note on one side of the cash book and to record the discount on the opposite side. If, for example, Henry Brown pays his bill of $1000, taking advantage of a 2% discount which has been allowed him, we enter on the debit side of the cash book a credit to his account of $1000, and on the credit side we debit Discount on Sales for $20. While by this means the proper accounts are debited and credited, we have been obliged to enter on the debit side an amount $20 in excess of the amount actually received, and to enter $20 as a payment on the credit side, such payment not having actually been made. Furthermore, the actual amount received or paid is not shown on either side. At the end of the month, the total receipts and payments as shown by the totals of the debit and credit sides respectively are both inflated for the reason that they include the accumulation of discount items for the entire month, whereas the debit footing should exactly agree with the total receipts and the credit footing with the total payments.

Because of this rather serious objection from the standpoint of good bookkeeping, the cash book for a business in which discounts are common invariably contains special columns for discounts on purchases and on sales. Such a cash book is illustrated on pages 82 and 83, with entries recorded in it as follows:

March 1 Balance, $3408.60.

1 Pay rent for the month, $600.

2 Receive check from H. W. Field to apply on account, $1000.

3 Receive check from Thomas Scott in payment of bill of February 25 for $650 less 2%. 4 Receive check from J. W. Johnson in payment of bill of March 1 for $225 less 1%. 5 Cash sales for the week, $127.80.

6 Pay Robert C. Grant on account, $500.

8 Pay invoice of F. W. Holmes of $727.60 less 1%.

9 Pay invoice of H. P. Kidder of the 1st inst. for $540 less 2%.

10 Pay office wages, $240; store wages, $375.

11 H. S. Denny pays his bill of the 3d of $145 less 1%.

12 James B. Ames pays his note of $100 due to-day with 60 days' interest.

13 Pay invoice of Henry A. Howe of the 5th for $700 less 2%.

14 Pay note due to-day held by G. S. Harwood for $360 with interest for 4 months at 6%. 16 Cash sales for week, $36.70.

17 The Commercial Bank discounts at 6% a note which we hold on E. G. Foss for $500 which is due March 31; the note does not bear interest.

25 Pay salesmen's traveling expenses, $112.50.

27 Pay electric light bill for month, $37.80.
28 Pay store wages, $286; office wages, $250.

31 Pay invoice of M. A. Ingell for $625 less 2%.

Comments on the Cash Book Illustrated Above. In addition to discounts on sales, provision must be made for the discount charged by the bank for discounting a note before maturity, which in the elementary cash book must also be entered, but on the opposite side. As such discounts are not likely to be of sufficient number to justify an additional column, the face of the note may be entered in the column for Accounts Receivable, the discount thereon in the column for Discounts on Sales, the items starred (*) or otherwise indicated, and the column analyzed at the end of the month. As an example, attention is called to the way in which the discount on the note of E. G. Foss was handled on the 17th.

If we borrow from the bank, giving our own note which is discounted, the entry would similarly be a credit to Notes Payable, the face being entered in the Accounts Receivable column, the discount in the Discount on Sales column, and the proceeds in the Net Receipts column. At the close of the month, when balancing the cash book, the starred items should be shown below as a debit either to Interest on Notes Receivable or to Interest on Notes Payable, depending upon which kind of note was discounted. Two or more discount items of the same class would, of course, be added together for posting purposes. The total of the discounts on sales items is shown as a debit to that account and is posted at the end of the month.

The individual items in the Accounts Receivable and Accounts Payable columns are posted to the proper sides of their respective accounts. Receipts other than from customers or payments other than to creditors are entered in the Net Receipts or Net Payments column, and the individual items are posted. The items checked, indicating the totals of the Accounts Receivable and Payable columns, are not posted.

The total of the Net Receipts column, which exactly agrees with the total cash receipts for the month, is posted to the debit of Cash, as indicated. In obtaining this total, care should be taken not to include the balance brought forward at the beginning of the month. This balance should be cut off by a line drawn beneath, or it may be short-extended in the explanation space.

The total of the Net Payments column, which exactly agrees with the total cash payments for the month, is posted to the credit of Cash, as indicated.

