invoices— Duplicate Invoices—Condensed Billing—Traffic Department Records—Analysis of Quantities and Amounts—Unit Billing—Back Orders—Split Orders—Loose-Leaf Sheets—Binders—Designing Stationery—Styles of Type—Carbon Papers—Blinds—How to Handle Orders on Billing Machine—Invoices in Blanket Form— Tabulators—Computing Machines in Billing—The Colored Sheet System—Compound Forms—Retail Dry Goods Billing—Devices of the Future

REVIEW QUESTIONS Page 303

INDEX Page 319

Footnote 1:

For professional standing of authors, see list of Authors and
Collaborators at front of volume.

Footnote 2:

For page numbers, see foot of pages.

OFFICE, FARWELL, OZMUN, KIRK & CO. (WHOLESALE HARDWARE), ST. PAUL,
MINN.
]

WHOLESALE, COMMISSION, AND STORAGE ACCOUNTS

WHOLESALE BUSINESS

In this section complete methods of bookkeeping as practiced in wholesale houses are demonstrated. Numerous modern methods that are readily adaptable to other lines of business are illustrated and explained in detail.

DIVIDING THE LEDGER

=1.= There are many advantages in dividing the ledger into sections. The subdivisions most commonly used are purchase ledger, sales ledger, and general ledger. Such divisions greatly facilitate posting and reduce the chances of error. While it is advisable in most cases to use a separate book for each division, the three ledgers may be combined in one book by setting aside a section for each. This practice is not recommended except where the number of accounts is small, when general and purchase ledgers or purchase and sales ledgers may be combined. The division of the ledger into three sections does not necessitate radical changes, either in form or method of handling, in the other books.

=2. Purchase Ledger.= The purchase ledger contains only accounts with those from whom we are making purchases. The balances of the accounts in this ledger will be on the credit side and represent a liability. The total balance of the purchase ledger is the amount we owe on open accounts. If, for example, our purchases on account during a stated period amount to $964.50, and the amount paid on account by us is $320.30, we still owe $644.20. If the work is correct the combined balances of all open accounts in the purchase ledger will exactly equal this amount.

=3. Sales Ledger.= The sales ledger contains only accounts with customers to whom goods are sold on account. The balances of the accounts in the sales ledger will be on the debit side and represent an asset. The total balance of the sales ledger is the amount that our customers owe us on open accounts. Suppose that a business is started with no open accounts receivable—during a stated period the sales on account amount to $1,427.75, and the total payments received on account are $965.50—the amount still outstanding is $462.25, and this amount should exactly equal the combined balances of all the open accounts in the sales ledger.

The sales ledger is sometimes subdivided into two or more parts. The divisions may be City and Country or they may be according to the letters of the alphabet—as A-K, L-Z, etc.

=4. Accounts in Both Ledgers.= Occasionally one from whom we are purchasing goods will also be a customer. For reasons which will appear later, accounts should, in these cases, be opened in both the purchase ledger and the sales ledger. When settlement of such an account is made, the necessary adjusting entries are made through the journal.

=5. General Ledger.= The general ledger contains the investment accounts of the proprietor or partners, and all real, representative, and nominal accounts. Accounts with the purchase and sales ledgers are also kept in this ledger. These are _controlling accounts_ which represent at all times the total balances of the purchase and sales ledgers.

When statements of the other ledgers have been made and proved correct, a trial balance of the general ledger is made.

CONTROLLING ACCOUNTS

=6.= A controlling account is one which exhibits a summary of all of the accounts in a ledger, or of all accounts of the same class.

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

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

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

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

ORDER BLANKS

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

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

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

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

Order Blank
]

SALES BOOK

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

INVOICE REGISTER

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

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

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

CASH BOOK

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

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

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

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

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

SUBDIVISION OF EXPENSE ACCOUNT

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

PETTY CASH VOUCHER

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

Petty Cash Voucher
]

TREATMENT OF PROTESTED PAPER

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

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

SAMPLE TRANSACTIONS

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

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

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

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

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

The following transactions are entered on the books:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Opening Entry in Journal
]

Adjusting Journal Entries
]

Sales Book and Invoice Register
]

SCENE IN SOUTH WATER STREET, WHERE THE COMMISSION HOUSES OF CHICAGO'S
GREAT PRODUCE MARKETS ARE LOCATED
]

Columnar Cash Journal
]

Columnar Cash Journal
]

Sales Ledger
]

Sales Ledger
]

Sales and Purchase Ledgers
]

Purchase and General Ledgers
]

General Ledger
]

General Ledger
]

General Ledger
]

Statement of Sales and Purchase Ledger
]

Balance Sheet and Trial Balance of General Ledger
]

EXERCISES

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

January 2nd, 1909

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

Deposited in Western National Bank $5,000.00.

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

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

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

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

—3rd—

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

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

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

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

—4th—

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

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

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

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

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

—5th—

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

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

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

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

—6th—

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

Deposited cash received to date.

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

Paid for telegram—petty cash—.40.

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

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

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

—8th—

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

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

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

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

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

Paid for labor, check No. 8, 16.50.

—9th—

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

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

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

—10th—

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

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

—11th—

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

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

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

—12th—

Deposited cash on hand.

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

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

—13th—

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

Paid sundry office expenses from petty cash 3.60.

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

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

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

—15th—

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

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

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

3rd. Take a trial balance.

4th. Credit interest to partner's accounts.

