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34   BOOKKEEPING

 

(d) Trial Balance Out of Balance—Finding Errors.

  1. Test the addition of the Trial Balance by adding it both upward and downward.

  2. Next take the difference between the Dr. and Cr. columns of the Trial Balance, and look in the Journal for this amount unposted. Then divide the difference by 2 and look for this amount posted on the wrong side.

  3. Add the Ledger accounts again. Then see if the footings have been correctly transferred.

  4. See if previous Ledger balances have been brought down correctly.

  5. Go over the posting again, placing a lead pencil dot (.) or check mark (,/ ), in both Journal and Ledger, opposite the verified items. Then look for the unchecked items in the Ledger.

  6. Closing the Books.

This includes (1) taking a trial balance, (2) stock-taking, (3) making financial statements, and (4) closing the ledger. The books are closed annually or semi-annually for the purpose of determining the net gain or the net loss, the net capital, the percentage of gain, etc.

  1. Stock-taking.

This consists in making inventories or lists at the time of closing the books : (1) Of Merchandise, Real Estate, Office Furniture, etc., on hand, of Rent and Salaries prepaid by us, of Interest Receivable accrued, etc.; and (2) of Rent and Salaries due by us, of Interest Payable accrued, etc.

In the first class, the inventories are in our favour and are called Asset Inventories; in the second class, the inventories are debts against us and are called Liability Inventories. Any loss and gain account may, or may not, have an inventory ; asset and liability accounts do not have inventories. These lists are made on separate sheets called stock sheets, or in a regular Inventory Book.

49. Inventory—Illustration Set.

Copy the following into your Inventory Book, or on some special pages of your Journal DaN Book reserved for Inventories.

INVENTORY, March 30, 19-.

Asset Inventory.

Merchandise :

900 yds. Canadian Tweed -   $ .90

1000 " Scotch Tweed   -   -   1.25

4000 " F. Cotton   -   -   .03

  1. Financial Statements.

There are three general kinds of Financial Statements, namely, Statement of Losses and Gains, Statement of Assets and Liabilities, and Statement of Receipts and Disbursements. The last one is generally used only by non-trading corporations, such as towns, cities, churches, hospitals, etc., which do not exist for the purpose of making profits. So that the term Financial Statements will, throughout this book, mean Statement of Losses and Gains and Statement of Assets and Liabilities, together with a Summary of the Proprietor's Account.

After taking a trial balance and stock-taking, and before closing the ledger, make Financial Statements from the trial balance and inventories. The following form with two others on page 65 are the statements in general use; they differ only in arrangement. The first and second forms are generally used by corporations and companies in their annual statements, because they are easily understood; they may be seen frequently in the newspapers. The third form is sometimes called the bookkeepers' statement; it is very compact, but not simple enough for general use in business.

810 1250 120

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