Fig. 18 c. Stock Ledger Card and Indexes
DEMONSTRATION OF PROOF WITHOUT A TRIAL BALANCE
19. Taking the accounts in the following trial balance, a model ledger is illustrated which demonstrates the manner of proving the ledger without the aid of the conventional trial balance. It is assumed, of course, that a book inventory or stock ledger is kept, and in this demonstration the figures showing the change in inventory are used. Only the ledger is illustrated, it being expected that the student will understand the necessary journal adjusting entries.
| TRIAL BALANCE | ||
|---|---|---|
| Cash in Office | $575.00 | |
| Bank | 8,750.00 | |
| Accounts Receivable | 8,871.00 | |
| Bills Receivable | 5,000.00 | |
| Inventory (Jan. 1) | 12,500.00 | |
| Furniture and Fixtures | 2,250.00 | |
| Bills Payable | $4,000.00 | |
| Accounts Payable | 3,325.00 | |
| Capital Stock | $25,000.00 | |
| Purchases | $6,750.00 | |
| Sales | 15,000.00 | |
| Advertising | 960.00 | |
| Salesmen's Salaries | 450.00 | |
| Traveling Expense | 190.00 | |
| Office Expense | 46.50 | |
| Office Salaries | 225.00 | |
| General Expense | 34.20 | |
| Rent | 175.00 | |
| Taxes and Insurance | 21.30 | |
| Discounts Allowed | 47.90 | |
| Interest Paid | 33.10 | |
| Interest and Discount Earned | 54.00 | |
| Administrative Salaries | 500.00 | |
On Feb. 1st the inventory shows a decrease of $3,500.00. A reserve of 3% on accounts receivable is to be created to provide for uncollectible accounts. To make these adjustments the following journal entries will be required:
| Trading a/c | 3,500.00 | |
| To Inventory | 3,500.00 | |
| Decrease in Inventory |
A study of this entry will show that the result is the same if we make up the trading account by using purchases and adding or subtracting the decrease or increase in inventory, or if the preceding inventory is added and present inventory is deducted. The result in either case is the turnover and the above entry makes the necessary adjustment in the inventory account without closing the account through the trading account.
The entry for the reserve for uncollectible accounts is
| Profit and Loss | 266.13 | |
| To Reserves | 266.13 | |
| Reserve of 3% to provide | ||
| for uncollectible accounts. |