In closing the Nominal accounts, attention should be given to the points referred to in the following observations.

In the Trading Account of Set I., for the sake of simplicity, the Stock is set out as a whole, whereas in the Trading Account of Set II. only that part of the stock is set out which comprises Material in process of manufacture and Finished goods (0). The remaining stock is distributed to the following accounts which receive their respective portions, viz:

Material account, folio 1.

Dyewares account, folio 2.

Chemicals, Soap, Size, Oil, &c. account, folio 3.

Packing Material account, folio 5.

Motive Power account, folio 10.

Mill Furnishings, Repairs, and Renewals to

Machinery account, folio 12.

Stables account, folio 13.

The stock is thus distributed in order to arrive at the actual cost of material or articles consumed under each of the above heads.

Mill Wages Account. Folio 8, pages 154-5.

All the wages paid at the Mill are regularly posted to this account, and transfers are made when the Trading Account is prepared. The several amounts to be transferred to other accounts are ascertained from the classification in the Wages books (see Wages).

Motive Power Account. Folio 10, pages 156-7.

This account is not required in Set I., where both Room and Power are included in the Rent and Power, &c. account, the machinery being turned at the expense of the landlord. Here, however, rent is paid for the mill premises and the firm provides. motive power for itself.

All expenditure incurred in driving the machinery and keeping the engine, boilers and gearing (or motive plant) in working order, is charged to this account (e.g., outlay in coal, tallow, lubricating oil, repairs to motive plant, and wages). The total amount of the engineer and firemen's wages, £300, is transferred from the Wages account at the end of the year. The cost of the production of motive power, when added to the Rent and Rates, may be compared with the current prices paid for room and power, calculated on the machinery in operation. This comparison will shew whether or not this item of expenditure exceeds the average of other similar concerns (p).

(0) The stock of material in process of manufacture, and of finished goods, having passed into the transition stage between the raw material purchased and the manufactured goods sold, can be dealt with only as a distinct and special item of the Trading Account. Any difference between the amount of such stock at the commencement and that at the close of a given period must be considered in computing the total consumption or production during that period.

(p) For the information of those who are not acquainted with the manufacturing industries, it may be said that many large mills are occupied by several tenants, the Landlord providing motive power for all and charging rent at so much for each machine.

Rent, Rates, Taxes, Gas and Insurance.

pages 156-7 and 160-1.

Folios 11 and 17,

Under this head an account is kept for the Mill and another for the Warehouse, which is supposed to be at a distance from the Mill.

In the Trading Account the cost of maintaining the Warehouse is kept distinct from the expenses of manufacture.

Where the premises upon which the business is carried on are owned by the firm a fair rent should be debited to the Trading Account and credited to the Capital Account.

Mill Furnishings (q), Repairs and Renewals Account.
Folio 12, pages 158-9.

The outlay under this head is sub-divided into departments, and the totals of the several columns of the Purchases Day Book are posted to the corresponding columns of this account. The column headed Store receives all articles that are not purchased specially for any one department, but which are handed out by the storekeeper as and where required (e.g., Brushes, Strapping, Oil-cans, &c.). It is desirable, where convenient, for the purchases of each department to be separately invoiced, in order to avoid the necessity of recording the subsequent distribution.

The stock in each column is supposed to represent only those articles that are already received in the department, but which are not yet handed out for use. The Mill Furnishings in actual use, as well as all other loose utensils, are comprised in the value of the Plant and Machinery in the several departments.

Stables Account. Folio 13, pages 158-9.

All expenditure connected with the stables, including the purchases of new horses and vehicles, is charged to this account, and the total of the carters' and teamers' wages for the year is transferred from the wages

account.

As the values of horses, vehicles, &c., fluctuate very much, and consequently it is not safe to depend upon a fixed rate of depreciation, a new valuation should be made at each stock-taking. The valuation should include horses, vehicles, utensils, provender and all other stable requisites, and the amount of the valuation should be treated as stock on hand.

(4) The Mill Furnishings, including loose utensils, should be and usually are, kept up to a standard value by replacements, and inasmuch as they do not therefore depreciate in common with the rest of the plant, to be strictly correct, they should be treated as a distinct and separate item. To do this, however, would often involve much complication and difficulty. The ordinary method is to include in one valuation both the Machinery and its necessary complement of Mill Furnishings and Utensils. Depreciation is then calculated on the whole valuation, and the rate is adjusted so as to allow for that portion which is not subject to depreciation. A list of all Mill Furnishings and loose utensils may be kept and compared yearly with the articles actually in use. Any increase or decrease may be then added to, or deducted from, the value of the stock in store. Bobbins, skeps, &c., should form the subject of a special account in the books of a Spinner (see also Skep Book).

The sum transferred to the Trading Account, therefore, represents the total cost of maintaining the stables, which may be compared with the probable cost of hired cartage to perform the same work.

Repairs to Mill Buildings Account. Folio 14, pages 158-9.

The firm, holding the mill under an agreement of tenancy, is responsible for certain repairs, the cost of which is posted to this

account.

The cost of new buildings or of improvements to the mill, erected or executed by the tenant and for which the landlord agrees to give compensation at the expiration of the tenancy, should be posted to a distinct account and treated as an asset, subject to depreciation, in the same way as Plant and Machinery. Where the mill is owned by the firm, the cost of new erections or improvements should be posted to the Mill Buildings account, unless it is desired to keep a special account for a particular erection.

Cards Purchases Account. Folio 15, pages 158-9.

