same in form as an invoice, differing only in the nature of the things purchased, or, it may take a different form.

The form here illustrated is a common one.

775

16

759

Less 2%
Received payment
May 3, 19-
HHWest&lo
by C. L.J

By many the word bill is used to refer to a purchase either of merchandise or of something to be used in carrying on the business.

The Expense account is credited when something that had been purchased for carrying on the business is sold, or when a rebate is obtained on something that has been purchased and charged to Expense.

An explanatory Expense account is given in detail on page 15. Of the items on the debit side, the first means that money was paid. out for the use of a room or building. The second, third, fourth, and

sixth mean that the business bought something for the carrying on of the business. The fifth, seventh, and eighth mean that money was paid out for services rendered the business. The credit of $5 means that some of the coal bought for the use of the business has been sold.

Everything that appears in the ledger accounts must first be entered in the cash book or in another book of entry. The ledger is a book of classification and not a book of entry. In order to classify entries in the ledger each entry in the cash book must be given the name of the account under which the item is to be transferred. Instead of writing "Invoice of S. N. Carson," the name of the account affected will be given first, as follows: "Merchandise-Invoice of S. N. Carson." Instead of writing, "Clerk's salary," "Expense-Clerk's salary" will be written.

The cash book of the retail store illustrated in Chapter I is rewritten on pages 16 and 17 to show the accounts affected by the receipts and payments of cash.

Exercise 4. Use two opposite pages of a sheet of journal paper as a cash book. Enter the following transactions by naming the accounts affected by the transactions. Use the cash book illustrated on pages 16 and 17 as a guide.

September 1.

The balance of cash on hand is $478.15. (Enter this in the last column of the Cash Receipts.) Paid rent of store in cash, $35.

Bought an invoice of merchandise of J. C. Dryer

3.

5.

for cash, $196.15.

8.

Bought 3 tons of coal at $4.95 a ton.

10.
13. Cash sales for the week, $87.55.

Paid the H. C. Miller Co. for office books, $12.15.

15.

Bought an invoice of merchandise of C. D. Paul for cash, $217.65.

18. Paid the Herald Co. $13.80 for advertising.

20. Cash sales for the week, $163.90.

23.

26.

Paid for telephone, $4.50.

Bought an invoice of merchandise of G. E. Thomas for cash, $206.45.

27. Cash sales for the week, $138.95.

29.

Paid J. C. Foster for repairs to store, $9.35.

30. Paid clerk's salary, $24.

30.

Cash sales for two days, $36.55.

Balance the cash book.

Before studying the next chapter, make a careful study of the cash book here illustrated, as it is the form that will be used in the first practice work.

The explanations are very important, as they give information that is often very valuable to the business. They should be clear and definite and yet brief. Only one line should be used for the explanation of each transaction because it is a poor practice to leave a line in the amount column blank.

CHAPTER III

ACCOUNTS WITH PERSONS

Business is no longer carried on chiefly for cash. In wholesale, jobbing, and manufacturing businesses, purchases and sales for cash are few in number. In the retail trade, cash purchases and sales are much more frequent, but there are many purchases and sales on account.

A purchase "on account" means that the buyer agrees to pay for the invoice after some time has elapsed, depending on the terms of the sale or the practice of the particular business. In order to record these purchases and sales on account, accounts with persons must be kept.

Accounts are kept with three different classes of persons:

1. Those from whom the business buys, called creditors.
2. Those to whom the business sells, called customers.

3. Those that invest in the business, called proprietors or owners. Accounts with creditors and with customers are called personal accounts. Accounts with proprietors or owners are called capital or ownership accounts.

An account with a creditor or with a customer is a personal account whether it records dealings with an individual, a partnership, or a corporation.

Accounts With Creditors. When goods are bought on account it is necessary for the business to keep a record of the persons to whom the money is owed, how much is owed, and when it should be paid.

If goods are purchased on account, Merchandise is received and is debited, but the business does not pay out cash for it. Some other account must be credited, that of the person from whom the business buys.

When the business pays this account in full or in part, the creditor's account must be debited to show how much of the indebtedness is canceled.

Rule. Credit a creditor's account when the business becomes indebted to him.

Debit a creditor's account when the business pays the creditor on account, or is allowed something for returned or damaged goods.