Accounting theory and practice, Volume 1 (of 3)

by Roy B. Kester

In drawing up the profit and loss statement refer to the forms already shown. See Chapters [XXVI] and [XXVII]. The Miscellaneous Sales item should be added to the Net Sales short-extended and their total should be full-extended, from which should be deducted Cost of Goods Sold as usual.

After the item, “Net Profit for the period,” set up the appropriation section, showing the shares of each of the partners, somewhat as follows:

Net Profit for the period			$ . . . . . . . .
Add:
Interest charged to partners on overdrafts:
C. Allen Cotten		$ . . . . . . . .
Scott Wooster		. . . . . . . .
Landsdowne Woolsey		. . . . . . . .	. . . . . . . .
Amount to be distributed as:			$ . . . . . . . .
Salary:
C. Allen Cotten	$ . . . . . . . .
Scott Wooster	. . . . . . . .	$ . . . . . . . .
Interest on Capitals:
C. Allen Cotten	$ . . . . . . . .
Scott Wooster	. . . . . . . .
Landsdowne Woolsey	. . . . . . . .	. . . . . . . .
In Profit and Loss Ratio:
C. Allen Cotten, 36%	$ . . . . . . . .
Scott Wooster, 44%	. . . . . . . .
Landsdowne Woolsey, 20%	. . . . . . . .	. . . . . . . .	$ . . . . . . . .

Excepting for the Accounts Receivable and Accounts Payable schedules, the detailed data for balance sheet and profit and loss statements come from the work sheet drawn up for [Assignment XV]. Set up the formal statements on letter size (8½ × 11) paper. Typewrite them if possible.

XVII

Using the “Adjustment” columns of the work sheet as a guide, make the adjusting entries in the general journal.

Using the profit and loss statement (including the appropriation section) as a guide, set up the closing entries in the general journal. Use the “Profits Distribution” section of the work sheet as the source of the transfer of the balances of the partners’ personal accounts to the loan accounts.

Post the adjusting and closing entries.

Rule the ledger accounts.

Take a post-closing trial balance of the general ledger.