Where the carding machinery constitutes a considerable portion of the whole plant, it is essential that the cards should be passed to a separate account, in order that the depreciation may be accurately computed (see Depreciation). As a heavy trade discount (often 10% or 15%) is usually allowed on cards, it should either be deducted from each individual invoice before entering the amount in the Purchases Day Book, or the total discount should be transferred at the end of the year, as in the example.

The balance of this account is transferred to the Private Ledger, where, for the sake of secrecy, the account showing the full valuation of the cards is kept.

Incidental Expenses Account. Folio 16, pages 160-61.

The expenditure under this head at the mill is kept distinct from that at the warehouse by means of two columns. It may be further classified, apart from the books, under several sub-heads, for comparison year by year.

Warehouse and Office Salaries, and Travellers' Salaries and Expenses. Folios 18 and 19, pages 162-3 (r).

The total payments, only, during each month are entered under these accounts, and the individual salaries and expenses are thus kept secret. The details may be recorded in separate memorandum books.

(r) It is often desirable to compare the results produced by the travellers with their respective salaries and expenses. For this purpose a separate Sales Day book may be kept for each traveller, or additional columns may be provided for classifying the sales. In making comparisons of this character, unless a uniform selling price is strictly adhered to, account should be taken of the profit yielded respectively by the sales of each traveller over and above the cost price of the goods.

Discount on Sales and Discount on Purchases Accounts. Folios 21 and 22, pages 162–165.

The Discounts on Sales are kept separate from the Discounts on Purchases, for reasons referred to in Chapter VII.

The two items posted to the Cr. side of the Discount on Sales account, and the three items posted to the Dr. side of the Discount on Purchases account, are made up of entries in the Cash Book which are distinguished by the initials S.L. and P.L. against the Ledger folios and which are printed in black type to represent red ink. As to the transfer from the Cards account, see page 214.

Bad Debts Account. Folio 24, pages 164-5.

As already explained on pages 205-6, the balance representing the net loss on a bad debt is transferred to this account; also, the whole balance of an insolvent account, the final settlement of which is likely to be prolonged, is transferred, and dividends received in respect thereof are posted to this account.

At the end of the year all debts from which further dividends are expected are valued, and the estimated value is brought down as a balance (see Bentley & Robinson, £59 7s. 7d.) (s).

Plant and Machinery Purchases Account. Folio 25, pages 164-5.

The postings to this account are dissected, and the amount belonging to each department is transferred at the end of the year to the Plant and Machinery account kept in the Private Ledger.

When a deduction is obtained for discount from the price of Plant or Machinery purchased, the amount should be credited to Plant and Machinery account and not to Discount on Purchases account.

We now turn to accounts in the Private Ledger, viz. :—

Plant and Machinery Account, and Cards Account. Folios I and 2, pages 182-3.

The purchases both of Machinery and Cards during the year are transferred from the Nominal Ledger, folios 25 and 15. The depreciation in each department is entered in its respective column.

(s) In order that insolvent accounts may not be overlooked or neglected, when numerous, it is well to post the several items of the Bad Debts account into a small Bad Debts Ledger, kept quite distinct from the ordinary books. Where credit is given to individuals in very large amounts there is often an entire immunity from bad debts for a time, followed by sudden heavy losses. Such losses ought to be provided for in anticipation. A provision fund may be raised by passing yearly to the Cr. of the Bad Debts account a certain percentage (say 10/- per cent.) of the sales. The amount of this percentage is charged to the Dr. of the Trading Account, Section II. All losses are then transferred as they arise to the Bad Debts account, in reduction of the fund. In this way the trading of each year is made to bear an equal burden.

on the Cr. side, and the whole depreciation is charged to the Dr. of the Trading Account, Section II. (page 186). The balances are then brought down, and represent the values in each department at the end of the year.

Income Tax Account. Folio 4, pages 182-3.

This account is re-posted from the Private Ledger account in the Nominal Ledger, folio 31, and the amount is transferred to the Dr. of the Trading Account, Section III.

James Brook, Loan Account. Folio 5, pages 182-3.

This account is re-posted from the Private Ledger account in the Nominal Ledger, folio 31.

The account illustrates the method of recording interest on "Account Current." The entries of interest, and of the number of days on which it is chargeable, are made in columns alongside the amounts to which they respectively refer, and a balance of interest is struck half-yearly. The half-yearly balances of interest are entered on the Cr. side of the account, and are counterbalanced by entries on the Dr. side of the Interest on Loans and Capital account (†) (see folio 9).

John Blackburn, Loan Account. Folio 6, pages 182-3.

This account is likewise re-posted from the Private Ledger account in the Nominal Ledger.

The account represents a loan to a relative of one of the partners. The interest is entered to the Dr. of the account and to the Cr. of the Interest on Loans and Capital Account (folio 9).

Benjamin Summers and William

Blackburn, Capital

Accounts. Folios 7 and 8, pages 184-5.

The interest passed to the Cr. of each of these accounts is carried to the Dr. of Interest on Loans and Capital account.

Interest is often charged upon partners' drawings, but in this case it is assumed that there is an agreement to the contrary, provided they do not exceed a certain sum.

(t) If desired, such entries may be made first in a Journal and then posted therefrom. The Journal entry would be as follows,

Inter on Loans and Capital account, Dr.
To James Brook,

for half-year's interest, as per account
current.

However, unless the entries are complicated, the use of the Journal (which has not hitherto been required) is unnecessary and superfluous.