Accounting theory and practice, Volume 1 (of 3)

by Roy B. Kester

In a large business where the clerical work is divided among departments, several copies of the original purchase order sent to the vendor are usually made out—one copy, for instance, for the purchasing department, one for the receiving room, one for the auditing department and so on. The procedure of auditing is then more complex. The copy furnished the receiving room is usually left blank as to quantities, and sometimes the description of the goods ordered is also omitted. When the goods are received, quantities and kinds are filled in by the receiving department, and the copy is sent to the auditing department where it is checked against the auditor’s copy of the original order and the purchase invoice from the vendor. If found correct as to quantity, kinds of goods, extensions, and additions, the invoice becomes the basis for entry in the purchase record—journal or voucher register as the case may be—after which it follows the customary routine as to filing. The invoice remains in a temporary file as long as it is unpaid. Upon payment it is placed in a permanent file, either under the name of the vendor, by invoice number, or according to whatever system may be in use.

Handling the Sales Invoice.—Practically all systems of handling sales require that at the time of the sale some record or memo of the transaction be made. In retail establishments the use by each salesman of a book of sales tickets with provision for duplicate or triplicate impression is very general, whether the sale be cash or charge. The cash and charge tickets are usually put up in separate books and a different color of paper is used for each. At the close of the day the total cash tickets are checked against the cash received from cash sales, and the total charge tickets give a controlling figure for charges to customers. The total of the cash tickets plus that of the charge tickets gives the total credit to Sales.

These sales tickets are usually entered on a daily sales sheet provided with distributive columns for analysis according to departments or kinds of commodities. A recapitulation giving the totals of each of these columns is made and posted to the ledger, while the customers ledger accounts may receive their charges direct from the sales ticket. This recapitulation really constitutes the sales journal record, as is explained in [Chapter XLVII].

Where the number of charge accounts is not large, a folder system is sometimes used. Each charge sales ticket is placed in the folder which takes the place of that customer’s account, thus avoiding the necessity of making a formal entry on the ledger. When the customer pays this bill, the sales ticket is so marked and is either left in the folder or transferred to a permanent file. The successful operation of the folder system presupposes that the customer will pay the exact amount of his bills shortly after the date of the ticket, no provision being made to care for overlapping credits. Whatever the system, the sales ticket is the original record of the transaction and therefore valuable as evidence in case of dispute. These tickets should be filed away and kept until all danger of dispute is past.

Credits and Returned Goods Invoices.—If for any reason goods purchased prove unsatisfactory and are returned, record of their return should be kept by the shipping clerk and used as a basis for securing proper credit from the vendor. The vendor usually sends a returned goods invoice, which, though similar in form to the purchase invoice, constitutes a credit to the purchaser instead of a charge. These credit memos, as they are termed, are always of some distinctive color, frequently red, in order to distinguish them readily from the regular invoice.

Similarly, when dissatisfied customers return goods, or when the business makes them an allowance on goods sold, a credit invoice or credit memo is sent them and the duplicate copy of this memo retained in the office becomes the basis for entering the transaction on the books.

Shipping Goods—The Bill of Lading.—The purchase and sale of goods usually involve dealings with railroads. It is not the purpose of this chapter to give an extensive system or method of handling shipments, but merely to explain the purpose of the railroad documents and their use as business papers.

A shipment of goods is evidenced always by a “bill of lading,” a contract under which the railroad accepts freight for carriage, defines its liabilities as a transportation company or warehouseman, and states its duties and those of the shipper. Its standard content is prescribed by the Interstate Commerce Commission, although any additions to it not in conflict with the standard content are not forbidden. If the shipper so desires, he may have bills of lading printed to conform in size with his own files, instead of using those furnished by the railroad. There are two standard forms, the straight bill of lading which is not negotiable and the order bill of lading which is negotiable.

The bill of lading is always made out in triplicate, the original and the two copies being identical except as to titles and signatures. The original is signed by the shipper and the railway agent, and constitutes the shipper’s receipt for the goods delivered to the railroad. The second copy called the “shipping order,” is signed by the shipper only. It is his order to the railroad to ship the goods, and is held by the railroad as evidence of its authority. The third copy or memo is an exact duplicate of the original. Like the first copy, it is signed by the shipper and the agent, and is held by the shipper as a duplicate receipt. Sometimes it is forwarded with the invoice to the customer, but otherwise should be filed by the shipper with the original bill of lading. In case of claim against the railroad for loss or damage to goods in transit, the original bill of lading is required as evidence and should therefore always be kept in the shipper’s possession.

Freight Notice and Expense Bill.—A notice, called “freight notice,” is sent by the railroad to the consignee upon arrival of the goods. A more or less formal order is given by the consignee to the teamster or drayage company to call for the freight. This order authorizes the railroad to deliver it to the teamster or drayage company. Upon its delivery, an “expense” or freight bill is sent to the consignee itemizing the freight charges due on the shipment. The freight notice and the freight bill are usually made at one impression, the heading on the one being a notice of the arrival of freight, while on the other the heading is that of an ordinary invoice or bill showing the freight charges on the designated goods. Some railroads make three copies at one impression, consisting of (1) the freight notice, (2) the delivery receipt, and (3) the freight bill. Copy (2) is a receipt surrendered by the consignee upon delivery of the goods.