654- 



THE HOME, FARM AND BUSINESS CYCLOPEDIA. 



154. When a person to whom we give a note allows us a certain 

 amount for paying that note before due, we debit Bills Payable for the 

 full face of the note ; and credit "Cash" for the cash we pay, and "In- 

 terest " for the discount we are allowed. 



Some business houses keep a separate account for Discount, but this is 

 not necessary. (See also 74.) 



INTEREST RECEIVABLE. 



155. Debit, at the end of the 



year, for the accrued interest to 

 date on all the interest bearing 

 notes and time drafts we hold 

 against ether parties, i.e., for the 

 total interest due us to date on our 

 Bills Receivable. 



156. Credit when the accrued 

 interest is paid which was charged 

 on opposite side of this account. 



157. Directions for closing the Interest Receivable account at the end 

 of the year : 



1st. Find the difference between the two sides of this account, and 

 then write on the credit side, in red ink, " By Balance" for that difference, 

 which will make the account balance. 



2nd. Rule the closing lines and write the total amounts between the 

 lines. 



3rd. Write on debit side of this account, in black ink, below the clos- 

 ing lines, " To Balance" for amount of this difference which shows the 

 balance of interest which is still due and receivable to us. 



158. EXPLANATION. At the end of each year, we compute the interest 

 on all the interest-bearing Bills Receivable we have on hand, from the 

 dates of such notes up to the end of the year ; excepting those notes the 

 dates of which extend back over one year ; these notes we compute the 

 interest on for only one year, because the interest has on these already 

 been computed up to the first of the year and charged to this account. 

 We then debit " Interest Receivable account " for the total amount of 

 interest due us, and credit the " Interest account " proper, for the same 

 amount. Thus it will at once be seen that the "Interest Receivable 

 account " is an account indicating a resource, being the amount of in- 

 terest due us up to the end of the year ; therefore, it is never carried over 

 to the " Loss & Gain account," the gain on interest being carried to the 

 " Interest account," as above indicated. 



