infallible rule or method of checking which would detect an error as
soon as it is made. No system could possibly prevent the making of an
error, but if detected, an error is quickly corrected. Numerous formulas
and checking systems, designed to detect errors in posting, have been
put on the market from time to time. Each has been advertised as the
only infallible system. All have been eagerly purchased, tried more or
less faithfully, and, as a rule, speedily discarded.
Modern methods of bookkeeping have done more to aid in the detection of
errors in posting than all of the checking systems combined. The
sectionalization of accounts not only facilitates the detection of
errors, but greatly minimizes the chances of their being made. As an
illustration take a sales ledger which is subdivided into two or more
parts, with special columns in cash book and sales book, and controlling
accounts for each section. If the individual balances taken from the
sales ledger do not agree with the controlling accounts, it is seen at a
glance in which section the error has been made. Instead of a search
through all postings to sales ledger accounts, it is only necessary to
check postings to that particular section.
[Illustration:
Ledger Proof Without a Trial Balance
]
Errors in posting to nominal accounts are minimized by special columns
in cash book, sales book, and purchase record, with one posting at the
end of the month, in place of a posting for each item entered.
But still, errors are and always will be made in posting, and for the
bookkeeper who has a large number of accounts to post and wishes to keep
a constant check on his work, the reverse posting or slip posting system
will give satisfactory results with little labor.
[Illustration:
Fig. 19. Monthly Posting Proof Sheet
]
This system is very simple, and easily operated. It consists of the use
of a slip of paper with debit and credit columns in which accounts
posted to the ledger are entered. A separate slip is used for each book
from which postings are made, and the items are posted to the slip from
the ledger. The slip should be placed on the desk on the opposite side
of the ledger from the book of entry.
If posting is from the sales book, the ledger should be placed to the
right of the sales book and the slip to the right of the ledger. After
the item is entered in the ledger it is posted to the slip. When the
work is completed the slip is footed and compared with the footing of
the sales book. If the footings agree, it is quite evident that the
correct amounts have been posted to the ledger, for it is scarcely
possible that an incorrect amount has been posted to the ledger and the
correct amount entered on the slip.
A further daily proof may be had by inserting a blank slip of paper in
the ledger wherever an item is posted. At the end of the day these
ledger accounts are referred to, the amounts are drawn off, and total
postings compared with the totals of the checking slips from the
different books.
When postings are not checked daily a form should be prepared to which
daily totals will be carried. Columns are provided for each book from
which posted, and these are footed at the end of the month and compared
with the footings of the books. If the ledger does not balance a
comparison of this proof slip with the column footings of the books will
show in which book the error has been made. The form of the monthly
proof slip is illustrated in Fig. 19.
SPECIAL ACCOUNTING FORMS
=21.= Bookkeeping, if it is to fulfil its mission, must furnish a
complete record of the transactions of a business. The record must show,
as well, the results of each transaction or class of transactions, with
respect to their bearing on the business as a whole, or on specific
sections or departments of that business. From a mere record of personal
debits and credits, bookkeeping has grown into a detailed history of a
business.
The principles of bookkeeping are the same regardless of the nature,
size, or condition of a business. But different businesses require
different kinds of information; vital facts in one business may be
valueless in another. The success or failure of each depends upon
certain elements which must be recorded in its history. It is the work
of the bookkeeper to record these facts—to write the history of the
business in language that will be understood by anyone who may read it.
Laying out the business history is the work of the accountant. He makes
an analysis of those elements which bear on the success of the business,
and determines what facts, when properly recorded, will furnish the
clearest and most understandable history. And when he has determined
what facts should be recorded he must plan how they are to be
recorded—in what form they will present the most concise history of
business transactions. His work should result in a system of bookkeeping
that will present the most vitally important information, with a minimum
expenditure of labor.
The increasing demand for more intelligible records—for facts—has
stimulated the ingenuity of accountants in devising forms that will not
only accommodate the records desired but will permit of their being made
with the least labor. Special forms exactly suited to the records which
they are to contain, are now made for every purpose. Labor-saving
devices and methods have minimized the drudgery of bookkeeping.
The bookkeeper who would rise above mediocrity requires something
besides the ability to record business transactions in the proper
columns of books prepared for him. He must know how to devise forms and
books, how to adapt correct principles to the building of a system of
bookkeeping for any line of business. If certain facts assume
importance, he must know how those facts can best be obtained and
recorded.
To assist in familiarizing the student with the more modern methods,
this section is devoted to illustrations and descriptions of special
forms of books for various purposes. The student should devote careful
study to these forms, for while they have been in the main devised to
meet special conditions, the principles can be adapted to any line of
business where similar conditions exist.