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

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

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

COMBINED ORDER AND SALES RECORD

=17.= Instead of keeping separate order and sales books, both records may be combined on one blank. This is accomplished by the use of order blanks provided with columns for the distribution of sales to the different departments. Before the order is filled these blanks are handled in the same manner as those without distribution columns. When filled, the amounts are extended in the proper columns and the invoice made. The orders are then filed in a binder, each day's orders being kept together, and postings made direct to customers' accounts. The footings are carried forward to the end of the month and totals posted to sales accounts. The original orders thus become a loose leaf sales book.

ABSTRACT OF SALES

=18.= When the order blank is used as a sales record, making a sales book with a record of a single sale to a sheet, it is somewhat inconvenient to determine from the footings the total sales for the day. This information is of considerable value, as a knowledge of what is being done from day to day is of importance to the principals of a business. Such a record is provided for by an abstract of sales on a separate sheet. This abstract should show total sales for each day, both cash and on account, divided by departments.

The blank may be made the same size as the order blanks, and filed in the sales binder at the beginning of the month. Sales are recorded daily and footings carried forward to the end of the month, when the totals may be posted direct to the credit of the sales account in the general ledger. The totals of sales on account will be posted to the debit of the sales controlling account in the general ledger.

OUT FREIGHT

=19.= The proper treatment of freight paid on outgoing shipments is an important question in accounting. When goods are sold at delivered prices, the freight paid is one of the items of expense in selling the goods, and when the books are closed the account will be closed into profit and loss. However, in a wholesale business, freight is sometimes paid as an accommodation to the customer when the goods have been sold at f. o. b. prices. Although the amount should be added to the invoice it should not be credited to the sales account as this would be taking credit for a fictitious trading profit. Such an item should be made a special charge against the customer by means of a journal entry.

Customer Dr.
Out Freight Cr.

Combined Order and Sales Record
]

THE GENERAL OFFICES OF THE SAMUEL C. TATUM CO., CINCINNATI, OHIO
]

Abstract of Sales by Departments
]

SALES EXPENSE

=20.= In a wholesale or manufacturing business it is very desirable that the exact cost of selling goods be known. Broadly, this cost is covered under the general head of sales expense, but this is usually divided into several classes of expenditures. The segregation of the various items of sales expense is desirable for the purpose of determining the percentage of each. The items which properly belong in sales expense depend somewhat on the nature of the business. For example, traveling expenses are usually a direct sales expense, but in some businesses they may be chargeable to the cost of purchases. The items entering into sales expense of the average business are: advertising, salaries of salesmen, traveling expenses of salesmen, commissions paid on sales, cost of packing and shipping, out freight.

=21. Advertising.= This account should be charged with all expenditures for publicity such as newspaper, magazine, street car, and bill board advertising, cost of printing catalogs, booklets, and circulars. Where there is any reason for so doing, the cost of the different classes of advertising can, of course, be kept in separate accounts. The aim and object of advertising being to increase the sale of goods, it is properly considered an item of sales expense.

=22. Salaries of Salesmen.= This account is charged with all salaries paid to salesmen whether traveling or working in the house. Commissions and bonuses are sometimes included in this account, but it is usually considered best to keep them in separate accounts.

=23. Traveling Expenses of Salesmen.= This account is charged with all legitimate traveling expenses of salesmen, the specific items included depending largely on the nature of the business. For example, in some businesses a liberal allowance is made for the entertainment of customers, while in others this item is never allowed. In any business the traveling expense account requires careful scrutiny. Salesmen should be required to furnish an itemized statement or voucher of expenses at stated intervals. For convenience, this should be made on a form specially provided for the purpose. One of the most convenient and popular expense vouchers is in the form of a book of a convenient pocket size, with a page for each day of the week and a summary of the week's expenses on the last page.

=24. Packing and Shipping.= This account is charged with the entire cost of packing goods for shipment. It includes such items as wages of shipping clerk and his assistants, crates, lumber, boxes, and all other packing materials.

TRIAL BALANCE BOOK

Traveler's Expense Book
]

=25.= To save rewriting the names of the accounts each month, a trial balance book can be used to good advantage. These books are made to accommodate six trial balances on a double page, and are sometimes made with alternate short leaves so that twelve trial balances may be made with one writing of the names. When the trial balance book is used, care must be exercised in providing space for the addition of new accounts in each section. Where separate sales and purchase ledgers are used, it is best to provide a trial balance book for each ledger.

THE CHECK REGISTER

=26.= Large check books are cumbersome to handle and necessitating the expenditure of much needless labor. Their use is rapidly giving way in modern offices to the check register. The check register has several distinct advantages. It exhibits, in compact form, a record of all checks issued and can also be arranged to show deposits and balance in the bank. Distribution columns can be provided with headings for the different expenditure accounts, which makes of the check register a cash expenditure book. The form should be varied to suit the business in which it is to be used. A typical form is illustrated on page 37.

=27. Checks in Pads.= When the check register is used it is the usual custom to have checks put up in pads. After the check is written, it is registered and numbered to correspond to the register number. With the use of padded checks, it is not necessary for the clerk who writes the check to know anything about the bank balance.

Trial Balance Book
]

Check Register Combined with Cash Expenditure Book
]

Cash Received Book
]

Checks in Pads
]

CASH RECEIVED BOOK

=28.= A cash book specially ruled for a record of cash received is used to supplement the check register or cash expenditure book. Columns are provided for the different classes of receipts, with one credit column. It is assumed that all cash received is deposited, payments being made exclusively by check. This does not refer to petty cash expenditures which should be kept in a petty cash book or on envelope vouchers.

SAMPLE TRANSACTIONS

=29.= The following transactions illustrate the use of the special blanks and books described.