BOOKKEEPING 825 BOOKKEEPING 



EXAMPLE E, PROFIT AND Loss 



counts Payable, in order to show that the 

 business owes the profit balance to its pro- 

 prietors. 



The Balance Sheet. Providing that the work 

 of closing has been correctly done a list of 

 the debits and credits will again balance. But 

 the accounts included in the list will differ 



from those in the trial balance in that they 

 will represent only assets and liabilities. Thus 

 Insurance, which before indicated merely a 

 source of expense, now designates an asset 

 money entrusted to the insurance companies 

 for protection which they have not yet given. 

 Gordon and Steele's Balance Sheet follows: 



Balance Sheet January 1, 1918. 



Assets 



Accounts Receivable 

 Bills Receivable 

 Cash 

 Expense 



Furniture and Fixtures 

 Insurance 

 Interest 

 Machinery 

 Material 

 Merchandise 

 Rent 

 Taxes 



4632.05 



1208.12 



1271.31 



4.12 



300. 



281.20 



21.73 



7500. 



4378.22 



3986.19 



3.22 



121.22 



23707.38 



Liabilities 

 Accounts Payable 

 Bills Payable 

 W. F. Gordon, Capital 

 W. F. Gordon, Personal 

 Interest 



A. J. Steele, Capital 

 A. J. Steele, Personal 



4650.82 



2017.19 



11043.63 



386.72 



47.21 



5521.81 



40. 



23707.38 



Corporation Bookkeeping 



The principal differences between the account 

 books of corporations and those of private 

 businesses occur in the treatment of proprietor- 

 ship and profit and loss accounts. The owners 

 of a corporation are its stockholders, and these 

 may be constantly changing. It is not con- 

 venient, therefore, to have their names appear 

 in the ledger, and they are recorded in a special 

 set of books. The ledger then deals with the 

 stockholders as a whole, in an account called 

 Capital Stock. 



Opening Corporation Books. The entries 

 necessary in opening the books of a corpora- 

 tion vary greatly according to the conditions 

 under which the company is organized. For 

 the simplest case let us suppose a company 

 which starts business with all its authorized 

 capital stock sold and fully paid for. The 

 first journal entry would be: 



If a corporation were organized to take over 

 the business of Gordon and Steele on the date 

 of the balance sheet given above, paying each 

 partner for his interest in the business with 

 shares of the new stock and selling enough 

 more stock to bring the capitalization to 

 $25,000, the entries could be made, in the old 

 journal, as follows: 



When these were posted the result would be 

 to cancel the claims of the old proprietors, 

 giving them an interest only through their 

 holdings of stock as shown in the stock-record 

 books, and to substitute the account called 

 Capital Stock for the old Capital accounts. 

 If not all the stock of a company is sold and 