SPECIAL LEDGERS
=22. Loose Leaf Ledgers.= A loose leaf ledger is one in which the leaves
are removable. Instead of the sheets being bound in solid book form,
each leaf is a separate sheet ruled for one ledger account. The sheets
are filed or bound in what is known as the binder, being securely held
in place by a mechanical device. The binder can be locked so that only
the person holding the key can insert or remove the sheets.
The loose leaf ledger is indexed either numerically or alphabetically.
When the numerical method is used the sheets are numbered and placed in
the binder in numerical order which gives the same arrangement as a
bound book. A separate index is required with the numerical method. The
alphabetical method of indexing necessitates the use of sheets on the
edges of which are tabs or projections printed with the letters of the
alphabet. These index sheets are placed in the binder in alphabetical
order and the ledger sheets are placed between them. The alphabetical
method is preferred by many as it makes the ledger self-indexing.
Another method of indexing is a combination of the alphabetical and
numerical. The alphabetical index sheet is used, and under it are filed
all accounts of persons whose names begin with that letter. These sheets
are numbered Account No. 1, No. 2, etc., and the names are written on
the index sheet, followed by the account number. This practically
divides the ledger into separate numerical ledgers for each letter of
the alphabet.
[Illustration:
Fig. 20. Loose Leaf Ledger
]
Binders for loose leaf ledgers are made to hold from a few sheets up to
one thousand or more. By proper arrangement of the indexes, more than
one ledger can be accommodated in one binder. As an illustration, the
general, purchase, and sales ledgers, each with its separate index, may
all be in the same binder.
One of the chief advantages of the loose leaf ledger is that all "dead"
matter can be removed. When a sheet becomes filled, it can be removed to
another binder called a transfer binder, and a new sheet put in its
place. Or if the account be permanently closed, it is transferred,
leaving only live accounts in the ledger. When new accounts are to be
opened, it is only necessary to insert additional sheets. There is no
transferring of all accounts from one ledger to another as with bound
books, for the loose leaf ledger is never filled. If the number of
sheets increases beyond the capacity of the binder, the ledger can be
divided by transferring a part of the sheets to a new binder.
The ruling of loose leaf ledger sheets is the same as in bound books,
the forms usually being made to fit the business. A sheet with a
conventional form of ruling is illustrated.
=23. Card Ledgers.= For certain classes of accounts, the card ledger is
very desirable. It is well adapted for a sales ledger in a business
having a large number of customers, and especially so if the nature of
the business is such that the purchases of a customer are infrequent. In
many businesses handling a single line of goods known as seasonable,
sales are made in the spring and fall so that a customer purchases
practically an entire year's supply in two orders.
[Illustration:
Fig. 21 _a._ Ledger Card for Dentists
]
The card ledger is largely used in banks for keeping accounts with
depositors in the savings department. A card 5 inches x 8 inches in size
gives room for forty items on each side, and for the average savings
account will last more than two years.
Some advantages claimed for the card ledger are:
_First:_ Dead records are eliminated, as filled cards and closed
accounts are transferred to a separate file, leaving only open accounts
in the current file.
_Second:_ It can be expanded to any size, which makes it ideal for
business with a large number of customers. The opening of a new account,
or re-opening of a closed account, is accomplished by merely dropping a
card in the right place.
_Third:_ The labor of making trial balances is greatly reduced, as there
are no closed accounts to refer to in the current file.
_Fourth:_ Statements can be mailed much earlier as the cards can be
distributed among several clerks who can be working on them at the same
time.
_Fifth:_ The ledger can be subdivided as desired by the use of proper
index cards. When one drawer or tray is filled, a part of the cards can
be taken out and placed in another tray without disturbing their
arrangement.
There are two general plans of indexing the card ledger—alphabetical and
numerical. The alphabetical method consists of a set of guide or index
cards between which the cards are filed. This index may consist of one
index for each letter of the alphabet, a smaller number with two or more
letters on one index, or a much larger number subdividing the alphabet
into as many parts as may be necessary. In planning an index for a card
ledger, a safe rule to follow is to provide one index card for every ten
ledger cards.
[Illustration:
Fig. 21 _b._ Ledger Card for Publishers
]
A subdivision of the alphabetical index is the geographical or
territorial. This divides the ledger by states and towns. Guide cards,
printed with the names of the states, provide the main division; other
guides, printed with names of towns, subdivide the state sections; and
where necessary, alphabetical guides subdivide the names in the towns.
If desired, the ledger may be divided into territorial sections, as East
and West; or each section may include the territory covered by one
salesman.
