Part 6

Grain Purchases—Bulls and Bears—Broker's Commission— Securities—Transfers—Clearing House—Ring Settlement— Commodities Handled—Cornering Market—Value of Wire— Settlement of Contracts by Offset—Adjustment of Balances or Settlement—Commission Allowed Brokers—Books and Forms Used— Glossary of Board of Trade Terms

BILLING AND ORDER RECORDING By Geo. C. Russell Page 235

European Methods—Machines for Manifolding—Development of Billing Machines—Loose-Leaf Sales Sheets and Invoices— Duplicate Invoices—Condensed Billing—Traffic Department Records—Analysis of Quantities and Amounts—Unit Billing—Back Orders—Split Orders—Loose-Leaf Sheets—Binders—Designing Stationery—Styles of Type—Carbon Papers—Blinds—How to Handle Orders on Billing Machine—Invoices in Blanket Form— Tabulators—Computing Machines in Billing—The Colored Sheet System—Compound Forms—Retail Dry Goods Billing—Devices of the Future

REVIEW QUESTIONS Page 303

INDEX Page 319

Footnote 1:

For professional standing of authors, see list of Authors and Collaborators at front of volume.

Footnote 2:

For page numbers, see foot of pages.

OFFICE, FARWELL, OZMUN, KIRK & CO. (WHOLESALE HARDWARE), ST. PAUL, MINN. ]

WHOLESALE, COMMISSION, AND STORAGE ACCOUNTS

WHOLESALE BUSINESS

In this section complete methods of bookkeeping as practiced in wholesale houses are demonstrated. Numerous modern methods that are readily adaptable to other lines of business are illustrated and explained in detail.

DIVIDING THE LEDGER

=1.= There are many advantages in dividing the ledger into sections. The subdivisions most commonly used are purchase ledger, sales ledger, and general ledger. Such divisions greatly facilitate posting and reduce the chances of error. While it is advisable in most cases to use a separate book for each division, the three ledgers may be combined in one book by setting aside a section for each. This practice is not recommended except where the number of accounts is small, when general and purchase ledgers or purchase and sales ledgers may be combined. The division of the ledger into three sections does not necessitate radical changes, either in form or method of handling, in the other books.

=2. Purchase Ledger.= The purchase ledger contains only accounts with those from whom we are making purchases. The balances of the accounts in this ledger will be on the credit side and represent a liability. The total balance of the purchase ledger is the amount we owe on open accounts. If, for example, our purchases on account during a stated period amount to $964.50, and the amount paid on account by us is $320.30, we still owe $644.20. If the work is correct the combined balances of all open accounts in the purchase ledger will exactly equal this amount.

=3. Sales Ledger.= The sales ledger contains only accounts with customers to whom goods are sold on account. The balances of the accounts in the sales ledger will be on the debit side and represent an asset. The total balance of the sales ledger is the amount that our customers owe us on open accounts. Suppose that a business is started with no open accounts receivable—during a stated period the sales on account amount to $1,427.75, and the total payments received on account are $965.50—the amount still outstanding is $462.25, and this amount should exactly equal the combined balances of all the open accounts in the sales ledger.

The sales ledger is sometimes subdivided into two or more parts. The divisions may be City and Country or they may be according to the letters of the alphabet—as A-K, L-Z, etc.

=4. Accounts in Both Ledgers.= Occasionally one from whom we are purchasing goods will also be a customer. For reasons which will appear later, accounts should, in these cases, be opened in both the purchase ledger and the sales ledger. When settlement of such an account is made, the necessary adjusting entries are made through the journal.

=5. General Ledger.= The general ledger contains the investment accounts of the proprietor or partners, and all real, representative, and nominal accounts. Accounts with the purchase and sales ledgers are also kept in this ledger. These are controlling accounts which represent at all times the total balances of the purchase and sales ledgers.

When statements of the other ledgers have been made and proved correct, a trial balance of the general ledger is made.

CONTROLLING ACCOUNTS

=6.= A controlling account is one which exhibits a summary of all of the accounts in a ledger, or of all accounts of the same class.

The sales account, with which the student has been made acquainted, exhibits net sales, while a sales controlling account exhibits a summary of all accounts in the sales ledger. The debits to the sales controlling account represent the total debits to customers' accounts as shown by the sales book or the journal. The credits to the sales controlling account represent the total credits to customers as shown by the cash book and the journal. This account is variously styled Sales Ledger Account, Accounts Receivable Account, or Sales Controlling Account.

A purchase controlling account exhibits a summary of all accounts in the purchase ledger. It is called a Purchase Ledger Account, Accounts Payable Account, or Purchase Controlling Account.

These controlling accounts are kept in the general ledger and show at all times the totals of accounts receivable and accounts payable, without the necessity of listing the individual balances. At the end of the month statements of the balances of the accounts in purchase and sales ledgers are made, and the totals of these balances must agree with the balances of the controlling accounts.

The operation of these controlling accounts demonstrates one of the most apparent advantages of the division of the ledger. If an error is made in posting to an account in the sales ledger it is discovered as soon as the statement of the sales ledger is made, and can be located without referring to purchase or general ledger accounts. Without the ledger division and the use of controlling accounts, there would be nothing to assist in locating an error in the trial balance in any particular section of the ledger.

ORDER BLANKS