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SIMPLE SYSTEM 



OF ACCOUNTING 



To make easy the adoption of such bookkeeping as will strengthen the 

 financial standing of small merchants, who frequently consider account hooks 

 too much bother, the National Association of Credit Men has prepared the 

 simple accounting system presented below, quite suitable for florists. 



OST failures and bankrupt- 

 cies are due to a lack of 

 information as to how a 

 business is prospering or 

 suffering. A simple book- 

 keeping system would sup- 

 ply the necessary informa- 

 tion. Why should a mer- 

 chant hesitate to begin 

 keeping records when it is 

 possible, at practically no cost and with 

 but little expenditure of time, to equip 

 himself with sufficient information by 

 simply following the ideas presented in 

 this brief story? 



The merchant should know, and not 

 guess, that the price at which he sells 

 an article, or the price for which he 

 contracts to do work, will cover the — 



Exact cost of the article, or the 

 Exact cost of the material and 



labor used in the contract. 

 The proportionate part of the cost 



of conducting the business which 



the article or the contract should 



bear. 

 With a little for his living, and 

 Something besides. 



He should again know, without simply 

 estimating, whether all his sales or all 

 his contracts at the end 

 of any given period of 

 time equal the first three 

 items as above cited. 



If they equal the cost 

 as indicated, then there is 

 no profit. 



If they exceed the cost;, 

 then a profit is a reality. 



No merchant can be 

 easy in mind and fair to 

 his business creditors or 

 bank, or even the business 

 public, who cannot tell 

 whether or not his busi- 

 ness enterprise is making 

 a profit. 



How He Can Tell. 



This can only be done 

 '\v keeping certain records 

 —commonly known as 

 l>'"iks of account. 



Without books of ac- 

 ci'Unt, a merchant un- 

 consciously goes on the 

 r<" ks or loses the chance 

 <^' making his business 

 profitable. 



Why should he wait un- 



the time when he finds 



cannot pay his bills 



'I hasn't assets enough 



meet his liabilities? 



>Vhy should he, when 



certain simple records would give him 

 the information any time? 



How can he tell what profits the 

 business is making, even though he is 

 meeting his obligations, unless he keeps 

 certain records? 



How Books Show Profits. 



With this straight-from-the-shoulder 

 message to all merchants not keeping 

 records or books of account, and be- 

 lieving that they will realize the fact 

 that present conditions will not permit 

 a business enterprise to run without 

 such records, it is our earnest effort to 

 make certain recommendations in the 

 way of a general outline of simple and 

 easily kept records, which we shall call 

 books of account, our great desire being 

 to render business service and to put 

 sound props under every business enter- 

 prise. ** 



The transactions that go to make up 

 a day's work in any business develop 

 either a profit or a loss. If a profit, it 

 finds its way into capital, or net worth; 

 the net worth is increased. If a loss, the 

 net worth is decreased. 



Starting at the beginning, then, a 

 record of the merchant's investment in 

 the business, his net worth, or capital 



(as it is termed), is necessary. Such a 

 statement of net worth we will con- 

 struct right here. 



ASSETS. 



1. Cash on hand and In bank $ 



2. Merchandise on hand $ 



3. Accounts owing from customers $ 



4. Furniture, fixtures, etc $ 



5. Lands and buildings $ 



6. All other Items of value not in 



auove classiflcatlon $ 



Total Assets $ 



Deduct from this: 



T.TAHTT.TTTF.fl. 



Amounts owing for 



10. Merchandise | 



11. Borrowed Money ♦ 



12. Items of expense accumulated 



and unpaid $ 



18. Lands and buildings (mort- . .^.,* 



gage) • «.-, , - 



14. All other debts not Included 



la above classification $ 



ToUil Liabilities $ -, 



Net Worth, Capital or Invest- 

 ment ^ 



' 1»1»H 



Eighty per cent of business 

 failures in the United States 

 are of firms having $5,000 or 

 less, ''too small to make book- 

 keeping worth while" in the 

 minds of those that fail. The 

 simple system here described 

 fits the needs of the small 

 florist and will keep him clear 

 of the financial rocks. 



We begin with assets, which term 

 covers property or accounts of value 

 such aa are listed above and numbered 

 from 1 to 6. The total of these assets 

 in dollars and cents, when compared 

 with the total amount of debts, de- 

 termines whether a business enterprise 

 is able to pay its debts and is there- 

 fore what we call solvent, 

 or is unable to pay its 

 debts and is insolvent. 

 There should be at least 

 $2 of assets to every dol- 

 lar of debts. 



Liabilities are the oppo- 

 site of assets (see above, 

 items numbered 10 to 14), 

 and to play the business 

 game right, the object is 

 to keep the liabilities less 

 than the assets. The 

 greater the difference be- 

 tween them, the greater 

 the investment and, there- 

 fore, the success of the 

 business. 



Figuring Income. 



So, the first thing that 

 books of account tell us, 

 is what is invested in a 

 business at the beginning, 



The next step is tc 

 make the investment earn 

 money by the carrying on 

 of business, whatever it 

 may be, for the purpose of 

 making a profit. We can 

 increase our net worth 

 by adding to our income. 

 We add to our income 

 when we make a profit on 

 ^hat we sell. So, a mer- 

 chant must censtruct his 