A numerical index divides the cards by tens and hundreds. Guide cards
numbered by hundreds—100, 200, etc.—provide the main divisions. Between
these are placed guides numbered 10, 20, 30, etc. to subdivide these
sections by tens, and the ledger cards are filed in numerical order
between these guides. To facilitate locating any number desired, the
cards themselves are made with small projections numbered from 0 to 9 to
represent the units. Each card bears one tab, and all tabs bearing the
same unit are in the same relative position on the card; that is—0 is
always at the extreme left, while 9 is ten positions to the right. When
the cards are placed in numerical sequence, between the guides numbered
by 10's, any number can be found instantly. To find number 2,987, we
refer first to the main guide number 29, then to the guide numbered 8—in
the section between 29 and 30—and then to the number 7 tab next
following. As there are never more than one thousand cards in a tray,
any number can be found more quickly than in a bound book. If a card is
misplaced in filing, the unit tab will greatly assist in locating the
missing card. Suppose card No. 964 is missing; a search through the row
of No. 4 tabs will locate it, no matter where filed. With this system of
filing, a separate index by name is required, and this also is made on
cards. For a very large ledger the numerical system is more frequently
adopted than the alphabetical.
[Illustration:
Fig. 21 _c._ Balance Form of Ledger Card
]
It is claimed that the numerical tab scheme affords one safeguard not
found in an alphabetical system. A missing card is at once detected by
the break in the row of tabs, but to make the safeguard of value it is
necessary to leave the cards in the file even after accounts are closed.
There is no good reason why an alphabetical card ledger should not be as
safe as the numerical. If it is desired to guard against the removal of
one card and the substitution of another, the blank cards should be
placed in the custody of one man, who will issue them to the bookkeeper
as needed, first placing his initials on the card. In any event, the
card ledger should be provided with a locking device which will prevent
the removal of a card, except by the one who has the key.
These suggestions may be of assistance to the bookkeeper who is called
upon to use a card ledger.
Never leave ledger cards lying on the desk. When you leave your work,
put them back in the file, where they belong.
Before leaving the office, lock the ledger so that no one can remove a
card in your absence.
If your superior asks you to see a certain ledger account, do not give
him that one card. He may lose it. Give him the entire tray, with the
cards securely locked. Should he insist on having that one card, ask him
to give you a receipt for it.
Some special forms of ledger cards are illustrated. Fig. 21 _a._ is a
form used by a dental supply house. The special feature of the form is a
separate column for each different class of goods purchased by the
customer. Fig. 21 _b._ is used by a publisher for advertising accounts.
Fig. 21 _c._ is a conventional balance ledger form adapted for use in
almost any line of business.
=24. Tabular Ledger.= This is a ledger in which the names are written
down the side of the page, with debits, credits, and balances extending
across the page. Columns are arranged to group entries during uniform
periods, as a month, week, or day. A special feature of this style of
ledger is that it can be more quickly balanced and proved than any other
style. To prove this ledger add the balances at the end of the preceding
period to the debit postings of the current period. This will equal the
total of the credit postings added to the new balances, if the balances
have been correctly extended. The postings to all of the accounts on a
page—30 to 40—can be footed at one operation, saving much time.
Fig. 22 _a._ is a form of a tabular ledger used by banks, known as the
_Boston bank ledger_. It is specially arranged to exhibit daily
balances, as it is necessary that the depositor's ledger be balanced
daily. This form can be used in a mercantile business, but as balances
are not required daily, the form shown in Fig. 22 _b._ is better adapted
to the purpose. These tabular forms of ledgers are not commonly used
except in banks.
=25. Balance Ledgers.= Three forms of balance ledgers are illustrated,
each one of which is specially adapted to some particular class of
business.
[Illustration:
Fig. 22 _a._ Boston Bank Ledger
]
[Illustration:
Fig. 22 _b._ Commercial Tabular Ledger
]
The special feature of Fig. 23 _a._ is two credit columns—one for cash
and one for merchandise returns. This form is favored in certain lines
of business where merchandise returns are frequent. A special column
serves to separate returns of merchandise sent out on approval, which in
some businesses is an important item.
[Illustration:
Fig. 23 _a._ Ledger with Special Credit Columns
]
Fig. 23 _b._ is provided with two balance columns, for debit and credit
balances. This form saves time in taking trial balances, as it is seen
at a glance whether the balance is a debit or a credit.
[Illustration:
Fig. 23 _b._ Balance Ledger
]
The feature of Fig. 23 _c._ is several credit columns to one debit
column. This form is largely used where sales are made subject to
periodical payments. It is well adapted for installment accounts, rent
accounts, insurance accounts, and similar classes. The number of credit
columns can be extended indefinitely to meet existing conditions.
