£ 
A SYSTEM OF ACCOUNTING FOR COTTON GINNERIES. 39D 
\ 
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 i in these items from the ledger accounts (accounts N1 to O6, 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, de will give the cost of ginning purchased seed cotton. Illus- 
tration: 
Total number bales eee EE SOM RC Mpa AUN SPL aN Peta Wy et, WE ae a Op en 1, 000 
Total number bales einned (seedicottom purchased) ic 83.5 we ls ul ay 150 
Ler OUDL Gite TN Ofte 5-8) O Obst ae a ae aa eat Meee ly ess a aa MN eee lei $2, 950. 00 
Total ginning cost per bale (B29 OTE OOO VRE OT AGL ha DU ed $2. 95 
Cost ginning seed cotton purchased ($2. G5 SO UNAM mee mc ae Aes $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: 
1. With the value of sittonsedd on 
hand at the beginning of the fiscal 
period. (Credit Inventory, ac- 
count No. A5.) 
2. 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 (P32). 
Debit: 
1. With the value of cotton on hand at 
the beginning of the fiscal period. 
ane Inventory, account No. 
5 
2. With the cost of any cotton pur- 
chased. 
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: 
1. With the value of bagging and ties 
on hand at the beginning of the 
fiscal period. (Credit Inventory, 
account No. A5.) 
2. With all purchases of bagging and 
ties, including freight and dray- 
age on same. 
. 
Credit: 
1. With the value of the bagging and 
ties 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.) 
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, 
