Part 12

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.