14. BULLETIN. 865, U. S. DEPARTMENT OF AGRICULEURE. 
If the estimated amount was $1,410 and the actual amount was $1,350 the entry at 
the time of payment would be: 
DEBIT. CREDIT. 
$1, 410 Account Payable patrons. 
Surplus Adjustment account. ........-- $60. - 
Baark” ACCOM ot = con eee ee 300 
In both the above cases the Accounts Payable Patrons: account would be closed. 
The Surplus Adjustment account should be closed into: Surplus aceount as described 
on page 22. 
Notes: RECEIVABLE DiscouNTED (Tf 4), 
DEBIT: ’ CREDIT: 
1. With the face value of notes: dis- 1. With the face value of all notes 
counted whem settled for either by | receivable discounted as shown by 
maker of through payment by the: the Balance Sheet at the time of 
organization to the bank. opening the beoks. 
2.. With: the face value of all motes 
subsequently discounted. 
By referring to the explanation under Notes Receivable, it will be noted that men- 
tion was made of notes receivable discounted, the proceeds of which were debited to 
the Bank Account, thus raising a liabhity. Jn case a note that has been discounted 
is not paid.at maturity, the organization will be obliged to make payment to the bank 
for the face value of this note, in which case the following entry will be made: 
DEsrr. CREDIT. 
$109: Notes Receivable. Discounted. 
Bank Accountity= 2 et ee ee _ $106: 
(For note of James: Benton not settled for by 
him at maturity.) 
In case the note was met at maturity, the following entry would be made: 
Dzprr. CREDIT. 
$100: Notes Receivable Discounted. 
INetes Receivable. (cic... 02k cee oe OOO 
(For note of James Benton settled for by 
him at maturity.) 
In both the above cases the liability to the bank*was liquidated-—first, by payment 
of the obligation by the organization, and second, by the maker. Therefore, Notes 
Receivable Discounted should be debited im either ease. In the first instamce, how- 
ever, the concern still owns the note-agaimst James Benton which is an: asset for future 
disposal, while in the second instance the note will be canceled and returned to the 
mailer. 
When, notes are discounted, the amount of the discount is to be considered as an: 
expense and charged to an account called Interest. Expense.. 
Desir. CREDIT. 
$490 Bank Account. 
10 Interest. 
Notes Receivable Discounted............ $500 
(For notes discounted at: bank with 10 per cent diseount.) 
