posted to the debit of Accounts Receivable in the general ledger. Write Accounts Receivable in parenthesis after M. E. Clinton & Co. to show this. P. A. Perry, Omaha, Neb., orders: 15 Counter Scales No. 507 8 Platform Scales No. M108 Terms: n/30. Deposit the check and N. Y. Draft on hand. % collection on the check. Prove cash, make a report, and post. October 28. The bank reports the sight draft on L. E. Widule, for invoice of the 23d collected. Collection charge, %. Receive of J. A. Dressler & Co. a check for $150, on account. (Incoming Check) As he is entitled to 2% discount, he must be given credit for more than the amount remitted. Divide the amount received by .98 to find the amount of the credit to him. Prove the result by taking 2% of the amount to be credited and subtracting it. The difference should equal the amount of the check, $150. After the amount to be credited has been found, make the entry in the usual way. C. A. King has paid out $5.50 for subscriptions to trade journals. Give him a check to reimburse him. Pay the gas bill by check in favor of the People's Gas Co., $4.75. 5 doz. Dexter Hand Saws No. 605 4 doz. Straight Shears No. 1044 Terms: 2/10, n/30. Deposit the check on hand. % collection. Prove cash, make a report, and post. October 29. Buy an invoice of tools of the Cleveland Tool Co., Cleveland, Ohio, amounting to $1016.50. Terms: 30-day draft for $500; balance, on account. The draft, dated October 27, has been accepted and returned to them. The Ohio Tool Co. has offered us an extra discount if we pay their account in full. They have agreed to allow us discount of 3% instead of 2%, for anticipating payment. Write the check on this basis. Post these transactions. October 30. Receive a check of J. A. Green & Co., for invoice of the 20th. (Incoming Check) They have included the collection charge, 42¢, in the check. Receive a check of C. L. St. John for invoice of the 20th. (Incoming Check) J. B. Mauer & Co., Sioux City, Iowa, order: 20 Ross Stoves at $17.50 15 Steel Wheelbarrows No. 1720 Terms: 2/10, n/30 on the wheelbarrows; n/30 on the stoves.. Make two entries for this transaction as the stoves are sold from the consignment and must not be entered on the sales blank. The debit in the journal must be posted twice. Why? J. A. Dressler & Co., Peoria, Ill., order: 4 doz. Jersey Vises No. 114 3 doz. Coe Wrenches No. 640 Terms: 2/10, n/30, f. o. b., Peoria, Ill. Prepay the freight on this shipment by check in favor of the Chicago & Alton R. R. Co., $8.20. J. A. Rogers & Co., Appleton, Wis., order: 20 Ross Stoves at $17.50 Terms: cash, $200; balance, on account. Receive their check for $200. (Incoming Check) D. L. Jackson & Co., Memphis, Tenn., order: 10 Ross Stoves at $17.50 25 Garden Plows No. 426 Terms: n/30. Deposit the three checks. %% collection. Prove cash, make a report, and post. October 31. Render account sales to the C. L. Ross Stove Co. for the stoves sold. Charge commission at 8%. Remit the net proceeds by check. Pay the salaries to the Student and to James Roach, each for one-half a month. Charge the student's salary to the Salaries account. Charles Sanborn reports his expenses for the week, $32.65. Give him credit for the amount. Give Charles Sanborn a check for one-half a month's salary. Credit each partner for one-half a month's salary according to the articles of copartnership. Do not enter this in the cash book. Prove cash, make a report, and post. CLOSING WORK 1. Find the total of the Amount column of the purchase book and make the closing entry. Rule, and post the entry. 2. Take a sales recapitulation sheet from your supplies. List the sales by date, order number, and amount. Find the total amount and make the closing entry. Post the entry. 3. Find the total of each amount column of the cash book. Prove the sum of the first two columns of the Cash Receipts with the last two columns. Prove the sum of the first three columns of the Cash Payments with the last two columns. Make the closing entries for the different columns of the cash book and post them. Balance the cash book. 4. Find the total of each column of the journal and prove the sum of the two debit columns with the sum of the two credit columns. Close the journal and post it. 5. Close the Returns and Allowances on Sales book. Post the closing entry. 