tracted from each side of an account in the trial balance and it will not alter the equality of the trial balance. For example, if $40 be subtracted from each side of S. N. Boden's account in the trial balance of totals, nothing would remain on the debit side and $1,460 would be left on the credit side. This is, in effect, subtracting the smaller from the larger side of the account. In the trial balance of differences, this difference is placed on the side that is the larger. The trial balance of totals when taken as a trial balance of differences would appear as follows: Trial Balance, Jan 31,19~ A How to Find Errors in a Trial Balance. If a trial balance does not add up the same on each side, some error must have been made. It may have been made: 1. In posting to the ledger. 2. In adding or subtracting in the ledger or in the trial balance. 3. In transferring amounts from the ledger to the trial balance. 4. In the omission of one or more open accounts from the trial balance. To find the mistake: 1. Add each side of the trial balance and find the difference. 2. If the difference is 10¢ or a multiple of it, the mistake is usually an error in addition or subtraction either in the trial balance or in the ledger. Prove subtraction by addition. Prove addition by adding the reverse way. 3. The difference may be due to a failure to post an amount. Το find the mistake, look for the amount in the books of entry. 4. If the difference is divisible by two, it may be that an amount has been posted to the wrong side of the account. Divide the difference by two and look for the quotient in the books of entry or in the ledger. 5. If the difference is divisible by 9, there is a strong probability that the error has been caused by a transposition of figures, as $57 posted instead of $75, or a "slide," as 75¢ posted as $75. The figures transposed may be found by taking the difference and dividing it by 9. The quotient represents the difference between the digits transposed. For example, suppose the difference in the trial balance is $54. $54 divided by 9 gives 6. That quotient is the difference between the digits transposed. It may be a transposition of 9 and 3, of 8 and 2, of 7 and 1, of 6 and 0. Checking the Posting. If these devices fail, the posting of the books should be checked. This is done by using a sharp pencil and putting a small, light pencil mark (v) on the double line to the left of the amount in the ledger and on the double line to the left of the amount in the book of entry. In checking the journal, take all the debits first, then all the credits. From the cash book the checking would be as follows: Cash Receipts, Jan. 19~ Jan. 11 S.N. Boden Investment $1500 Foot each side of each account in the ledger, if the side contains more than one item. Place the footings in small pencil figures underneath the line on which the last item on that side is entered. Make a trial balance of totals of the ledger. Submit it for approval. Copy the journal, cash book, ledger, and trial balance in the blank books. Keep the manuscript ledger for further use. SET II 1. TRANSACTIONS FOR FEBRUARY i. Enter each of the following transactions in the cash book or in the journal. 2. Balance the cash book. 3. Post the journal and the cash book to the ledger. 4. Take a trial balance of totals. 5. Present all papers to the teacher for approval. 6. Copy the journal, cash book, ledger, and trial balance in the blank books. Keep the manuscript ledger for further use. February 1. 2. B. D. Tower began a coal and wood business by investing cash, $2,500. Paid S. N. White for rent of store to March 1, $30. 3. Bought of H. A. Baxter, for cash: 4. 50 tons hard coal at $7.35 Paid for an advertisement in a local paper, $3.50. 5. Bought of D. Jenkins, on account: 6. 8. 75 tons soft coal at $2.85 Sold C. S. Oliver, for cash: 20 tons hard coal at $8.15 Sold D. E. Martin, on account, 15 days: 30 tons soft coal at $3.50 9. Bought of G. H. Franke, on account, 15 days: 10. Paid bill for printing bills and letter heads, $3.75. 11. Paid D. Jenkins cash on account, $125. 15. Bought of D. Jenkins, on account, 20 days: 16. 17. 18. 19. 20. • 22. 23. 24. 25. 26. Sold J. O. Bauer, on account: 65 tons coke at $5.80 Paid D. Jenkins cash, on account, $50. 15 tons hard coal at $7.50 Paid G. H. Franke cash, on account, $200. 25 tons hard coal at $7.40 Received cash of D. E. Martin, for invoice of the 8th, $105. Paid G. H. Franke cash, on account, for balance of Received cash of J. O. Bauer, on account, $200, 40 tons hard coal at $8.10 20 tons soft coal at $3.45 (Have you shown the extension of each item sold in the explana tion in the journal?) 27. Paid clerk's salary for two weeks in cash, $15. 27. Paid the City Teaming Co. $25 for making deliv eries for the business. CHAPTER VI ACCOUNTS CLASSIFIED Accounts may be divided into real, nominal and mixed. Personal Accounts are accounts with individuals, partnerships and corporations. Property Accounts are accounts kept to show the value of property belonging to the business; as, cash, accounts with notes, land, buildings, horses, wagons, office fixtures, machinery, etc. Nominal Accounts are accounts that name some profit or loss of the business. They are frequently called profit and loss accounts. The only one studied so far has been the expense account. In more advanced bookkeeping, the expense account may be divided into several accounts, and many other accounts may be kept, such as, freight, commission, interest, discount, etc. Mixed Accounts are accounts that contain both real and nominal elements. The Merchandise account is the best example of a mixed account. All real accounts show an asset or a liability. 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. Rule for Real Accounts. Real accounts with the debit side the larger are assets; with the credit side the larger are liabilities. A personal account must first be examined to see whether the account is that of a customer-one to whom the business has sold, or that of a creditor-one from whom the business has bought. The debit side of a customer's account is usually the larger because the debit side represents sales to him and the credit side represents payments or allowances on goods. It should show an asset. The credit side of a creditor's account is usually the larger because the credit side represents purchases from him and the debit side represents payments made to him or allowances given the business on goods. It should show a liability. |