<538 



TILE HOME. FARM AM) BTSIXKSS C \VL< >P.EDIA. 



then. We will suppose that the price of flour has declined $1 per barrel, 

 and we could therefore buy it at $7 per barrel. Our 40 barrels remaining 

 unsold would then be worth only $280. This amount we add to the 

 amount sold during the year ($600), which makes a total of $880. We 

 now find the amount that this the credit side exceeds the debit, whiclr 

 gives $80, or our net gain on merchandise. 



ILLUSTRATION MERCHANDISE ACCOUNT. 



T3. ANOTHER ILLUSTRATION. We debit Mdse. at commencement of 

 business for the value of the merchandise then on hand, and we debit it 

 during the year for all the merchandise we buy; at the end of the year 

 we ascertain how much of this merchandise we have on hand, valuing it 

 at its present worth, or what it would cost to lay it in the store at this 

 present time. We then find the difference between the value of the mer- 

 chandise we now have on hand, and the total amount of the debit side of 

 the Mdse. account, which will show the cost of the goods we have sold ; and 

 by referring to the credit side of the Mdse. account, we find how much we 

 have realized for the goods we have sold. We now find the difference be- 

 tween the cost of the goods sold and the amount for which we sold them, 

 and this difference will be the gain on Mdse. We then transfer that gain 

 to the " Loss & Gain account," close the Mdse. account " By Balance," and 

 bring down on the debit side again, the balance of the Mdse. now on 

 hand. 



T4. It is customary among many business houses to allow a discount 

 for cash on bills paid within a certain time. If we are allowed a discount 

 for cash for goods we buy, the simplest way is to deduct the amount of 

 the discount on the bills before entering them, and pay these bills within 

 the time allowed for discount. If we allow a discount on our bills p;nd 

 within a certain time, it is the easier way to give the parties credit in the 

 Cash Book, when they pay, for the full amount of the bill, and debit Md.M-. 

 (or Discount) on the opposite side of the Cash Book (credit side) for the 

 discount allowed. (See 497, 498 and 534.) Some houses keep a " Discount 

 account " for these discounts ; but it is the same in effect, and less trouble, 

 to make the entries to the Mdse. account. In reality we get so much less 



