SUMMARY OF PRINCIPLES AND RULES An Entry is a systematic record of a transaction. The Journal is a book of entry in which transactions are entered as they occur with a debit for every credit or one or more debits that are equal to one or more credits. The Ledger is a book in which the items from the original books of entry are classified under appropriate headings called accounts. Posting is transferring the debits and credits from the books of entry under the proper headings in the ledger. A Trial Balance is a list of the open accounts in a ledger with the debit and credit footings, or the balances set opposite the names of the accounts, and with the total debits and credits equal. Real Accounts are accounts that represent actual values. Nominal Accounts are accounts that name some profit or loss of the business. Mixed Accounts are accounts that contain both real and nominal ele ments. An Asset is property belonging to the business or an amount owed to the business. A Liability is an amount owed by the business, whether due or not. A Note Payable is a note given by the business. A Statement of Profit and Loss shows in detail the profits and losses of the business and the net profit or loss of each proprietor. A Statement of Assets and Liabilities exhibits in detail the assets and liabilities of the business and the net worth of each proprietor. Rule of Double Entry. Equal debits and credits must result from each transaction. General Rule of Debits and Credits. Debit what the business receives or the account that receives the benefit. Credit what the business parts with or the account that yields the benefit. Rule for Creditors' Accounts. business becomes indebted to him. Credit a creditor's account when the business pays the creditor on account, or is allowed something for returned or damaged goods. Rule for Customers' Accounts. Debit a customer's account when he becomes indebted to the business. Credit a customer's account when he makes a payment on account or is given an allowance for returned or damaged goods. Rule for Real Accounts. Real accounts with the debit side the larger are Assets; with the credit side the larger, are Liabilities. Rule for Nominal Accounts. A nominal account shows a loss if the debit side is the larger and a profit if the credit side is the larger. To Find the Profit or Loss on Merchandise. 1. Subtract the inventory from the debit side. Take the difference between the credit side and this result. If it is a debit difference, it is a loss. If a credit difference, it is a profit. 2. Add the inventory to the credit side. Take the difference between this result and the debit side. If it is a debit difference, it is a loss. If a credit difference, it is a profit. To Find the Net Worth. 1. Add the net profit to the net credit or subtract the net loss from the net credit. 2. Subtract the liabilities from the assets. Rule for Transferring Red Ink Entries. 1. Everything in red ink to close must be brought down in black ink on the opposite side of the ledger. 2. Inventories, balances, and net worth are transferred to the opposite side of the same account. 3. Profit and Loss items, including net profit or net loss, must be transferred to the opposite side of some other account. Rule For Notes Receivable. Debit Notes Receivable at the face value for all notes of others received by the business. Credit Notes Receivalle at the face value for all notes of others paid by them and for all notes of others parted with in any other way. Rule For Notes Payable. Debit Notes Payable when our notes are paid by the business. Credit Notes Payable when our notes are issued. Rule For Interest. Debit Interest when the business allows it to others. Credit Interest when others allow it to the business. Rule For Discount on Notes. Debit Interest for all discount allowed by the business on our notes or on others' notes. Credit Interest for all discount allowed to the business on our notes or on others' notes. Rule For Merchandise Discount. Debit Merchandise Discount for all discount allowed to others on invoices of merchandise. Credit Merchandise Discount for all discount allowed to the business on invoices of merchandise. INTRODUCTION The work of Part III presupposes the completion of the elementary work in bookkeeping such as that presented in Parts I and II of this system or in the work of any other system that has developed the use of the journal, the cash book, the sales book, and the purchase book or invoice book as books of entry, and the ledger. It presupposes a knowledge of the ordinary business papers and their use. The mechanical features of the work must not be neglected. The habits of neatness, carefulness, and accuracy that were learned in the beginning work must be continued. Pupils must not be allowed to neglect these things. They should become a part of each pupil. The proper study of bookkeeping should develop system and a pride in doing the work of the bookkeeper as it should be done in an office. But of even more importance is the training the pupil should receive in the work of reasoning and analyzing. The plan of this text is to develop this power so that the pupil may acquire the power to become more than a routine bookkeeper. For this reason, new features of the work are fully presented and exercises given to develop his understanding of the subject. When these new features are presented in the sets, little explanation is given, so as to require the pupil to analyze the transaction and to relate it to the knowledge that he already has. He is taught to keep his records and entries in such a way that they will give him the necessary information when wanted. He is taught different labor-saving devices and modern methods of handling sales, vouchers, etc. He is given a larger number of transactions for each financial period than in the elementary work so that the work of proving cash, of taking a trial balance, and of making statements may be more like actual business. To help the pupil to analyze and to think many exercises are given. Most of these help in the gradual development of the subject but some may be omitted without destroying the plan of the work. In addition to these a number of questions and problems that are not |