BOOKKEEPING. 292 BOOKKEEPING. and the amount of the entry. The page of the ledger to «liich the item lias been posted is then immediately entered in the eoluinn at the left of the journal, on a line with the item transferred. The last step is taken to leave evidence that the posting has been done. To open a set of books by double entry, the bookkeeper states in the opening entry of the daybook the kind or name of the business in which the proprietor is to engage. He then enu- merates in detail the items which are to consti- tute his investment, such as cash, real estate, accounts due him, etc., and the debts, if any, which are to be paid out of the business. These two sets of items represent, respectively, his re- sources and liabilities. The difference between them will be his net investment. When this entry is journalized, e.ich of the items which w^ill make up the resources will be debited, and each of the titles entering into the liabilities will be correspondingly credited, and the proprietor's name or stock will be credited for the net invest- ment, or the difference betveen the sums of the two. When this journal entry has been posted, the books are pro|)erly opened. When the post- ing for an}- period has been completed, the debit and credit sides of the ledger should be equal. To determine whether this is the case or not, the trial balance is taken — that is. all the headings of the ledger, excluding those which are in bal- ance or ruled up, are entered on a suitable sheet, together with the debit and credit footings of each in their proper columns; the two columns are then footed and ought to give equal amounts. If the results are not equal, there is certainly some error which must be found. On the other hand, should the trial balance prove, it would not be certain that no mistakes had been made. For the trial balance will not discover errors of computation, omission of transactions, posting to wrong accounts, etc. The trial balance should be taken, as a rule, at least once a month. The halance sheet, which is to be distinguished from the trial balance, involves a classification and analysis of accounts in such a way as to exhibit in detail the resources, liabilities, losses, gains, net gain or loss, and present capital of the business. The balance sheet is of great impor- tance to the business man, and shoild be made at least once a year, or whenever the business is closed out or otherwise disposed of. It in- volves the taking of an inventory of all the property on hand, which, in some lines of busi- ness, is quite a laborious process. A form of balance sheet is presented below. When accounts balance, when they become crowded for space, or when they show a loss or gain at the time of making a balance sheet, they are ruled up or closed. The form of closing varies somewhat in accordance with individual taste. The foregoing example of ledger ac- counts furnishes also an illustration of a simple and convenient form of closing. When red ink is used in the process, it indicates that the entries distinguished by it have been made upon the wrong side of the ledger for the purpose of balancing, and before the work can be regarded as complete, they must l)e transferred to the opposite side of the ledger, either below the rulings of the account just closed, or below some other heading of the ledger, which is indicated in the red-ink entry. .side from the purpose of eliminating from an account the element of loss or gain, or of prevent- ing crowding, an account is closed in order to conden.se it into a single item, thus simplifying and making intelligil)lc at a glance all the infor- mation which the account can give. After a gen- eral closing of the ledger it is usually advisable to take off a trial balance of the ledger bal- ances to make sure that all have been cor- rectly transferred: as a mistake in this matter may cause groat trouble at the time of the next trial balance. In the simple combination of books for double- entry bookkeeping, which has been explained, practically all the principles of the .system are exemplified. In addition to the books named, however, there are generally found in use one or more such books as the following: Ciish-book, sales-book, invoice-book, bill-book, order-hook, cheek-book, inventory -book, etc. It is unnccps- sarv to enter upon an explanation of the purpose of these books, it being sufficiently indicated by the name. Of the ways in which they may be combined, there is great variety, every business and every establishment introducing some peculi- arities of its own. The general principles, however, are the same in all. They may be used either as principal or auxiliary books. A prin- cipal book may be defined as one from which or to which posting is done: an auxiliary book, one kept for convenience of reference, but from which no posting is done. When these booka are used purely as auxiliary books, they do not affect the work in the other books. When, however, they are used as principal books, all entries found in them are omitted from the jour- nal. No account is kept in the ledger of the property with which such books respectively deal : or if kept, only the footings are posted at regular intervals. The latter plan is followed by some in order that a trial balance of the business accounts may be taken without refer- ence to any other book than the ledger. When this is not done, the footings or balances from such books must be properly entered in the trial balance before it can be expected to prove. The ledger titles found on the debit side of these books must be credited in the ledger with the amounts set opposite them and those on the credit side similarly debited. These books are often ruled with special columns for items of frequent occurrence, and when this is done the footings of such columns only are posted to the title which heads the column in accordance with the principle stated below. A form of the cash-book is given below and the method of posting and ruling the same is illustrated. Single Entry. Single-entry bookkeeping, in its pure form, which, however, is rarely used, keeps no account of property. Only personal ac- counts apjiear in the ledger, which as a conse- quence will not be in balance except when the business is closed out. It therefore involves less labor than double entry, and, on the other hand, fuinislics fewer checks for detecting errors. It is, however, well adapted to some forms of busi- ness, and its results are as intelligible and sig- nificant as in the more conijilete system. It fails, of course, to give detailed information in regard to the sources of gain or loss, and this, for some kinds of business, is a fatal objection, for it is this information, clearly set forth by the double-
