36 BULLETIN 985, U. S. DEPARTMENT OF AGRICULTURE. 



must be kept constantly in mind, namely: (1) No entries are to be 

 made direct to the ledger, but must be posted from original entries 

 in the journal; (2) the equality of the debits and credits of each page 

 of the various journal forms must be proved before any figures are 

 either carried forward or posted to the ledger. It follows, then, that 

 if the journal pages are proved to be in balance and the entries are 

 correctly posted the ledger also must balance. In order to prove 

 whether or not the equality of the debits and credits has thus been 

 maintained, a trial balance must be taken of the ledger at the end 

 of each month. A trial balance consists of a schedule of the open 

 accounts in the general ledger showing in one column the debit 

 balances and in another column the credit balances of the accounts. 

 The footings of the two columns must be equal. A stock form of 

 trial balance book should be obtained for the permanent preserva- 

 tion of the monthly trial balances. 



After the trial balance has been completed it is necessary to "close 

 the books" and to prepare a balance sheet and an income and expense 

 statement in order to ascertain the results of the period's operations 

 and the financial position of the company. 



CLOSING THE BOOKS. 



By the expression "closing the books" is meant the process of 

 balancing all income and expense accounts by transferring their 

 balances to the loss and gain account. After this has been done, 

 the only open accounts to be found in the ledger are the balance- 

 sheet accounts which represent the assets and liabilities of the 

 company. 



Preparatory to closing the books, it will be necessary to make the 

 following schedules: 1 



Seed cotton on hand — unginned List showing quantity, kind, grade, and 



price. 

 Cotton seed on hand List showing quantity, kind, condition, 



and price. 

 Cotton on hand — ginned List showing quantity, class, grade, and 



price. 



Bagging on hand List showing quantity and cost. 



Ties on hand List showing quantity and price. 



Accrued interest on notes receivable 2 ... List by name of drawer, date, time to run, 



interest rate, and amount of note. (See 



discussion, p. 21). 

 Insurance premiums unexpired at the List by policy number, date, property 

 end of the period. covered, time, and amount of premium 



unexpired. 

 Unused stationery and printing List by quantity, kind, and value. (See 



account No. 01). 



Accrued salaries and wages List by name, time, and wage rate. 



Accrued rent and taxes List by name, time, and rate. 



Accrued interest on notes payable 2 List by name of payee, date, time to run, 



interest rate, amount of note. 



1 These schedules are called "inventories." 



2 In some cases there may be some notes receivable on hand, or notes pa3-ab!e outstanding. It is (hen 

 necessary to compute the accrued interest on each class, and open two new accounts, captioned, res 

 tively, "Accrued interest on notes receivable" and "Interest accrued on notes payable." The following 

 journal entries would then be made: 



000 Interest accrued on notes receivable. 



Sundry income 000 



To set up as income and asset the earning of interest not yet received in ca . 

 000 Miscellaneous expense. 



Accrued interest on notes payable 000 



To place on the books the expense for interest, not yet paid. 



