1917 

 May 



1918 

 Jan. 



BOOKKEEPING 



Niagara Policy No. 7392 

 Globe No. SO 198 2 



I'nexplred 



824 

 KXAMPLK A. INSURANCE 



BOOKKEEPING 



Unexpired 

 Profit and Loss 



S81 

 78 



360 



EXAMPLE B, INTEREST 



EXAMPLE C, MATERIAL 



Dec. 



1918 

 Jan. 



Cook shipment 

 Bronson " 

 O' Gorman 



Inventory 



60 Dec. 31 Inventory 

 09 Merchandise 



92 



(10 



L'J 



EXAMPLE D, MERCHANDISE 



le 



4378 

 17788 



22166 



01) 



to have been responsible for a large loss. This 

 is of course not the true state of affairs, for 

 that part of it which has been made into 

 Merchandise has been a source of profit to 

 the firm. In a business which buys its mer- 

 chandise already manufactured, debits for 

 purchases appear in the Merchandise account, 

 and it is of course possible to combine Mate- 

 rial and Merchandise in manufacturing ac- 

 counts. But it is generally more advisable to 

 keep them apart until the books are closed. 

 If the expenses of freight, express and cartage 

 on material have been kept in a separate ac- 

 count they should also be transferred to Mer- 

 chandise, for they are part of the cost of the 

 material. The closing entries of Material 

 account appear in Example C. 



Merchandise, before its balance is transferred 

 to Profit and Loss, should be charged not only 

 with the cost of material, but with Wages. 



In the article ACCOUNTING is an explanation 

 of what is called cost accounting, a system by 

 which manufacturing costs are made to include 

 a share of interest, rent, insurance, taxes and 

 depreciation. In the present instance, Mer- 

 chandise will be closed as in Example D. 



Profit and Loss has now received all the 

 balances from accounts which affect it, and 

 appears as shown in Example E. 



There are several ways in which this ac- 

 count may now be closed. The business pol- 

 icies of the proprietors will determine which 

 shall be chosen. If they wish to spend the 

 money they will divide and carry it to their 

 personal accounts. If they wish to leave it in 

 the business to increase their working capital 

 they can carry it to their capital accounts. A 

 third method, less frequently adopted in pri- 

 vate partnerships than in corporations, is to 

 close Profit and Loss account exactly like Ac- 



