Accounting theory and practice, Volume 1 (of 3)

by Roy B. Kester

• Cash sales $10,000.
• Sales on account:
• Davis $300;
• Elliot $400;
• Foley $500;
• Gaynor $600;
• Harvey $700.
• Purchases were:
• Cash $3,500;
• Jackson & Co. $500;
• Kelsey $450;
• Landon $750;
• Morey & Co. $1,000.

Cornell returned goods to Morey & Co. $50, and received an allowance from Kelsey $20.

He made Harvey a rebate of $25.

• He received cash on account from Davis $250;
• Elliot $300;
• Foley $400;
• and notes from Gaynor $250 and Harvey $500.
• He paid on account cash to Morey & Co. $500;
• Jackson & Co. $600;
• Kelsey $675.
• He gave his note for $1,000 to Landon.
• He paid off the mortgage with interest $530.
• Expenses paid were:
• Clerks $750;
• cashier, stenographer, etc., $250;
• N. Y. C. Ry. for freight $250;
• horse feed and expense of driver $125;
• newspaper and street-car advertising $300.

Cornell drew $2,000, and made an additional investment of a safe valued at $250.

At the close of the year inventories and appraisals of data not on the ledger were as follows:

• Store building and lot $2,970.
• Furniture and fixtures $725.
• Horse and wagon $235.
• Merchandise $3,000.
• Notes receivable $750, with accrued interest $2.50.
• Notes payable $1,000, with accrued interest $15.
• Accrued salaries and expenses $25.

It was decided to value the accounts receivable at face value less 2%.

Journal
19—			L.F.	Items	Dr.	Cr.
June 30	A. B. Cornell commenced business, purchasing the store and stock of the ........ Company, taking over all its assets and assuming all its liabilities and obligations. He deposited $500 as a working fund for the business. The following shows his investment assets and obligations:
	Assets
	Store Bldg. and Lot	3,000.00
	Furniture and Fixtures	500.00
	Horse and Wagon	250.00
	Merchandise	5,250.00
	Accounts Receivable:
	B.C. Davis Dr.  50.00		5		50.00
	C.D. Elliot Dr.  75.00		5		75.00
	D.E. Foley Dr. 100.00		5		100.00
	E.F. Gaynor Dr.  25.00		5		25.00
	F.G. Harvey Dr. 125.00	375.00	5		125.00
	Cash	500.00
	Total Assets			9,875.00
	Liabilities
	Mortgage on Real Estate	500.00
	Accounts Payable:
	G. H. Jackson & Co. Cr. 250.00		5			250.00
	H.J. Kelsey Cr. 375.00		5			375.00
	J. K. Landon Co.  Cr. 500.00	1,125.00	5			500.00
	Total Liabilities			1,625.00
	A. B. Cornell, Capital	Cr.	6	8,250.00		8,250.00
Dec. 31	Morey & Co.	Dr.	5		50.00
	Returned goods as unsatisfactory.
	H. J. Kelsey	Dr.	5		20.00
	Allowance a/c inferior goods.
	F. G. Harvey	Cr.	5			25.00
	Rebate a/c dissatisfaction.
	E. F. Gaynor	Cr.	5			250.00
	Note at 3 mo. 6% on a/c.
	F. G. Harvey	Cr.	5			500.00
	Note at 60 da., no interest on a/c.
	J. K. Landon Co.	Dr.	5		1,000.00
	Note at 6 mo. 6% on a/c.
	A. B. Cornell, Capital	Cr.	6			250.00
	Made additional investment of office safe.
					1,445.00	10,400.00

Journal
19—					L.F.	Items	Dr.	Cr.
Dec. 31	Financial Statement
	Assets
	Store Bldg. and Lot			2,970.00
	Furniture and Fixtures			725.00
	Horse and Wagon			235.00
	Merchandise			3,000.00
	Accounts Receivable:
	B.C. Davis	100.00
	C.D. Elliot	175.00
	D.E. Foley	200.00
	E.F. Gaynor	375.00
	F.G. Harvey	300.00	1,150.00
	Less—Bad Debts est.		23.00	1,127.00
	Notes Receivable			750.00
	Accrued Interest on above			2.50
	Cash			1,970.00
	Total Assets					10,779.50
	Liabilities
	Notes Payable			1,000.00
	Accrued Interest on above			15.00
	Accounts Payable:
	G. H. Jackson & Co.		150.00
	H. J. Kelsey		130.00
	J. K. Landon Co.		250.00
	Morey & Co.		450.00	980.00
	Accrued Salaries and Expenses			25.00
	Total Liabilities					2,020.00
	Net Worth					8,759.50
	A.B. Cornell, Capital, 6/30			8,250.00
	Additional Investment			250.00
				8,500.00
	Drawings			2,000.00
				6,500.00
	Net profit this period			2,259.50		8,759.50
	A.B. Cornell, Personal			Cr.	6			2,259.50
	To carry the net profit to Cornell’s Personal account.
	A.B. Cornell, Personal			Dr.	6		259.50
	A.B. Cornell, Capital			Cr.	6			259.50
	To transfer the balance of profit left in
	the business to Cornell’s Capital account.
	Totals						259.50	2,519.00