CLASSIFICATION OF LEDGER ACCOUNTS FOR CREAMERIES. 



17 



The following Journal entry will illustrate this procedure: 



Debit. Credit. 



$8.50 John Jones. 



Merchandise Sales $8. 50 . 



(For sale of merchandise to John Jones, employee.) 



John Jones would then receive his entire wages and would settle for his account by 

 the following: transactions: 



Credit. 



Debit. 



$8.50 Cash. 



John Jones $3. 50 



(For payment of John Jones' account.) 



Taxes Accrued (G 3). 



Debit: 



Credit: 



1. With the amount actually paid for 



1. With the amount of accrued taxes 



taxes. 



as shown by the Balance Sheet 





at the time of opening the books. 





2. At the close of the period with its 





proportion of estimated annual 





taxes. 



At the beginning of the fiscal year an estimate of the taxes which will become due 

 during the succeeding 12 months should be made. The amount of this estimate, if 

 given careful consideration, can be made to approximate very closely the taxes which 

 are actually assessed. Normally, this amount will show a credit balance which repre- 

 sents the liability for taxes accrued but not due. However, when the tax payment 

 is made during the fiscal year there will be a debit balance. This will be gradually 

 adjusted as the periodical entries are made. Any balance on this account after the 

 yearly taxes have been paid should be transferred at the end of the fiscal year to the 

 Taxes account. 



H. RESERVES. 



Reserve for Doubtful Accounts (H 1). 



Debit: 



Credit: 



1. With all accounts charged off as 



1. With the amount reserved to cover 



uncollectible. 



doubtful accounts as shown by the 





Balance Sheet at the time of open- 





ing the books. 





2. At the close of each period with its 





proportion of estimated annual 





loss due to bad accounts. 



Any collections received on an account that has been previously charged off 

 should be credited to this account. This periodical charge should be based on the 

 amount of annual sales and previous losses from this source. 

 180208°— 20— Bull. 865 3 



