BOOKKEEPING 



821 



BOOKKEEPING 



when a deposit is made, and the Bank is 

 credited for all withdrawals by check. 



Furniture and Fixtures. If the firm pur- 

 chases office furniture, a typewriter, sales 

 counters or permanent fixtures of any sort for 

 the office or shop, they are entered in this 

 account, which is exactly similar to Machinery. 

 Things which will be used up, however, such as 

 stationery, pens and ink or paper towels, 

 belong under the head of Expense or of a 

 special account called Office Expense. 



Insurance. One of the first acts of the new 

 firm will be to insure its property. Insurance 

 is a form of expense but is often recorded in a 

 separate account. Besides the reason of its 

 importance there is the one that policies are 

 sometimes written for more than one year, 

 so that at the end of that time some of the 

 insurance will remain to be used up. 



Material. Before commencing to manufac- 

 ture, the firm will have to purchase raw 

 materials. These will be charged to an appro- 

 priately-named account, or to separate accounts 

 for each important class of material. After 

 the raw material has been manufactured into 

 the article to be sold it becomes Merchandise. 

 Usually, therefore, all entries to Material will 

 be debits, and all those to Merchandise, cred- 

 its. At the end of a month or year, when an 

 inventory is taken of the amount of material 

 remaining on hand, there will be credits to the 

 account, as explained below under How to 

 Close the Books. 



Wages. At the end of the first week the 

 firm will have to pay its employees. The 

 usual entry will be a debit to Wages and a 

 credit to Cash. Unless an employee has the 

 privilege of drawing money from his account 

 at any time it is unusual to keep a separate 

 page for him. The details may be written 

 under the entry, or, if there are a large number 

 of employees, kept in a separate book, usually 

 the Time Book. 



Personal Accounts. In a partnership such 

 as this there will probably be two accounts, 

 A. J. Steele, Personal, and W. F. Gordon, Per- 

 sonal. If the partnership articles arrange for 

 the proprietors to draw monthly salaries, the 

 amount due them at the end of a month will 

 be credited to these accounts, and any sums 

 from time to time drawn by either one of 

 them, or paid for the interests of either, will 

 be debited to his personal account. 



Expense includes items of expenditure which 

 can not be posted to any of the special ac- 

 counts like Insurance and Rent, nor to any of 



those representing assets. Pins for the office, 

 for instance, or the mending of a broken win- 

 dow would be charged to it. Sometimes spe- 

 cial accounts are opened for Office Expense, 

 Selling Expense, and the like. 



Other accounts which are apt to occur are 

 similar to those already described. Real Es- 

 tate, for instance, represents assets and resem- 

 bles Machinery; Mortgage Payable is a liabil- 

 ity to be handled like Bills Payable; Taxes 

 must be treated like Insurance. Commissions 

 to salesmen are somewhat like Wages, though 

 often more difficult to handle; there are so 

 many ways to treat them that a full discus- 

 sion cannot be given here. 



The Trial Balance. Since for every debit 

 there is an equal cred.it, and vice versa, it is 

 evident that if books are correctly kept all 

 the debits in them will equal the sum of all 

 the credits. In bookkeeping language, the 

 books will balance. Once a month, or oftener 

 for a new bookkeeper, it is well to take a 

 trial balance, or list of the total debits and 

 credits for each account in the ledger, to prove 

 that in posting from the journal there have 

 been no errors or omissions which will affect 

 the balance. Of course errors in posting to the 

 wrong account or others which do not affect 

 the balance cannot be discovered in this way. 

 In taking a trial balance the totals of accounts 

 should not be written in the books, unless in 

 pencil marks easily erased. 



A trial balance for Gordon and Steele might 

 be as follows: 



Trial Balance Dec. 31, 1917 



If the two columns of the trial balance do 

 not have equal sums the error to be sought 



