A SYSTEM OF ACCOUNTING FOR COTTON GINNERIES. 



35 



Great care should be used that all charges incurred in ginning purchased seed cot- 

 ton have been made in this account before it is closed into Loss and gain account. 

 The cost of ginning seed cotton purchased must be charged to this account in order 

 that the Income and expense statement may show the true results of the operations, 

 including the handling of cotton. 



This is sometimes done by crediting an income account with the amount which 

 would have been received had all cotton been ginned for customers. This practice 

 is entirely incorrect and has little if any justification. It is, therefore, to be avoided 

 in every case, and a more nearly correct method, as described below, should be used. 



To ascertain the cost of ginning seed-cotton purchases, the total of the items appear- 

 ing on the Income and expense statement (see page 6) should be ascertained by 

 filling in these items from the ledger accounts (accounts Nl to 06, inclusive). This 

 amount is then divided by the total number of bales handled (including the number 

 ginned from seed-cotton purchases), thus arriving at the unit cost per bale. The 

 unit cost thus obtained is now multiplied by the total number of bales of seed-cotton 

 purchases ginned, which will give the cost of ginning purchased seed cotton. Illus- 

 tration: 



Total number bales ginned 1, 000 



Total number bales ginned (seed cotton purchased) 150 



Total ginning expense $2, 950. 00 



Total ginning cost per bale ($2,950^-1,000) $2. 95 



Cost ginning seed cotton purchased ($2.95X150) $442. 50 



Using the figure thus obtained, an entry is made as shown on page 38. 



The amount of this entry is then entered on the Income and expense statement and 

 on the Cost and income analysis in the space provided. 



Cottonseed Purchases (P2). 



Debit: 



With the value of cottonseed on 

 hand at the beginning of the fiscal 

 period. (Credit Inventory, ac- 

 count No. A5.) 



With the cost of all cottonseed pur- 

 chased. 



Credit: 



1. With the value of the cottonseed 



on hand at the end of the fiscal 

 period. (Debit Inventory, ac- 

 count No. A5.) 



2. With the debit balance at the end of 



the fiscal period. (Debit Lossand 

 gain.) 



Cotton Purchases (P3). 



Debit: 

 1. With the value of cotton on hand at 

 the beginning of the fiscal period. 

 (Credit Inventory, account No. 



A5.) 

 With the 

 chased. 



cost of any cotton pur- 



Credit: 



1. With the value of the cotton on hand 



at the end of the fiscal period. 

 (Debit Inventory, account No. 

 A5.) 



2. With the debit balance at the end of 



the fiscal period. (Debit Loss and 

 gain.) 



Bagging and Ties Purchases (P4). 



Debit: 



Credit: 



1. With the value of bagging and ties 



1. With the value of the bagging and 



on hand at the beginning of the 



ties on hand at the end of the 



fiscal period. (Credit Inventory, 



fiscal period. (Debit Inventory, 



account No. A5.) 



account No. A5.) 



2. With all purchases of bagging and 



2. With the debit balance at the end 



ties, including freight and dray- 



of the fiscal period. (Debit Loss 



age on same. 



and gain.) 



THE TRIAL BALANCE. 



From the discussion of the journal and the ledger in the preceding 

 entries and also on pages 16 and 18, it will be noted that all entries 

 made in the ledger originated in the journal. Two points, therefore, 



