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Author:
Sargent, Aaron
Title :
The theory and practice of
book-keeping combined
Place:
Boston
Date:
1862
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Sargent, Aaron.
The theory and practice of book-keeping combined. By
Aaron Sargent. Boston, Swan, Brewer & Tileston, 1862.
44 p. incl. forms. 23 x 18*".
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THE
THEQllY AND TRiCTI
OF
BOOK-KEEPING
COMBINED.
BY
AARON S A R G E ]Sr T.
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THE
THEORY AND PRACTICE
OF
BOOK-KEEPING
COMBINED.
BY
AAROI^ SARaEI^T.
BOSTON:
SW^N, BRET\^EIl & TILESTON".
1862.
n
y<'^-^^JLAJUA^
)
PREFACE.
Entered, according to Act of Congress, in the year 1861,
By AARON SARGENT,
In the Clerk's Office of the District Court of the District of Massachusetts.
li
ELECTROTYPED AT THE
BOSTON STEREOTYPE FOUNDRY.
OOK-KEEPING should be taught, theoretically, in all our High and Grammar
Schools, though it may require actual business practice and experience to make
[a proficient book-keeper.
In the following treatise, it has been the aim to present the subject in so plain
and simple a form, that when the learner shall have occasion, he will be able to
carry the theory into practice, and, with experience, become a master of his
'profession.
The Examples for Illustration, with the pages preceding them, are intended as
rules by which to acquire a knowledge of the study ; and the Examples for Practice
are intended as problems to be solved, the answers being given in the aggregates
of each Trial Balance, and finally in the net gain and net capital at the time of
closing the Ledger.
* \'
BOOK-KEEPING
CONTENTS.
I ■»■ I
PREFACE, ....
PURPOSE OF BOOK-KEEPING,
BOOKS USED IN BOOK-KEEPING,
ACCOUNT?,
EXAMPLES FOR ILLUSTRATION,
Original Entries,
Posting,
Closing Accounts,
Trial Balance,
Closing the Ledger,
Re-opening of the Ledger, .
Waste Book,
Form of Note Book, .
Cash Book, . . . ,
Index to Ledger,
Ledgsr, • . . ,
MERCANTILE FORMS,
EXAMPLES FOR PRACTICE, .
QUESTIONS, ....
Page
3
ITS PURPOSE.
5
5
6
6
. 10
10
11 and 37
11
. 12
. 13 to 16
. 17
. 18 to 25
. 26
. 27 to 36
. 38
41
. 44
(4)
BOOK-KEEPING is the recording, in blank
books made for the purpose, the every-day
business transactions of the Merchant, Manufac-
turer, or Trader, clearly, concisely, and in so per-
fect a manner, that he can at any time know how
much property he has, and of what it consists ; how
much he owes, and to whom, and how much others
owe to him, and who they are ; and whether he
is doing business at a profit or a loss, and how much
profit or loss.
BOOKS.
The principal books used in Book-Keeping are
the Cash Book, Waste or Day Book, and
Ledger.
The Cash Book contains the original entries
(i. e., the first records or entries) of the transactions
in which cash forms a part ; in other words, an ac-
count of all cash received and all cash paid.
The Waste Book contains the original entries
of the transactions in which cash forms no part.
The Ledger contains all the items of the books
of original entries, transferred therefrom, and ar-
ranged, each under its distinctive head or title, as
will be explained. The process of transferring is
called Posting.
Other books, auxiliary to those already named.
are the Inventory Book, Note Book, Invoice
Book, Sales Book, &c., according to the nature
of the business, and as may be found convenient.
Sometimes one or more of these books are used as
books of original entries, and the posting to the
Ledger is made from these lw)oks ; and when so
used, the transactions recorded in such of them as
are so used, must not be recorded in any other book
of original entries.
In order that any account in the Ledger may be
readily found, a small book, called the Index, ac-
companies the Ledger, in which the titles of all the
Ledger accounts are alphabetically arranged ; one
or more pages being appropriated to each letter of
the alphabet.
ACCOUNTS.
