The items that are already in the ledger are marked ✓ so that they will not be posted. After the above entry has been posted, the accounts of the business are in double-entry form.

A Double-Entry set of books may be changed to a single-entry set by leaving out of the ledger all accounts except personal accounts.

The Use of Other Sets for Single Entry. If the instructor thinks it desirable to have additional work in single entry, it is suggested that any set in the Introductory portion of the textbook may be written in single-entry form. Journal paper and ledger paper may be used for this additional work.

REVIEW EXERCISES

The following review exercises are suggested:

1. July 1 Frank Wilson and Chas. K. Peck began a Provision business with the following resources and liabilities :

The partners had an equal interest in the business.

The books had been kept by single entry.

October 1 the partners decided to change the books to double entry. The resources and the liabilities on that date were as follows:

a. On a ledger sheet credit each partner with one half of the net resources on July 1.

b. Make a statement showing the net gain on October 1.

c. Credit each partner in the ledger with one half of the net gain, and show the present worth of each partner.

d. Change the books to double entry by debiting in the ledger each resource item, and crediting each liability item, on October 1.

e. Take a trial balance of the ledger.

NOTE. If the instructor so desires, the change to double entry may be accomplished by making the journal entry as illustrated on page ix.

2. The following is a trial balance from a double-entry ledger. From this trial balance open a single-entry ledger, four accounts to the page.

APPENDIX B

DEFINITIONS AND EXPLANATIONS

Bookkeeping is the art of making a systematic record of business transactions, enabling the proprietor to ascertain the condition of his business. A Business Transaction is an exchange of values.

There are two methods of bookkeeping, Double Entry and Single Entry. In Double Entry, accounts are kept not only with persons but with all sources that affect the results or the condition of the business.

In Single Entry, accounts are kept, usually, with persons only.

There are two classes of accounts:

Resource and liability accounts;

Loss and gain accounts.

An Inventory is an itemized statement or schedule, in writing, showing the amount of certain assets owned by the business, or certain liabilities owed by the business.

Allowances are made for the use of money, for the early payment of invoices, etc. Interest and discount are allowances.

Capital, at the beginning of business, usually is the amount invested; at other times it is the excess of resources over liabilities.

Merchandise includes all commodities which are held for purposes of exchange.

Expense is any expenditure to carry on the business.

Interest is the compensation allowed by law or fixed by the parties for the use or forbearance or detention of money. - Huffcut.

Discount is usually an allowance for early payment.

Bills Receivable are the written promises of others to pay us.

Bills Payable are our written promises to pay others.

Posting is a process of transferring debit and credit items to their respective accounts in the ledger.

Present Worth of the Proprietor's account:

Is net credit plus net gain; or

Net credit minus net loss; or

The excess of resources over liabilities.

A Receipt is a written acknowledgment of money or other value received. A Voucher is a written statement proving that some transaction has occurred.

When resources exceed liabilities a business is Solvent.

When liabilities exceed resources a business is Insolvent.

A Statement of the business shows the results and the present condition of the business; a Statement of a ledger account is an abstract of the account, and shows the balance remaining unpaid.

The Journal is a book in which the debits and the credits of business transactions are arranged systematically; the history of each transaction and the amount are included.

The Ledger is a book containing the accounts of the business, the debits and the credits having been collected from other books of entry.

A Book of Original Entry is a book in which entries are made first.

An Auxiliary Book is subordinate to a book of original entry.

A Bill Book contains an itemized record of all notes received or issued by the business.

The term Charge, as used in bookkeeping, means debit.

Red Ink is used for

All rulings;

Recording inventories in ledger accounts;

Entéring items in the ledger that are to be transferred.

In closing accounts, a single red line means that the items above it are to be added; double red lines mean that the account is closed, the items and the totals above this ruling are not to be used again.

An Invoice is an itemized statement of goods bought or sold. It includes the names, the quantities, the prices, and the amounts.

GENERAL RULE:

RULES FOR JOURNALIZING

Debit the account that stands for a value received, or for a person or a thing that causes value to go out.

Credit the account that stands for a value given, or for a person or a

thing that brings in value.

RULE I. Proprietor's Account. The proprietor is debited:
For withdrawals from the business for personal use;

For his liabilities assumed by the business;

For net loss when the books are closed.

RULE II. Property Accounts. Under its given name property is
Debited when it comes into the possession of the business;

Credited when the business parts with it.

Property includes cash, merchandise, real estate, notes, etc.

That the journalizing of bills receivable and bills payable may be more clearly understood, separate rules are given herewith.

RULE III. Bills Receivable. Under this title they are

Debited when received by the business;

Credited when the business parts with them.

RULE IV. Bills Payable. Under this title they are
Debited when redeemed by the business;

Credited when issued by the business.

RULE V. Accounts with Persons. Persons are debited:

When they get into our debt;

When we get out of their debt. Persons are credited:

When we get into their debt;

When they get out of our debt.

Personal accounts are open accounts with individuals, firms, or corporations. Generally they are the result of buying or selling on account.

RULE VI. Expense Account. This account is

Debited for any expenditure to carry on the business;

Credited for the proceeds of the sale of any item previously charged to expense.

Expense includes rent, salaries, insurance, and other like items. In a large business a separate account is kept with each of these items.

RULE VII. Allowances. Under the given names these items are

Debited when we allow them to others;

Credited when allowed by them to us.