Opening Entries.—In opening a set of single-entry books, as complete a record should be made as under double entry. If the proprietor begins business with an investment of cash only and without any obligations, an entry in the cash book of the amount invested as a credit to the proprietor’s capital account is all that is necessary. If the investment consists of a variety of properties and liabilities to creditors, and obligations on leases, salaries, etc., are assumed, a very careful and complete record should be made in the journal, showing the kinds and values of the properties invested, and the kinds and amounts of the liabilities assumed. This is best arranged in schedule or statement form, with extension into the posting money columns only of those personal items for which accounts are to be opened in the ledger. Illustration will be given of a simple set of single-entry books, the journal, cash book, sales and purchase records, and the ledger. In order that the entries may be traced, a separate statement or diary of the transactions will be given, covering in summarized form a six months’ period.
Problem. June 30, 19—, A. B. Cornell purchased a store and business, paying $7,750.
He took over the following assets and liabilities at the values shown:
He deposited $500 as an additional investment.
During the six months the following transactions took place:
Cornell returned goods to Morey & Co. $50, and received an allowance from Kelsey $20.
He made Harvey a rebate of $25.
Cornell drew $2,000, and made an additional investment of a safe valued at $250.
At the close of the year inventories and appraisals of data not on the ledger were as follows:
It was decided to value the accounts receivable at face value less 2%.
| Journal | ||||||
| 19— | L.F. | Items | Dr. | Cr. | ||
| June 30 | A. B. Cornell commenced business, purchasing the store and stock of the ........ Company, taking over all its assets and assuming all its liabilities and obligations. He deposited $500 as a working fund for the business. The following shows his investment assets and obligations: |
|||||
| Assets | ||||||
| Store Bldg. and Lot | 3,000.00 | |||||
| Furniture and Fixtures | 500.00 | |||||
| Horse and Wagon | 250.00 | |||||
| Merchandise | 5,250.00 | |||||
| Accounts Receivable: | ||||||
| B.C. Davis Dr. 50.00 | 5 | 50.00 | ||||
| C.D. Elliot Dr. 75.00 | 5 | 75.00 | ||||
| D.E. Foley Dr. 100.00 | 5 | 100.00 | ||||
| E.F. Gaynor Dr. 25.00 | 5 | 25.00 | ||||
| F.G. Harvey Dr. 125.00 | 375.00 | 5 | 125.00 | |||
| Cash | 500.00 | |||||
| Total Assets | 9,875.00 | |||||
| Liabilities | ||||||
| Mortgage on Real Estate | 500.00 | |||||
| Accounts Payable: | ||||||
| G. H. Jackson & Co. Cr. 250.00 | 5 | 250.00 | ||||
| H.J. Kelsey Cr. 375.00 | 5 | 375.00 | ||||
| J. K. Landon Co. Cr. 500.00 | 1,125.00 | 5 | 500.00 | |||
| Total Liabilities | 1,625.00 | |||||
| A. B. Cornell, Capital | Cr. | 6 | 8,250.00 | 8,250.00 | ||
| Dec. 31 | Morey & Co. | Dr. | 5 | 50.00 | ||
| Returned goods as unsatisfactory. | ||||||
| H. J. Kelsey | Dr. | 5 | 20.00 | |||
| Allowance a/c inferior goods. | ||||||
| F. G. Harvey | Cr. | 5 | 25.00 | |||
| Rebate a/c dissatisfaction. | ||||||
| E. F. Gaynor | Cr. | 5 | 250.00 | |||
| Note at 3 mo. 6% on a/c. | ||||||
| F. G. Harvey | Cr. | 5 | 500.00 | |||
| Note at 60 da., no interest on a/c. | ||||||
| J. K. Landon Co. | Dr. | 5 | 1,000.00 | |||
| Note at 6 mo. 6% on a/c. | ||||||