Accounts represent property, indebtedness by
or to those with whom business is transacted, and
gain and loss by trade ; and are designated by the
titles of Stock,* for the capital employed in busi-
♦ Note. — When there are two or more persons in a firm, the
individual names of its members are used in lieu of the word
Stocky and each is debited or credited in his own name.
ness ; Cash, for money in bank, or in store or
counting room; Merchandise, for general arti-
cles of trade ; Shipment, or Adventure, (naming
the vessel by which, or the port to which, shipped ;
and if more than one shipment by the same vessel
or to the same place, may be numbered,) for goods
shipped to other ports to be sold for account of the
(5)
BOOK-KEEPING.
shipper ; Consignment from, (naming the person
or firm from whom received ; and if more than one
consignment from the same person or firm, may be
numbered,) for goods received from others to be
sold for their account ; Notes Receivable, for all
notes made and payable by and received /rom oth-
ers, and also for all drafts drawn »hich « ,s given, unless the contra.7 is expressed
upon ,ts face ; therefore this note, dated Dec. 5, 1859
would be payable June 8, 1860 ; usually expressed
t"!^ r /'''^ '"'' ""'"• •''^''»'=''"g »»•« interest
for the time from Feb. 27 to June 8, the Bank paid
the balance m cash. Cash (for the amount received
from the Bank) and Interest (for the amount of
mterest or discount deducted by the Bank) are the
Drs., and Notes Receivable is Cr. Two entries
(one m the Waste Book and one in the Cash Book)
are to be made for this discounted note, and mu/t
be as on pages 14 and 18.
On th 20th April, 50 bbls. Molasses, gauging
1870 gaUons, were sold to George T. Knappfof
Portland, on account, at 30 cents per gallon : and
on the 27th, 50 bbls. Flour were sold^to him 1
account, at $8i per bbl. The entries must be as
on page 14. "^
T ^Vt ^l* ^^"^' ^"^ ^^^'- ^^'o" ''^e sold to
Joseph Marshall, at $8J per bbl., cash. Entry on
page 20. ^
BOOK-KEEPING.
9
Joseph Marshall, at $8^ per bbl., payable in 6
months, and his note for the amount was received
in payment. The entry must be as on page 14.
On the 3d March, paid premium of insurance on
the Pork from Boston to San Francisco, (insured
by the Frankhn Insurance Co. for Si 600, at 3
per cent., with $1 for policy;) on the 5th, paid
trackage on the s.nme, $4; and on the 7th, paid
wharfage, $4. The entries must be as on pa^e
On the 17th March, paid note to John Wheeler,
for $1000, due Mareh »/„. The entiy must be
as on page 21.
On the 1st May, drew a draft on George T
Kuapp for amount of bill against him, ($975,) a
five days' sight, (i. e., eight days after it was pre-
sented to and accepted by him, he would be required
o pay It,) and sent it to him for acceptance. On
the od, received the draft back, he having accepted
It, by writing across its face,
after which it must be called an Acceptance. Entry
on page 15. •'
On the 20th March, bought of G. O. Clark 500
bbls. Rosin, at $1 J per bbl., cash, and shipped it by
sh,p Commodore, bound for Liverpool, consigned to
John Howard, with orders to seU, and remit the
proceeds. The entry must be as on page 21
On the 9th May. sent the acceptance of Geo.^
r. Knapp (which would be due May 7,„) To
Portland for collection ; on the lOtl^he paid it, and
on the 11th the money was received. Entry on
page 22. •'
. °"i?^2/**%'P^d note to Charles Crosby,
for $12o0, due May V^ Entiy on page 23.
On the 29th May, received from John Howard
account sales of the Kosin which was consigned to
^im by the ship Commodore, and also a Bill of
Exchange (draft) on London (i. e., on some bank-
ing house in London) for the net proceeds, amount-
mg to £210 stg., (210 pounds steriing.) This BUI
of Exchange was sold to C. F. Hall, at 9 per cent
Tr^T: ?^^ """"'"^ P"^"- ^«'»« of the £ stg. is"
« 4.44J.) Entry on page 22.
On the 1st June, received by ship Monmouth,
from New Orleans, 25 hhds. Sugar; a consignment
from John Babcock, of New Orleans, and paid to the
ship freight, at $ 4 per hhd. On the 2d, paid truck-
age, $5 ; and on the 4:th, wharfage, $5. Entries on
page 23.
