The proper basis for distribution cannot be found, as in simple proportion, by an addition of the values in the departments. Before addition, the value in A must be weighted by 2, i.e., doubled. This gives a basis of $70,000 ($20,000 for A + $15,000 for B + $35,000 for C = $70,000). Of the $1,000 insurance cost, department A will have to bear ²⁰/₇₀; B ¹⁵/₇₀; and C ³⁵/₇₀. The charges will be therefore:

A, ²⁰/₇₀ of $1,000 or$ 285.71
B, ¹⁵/₇₀ ”1,000 ”214.29
C, ³⁵/₇₀ ”1,000 ”500.00
$1,000.00

Apportioning Freight Charges.—In-freight and cartage are treated as additions to the cost of goods bought; consequently, at inventory time it is necessary to add the correct amount of in-freight to the cost of goods on hand. However, it is seldom possible to apply the freight costs directly to each unit of product on hand and yet theoretically this should be done. Usually the ratio of freight costs to the total amount of purchases during a given period is taken as the basis for adding freight to the inventory. Thus, if that ratio has been 5% for the period, a commodity costing $100 would be valued at $105 for the inventory. Thus the freight expense is deferred.

This usually is deemed sufficiently accurate for most purposes. Where departmental records are kept, or where accurate factory costs are required, a closer apportioning is sometimes necessary. The freight classifications are such that the rates are not proportionate to the values of the goods; but other factors such as weight, kind of goods, method of crating, etc., all enter into the freight rate. Of these, the only factor which is easily obtainable is the weight. A distribution of freight on the basis of value and weight has been suggested—a weighted proportion method of apportionment. This, of course, requires an involved calculation which is usually “shied” at by bookkeepers and is not necessary except where very accurate and detailed costs are required.

CHAPTER LIII
SINGLE OR SIMPLE ENTRY

Different Systems of Bookkeeping.—Except in small enterprises, the only satisfactory system of bookkeeping is double entry. The system—or rather lack of system—known as single entry antedates double entry and is met today occasionally, particularly in small retail stores. It seems necessary, therefore, to give the student an explanation of its main features.

An early writer defines bookkeeping as “the art of recording mercantile transactions in a regular and systematic manner.“ In further elucidation he says: “A merchant’s books should contain every particular which relates to the affairs of the owner. They should exhibit the state of all the branches of his business; the connection of the various parts; the amount and success of the whole. They should be so full and so well arranged as to afford a ready information in every point for which they may be consulted.“ Single entry hardly measures up to these requirements, but there are places and circumstances where it gives results satisfactory enough. Bookkeeping has had a development contemporaneous with industrial life. Only simple records are needed so long as industries are simple, but with the increasing complexity of industrial enterprise, previous methods become inadequate.

Single Entry.—Single entry may be defined as that method of keeping records which sorts out and classifies debits and credits only as they apply to persons, the proprietor included, and usually also to cash. To justify the strict application of the term, a system must needs keep record of all transactions. Methods—not systems—of single-entry account-keeping are sometimes met with which do not make full record. The point of view of single entry is personal. All features of the business not connected with persons are looked upon as being under the direct hand of the owner and subject to his control. But uncompleted transactions with persons, whether customers or creditors, are not capable of such oversight without the aid of individual, classified records. The necessity of safeguarding the cash and keeping its flow under review makes the classified cash record an almost universal feature of single entry. As a usual thing, therefore, single entry is characterized by: (1) a record of all transactions; (2) a debit and credit analysis applied only to persons and to cash; and (3) a classified and grouped record, i.e., ledger record, only as to persons and cash. It does not analyze every transaction in its relation to the business as a whole. It has a single point of view, i.e., it considers only persons and cash and makes entries accordingly. Hence, its name.

Books Required and Methods of Record—The Journal.—In a single-entry system three books of account are necessary—the journal, the cash book, and the ledger. The cash book records all cash transactions, receipts and payments, classified as to persons but otherwise in narrative form. The journal records all other transactions following the same method. The ledger makes secondary record only under the heads of customers, creditors, and proprietor. The journal is the standard two-column journal, the first column being used as an “items“ column, and the second for totals. A three-column journal is advantageous, the first column being used for items and for all unposted amounts, the second for debit postings, and the third for credit postings. This aids in proving the ledger postings, as will later be seen. Transactions affecting persons are recorded under those persons’ names followed by “Dr.” or “Cr.,” according to the analysis of the transaction. This is necessary since position does not show it, the method of left and right position for debit and credit not being used in the single-entry journal. All other transactions are recorded in narrative form, merely a memorandum being made of them.

Cash Book.—The cash book is the same as for double entry, receipts on the left and disbursements on the right-hand page or column, according as a double- or single-page cash book is used. Where the double page is used, one of the two columns on either side is sometimes used for the exclusive extension of the amounts to be posted to personal accounts. This facilitates posting, since these are the only amounts which are to be transferred to the ledger.