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Stocks & Bolt, Birmingham. Folio 18, page 144.

This account illustrates the treatment of a renewed bill. Bill No. 22 is supposed to have been deposited in the bank on the 9th December, the amount being entered in the ordinary course on the left-hand side of the Cash Book on that date (see page 124), and posted to the Cr. of the Bills Receivable Ledger (see page 149). On December 12th Stocks & Bolt request a renewal of the bill for two months, agreeing to pay interest. The bank, being thereupon advised, retires the bill, and the amount is entered on the right-hand side of the Cash Book in the Bank column; the transaction being equivalent to a payment by the bank. The two months' interest (£2 175. rod.) is entered in the Discounts column, and both the amount and interest are posted to the Dr. of Stocks & Bolt's account, as a payment made on their behalf. The renewed bill, which, with interest added, amounts to £350 6s. 4d. is entered when received in the ordinary way. Sundry Persons Account. Folio 20, page 144.

This account is for small sales to persons for whom it is not worth while to open a special account.

The item on Feb. 4th (Wm. Blackburn, £3 25. od.) represents a small sale to one of the partners. It is desirable that the partner, as in the example, should pay cash for such transactions, but the amount might be transferred to his Drawings account.

THE BILLS LEDGERS.

Bills Payable. See Example, pages 146-7. The only variations in this book from that of Set I. are the additional column for entering discount allowed alongside the amount of each bill and the monthly division of the column for the due dates.

When a bill is given in settlement of an account it is usually for the full amount, but odd shillings and pence are frequently written off and must be treated as discount. The ordinary trade discount is sometimes claimed, less the Banker's charge for discounting the bill, and in such cases the difference is treated as the amount of discount allowed.

The amount both of the discount and the bill is entered in one sum to the Dr. of the respective account in the Purchases Ledger.

The total of the Discounts column is posted quarterly to the Cr. of the Discount on Purchases account in the Nominal Ledger (folio 22, page 165).

Bills Receivable. See Example, pages 148-9. A column is added for discounts, as in the Bills Payable Ledger, and the total of the Discounts column is posted quarterly to the Dr. of the Discount on Sales account in the Nominal Ledger (folio 21, page 162). The due date column is ruled with monthly divisions.

Nos. 6, 7, 8, and 9, received from Jonas Harrop & Sons, represent Promissory Notes (j) for the amount of composition on their debt.

These notes are treated in the same manner as bills, except that a memorandum is added describing them as promissory notes and giving the name and address of the surety (see page 148).

Nos. 10 and ii shew the method of treating bills that are discounted otherwise than through the firm's Banker.

The charge for discounting, £20 18s. 7d., is entered in the Discounts column of the Cash Book, folio 3, page 110, alongside the amount received from the Discount Company, and both the charge for discounting and cash are posted to the Cr. of the Bills Ledger.

No. 12, received from Bentley & Robinson, represents a customer's bill (i.e., a bill accepted by one of Bentley & Robinson's own customers).

The name and address of the acceptor and drawer are recorded, as they would be required were the bill dishonoured. The names and addresses of indorsers, if any, should also be set out; in fact all the material particulars of the bill.

No. 27. This bill is marked as a renewal (k) of No. 22.

Nos. 1, 16, 20, 23, and 28 are drafts on a third party, which would be presented for acceptance of the drawee (see Bills of Exchange).

The method of dealing with renewed bills is described on page 207. The treatment of dishonoured bills is explained on page 206.

Where a Bill Receivable is handed over by the firm to one of its own creditors in discharge of a debt, the amount of the bill is entered on the left-hand side of the Cash Book, as received, and posted to the Cr. of the Bills Ledger. The amount is also entered on the righthand side of the Cash Book, as paid, and posted to the Dr. of the creditor's account. Payment by customer's bill is seldom resorted to except in case of need, or unless a marked advantage is to be gained thereby. It is regarded amongst home traders as prima facie evidence of financial weakness.

Where it is often necessary to record any further material particulars, additional columns may be added (e.g., for the acceptor's and drawer's name and address; for currency; for the details of discount or exchange, &c., &c.).

(j) It is in some cases convenient to appropriate a distinct portion of the Bills Ledger to promissory notes and bills received from insolvents, especially where they are numerous. As these instruments frequently extend over long periods, if entered with the current bills they not only cause difficulties in balancing, but are liable to be overlooked and neglected.

(k) It may here be remarked that bills should never be renewed until full enquiry has been made into the circumstances which have caused the customer to request renewal.

THE NOMINAL LEDGER.

See Example, pages 152—169. This is a sub-division of the Private Ledger appropriated to all those accounts which do not belong either to the Purchases or Sales Ledger

The Nominal Ledger, strictly should be confined to nominal accounts. It is, however, often convenient to keep therein any personal accounts that do not properly belong either to the Purchases or the Sales Ledger, and also which are not required to be kept entirely secret. All transactions of a private nature are, for the time being, posted without particulars to a Private Ledger account (1) (see folio 31, pages 168-9).

The accounts in the Nominal Ledger are referred to seriatim in the description of the Trading Account.

The transfers in several of the accounts at the end of the year, also the closing entries and the balances brought down (both Reserves and Stock) are entered after the final trial balance has been prepared in the Balance Book

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The principle of this book is identical with that of Set I., but it has four additional money columns to provide for the Dr. and Cr. postings of four quarters instead of two.

The Dr. and Cr. balances in the Private Ledger at the commencement of the year are cast up, and the totals are entered on either side of the Private Ledger account that is kept in the Nominal Ledger (see folio 31, pages 168-9). All the transactions during the year that are posted to the Private Ledger are also posted to this account, consequently the books can be balanced periodically without reference to the Private Ledger.