6. Close the Returns and Allowances on Purchases book. Post the closing entry. 7. Make a proof of the sales ledger. 8. Make a proof of the purchase ledger. 9. Take a trial balance of the general ledger. Set VII, October will be completed in chapter XXVIII. CHAPTER XXVIII ADJUSTMENT ENTRIES Adjustment Entries are of three kinds: those made to adjust some error in the entries for the daily transactions or in closing the books, those made necessary by some unusual happening, such as a fire or an embezzlement, and those made necessary because of some partnership agreement. Errors in Entering the Daily Transactions are of different kinds. To correct any error, the explanation should be very clear and definite both in the book of entry and in the ledger. The following examples will illustrate some of the most important errors and the method of adjusting them. 1. A Charge to the Wrong Account. Suppose the bookkeeper has by mistake charged D. L. Smith with $375 in the sales book and posted it to the ledger. He afterwards discovers that the charge should have been to D. L. Simmons' account. The entry to adjust should be made in the journal, as follows: D. L. Simmons (Accounts Receivable) To correct the charge made on the GENERAL ACCTS. REC. $375 $375 Since there is no debit column in the journal for Accounts Receivable, it is necessary to put the debit to D. L. Simmons' account in the General column and to post the amount to the debit of his account in the sales ledger and also to the debit of Accounts Receivable in the general ledger. The ledger account of D. L. Simmons should show that this is to correct a charge that should have been made on the 10th. The ledger account of D. L. Smith should show that this entry is to correct an error, so that when a statement of account is sent to him, the items of $375 on each side will not be entered on it. In these journal entries, all amounts will be placed to the right to show the debit and credit effect better. A sight draft may have been drawn 2. Sight Draft Dishonored. on May 3, on C. D. Comstock, in favor of D. J. Lawler, and the following entry made: ACCTS. PAY. ACCTS. REC. D. J. Lawler To C. D. Comstock $200 $200 When the draft is presented for payment, C. D. Comstock refuses to pay it, and D. J. Lawler, the payee, returns it to the drawer. The drawer must then make an entry to adjust, as follows: C. D. Comstock (Accounts Receivable) To adjust entry of May 3, be cause draft was dishonored. GENERAL GENERAL $200 $200 3. Cash Shortage or Cash Over. It may be necessary to make a temporary entry to account for a shortage of cash or for an amount over. To adjust this, a Cash Difference account, a Suspense account, or an Adjustment account may be used. In the illustrative entries to follow the Cash Difference account will be used. Cash Difference Account. If the cash is short $10, and it cannot be found, the following entry may be made on the Cash Payments: Jan. 10 Cash Difference Shortage $10 When the mistake is found, a counterbalancing entry is made on the Cash Receipts: Jan. 15 Cash Difference Shortage on the 10th $10 The entry is then made as it would have been made on the day the shortage was discovered. Suppose it was a withdrawal of a partner, the entry on the Cash Payments would be as follows: the balance in the cash The entry on the Cash Jan. 15 Partner, Personal Withdrawal on the 10th $10 $15 Jan. 8 Cash Difference Cash over When the mistake is found, Cash Difference is debited on the Cash Payments. The correct entry is then made on the Receipts side, such as, a credit to Interest, if interest on a notes receivable was omitted; a credit to a customer's account, if the receipt of money from a customer was not recorded. The debits and credits to Cash Difference may be entered in red ink on the cash book. The Cash Difference account, on closing the books, should be treated as a profit or a loss depending upon which side is the larger unless the items are of recent date and there is a possibility that they may be found. These items may be treated as an asset if the debit side is the larger and as a liability if the credit side is the larger. |