| A. B. Cornell, Capital | Cr. | 6 | 250.00 | |||
| Made additional investment of office safe. | ||||||
| 1,445.00 | 10,400.00 | |||||
| Journal | ||||||||
| 19— | L.F. | Items | Dr. | Cr. | ||||
| Dec. 31 | Financial Statement | |||||||
| Assets | ||||||||
| Store Bldg. and Lot | 2,970.00 | |||||||
| Furniture and Fixtures | 725.00 | |||||||
| Horse and Wagon | 235.00 | |||||||
| Merchandise | 3,000.00 | |||||||
| Accounts Receivable: | ||||||||
| B.C. Davis | 100.00 | |||||||
| C.D. Elliot | 175.00 | |||||||
| D.E. Foley | 200.00 | |||||||
| E.F. Gaynor | 375.00 | |||||||
| F.G. Harvey | 300.00 | 1,150.00 | ||||||
| Less—Bad Debts est. | 23.00 | 1,127.00 | ||||||
| Notes Receivable | 750.00 | |||||||
| Accrued Interest on above | 2.50 | |||||||
| Cash | 1,970.00 | |||||||
| Total Assets | 10,779.50 | |||||||
| Liabilities | ||||||||
| Notes Payable | 1,000.00 | |||||||
| Accrued Interest on above | 15.00 | |||||||
| Accounts Payable: | ||||||||
| G. H. Jackson & Co. | 150.00 | |||||||
| H. J. Kelsey | 130.00 | |||||||
| J. K. Landon Co. | 250.00 | |||||||
| Morey & Co. | 450.00 | 980.00 | ||||||
| Accrued Salaries and Expenses | 25.00 | |||||||
| Total Liabilities | 2,020.00 | |||||||
| Net Worth | 8,759.50 | |||||||
| A.B. Cornell, Capital, 6/30 | 8,250.00 | |||||||
| Additional Investment | 250.00 | |||||||
| 8,500.00 | ||||||||
| Drawings | 2,000.00 | |||||||
| 6,500.00 | ||||||||
| Net profit this period | 2,259.50 | 8,759.50 | ||||||
| A.B. Cornell, Personal | Cr. | 6 | 2,259.50 | |||||
| To carry the net profit to Cornell’s Personal account. | ||||||||
| A.B. Cornell, Personal | Dr. | 6 | 259.50 | |||||
| A.B. Cornell, Capital | Cr. | 6 | 259.50 | |||||
| To transfer the balance of profit left in | ||||||||
| the business to Cornell’s Capital account. | ||||||||
| Totals | 259.50 | 2,519.00 | ||||||
| Dr. Cash | Cash Cr. | ||||||||
| 19— | 19— | ||||||||
| June 30 | A. B. Cornell | ✔ | 500.00 | Dec. 31 | Purchases | 3,500.00 | |||
| Dec. 31 | Sales | 10,000.00 | Morey & Co. on a/c | 5 | 500.00 | 500.00 | |||
| B.C. Davis on a/c | 5 | 250.00 | 250.00 | Jackson & Co. ” | 5 | 600.00 | 600.00 | ||
| C.D. Elliot ” | 5 | 300.00 | 300.00 | H.J. Kelsey Co. ” | 5 | 675.00 | 675.00 | ||
| D.E. Foley ” | 5 | 400.00 | 400.00 | Mortgage and Interest | 530.00 | ||||
| Clerks | 750.00 | ||||||||
| Cashier Stenographer, | 250.00 | ||||||||
| N.Y.C. Ry. Freight | 250.00 | ||||||||
| Horse Feed and Driver Expense | 125.00 | ||||||||
| Newspaper Advertising | 300.00 | ||||||||
| A.B. Cornell | 6 | 2,000.00 | 2,000.00 | ||||||
| Balance | 1,970.00 | ||||||||
| 950.00 | 11,450.00 | 3,775.00 | 11,450.00 | ||||||
| 19— | |||||||||
| Jan. 2 | Balance | 1,970.00 | |||||||
| Sales Journal | ||||
| 19— | ||||
| Dec. 31 | Cash | 10,000.00 | ||
| B. C. Davis | 5 | 300.00 | ||
| C. D. Elliot | 5 | 400.00 | ||
| D. E. Foley | 5 | 500.00 | ||
| E. F. Gaynor | 5 | 600.00 | ||
| F. G. Harvey | 5 | 700.00 | ||
| Sales on Account | 2,500.00 | |||
| Sales for Cash | 10,000.00 | 10,000.00 | ||
| Total Sales | 12,500.00 | |||
| Purchase Journal | ||||
| 19— | ||||
| Dec. 31 | Cash | 3,500.00 | ||
| G. H. Jackson & Co. | 5 | 500.00 | ||
| H. J. Kelsey | 5 | 450.00 | ||
| J. K. Landon Co. | 5 | 750.00 | ||
| Morey & Co. | 5 | 1,000.00 | ||
| Purchases on Account | 2,700.00 | |||
| Purchases for Cash | 3,500.00 | 3,500.00 | ||
| Total Purchases | 6,200.00 | |||
| B. C. Davis | |||||