For convenience, the abstracts from the Bills Ledger are entered under Section iii. of the Balance Book, as though the Bills Payable and Bills Receivable accounts belonged to the Nominal Ledger.

In abstracting the postings from the Ledger Accounts, it is convenient to tick, thus V, beneath the last posting in each quarter on both the Dr. and the Cr. side, so as to distinguish them from the postings of the succeeding quarter (see example in Brandram, Reeves & Co.'s account, page 130).

The method of carrying forward the totals of the several columns of the Balance Book to the top of the succeeding page is shewn in the example. It is better, however, where many pages of the Balance Book are employed, to carry the totals of each page to a summary and not to carry them forward from page to page.

(2) The particulars of the Private Ledger items in the example are given in the Cash Book, but in practice the entries may be so made as not to reveal their nature anywhere but in the Private Ledger.

THE TEST JOURNAL.

See Example, pages 178–179. This book shews an extension of the principle of the Test Journal described on pages 76-7. In addition to the single money colunin as in Set I. (see page 56), six further columns are provided for classifying the entries according to the Ledgers to which they have been posted-three columns for the Dr. side and three for the Cr. side. The columns on either side are respectively headed (i.) The Purchases Ledger, (ii.) The Sales Ledger, and (iii.) The Nominal and Biils Ledgers.

It is stated on page 77 that the grand total of the entries abstracted into the Test Journal should agree with the grand totals of the postings abstracted into the Balance Book. It follows, therefore, that when the entries are classified in the Test Journal, the total of each column of the Test Journal should agree with the total of the corresponding section of the Balance Book.

The total of the entries in each of the separate books, except the Cash Book, can be classified instantly. It has already been explained that the entries are posted as follows, viz :

the Cr, of the Purchases Ledger in The entries in the Purchases Day Book are

.

individual items, and posted to

to the Dr, of the Nominal Ledger

in quarterly totals.

the Dr, of the Purchases Ledger in The entries in the Returns and Claims

individual items, and (Purchases) Day Book are posted to to the Cr. of the Nominal Ledger

in quarterly totals.

the Dr. of the Purchases or Mill The entries in the Mill Sales Day Book are Ledger in individual items, and posted to

to the Cr, of the Nominal Ledger in

quarterly totals.

the Dr. of the Sales Ledger in The entries in the Sales Day Book are

individual items, and posted to

to the Cr, of the Nominal Ledger in

monthly totals.

the Cr. of the Sales Ledger in The entries in the Returns and Allowances

individual items, and (Sales) Day Book are posted to

to the Dr. of the Nominal Ledger in

monthly totals. the Bills to the Cr, of the Bills Pay. able Ledger individually, and the

Discount to the Cr, of the Nominal The Bills Payable, including Discount, are Ledger in quarterly totals, and posted

to the Dr. of the Purchases Ledger individually, both Bills and

Discount. the Bills to the Dr. of the Bills Receivable Ledger individually, and

the Discount to the Dr, of the NomThe Bills Receivable, including Discount, inal Ledger in quarterly totals, and are posted

to the Cr. of the Sales Ledger individually, both Bills and

Discount.

The individual entries in the Cash Book, as explained on page 201, are classified as the book-keeping proceeds, and at the end of the quarter a note is made on either side of the Cash Book shewing the total of the entries posted to each Ledger (m) (see pages 110 and 111). From this note the classification is made in the Test Journal.

In case of a transfer from one Ledger account to another, as there is no separate book of entry for transfers, the amount is entered separately in the Test Journal (see examples).

In the examples, the quarterly totals of the several classification columns of the Test Journal will be found to correspond in each case with the quarterly totals of the corresponding sections of the Balance book. In the event of a discrepancy arising when the Trial Balance is being prepared, it is only necessary to examine the entries and postings comprised in the particular column and section where the discrepancy appears. Errors being thus localised the Ledgers can be balanced one by one, and the Dr. and Cr. sides of each separately.

It may be useful to point out that, provided the original entries in the separate books have been faithfully recorded, a principal may satisfy himself of the absolute accuracy of the book-keeping by preparing the Test Journal himself, and seeing that it corresponds with the Balance Book, which may be entered up by the book-keeper.

THE TRADING ACCOUNT (n), CAPITAL ACCOUNT

AND BALANCE SHEET.

The mode of preparing the Trading Account, Capital Account and Balance Sheet having been fully explained on pages 15-17 and 77–80, it is only necessary here to consider the treatment of those nominal accounts which contain items of a special nature, or which differ in their final adjustment from the more simple accounts already described. In the Summary of the Balance Book, columns 14 and 15 (see page 177), we have presented to us the total of the balances in each of the Ledgers on December 31st, 1884. The total balances of the Purchases and Sales Ledgers are transcribed straightway to a list of final balances prepared on a separate sheet of paper (see page 184-5). The balances of the Nominal Ledger are, however disposed of individually; those which represent Expenditure or Income being transferred to the Trading Account, and those which represent Liabilities or Assets being transcribed to the list of final balances.

(m) The Cash and Bank balances at the commencement of each quarter are not posted to the Ledger, but appear in the Cash Book merely as memoranda for the purpose of testing at any time during the quarter the state of the Cash and Bank accounts. The amounts of such balances are therefore deducted from the totals to be entered in the Test Journal (see note in Cash Book, page 110, 111).

(n) The Trading Account of a manufacturing concern combines both the Goods Account and the Profit and Loss Account. The term Profit and Loss Account, strictly, describes an account which shews the profit or loss resulting from each of the several enterprises or adventures of the firm. The title Trading Account applies to an account of Income and Expenditure of a trading concern. Where more than one concern is carried on by the same firm, the result of the trading of each may be carried to a Profit and Loss account (see also Departmental Accounts).

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