BOOKKEEPING 



SJ2 



BOOKKEEPING 



for may be either in the work of taking the 

 trial balance itself, or a previous mistake in 

 the books. If the latter, it may be an error 

 in journalizing, a posting omitted, a posting 

 to the wrong side of the ledger, a posting made 

 twice, or a posting of the wrong amount. To 

 discover the error find the difference between 

 the sums of the two columns. If Gordon and 

 Steele's bookkeeper had found that his debits 

 were $225.96 less than his credits, he would 

 probably have recalled that he had given a 

 check for this amount of taxes, and looked at 

 once to see if he had omitted to post it or to 

 copy it from the ledger to the trial balance. 

 If the discrepancy had been 1451.96, an unfa- 

 miliar number, he might have divided it by 

 two and finding the result to be $225.98, would 

 would have guessed that the amount was posted 

 to the credit side of the ledger instead of to 

 the debit side. If the difference of the two 

 columns were a number divisible by nine, say 

 $2700, the error might be due to a transposi- 

 tion; that is, $23610 might have been written 

 $26310, with the figures 3 and 6 transposed. 

 (It will be noted that 27 divided by 9 gives 3, 

 the difference between the two figures trans- 

 posed.) In the same way that one who drives 

 an automobile learns to locate the trouble in 

 his engine, a bookkeeper soon comes to know 

 the short cuts to the correction of his errors. 

 The fact that almost any sort of error in the 

 books will be revealed in the trial balance is 

 perhaps the greatest advantage of the double- 

 entry system. 



Taking the accounts in the order in which 

 they appear in the trial balance, the first is 

 Accounts Payable. The credits to this account 

 represent sums the firm has owed, the debits 

 the amount paid on them. The excesses of 

 credits over debits must therefore be debts 

 still unpaid, or liabilities. This balance is writ- 

 ten (usually in red ink to show that it is a 

 figure arbitrarily introduced into the books 

 instead of a posting) on the side which has the 

 smaller total. All subtracting necessary to dis- 

 cover the balance should be performed outside 

 of the books. Beneath the figures of the last 

 written line of the longer column a single line 

 is drawn in either black or red ink, then the 

 total is written and beneath it a double line 

 drawn. A single line in bookkeeping always 

 signifies that the figures above it are to be 

 added, a double line that the addition is com- 

 pleted. In the other column the single line, 

 the total and the double line are written di- 

 rectly opposite the first. The red ink entry is 

 given the date of closing, in this case Decem- 

 ber 31, 1917. Then below the double line of 

 the other column is written in black ink a 

 copy of the entry and the date January 1, 

 1918. This restores the equality of debits and 

 credits, as shown in the trial balance, and gives 

 to next year's books the total amount owed 

 on accounts. 



Balanced in this fashion, the close of the 

 account will now appear as follows. Italics 

 are used to represent red ink in all the exam- 

 ples hereafter given: 



Dec. 

 Dec. 



m 



: 



J. C. Moakley 

 Balance 



265 



How to Close the Books. Closing the books 

 refers not only to bringing accounts to a con- 

 clusion when a firm ceases to transact business, 

 but also and in most instances to arranging 

 them at the close of a year or other period 

 in order to reckon profits or losses. 



In the work of closing, entries are usually 

 made directly into the ledger. Care must be 

 taken not to disturb the balance of debits and 

 credits; whenever figures are entered on one 

 side, corresponding ones must be posted some- 

 where on the opposite side. For this reason 

 a few bookkeepers make their closing entries 

 through the journal. 



83 



Accounts Receivable, Bills Payable, Bills 

 Receivable and Cash are handled in the same 

 manner, and sums due to or from individuals. 



In Furniture and Fixtures we consider a 

 different class of account. It represents an 

 asset, but one which is presumably worth less 

 than when it was entered in the books at the 

 time of purchase. There has therefore been 

 some loss to the business; this must be shown, 

 and the proper value must be entered for the 

 start of the new year. If the furnishings are 

 now considered worth $300, this figure written 

 in red ink together with the word Inventory 

 on the credit side of the account will indicate 



