Accounting theory and practice, Volume 1 (of 3)

by Roy B. Kester

The method then advocated and used in a few institutions has become quite generally accepted. It has justified itself by the ease and extent to which students without any previous training in accounting have grasped the essentials of the subject. Experience with the book in the classroom, however, and changing ideas with regard to manner of presentation and sequence of material, have shown as desirable a rearrangement of some parts and an addition of new material in places. Accordingly, a systematic revision has been made.

The arrangement of the subject matter of the first portion of the book has been altered but slightly. The use and function of the balance sheet and profit and loss statement have been somewhat amplified. The working sheet has been introduced earlier than in the first edition to afford an easy summary of the period’s results. It should later on be made a part of the regular work of summarization. The controlling account is also explained earlier so as to afford more practice in its use. The accounting features of the partnership and of the corporation are given continuous treatment. Here a new chapter has been added, which discusses certain features of the corporation not treated in the original book such as the issue and sale of treasury stock and of bonds, bond interest as related to premium and discount, sinking fund, sinking fund reserve, redemption of bonds, etc.

The material presented in the last quarter of the book deals with the interrelations of accounting, financial management, buying, and marketing. Thus the chapters dealing with the handling of cash, notes receivable and payable, cash discounts, and balance sheet valuation, treat of the relations between accounting and financial management. Several chapters at the end treat of some special methods of accounting practice and of the basic principles of single entry. In this portion of the book new chapters on balance sheet valuation and on buying have been added.

Entirely new problem material has been furnished, carefully graded and related so far as possible to the subject matter of the chapters of the text. For the convenience of the student this material is separated from the text, and grouped in three appendices. A few of the problems have been drawn from the examinations of various state boards and the regents of the University of the State of New York, and from other miscellaneous sources, to all of which acknowledgment is due. The author is indebted to Mr. George B. Kelley for assistance in building up a large part of the practice material. It need hardly be said that a fundamentally sound knowledge of accounting cannot be gained without ample practice work. Theory can never be sure of itself until put to the test of practice.

The author desires to acknowledge again his debt to the many friends whose counsel and aid counted so largely in the first writing of this book. In the revision he finds himself still further indebted to many instructors in all sections of the country for criticism and suggestion. He desires especially to express his appreciation of the active co-operation of his associates on the Columbia staff of instructors in First Year Accounting, in particular Miss Nina Miller and Messrs. Ralph T. Bickell and E. Gaylord Davis. In the actual work of revision Messrs. Eskholme Wade, John Jaffee, and Raymond Gatchell have given valuable assistance.

Roy B. Kester

Columbia University,
New York City,
July 22, 1922

CONTENTS

CHAPTER		PAGE
I	Basic Relationships—Proprietorship	[ 1]
II	Assets, Liabilities, and Capital	[11]
III	The Balance Sheet	[22]
IV	The Comparative Balance Sheet	[32]
V	The Economic or Profit and Loss Elements of a Business	[38]
VI	The Profit and Loss Summary	[44]
VII	Interrelation Between the Economic and the Financial
	Elements of a Business, and Some Inter-Ratios	[57]
VIII	The Account	[67]
IX	The Account (Continued)	[72]
X	The Philosophy of Debit and Credit	[78]
XI	Debit and Credit as Applied to Asset and Liability Accounts	[85]
XII	Debit and Credit as Applied to Proprietorship Accounts	[91]
XIII	Debit and Credit as Applied to Mixed Accounts	[97]
XIV	Periodic Work on the Ledger	[106]
XV	Periodic Adjustments and Summarization	[115]
XVI	Sources of Data for the Ledger	[132]
XVII	The Subdivision of the Journal	[136]
XVIII	The Purchase and Sales Journals	[139]
XIX	The Cash Journals	[147]
XX	The Modern Journal	[162]
XXI	Business Papers—Negotiable Instruments	[173]
XXII	Business Papers—The Goods Invoice and Bill of Lading	[185]
XXIII	Banks and Their Methods	[192]
XXIV	Methods of Posting	[199]
XXV	The Trial Balance and Methods of Locating Errors	[204]
XXVI	The Classification of Accounts	[213]
XXVII	The Work Sheet and Summary Statements	[221]
XXVIII	Adjusting and Closing the Books	[237]
XXIX	Types of Accounting Records and Their Development	[251]
XXX	Controlling Accounts	[264]
XXXI	Handling Controlling Accounts	[272]
XXXII	Partnership from a Business Viewpoint	[284]
XXXIII	Partnership from the Accounting Viewpoint	[290]
XXXIV	Capitalization of the Partnership	[297]
XXXV	Other Partnership Problems	[305]
XXXVI	Partnership Profits	[313]
XXXVII	Partnership Dissolution	[321]
XXXVIII	The Corporation	[330]
XXXIX	Opening the Corporation Books	[338]
XL	Current and Closing Entries for the Corporation	[351]
XLI	Handling the Cash	[366]
XLII	Notes Receivable and Payable	[376]
XLIII	Problems Encountered in Recording Notes Receivable and Payable	[384]
XLIV	Discounts	[392]
XLV	Balance Sheet Valuation	[403]
XLVI	Buying and Stock Control	[420]
XLVII	Sales	[433]
XLVIII	Consignments	[447]
XLIX	Adventure Sales	[460]
L	Accounts Current	[468]
LI	Balancing Methods	[477]
LII	Some Application of Interest and Proportion	[485]
LIII	Single or Simple Entry	[495]
LIV	Illustration of Single Entry	[504]
Appendix	A—Practice Work for Student—First Half-Year	[513]
	B—Practice Work for Student—Second Half-year	[553]
	C—Miscellaneous Problems for Supplementary Work	[597]

FORMS