Adjust and close the books in accordance with the information given in the preceding Practice Data XVI.

The student is referred, for illustration of the work of adjusting and closing the books, to Volume I, Chapters XXIX, XXX, and XLIII, and to certain portions of [Chapters XIV] and [XIX of Volume II].

XVIII

Practice Data

The results for the year proving very unsatisfactory in comparison with the volume of business transacted, N. G. Goodman was retained to make an audit of the year’s operations in an effort to locate the trouble. In his report covering the audit, he called attention to the following items:

(a) In the Trade Debtors are included two charges, viz., advances to salesmen $500, and New Method Manufacturing Co. for purchases $2,500, which are in no sense charges to customers.

(b) In the Notes Receivable is included Noble’s note given in payment of the balance on his subscription to capital stock $1,000 but now reduced to $600 through the application of his March dividend as a partial payment. This does not belong in Notes Receivable account.

(c) There is on the books no record of the Boston Office Co. consignment received on June 15, 1916. Investigation showed that on July 2, a sale of $4,500 was made from the consignment and the balance was included in the Sundry Office Supplies Inventory, being there valued at $1,000. It was ascertained that the freight and cartage paid on the incoming consigned goods amounted to $25.12, and had been charged to the In-freight and Cartage account.

(d) The inadequacy of the purchases system was shown. Perhaps due to the fact that during the year the main stock was withdrawn from the store and the immediate supervision of the responsible head and placed in the warehouse, the stock had been allowed to run down so that it amounted at the close of the year to only $9,662.37—correct value being $8,662.37 when allowance for the inclusion of the Boston Office Co. consigned goods was made—as compared with $42,282.27 on hand at the beginning. Suggestion for the installation of a distinct purchasing department and the introduction of a stock record was made in order to keep track of the condition of the stock.

(e) The depreciation of good-will is to be reversed.