CHAPTER XXI

ACCOUNTS

AN account is an orderly record of the transactions pertaining to any one person or thing.

213. The Cash Account. In keeping a record of cash, All cash receipts are entered on the left, or debit side;

All cash payments are entered on the right, or credit side;

The difference between the total receipts and total payments is the balance of cash on hand.

The following transactions are recorded in the model cash account in the illustration.

April 6, 1922, C. D. Smith invested $5,000 in business; April 7, he paid $1,640 for goods; April 10, he paid his store rent, $75; April 11, he received $275 for merchandise; April 13, he received $36 from John Appleton; April 14, he paid F. G. Barton $128; April 18, William Hobart paid him $60 on account; April 28, he paid D. F. Hilton $30 on account.

214. Personal Accounts. Transactions with persons are recorded in personal accounts. Persons to whom goods are sold are debited for all goods sold to them on account; they are credited for payments made by them on account.

Persons from whom goods are bought, are credited for goods purchased from them on account; they are debited for payments made to them on account.

The two illustrations which follow will show the two common rulings for personal accounts.

May 2, 1922, purchased from Harold Booth, merchandise, $260. May 8, purchased merchandise from him, $37.90; May 10, paid him for the invoice of May 1, less 1% discount, Cash $257.40, Discount $2.60; May 17, paid him for the invoice of May 8, less 1% discount, Cash $36.52, Discount $.38; May 20, purchased merchandise, $271.25.

June 1, 1922, sold to B. A. Newcomber, goods amounting to $345.70; June 5, sold to Newcomber merchandise amounting to $38.45; June 12, received payment for invoice of June 1, less 2%, Cash $338.79, Discount $6.91; June 13, sold Newcomber an invoice amounting to $83.92; June 14, received payment for the invoice of the 5th, less 1%, Cash $38.07, Discount $.38.

215. Accounts Receivable and Accounts Payable. If a person's account is larger on the debit side, it shows a balance owed by that person; it is therefore an account receivable, and the balance is an asset.

If a person's account is larger on the credit side, it shows a balance owed to that person; it is therefore an account payable, and the balance is a liability.

Written Work

1. Rule a cash account and enter the following transactions; find the balance, and rule the account.

August 2, you invest $5,000 in a grocery business; August 3, purchase merchandise, paying cash for the same, $1,345.75; August 6, receive cash for merchandise sold, $127.50; August 10, receive cash for goods sold, $50.25; August 12, pay for advertising, $5.60; August 17, receive cash for merchandise sold, $23.74; August 18, pay cash for an invoice of merchandise, $56.35; August 21, receive cash from Henry Belmont on account, $45.80; August 23, pay cash to Oscar Haines on account, $54.85; August 31, pay store rent, $30, and clerk hire, $35.

2. Rule a personal account similar to the illustration of Harold Booth's account, page 246, and enter the following transactions:

September 3, you purchase from R. G. Henderson, on account, 2/10; N/60, an invoice of goods amounting to $237.40; September 9, purchase an invoice of goods from Henderson, $58.35, terms 1/15; N/2 months; September 11, purchase an invoice of merchandise from Henderson, $123.60, terms 2/5; N/30; September 12, pay the invoice of the 3d, less the discount; September 14, purchase goods amounting to $25; September 16, pay the invoice of the 11th, less the discount. What is the balance of Mr. Henderson's account? Is this an account receivable or an account payable? Is the balance an asset or a liability?

3. Rule an account similar to the illustration of B. A. Newcomber's account, page 246, and enter the following transactions:

July 2, sold R. S. Clark, terms 1/5; N/30, merchandise amounting to $57.82; July 5, sold Clark goods to the value of $23.95, terms 2/10; N/60; July 7, received payment for the invoice of the 2d, less the discount; July 9, sold Clark an invoice of $75, less a trade discount of 10%, terms 1/10; N/30; July 11, sold him a bill of goods amounting to $40; July 15, received cash for the invoice of the 5th, less the discount.

Is this account an account receivable or an account payable? Is the balance an asset or a liability?

CHAPTER XXII

TAKING INVENTORY

AT certain regular intervals an inventory is taken to determine the value of the stock on hand. Two clerks usually work together in taking the inventory. One counts the number of items of each kind, and reads aloud the cost price marked on the goods. The second clerk records these facts. The inventory is then sent to the office, where the value of each item is extended and the total value of the stock on hand is determined.

Inventories are entered in various forms, depending upon the details of information desired.

216. Periodic Inventories. A simple form like the following may be used:

Rule an inventory similar to the preceding form, enter the following items, find the cost of each item, and the total cost.

This is one of several inventory sheets used in taking stock in a grocery.

A more elaborate form of inventory similar to the following may be used when desired.

217. Explanation of Form. The Lot Number is a number given an article by either the manufacturer or the merchant. Since different styles of goods are given different lot numbers, this number may be entered in the inventory in place of a description.

The "size" column is used to show the different sizes of an article in stock. As illustrated in the model inventory, each size of an article may appear on a separate line, or all sizes may be entered on the same line. When the latter method is followed, the quantity of a certain