On the 4th June, sold the Sugar which was re-
ceived from John Babcock, and which weighed
41,237 lbs., to John G. Emerson, at 6 cents per lb.,
cash. Charged the consignment a commission of
2^ per cent, on the amount of the sale. Sent account
sales to J. B., requesting him to draw (his draft)
for the net proceeds — $ 2302.37 — (i. e., for the
amount received for the Sugar, less the freight,
truckage, wharfage, and commission.) Entries on
pages 15 and 22.
On the 12th June, bought 10 shares Western
Railroad Stock, at $100 per share, cash. Entry on
page 23.
On the 15th June, bought of G. O. Clark, 400
bbls. Rosin, at $1^ per bbl., cash, and shipped it by
ship Sea Flower, bound for Liverpool, consigned to
John Howard, with orders to sell, and remit the
proceeds. Entry on page 25.
On the 18th June, bought of George Lincoln the
schr. Union, for $ 3000, and paid for her, one half
in cash, and one half by note at 4 months. En-
tries on pages 15 and 25.
On the 20th June, received from Henry Howe
account sales of the Gunny Bags and the Pork,
consigned to him. The net proceeds, as appears
by the account sales, amount to $1690 on the
Gunny Bags, and $1495.25 on the Pork. Also
received from him, on account of the proceeds of
said Gunny Bags and Pork, a draft on C. F. Hall
for $ 2000, (which amount has been received from
C. F. H.,) for which draft H. H. paid in San Fran-
cisco, in addition to the $2000, «Kchange at 3 per
cent, on the same, or $60, and for which, as well
as the $2000, he must be credited.
In the example on page 8, of net proceeds of the
Rosin, there was no necessity of debiting the con-
2
signee (or seller of the goods) with the amount of
the net proceeds, and then crediting him with the
cash, because the remittance was in full for the net
proceeds, and crediting the Adventure by debit-
ing Cash was all that was necessary ; but in the
above example, only a part of the proceeds of two
adventures has been received, the balance remain-
ing due from the consignee ; and as it is also un-
certain how much of the remittance belongs to each
adventure, it will be necessary to debit Henry
Howe with the amount of net proceeds of the Ad-
ventures, and credit him with Cash as received,
and Exchange, until they shall equal in amount
the net proceeds. Entries on pages 15, 16,
and 24.
On the 25th June, paid John Babcock's draft,
payable at sight, for $ 2302.37, being for amount of
net proceeds of Sugar, as per account sales sent
him on the 4th inst. Entry on page 25.
On the 30th June, received from Henry Howe,
in full for balance due for net proceeds of the
Gunny Bags and Pork, a draft on C. F. Hall for
$1092.47, (which amount has been received from
C. F. H.,) for which draft H. H. paid 3 per cent,
exchange, or $32.78. Entries on pages 16 and
24.
Exchange account having been debited with the
exchange paid in San Francisco on the proceeds
of the two Adventures, it will, be necessary to debit
the Adventures and credit Exchange account with
this exchange, in proportion to the amount of the
net proceeds of each adventure. The exchange
was paid on the amount remitted, and the net pro-
ceeds in San Francisco, therefore, would be 103
per cent. \%% of the net proceeds of each adven-
ture would be the remittance, and the remaining
t8^3 would be the exchange oif the remittance.
Entry on page 16.
On the 30th June, paid rent of Store, $400;
Postage bill, $1.70 ; Stationery, $ 15.20. Entries
on page 25.
10
BOOK-KEEPING.
POSTING.
Il
The foregoing make a connected series of busi-
ness transactions, extending over a space of six
months. It is customary, in actual business, to
post to the Ledger each day, week, or month, as
convenience or necessity may require ; but it was
thought best, in the preceding examples, to explain
the manner of making original entries in some of
the more important forms of busmess transactions
before treating of the Ledger.
We will now proceed with the Posting ; i. e., the
collecting in the Ledger, from the books of original
entries, all the items of the several accounts, each
account on a separate page of the Ledger, or part
of a page, as it may be judged will be required,
commencing with the first entry in the Waste Book,
and posting, by the month, the entries in the Waste
Book and Cash Book. The first account is Stock,
which is opened by writing at the head of the first
page in the Ledger the word Stock, with Dr. at its
left and Or. at its right, in letters much larger than
ordinary handwritmg. The first space from the
left below the heading (on either the Dr. or
Cr. side of the Ledger page) is for the date, the
second space from the left for the title of the ac-
count to which the account named at the head of
the page is Dr. or by which it is Cr., the third space
for the folio of the book from which the account is
posted, and the fourth and fifth spaces for the
amount in dollars and cents for which the account
is to be debited or credited.
