.' I 



July 16, 1920 



The Florists^ Review 



^ KEEPING 



THE BOOKS s^ 



NDEE the heading, "Sim- 

 ple System of Account- 

 ing," The Eeview pre- 

 sented in its leading arti- 

 cle last week the outline 

 of an easy method of 

 bookkeeping devised by 

 the National Association of 

 Credit Men for the use of 

 small businesses. The gen- 

 eral purpose of such a system was 

 pointed out last week. This week are 

 considered in detail the items which go 

 to make up the books of account. These 

 are presented in the simplest possible 

 form, so as to reduce the work of keep- 

 ing such books to the degree that it will 

 not deter any florist from employing 

 this necessity to business success. 



Eeferenee to the two tables, one show- 

 ing the form of statement of business 

 worth, and the other the form of state- 

 ment of net income, or profit, will make 

 clear the relation of the various ac- 

 counts mentioned. 



Tlie Assets. 



The capital investment is to be de- 

 termined as outlined ii* the table headed 

 "Assets." 



"Cash on hand anj in bank" (Ac* 

 count No. 1). — This fcure, when ob- 

 tained, is entered on^T^e left side, or 

 debit side of the ledgeii^ttieet, and placed' 

 under the asset sectiott'of the ledger. 



"Merchandise on lland" (Account 

 No. 2). — Take inventory of the stock 

 on hand, by putting down each item of 

 stock on a sheet at its cost price, if 

 that cost price is at or below the figure 

 at which the article can be duplicated; 

 or at its exact market value, if the 

 market is less than the price that was 

 originally paid. After taking down all 

 the items of merchandise, then the total 

 is entered on a ledger sheet on the left 

 or debit side, and placed under the asset 

 section of the book. 



' ' Accounts owing from customers ' ' 

 (Account No. 3). — Each customer's ac- 



FIGURING NET WORTH. 



ASSETS. 



1. Cash on hand and in bank $ 



2. Merchandise on hand $ 



3. Accounts owing from customers. . $ 



4. Furniture, fixtures, etc $ 



5. Inlands and buildings $ 



6. All other items of value not in 



above clnssiflcatiou $ 



Total Assets $ 



From which deduct: 



LIABILITIES. 

 Amounts owing for 



10. Merchandise $ 



11. Borrowed money $ 



12. Items of expense accumulated 



and unpaid $ 



13. Lands and buildings (mort- 



gage) $ 



14. All other debts not included 



in above classification $ 



Total LJabilities $ 



Net Worth, Capital or Invest- 

 ment : $ 



count is by name entered on a separate 

 sheet, and the amount owing and col- 

 lectible from each placed on the left, 

 or debit side and placed under the asset 

 section of the ledger. 



"Furniture, fixtures, etc." (Account 

 No. 4). — A fair valuation of these items 

 should be made and the total of them 

 all recorded under this caption on the 

 left side of ledger sheet and also placed 

 under asset section. 



"Lands and buildings" (Account 

 No. 5). — rif the merchant owns a store, 

 warehouse, factory, or a plant, im- 

 proved or unimproved land, a reason- 

 able valuation is placed upon it and the 

 total thereof is entered on a ledger 

 sheet, left, or debit side, and placed 

 under the asset section of the ledger. 



"All other items of value not classi- 

 fied in preceding accounts." — These ac- 

 counts should be itemized and the total 

 entered in this account on the left side 

 of ledger sheet, and placed, like the 

 others, in the asset section of the ledger. 



The left side of the ledger is always 

 the debit side; the right side is known 

 as tHe credit side. 



We debit what we have. 

 ^^e CI edit wkat W 9W. 



We debit our expenses. 



We credit our incolne. 



By entering the items 1 to 6 on the 

 left side, the merchant has charged hii 

 gross investment on the books. 



The Liabilities. 



We are ready now to take up the 

 second section, the liabilities section. 

 From the gross investment, the liabili- 

 ties must be deducted in the table under 

 that head to determine the merchant's 

 net investment. 



