Red ink for these lines.
All loss and gain accounts may or may not have Inventories, of which there are two kinds—Asset Inventories and Liability Inventories. An Asset Inventory is a value belonging to the business, not shown in the Trial Balance, such as, Mdse. on hand, Real Estate on hand, Rent or Salaries prepaid, Interest Receivable accrued (on Bills Receivable, etc., bearing interest), Discount Receivable (on Bills Payable, etc., not yet due). A Liability Inventory is a debt owing by the business, not shown in the Trial Balance, such as, Rent or Salaries due by the business, Interest Payable accrued (on Bills Payable, etc., bearing interest), Discount Payable (on Bills Receivable, etc., not yet due).
Asset Inventories are placed on the Cr. side in red ink ; and, after closing, are brought down in black ink on the Dr. side for the next month. Liability Inventories are placed on the Dr. side in red ink ; and, after closing, are brought down in black ink on the Cr. side for the next month.
These Inventories are placed on their wrong sides in red ink, to find the gain or the loss ; they are afterward brought down on their right sides in black ink, as assets or liabilities.
Financial Statements—Treatment of Inventories.
The Statements in Sections 93, 94 and 95 show how to treat the two kinds of Inventories. These statements are made from the following Trial Balance and Inventories, which have no connection with any of the given sets. The Pupil may select any one of the three forms, but should understand all ; the columnar statement—Form 3, is not much used in actual business.