Sundries Dr. to Stock. Stock, then, is Cr.
^ S by I <^un^t^\ as may be seen by refer-
ring to foHo |/| of the Waste Book, for \\^000\oo\,
and in form wiU stand in the Ledger as posted on
page 27. »
The item having been' posted, the next thing to
be done (m order to know at any subsequent time
that the item has been posted, and also to know the
page of the Ledger to which it has been posted) is
to place the post-mark (a figure denoting the Led-
ger folio) in the second space from the left, in the
book from which it has been posted, and on a line
with the title of the account in the third space; and,
finally, in the Index, under the letter S, write the
title of the Ledger account, and at its right the
folio of the Ledger upon which the account may be
found.
Posting an account, then, consists in its complete-
ness of entering in the Ledger, placing the post-
mark and (unless it has been done at some previ-
ous posting to the same account) the indexing.
The Cr. side of the entry having been posted,
the Dr. side must next be taken. The Drs. are
Merchandise and Notes Receivable. Merchandise '
is Dr. to Stock $6500, and Mtes Receivable is Dr.
to Stock $2500, and they will stand as posted on
pages 27 and 28.
The otlier Waste Book entries for the month of
January, in their order, are posted m the same
manner ; after which the Cash Book entries for the
month may be posted, commencing with Gash Dr.
to Stock. Stock is Cr. by Cash $5000, as posted
on page 27.
No Cash account is opened in the Ledger, as it
would only be a repetition of the Cash Book, which
of itself is a Cash account, and therefore only one
posting need be made to the Cash Book entries,
though there is no objection to opening a Cash ac-
count in the Ledger if it should be preferred.
The other Cash Book entries for the month of
January being posted in their order and to their
several accounts, the posting of the Waste Book
and Cash Book entries for the succeeding months,
month by month, follow.
BOOK-KEEPING,
11
CLOSING ACCOUNTS.
Whenever any Ledger account balances, i. e.,
when the Dr. ^d Cr. sides are equal in amount,
close the account by drawing single lines under the
money spaces, adding the amounts above, and pla-
cing the sum under the line, and then finish by
drawing double lines under the sum, and a single
Ime at their left, about one fourth across the title
of account space, commencing at the left.- An ac-
count balancing itself, and closed, will stand as on
page 29, first account.
Sometimes an account may be closed, which in
itself does not balance. An Adventure account, for
instance, if the proceeds have been received, may
be made to balance by debiting it to, or crediting
I it by, (as the case may be,) Projit ^ Loss for the
amount of the gain or loss, as on page 31, first
account ; by which it will be seen that the amount
received for the Rosin was $1017.33, and that the
cost was $750. The difference, ($267.33,) which
is to the credit of the Adventure, is the gain on the
Rosin. Now, if the account has been credited with
$267.33 more than it has been debited, it must be
balanced or closed by debiting it with this amount,
and if the account is debited, some account must be
credited. As this balance of $267.33 is the gain
on the Adventure, therefore Profit & Loss account
must be credited.
TRIAL BALANCE.
At the close of each month, after all the original
entries have been posted, it is customary to take a
Trial Balance of the Ledger ; i. e., to take off* on
paper the balances of the several accounts, includ-
ing the balance from the Cash Book, to see if the
posting has been done without error, by making the
sum of the balances of the Drs. and of the Crs.
equal in amount, as on page 37.
CLOSING THE LEDGER.
In actual business, it is the practice to take an
account of the stock in trade on hand, and close
the Ledger, once a year ; but it will answer every
purpose to close the foregoing at the termination of
the six months.
The object of closing the Ledger is lo ascertain
the amount of gain or loss since the opening of the
books, or since the last closure, and, consequently,
to ascertain the amount of net capital- at the time
of closing.