"Amount owing for merchandise" 

 (Account No. 10). — The total owing by 

 the merchant to each creditor is listed 

 on a separate ledger sheet on the right 

 side and placed under this liability sec- 

 tion of the ledger. There should be one 

 account for each concern from whom 

 the merchant buys on credit. 



' ' Amount owing for borrowed money ' ' 

 (Account No. 11). — The total when ac- 

 curately determined is listed on a ledger 

 sheet on right side and placed under 

 liability section of the ledger. 



"Amount owing for items of ex- 

 pense" (Account No. 12). — If, at the 

 time this net worth is being determined, 

 there are any unpaid expense bills, the 

 amount owing to each creditor should 

 be listed on a separate sheet on the 

 right-hand side and filed under the lia- 

 bility section. 



"Amount owing on lands and build- 

 ings" (Account No. 13). — The amount 

 owing, usually in the form of a mort- 

 gage, is entered on the ledger sheet, and 

 placed on the right-hand side thereof, 

 and filed under this liability section. 



"Amounts owing to all others not in 

 eluded in accounts 10 to 13." (Account 

 No. 14). — This account is self-explana- 

 tory. If there are any amounts owing, 

 they are to be placed on the right-hand 

 side of the ledger sheet and filed as 

 liabilities. 



"Net worth, capital, or net invest- 

 ment" (Account No. 15). — there must 



be one account in the liability section 

 that is headed as above — the difference 

 between all that is listed in the asset 

 section and all that is listed in the lia- 

 bility section. That exact difference 

 constitutes this item, and the amount, 

 when determined, is placed on the right- 

 hand side, or credit side, of this ac- 

 count, showing the exact net invest- 

 ment in the business enterprise. 



It is a simple matter at this point to 

 prepare a financial statement, as out;, 

 lined in the first table, which will give 

 one his true financial condition. 



The Income. 



We will consider now the third sec- 

 tion, the income. Just as with the assets 

 and liabilities, accounts should be 

 opened in which will be recorded the 

 transactions arising out of the operation 

 of the business. 



"Profit on sales" (Account No. 20. — 

 The profit on sales can be easily de- 

 termined by consulting the inventory, 

 if the goods were inventoried; if pur- 

 chased since inventory taking, then by 

 consulting the bills. The difference be- 

 tween the price paid and what it is sold 

 for, is the profit on the sale. This profit 

 is credited to this account by entering 

 the sum on the right side and placing 

 it in the income section. If the busi- 

 ness is such that the items are too nu- 

 merous — and it is possible to take an 

 inventory frequently — then the profit on 

 sales is determined as follows on the 

 desired periods of time: 



stock on hand beginninK of period $ 

 Add stock purchased during 

 period $ 



Total $ 



Deduct Inventory end of period. $ 



Difference is cost of goods sold. $ 

 Sales during period... $ 

 Deduct cost of goods 

 ■old, as above $ 



Difference is proOt on 

 ■ales $ 



"Profit on contracts" (Account No. 

 21). — Where a contracting business is 



FIQURING NET PROFIT. 



INCOME. 



20. Profit on sales $ 



21. I'roflt on contracts $ 



22. Interest on bank balances $ 



23. Discount on merchandise pur- 



chased $ 



24. Items of income not above classi- 



fied $ 



Total Income $ 



From which deduct: 



EXPENSES. 



30. Rent (fair rate, if owner) $ 



31. Wages paid (not charged on con- 



tracts) $ 



32. Allowance to merchiint for his 



service (at fair rate) $ 



33. InHurance on merchandise, fix- 



tures, etc $ 



M. Interest on borrowed money $ 



3."). Deliver.v expenses $ 



Hd. Taxes of all kinds $ 



37. Fuel and light $ 



38. Charity $ 



.38. Had accounts $ 



40. General expenses not included in 



above $ 



Total Expenses $ 



When deducted from total In- 

 come gives net profit, or net 

 income $ 



