A SYSTEM OF ACCOUNTING FOE, COTTON GINNERIES. 37 



Great care must be exercised in inventorying these items as the 

 value of the income and expense statement and the balance sheet 

 depends upon the accuracy of the inventories. This work should 

 always be conducted, or at least directly supervised, by a competent 

 committee of the board of directors if the business is incorporated. 



When the above schedules have been completed, extensions made 

 and verified, the following journal entries should be made. The 

 figures in the schedules will be those used for the entries. 



(i) 

 Debit. Credit. 



000 Inventory. 



Seed-cotton purchases 000 



Cottonseed purchases 000 



Cotton purchases 000 



Bagging and ties purchases 000 



To place the inventories on the books as an asset. 



(2) 

 Debit. Credit. 



000 Insurance. 



Prepaid insurance 000 



To enter in the expense account the amount of insurance premiums expired during 

 the year, and reduce the asset of prepaid insurance to the amount of premiums yet 

 to be exhausted. 



(3) 

 000 Rent. 

 000 Taxes. 



Accrued rent and taxes 000 



To set up as expense the portion of these items which apply to the period, and are 

 still unpaid. 



( 4 ) 

 000 Depreciation. 



Reserve for depreciation, Buildings 000 



Machinery and equipment. . . 000 

 Office furniture and equip- 

 ment 000 



To set up the expense for depreciation, and created reserve. 



(5) 

 000 Loss from bad accounts. 



Reserve for doubtful accounts. 000 



To set up as expense the estimated loss from bad accounts for the current period, 

 and to create a reserve. 



(6) 

 000 Custom ginning income. 

 000 Cottonseed sales. 

 000 Cotton sales. 

 000 Bagging and ties sales. 

 000 Cash discount on purchases. 



Loss and gain 000 



To close the income accounts and transfer gross gains to Loss and gain account.. 



