15. A form much used by accountants combines the trial balance with the balance sheet, trading and profit and loss statements. The compilation of the information required for this form is greatly facilitated by a proper classification of accounts in the ledger. The form is known as a working balance sheet.
A working balance sheet is shown in Fig. 15 a. The figures used are taken from the last trial balance shown, and furnish a graphic illustration of the difference between proper and improper classification of accounts. It will be noticed that the first two columns constitute the trial balance. Following this are columns which classify the accounts under the headings of Trading, Profit and Loss, and Balance Sheet. The balance of each account is extended to its proper group.
At the bottom of the form, trading and net profits are extended as a memorandum only. Since no inventory has been taken these figures are not exact, but represent approximate results on the supposition that the inventory would be practically the same as when the last inventory was taken. Of course, if there was a noticeable change in the quantity of merchandise in stock, an estimate would be made and taken into consideration in making this statement of probable profits.
EXERCISE
From the following trial balance, prepare a working balance sheet showing actual gross and net profits.
| TRIAL BALANCE | ||
|---|---|---|
| Bank | $8,460.00 | |
| Capital Stock | $25,000.00 | |
| Sales | 11,201.00 | |
| Purchases | 10,000.00 | |
| Returns and Allowances | 400.00 | |
| Interest and Discount earned | 260.00 | |
| General Expense | 425.00 | |
| Salaries | 360.00 | |
| Rent | 300.00 | |
| Taxes and Insurance | 37.60 | |
| Selling Expense | 421.00 | |
| Inventory (Jan. 1st) | 8,864.00 | |
| Fixtures | 2,500.00 | |
| Accounts Receivable | 5,680.00 | |
| Accounts Payable | 1,274.00 | |
| Cash in Office | 287.40 | |
| 37,735.00 | 37,735.00 | |
| Inventory (Feb 1) | 9,650.00 | |
COMPARATIVE STATEMENTS
16. The trial balances shown in the preceding pages illustrate some of the advantages of properly classified accounts. The information gained can be made of still greater value by the construction of comparative statements; for, as has been stated, the chief value of many of the figures shown lies in the opportunity for comparisons. Statements which permit of comparison of items of a like nature from month to month furnish a valuable survey of the progress of the business.
The following is a trial balance taken from the books of a manufacturing business, and will be used as a basis for the construction of comparative statements.
| TRIAL BALANCE | ||
|---|---|---|
| Dr. | Cr. | |
| Cash in Office | $162.50 | |
| Bank | 8,500.00 | |
| Accounts Receivable | 7,500.00 | |
| Bills Receivable | 4,500.00 | |
| Inventory, Materials (Jan. 1) | 9,500.00 | |
| Inventory, Manufactured Goods | ||
| (Jan. 1) | 6,000.00 | |
| Real Estate | 20,000.00 | |
| Machinery and Tools | 17,500.00 | |
| Furniture and Fixtures | 3,500.00 | |
| Bills Payable | $7,000.00 | |
| Accounts Payable | 5,000.00 | |
| Capital Stock | 50,000.00 | |
| Surplus | 10,000.00 | |
| Undivided Profits | 900.00 | |
| Advertising | 1,200.00 | |
| Salesmen's Salaries | 1,000.00 | |
| Salesmen's Expenses | 720.00 | |
| General Expense | 430.00 | |
| Interest and Discount | 97.50 | |
| Salaries Administrative | 900.00 | |
| Factory Expense | 850.00 | |
| Factory Labor | 1,750.00 | |
| Repairs to Machinery | 150.00 | |
| Depreciation | 175.00 | |
| Taxes and Insurance | 25.00 | |
| Material Purchases | 4,600.00 | |
| In-Freight and Cartage | 126.00 | |
| Sales | 16,491.00 | |
| Returns and Allowances | 400.00 | |
| 89,488.50 | 89,488.50 | |