FORM PAGE
1.Form of Ledger Accounts[70]
2.Chart of Accounts[75]
3.Accounts Balanced and Ruled[109]
4.Transfer of Accounts to a New Page[112]
5.Personal and Notes Payable Accounts[113]
6.Standard Form of Journal[135]
7.Purchase Journal[142]
8.Modern Type of Purchase Journal[142]
9.Departmental Purchase Journal[144]
10.Cash Book (Cash Receipts Journal)[148]
11.Cash Book (Disbursements Journal)[149]
12.Columnar Cash Book—Debit Side[158]
13.Columnar Cash Book—Credit Side[159]
14.Divided Column Journal[164]
15.Opening Entries on Books[166]
16.A Promissory Note[175]
17.A Draft[175]
18.A Bank Draft[180]
19.Forms of Checks[182]
20.Monthly Statement of Account[191]
21.Bank Deposit Ticket[193]
22.Cross-indexing in Posting[202]
23.Work Sheet[226-227]
24.Balance Sheet—Report Form[232]
25.Balance Sheet—Account Form[233]
26.Statement of Profit and Loss—Report Form[234]
27.Statement of Profit and Loss—Account Form[235]
28.Profit and Loss Account in Ledger[249]
29.Standard Ledger—Divided Column[258]
30.Standard Ledger—Center Column[258]
31.Balance Ledger Rulings[259]
32.Balance Ledger Rulings[259]
33.Boston Ledger Sometimes Used for Depositors[262]
34.General Journal[279]
35.Sales Journal Summary[279]
36.General Journal Summary[281]
37.Cash Book Summary Book—Receipts Side[282]
38.Cash Books Summary Book—Disbursements Side[282]
39.Petty Cash Book[369]
40.Weekly Statement of Receipts and Disbursements[375]
41.Notes Receivable Journal[380]
42.Discount Columns Used for Cash Balance[400]
43.Stock Control Card[430]
44.Account Sales[451]
45.Form of Adjusted Account Current[470]
46.Account Marked for Analysis[478]
47.Ledger Analysis Sheet[480]

Accounting—Theory and Practice

CHAPTER I
BASIC RELATIONSHIPS—PROPRIETORSHIP

Records and Their Functions.—As far back as our knowledge reaches, records of some sort have been kept and used and they have frequently formed the basis on which our knowledge rests. In a broad sense a record may be defined as a written memorial, a register or history of events, a testimony. Even though the desire to make and hand on to the future a record of achievement is a deep-seated characteristic, record-making has seldom been an end in itself. Knowledge of what has been done has always been a starting point and a guide for future achievement. The longhand or narrative record is indispensable in some fields of knowledge; the shorthand or statistical record is equally necessary in others. The statistical method and accounting are, without question, most potent agencies for the advancement of human knowledge and for the control of human relationships. They provide the basis in fact on which judgments must largely rest. This book, therefore, may begin by sketching the relation of accounting to some of the larger fields of human endeavor—the economic organization of society and the law—to point out its place in the business unit and briefly state the basic function it performs therein.

The Business Unit.—To carry on its various activities, economic society has organized itself into numberless separate units or business organizations. These units are the means through which society operates, their ultimate purpose being the easy and efficient satisfaction of human economic wants. Individual business units, conducted as they are by members of society, are under the broad general supervision of society as a whole. This is evidenced everywhere by the laws, licenses, and regulations by which society attempts to regulate the activities of the individual for the larger interest of society as a whole. As business is conducted in most parts of the world, it is highly individualized rather than communized. There is a growing tendency, however, for society to exercise a larger control and supervision over all types of individual activity, particularly with a view to conserving the welfare of its members. The business unit is thus the medium through which society works to satisfy its economic wants.

Internal Organization of the Business Unit.—Society early found that only by means of a highly specialized division of its activities was it possible to satisfy without waste its rapidly increasing economic wants. Individual business units are thus organized for the purpose of carrying on some one or more of these greatly subdivided activities. Within itself the business unit is organized into departments or divisions for the efficient and thrifty handling of its work. The two large divisions in any business undertaking have to do with what the economist calls the production and exchange of wealth, that is, commodities, services, and so forth. In carrying on these activities of production and exchange it has usually been found desirable to segregate into separate departments certain major functions which are common both to production and to exchange. What the major departments may be depends very largely upon the size of the business unit, its relative complexity of organization, and to some extent on the individual ideas of its managers. Throughout the business world one notes, however, a quite general departmentization under the following heads:

There are two main activities under the control of the finance division of a business: (a) the problem of original investment, including that of location and acquisition of a plant suitable for the conduct of a contemplated business; and (b) the problem of operating finance, that is, of providing the business with a fund of working capital for its efficient operation. The financing of purchases, sales, credits, operating expenses, and so forth, comprises a large part of the work of finance of an operating or going concern.

In the second of the major departments, that of procurement or production, one finds these activities: (a) the purchasing of the stock-in-trade to be dealt in, if the concern is a trading business; or (b) the manufacture of the stock-in-trade, if the concern is a manufacturing business.

In the department of marketing or distribution, the following activities center: (a) those having for their purpose the creation of a market or demand for the commodity dealt in—the sales organization, the advertising activities, and so forth; (b) the actual selling of the commodity; and (c) the transportation and delivery of the product.