| 19— | 19— | ||||
| June 30 | J2 | 50.00 | Dec. 31 | C4 | 250.00 |
| Dec. 31 | S4 | 300.00 | |||
| C. D. Elliot | |||||
| 19— | 19— | ||||
| June 30 | J2 | 75.00 | Dec. 31 | C4 | 300.00 |
| Dec. 31 | S4 | 400.00 | |||
| D. E. Foley | |||||
| 19— | 19— | ||||
| June 30 | J2 | 100.00 | Dec. 31 | C4 | 400.00 |
| Dec. 31 | S4 | 500.00 | |||
| E. F. Gaynor | |||||
| 19— | 19— | ||||
| June 30 | J2 | 25.00 | Dec. 31 | J2 | 250.00 |
| Dec. 31 | S4 | 600.00 | |||
| F. G. Harvey | |||||
| 19— | 19— | ||||
| June 30 | J2 | 125.00 | Dec. 31 | J2 | 25.00 |
| Dec. 31 | S4 | 700.00 | ” ” | ” | 500.00 |
| G. H. Jackson & Co. | |||||
| 19— | 19— | ||||
| Dec. 31 | C4 | 600.00 | June 30 | J2 | 250.00 |
| Dec. 31 | P4 | 500.00 | |||
| H. J. Kelsey | |||||
| 19— | 19— | ||||
| Dec. 31 | J2 | 20.00 | June 30 | J2 | 375.00 |
| ” ” | C4 | 675.00 | Dec. 31 | P4 | 450.00 |
| J. K. Landon Co. | |||||
| 19— | 19— | ||||
| Dec. 31 | J3 | 1,000.00 | June 30 | J3 | 500.00 |
| Dec. 31 | P4 | 750.00 | |||
| Morey & Co. | |||||
| 19— | 19— | ||||
| Dec. 31 | J2 | 50.00 | Dec. 31 | P4 | 1,000.00 |
| ” ” | C4 | 500.00 | |||
| A. B. Cornell, Personal | |||||
| 19— | 19— | ||||
| Dec. 31 | C4 | 2,000.00 | Dec. 31 | J3 | 2,259.50 |
| ” ” | J3 | 259.50 | |||
| A. B. Cornell, Capital | |||||
| 19— | |||||
| Net Worth (down) | 8,759.50 | June 30 | J2 | 8,250.00 | |
| Dec. 31 | J3 | 250.00 | |||
| ” ” | J3 | 259.50 | |||
| 8,759.50 | 8,759.50 | ||||
| 19— | |||||
| Jan. 1 | 8,759.50 | ||||
| Ledger List (before closing) | |||
| B. C. Davis | $ 100.00 | ||
| C. D. Elliot | 175.00 | ||
| D. E. Foley | 200.00 | ||
| E. F. Gaynor | 375.00 | ||
| F. G. Harvey | 300.00 | ||
| G. H. Jackson & Co. | $ 150.00 | ||
| H. J. Kelsey | 130.00 | ||
| J. K. Landon Co. | 250.00 | ||
| Morey & Co. | 450.00 | ||
| A. B. Cornell, Personal | 2,000.00 | ||
| A. B. Cornell, Capital | 8,500.00 | ||
| $3,150.00 | $ 9,480.00 | ||
| 3,150.00 | |||
| Excess of credits | $ 6,330.00 | ||
| Proof | ||||||
| Total | postings | from | Journal | $1,445.00 | $10,400.00 | |
| ” | ” | ” | Sales Journal | 2,500.00 | ||
| ” | ” | ” | Purchase Journal | 2,700.00 | ||
| ” | ” | ” | Cash Book | 3,775.00 | 950.00 | |
| $7,720.00 | $14,050.00 | |||||
| 7,720.00 | ||||||
| Excess of credits as above | $ 6,330.00 | |||||
Net Profits.—Inasmuch as the change in proprietorship is determined only by a comparison of the two financial statements, at least the result of the comparison should be incorporated into a journal entry and so be brought into the ledger account. Sometimes the statement itself and the calculation of change in net worth are made on the face of the journal, thus making permanent record of them. This is worth while since they are an essential part of the system. A permanent statement book will accomplish the same result. In the illustration the statement is entered in the journal. The net profit of $2,259.50 may be set up in the proprietor’s personal account, and the balance of that account, being the amount of profits retained in the business, transferred to the capital account; or the net amount left in the business may be transferred directly to the capital account and the personal account ruled off without balancing as suggested in Chapter LIII. The same result is accomplished, but the ability to prove postings against the books of original entry is lost. Hence the first method which is the one shown in the illustration is the better.