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The CAPITAL ACCOUNT (ledger folio I) then shows a surplus on the Cr. side of £4979, which is brought down as a Cr. balance, and is recorded in the list of balances on page 21.

The list of balances on page 21 shows exactly the state of every account in the ledger, and from it the Balance Sheet may be conveniently arranged as shown on page 21.

It may be well here to repeat that this Balance Sheet might have been prepared whether the books were, or were not, kept by doubleentry, and the profit of the period could have been ascertained by comparing its surplus of assets over liabilities (i.e., the Capital), with the surplus shown by the Balance Sheet at the commencement of the six months, see page 10. The Trading Account, however, which is the product of double-entry, shows the precise income and expenditure from which the profit arises.

The Goods Account, and the Trading Account, are given in their simplest form and are capable of considerable modifications as will be seen in succeeding pages of this book.

SPECIMEN ACCOUNTS.

ILLUSTRATING ELEMENTARY PRINCIPLES.

Note.—The figures alongside the postings in the following ledger accounts indicate the number of the respective item in the list of transactions on page 10.

Dr. Capital Account (Abraham Crosland). Cy. 1. £

£ To Drawings Account 256

By Surplus, at the com.
Bulance, carried down.. 4979

mencement of the year 4500
Profit......

735

5235 : 0:0

5235 : 0:0

By Balance..

4979

Dr.
Goods Account.

Cr. 2.

£ To Stock on hand, at

2 By George Brownson.... 7200 commencement

3160

3 Albert Lodge(returns) 75 1 John Blamires

3200

12 Thomas Allen ... 2800 7 Thomas Allen(returns) 320

Stock on hand at close.. 3980 8 Ephraim Broadbent.. 2950 „ Transfer to Trading Account.

4425

14055 : 0:0

14055 : 0:0

To Stock on hand...

3980

3.

Dr.
Plant and Machinery Account.

Cr.

£ To Value of Machinery

By Balance carried down.. 2379 on hand, at commencement.

2200 10 Cash for five looms

179

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LIST OF BALANCES at the end of the six months' trading, after closing the Accounts.

Dr. Cr.

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The specimen transactions employed in the foregoing illustrations are all set out in one list on page 10; but there are manifest advantages to be gained by classification before posting the items into the ledger.

For instance there might be a hundred transactions of exactly the sanie character as No. 2. “ Sold goods to George Brownson, £7,200.” By keeping these similar items separate and distinct (although it would be necessary to post each individual transaction to the Dr. of the respective customers' accounts) the aggregate of the hundred transactions might be posted in one sum to the Cr. of Goods Account, thus saving ninety-nine postings. The same remarks apply to all classes of transactions that are of frequent occurrence.

The importance of this classification was early recognised, and used to be performed every day through the medium of a book called the “ Journal.” Subsequently, in order to further reduce the number of postings, the journal was written up weekly, monthly, or at other convenient periods, so that the title “Journal” lost its significance. It will be perceived that the journal is not absolutely necessary, inasmuch as we have posted our transactions to the ledger without its aid, and following the usual fate of things that can be dispensed

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