All the Ledger accounts except Stock, Profit &
Loss, and Balance, are closed by their several bal-
ances being transferred either to Profit & Loss,
to Balance, or in part to each of these two ac-
counts. Accounts representing property, and indebt-
edness by or to others, must always be closed with
Balance for the amount of the property or indebt-
edness ; and those representing gain or loss may
always be closed with Profit & Loss for the
amount of the gain or loss. Profit & Loss and
Balance accounts are closed by their balances being
transferred to Stock ; and these last two transfers
will of necessity close Stock account, and leave the
Ledger closed. The balance transferred from Profit
& Loss to Stock will show the net gain or loss,
(as on page 32,) and the balance transferred from
Balance to Stock will show the net capital (as on
page 36) at the time of closing.
The accounts may be taken in their order, com-
mencing with Merchandise. The Dr. side of the
account shows the cost, and the Cr. side the amount
of the sales. If aU the merchandise has been sold,
the account may be closed with Profit & Loss
alone, and the Trial Balance will show for what
amount ; hut if any part remains unsold, the ac-
count must be credited by Balance for the value of
the portion unsold, and then closed with Profit &
Loss. The Trial Balance for June shows a Cr.
balance of $743.75 ; but by taking account of stock,
it will be found that 50 bbls. Flour (say worth $8
per bbl.) remain unsold. Merchandise account,
then, must be credited by Balance $400, and Bal-
ance account must be debited to Merchandise $400.
The Cr. balance of Merchandise is now $1143.75,
and the account may be closed by debiting it to
Profit & Loss, and creditmg Profit & Loss by Mer-
chandise.
Notes Receivable. The balance, if any, must
be on the Dr. side, and for the amount of the notes
on hand ; consequently the account must be closed
with Balance, and the Trial Balance will show for
what amount.
12
BOOK-KEEPING.
Notes Payable. Th6 balance, if any, must
be on the Cr. side, and for the amount of the notes
outstanding; consequently the account must be
closed with Balance.
O. S. LiTTLEFiELD. The account, having pre-
viously balanced itself, has already been closed.
Adventures per Staghound, Nos. 1 and 2.
The proceeds having been received, these accounts
may be closed with Profit & Loss.
Interest. The Dr. side shows the amount paid,
and the Cr. side the amount received, and the bal-
ance the gain or loss ; consequently the account
may be closed with Profit & Loss.
Adventure per Commodore. The account
has already been closed.
George T. Knapp. Closed.
Consignment from John Babcock. Closed.
Commission. The Dr. side shows the amount
paid, and the Cr. side the amount received, and the
balance the gain or loss ; consequently the account
may be closed with Profit & Loss.
ScHR. Union. As she is still on hand, the ac-
count must be closed with Balance.
Henry Howe. Closed.
Exchange. Closed.
Western Railroad Stock. All the shares
which were bought are still on hand, and the account
must be closed with Balance.
Adventure per Sea Flower. As the pro-
ceeds have not been received, the account must be
closed with Balance.
Expense. The Dr. side shows the amount paid,
and the Cr. side the amount received, and the bal-
ance the gain or loss ; consequently the account may
be closed with Profit & Loss.
Profit & Loss. After the closures and
transfers as above, the Cr. side wiU show the whole
amount of the several gains, and the Dr. side the
whole amount of the several losses ; and the bal-
ance the net gain or loss. The account may be
closed with Stock.
Balance. After the closures and transfers as
above, and including the balance from the Cash
Book, the Cr. side will show the whole amount of
debts or liabilities, and the Dr. side the whole amount
of assets or property, and the balance the net capitaL
The account must be closed with Stock.
Stock. The balances having been transferred
from Profit & Loss and Balance, the account will
be found to be closed.
The balance from Profit & Loss shows the net
gain to be ^1246, and the balance from Balance
shows the net capital to be $14,246.
RE-OPENING OF THE LEDGER.
If it is not intended to continue business, the
Ledger will remain closed ; but if business is to be
continued, the balances of all those accounts that
were closed with Balance, includmg Stock, must be
opened by bringing down the balances with which
the accounts were closed, on the opposite side, of
course, from which the balance was used in closing
the account, and the Ledger will then be ready for
future postings.
WASTE BOOK.
13
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MERCANTILE FORMS.
MERCANTILE FORMS.
NOTE.
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BOOK-KEEPING.
account of
.. ^
eot/jo ^' Q^i nah/i,
^ti^eotai
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'Mi/tanc/, G>/lc
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