JAMES M. HASTINGS BUSINESS

APRIL

The student is now to act as bookkeeper for James M. Hastings, who has opened a store at 146 Elm Street, for dealing in flour, grain, and produce at wholesale. The salary paid will be $75 per month.

Mr. Hastings attends to the buying and selling and is absent from the city most of the time; a power of attorney will be conferred upon the student in order that he may sign and indorse notes, checks, and other papers during Mr. Hastings's absence. The power of attorney is the first paper on the pad of incoming vouchers which belongs to the outfit of business papers and forms furnished the student. The document should be read carefully in order that the form and wording be understood, and then folded lengthwise. Across the end of the folded instrument write:

Power of Attorney

given to

(Student's name)

by

James M. Hastings
.April 1, 19-

The instrument may then be filed in the folder labeled Vouchers, which will be found in the large envelope of Business Forms.

Books Used. In this exercise, the books used will be a journal, purchases journal, sales journal, cash book, and ledger. All cash transactions will be entered in the cash book, as illustrated on pages 78 and 79. All transactions other than cash will be recorded in the other books of original entry (journal, purchases journal, and sales journal).

Selling Price Lists. Each student will be assigned a separate price list from the table, shown on page 86, from which the selling prices of all commodities dealt in will be taken.

It will be noted that the prices of the commodities dealt in are below the normal market prices of such commodities. The purpose of the individual price lists is primarily to give practice in billing and to encourage individual effort on the part of the student, and not to teach market conditions and prices.

Currency. In addition to receiving checks and making payments by check, the student will also handle currency in the form of imitation bills and fractional pieces. This provides excellent drill in counting money rapidly and accurately, in arranging bills according to denominations and all facing the same way, and in balancing cash.

The proper way to count bills will be demonstrated by the teacher, or the student should take advantage of the opportunity of watching an experienced cashier or a paying teller at any bank. Their methods of handling money should be carefully imitated in all practice work.

All currency and checks received should be placed in the large envelope labeled Cash Drawer, which will be found in the package of Business Forms. All currency and checks issued should be placed in the envelope labeled Cash Paid Out.

TRANSACTIONS

No. 1 April 1, 19- James M. Hastings invests $8000 in the business which he has begun on this date. The amount should be in agreement with the currency contained in the envelope numbered to correspond with the number of this transaction on the April pad of incoming vouchers.

No. 2 April 1- Mr. Hastings has rented the building at 146 Elm Street, from R. B. Hines at a rental of $100 per month. Pay April rent in currency, using bills of the largest denomination possible.

Remove from the pad of incoming vouchers the lease and receipt, each numbered 2, representing the business papers which were issued in connection with this transaction. Read the lease carefully, fold it lengthwise, and file it with the receipt in the folder labeled Vouchers.

No. 3 April 2- We have bought goods of Daniels Bros. as per invoice numbered 3 taken from pad of incoming vouchers.

Verify multiplications and additions and, if found to be correct, O.K. the invoice as explained on page 61. Place the invoice in the folder labeled Invoices. The same routine should be followed in the case of every invoice received, and the student will be held responsible for any undetected errors in the invoices or for any mistake in filing.

Pay the invoice by removing the amount of currency necessary from the Cash Drawer and placing it in the Cash Paid Out envelope. For this transaction an entry should first be made in the purchases journal, followed by the proper entry in the cash book for the payment of the invoice. (See pages 79 and 80.)

No. 4 April 2-Bought goods from D. Davenport and Co., as per invoice. Terms, cash. Proceed exactly as in No. 3.

No. 5 April 3-Voucher No. 5 from the pad of incoming vouchers shows an order from J. A. Barker for a bill of goods. The terms are cash, and the cash accompanies the order.

Fill the order, making out a bill on a billhead taken from the pad in the package of Business Forms; use the selling price list assigned you, in billing the goods. If the bill is correctly figured, the total should agree with the amount of cash accompanying the order. The bill should be receipted and placed in the envelope labeled Vouchers for Others.

All bills made out should be correct as regards punctuation, capitalization, tabulation of items and prices, and should be written in a neat, business-like style of penmanship.