[Illustration:
THE PRUDENTIAL BUILDING
One of Buffalo's Best Office Buildings
]
[Illustration:
Fig. 23 _c._ Balance Ledger for Installment Accounts
]
CASH BOOKS
=26.= Since the almost universal adoption of special forms of sales
books, purchase books, and check registers, the journal proper is only
used for adjusting entries. The cash journal, which is a combination of
cash book and journal, has taken the place of the two books. Some forms
of this book have been illustrated earlier in this text, and a typical
form is shown in Fig. 24 _a._ A study of this form will be found
instructive as it suggests the many possibilities of segregating
distinct classes of receipts and expenditures. Note the segregation of
charges to manufacturing, selling, and administrative branches of the
business. Under each branch the different kinds of expense might be
shown with all their subdivisions by providing additional columns.
In fact, as we have already stated, there is no end to the possibilities
of segregating different classes of transactions by means of the
columnar principle in designing books of entry. But it may not be out of
place to sound a note of warning against increasing the size of the
pages of a book beyond a reasonable limit. While the saving of time is
the important factor that influences the introduction of columnar books,
there has grown up a tendency to go to such extremes that the unwieldy
book defeats this very purpose.
[Illustration:
Fig. 24. Cash Journal—Left-Hand Page
]
While the "sundries" columns in the form shown render possible the
making of any kind of adjusting entries in this cash journal, we
recommend that it be reserved for cash transactions and that all
adjusting entries be made in an ordinary journal. This will segregate
cash transactions, just as sales and purchases are segregated, and
render much easier an audit of the books. The journal of the ordinary
type also affords abundant space for explanations which should be
exceptionally complete for adjusting entries. Entries of this kind are
frequently used to cover up fraud and they are sure to receive the
careful attention of the auditor.
[Illustration:
Fig. 24. Cash Journal—Right-Hand Page
]
TABULAR SALES BOOKS
=27.= In no department of a business are tabulated records of greater
value than in the sales department, for only by studying the records of
sales of different classes of goods or of different departments can a
manager determine which departments of his business are most profitable.
A tabular sales book makes it possible to record sales in detail with
very little additional labor, resulting in greater economy of time in
collecting valuable data.
[Illustration:
Fig. 25 _a._ Tabular Sales Book
]
In certain lines of business a record of quantities of different kinds
of merchandise sold is of almost equal value to records of values.
Examples are—wholesale coal business, in which records are kept of
quantities and values of different grades and sizes or the product of
different mines; lumber, in which sales are divided as to lumber, lath,
shingles, sash, and doors; wholesale paper, in which some of the
divisions are book, flats, bonds, cover, etc. A sales book designed for
a business of this class is shown in Fig. 25 _a._ This is arranged for a
record of sales in a coal business, segregating sales of the product of
each of three mines.
There are businesses in which returns and allowances are so frequent as
to constitute an important item in the record of transactions. Such
cases demand special columns in either journal or sales book. Another
condition occasionally met with is where purchases are frequently made
from customers, resulting in accounts in both ledgers. This requires
journal entries to adjust the accounts, but instead of making these in
the regular journal, special columns can be provided for the purpose in
the sales book. Fig. 25 _b._ illustrates a sales journal with columns
for returns and allowances, and columns for purchase adjustments. The
total of these adjustment columns are posted to the sales ledger
controlling account.
[Illustration:
Fig. 25 _b._ Sales Journal with Adjustment Column
]
_Sales recapitulations_ are of very great importance in department
stores and similar businesses where it is desired to ascertain the total
sales of each sales person as well as the result by departments. In Fig.
25 _c._ is shown a sales recapitulation sheet arranged for daily records
of sales of each clerk and of each department. All sales tickets are
lettered or numbered to indicate the clerk, and at the end of the day
these tickets are tabulated by numbers. One of these recapitulation
sheets is used for a month's record, and it can of course be designed to
accommodate as many departments and clerks as there are in the
establishment. Recapitulation sheets arranged on this plan are found
very convenient in many lines other than department stores.
[Illustration:
Fig. 25 _c._ Sales Recapitulation Sheet
]
[Illustration:
Fig. 26. Departmental Pay-Roll Record for Piece Work and Day Workers
]
PAY-ROLL RECORDS
=28.= The designing of pay-roll records to meet the special conditions
in the great variety of manufacturing industries, offers a wide field
for the ingenuity of the bookkeeper or accountant. Where all employes
are paid a stated wage and their employment in one department is
continuous, the problem is a simple one, resolving itself into a mere
record of the number of hours worked each day, the rate, and the amount
due. But this condition seldom exists.
In most industries more complex problems are encountered. The same
employe may be called upon to work in more than one department during a
pay-roll period, or he may do several different kinds of work in the
same department. In either case the form for the record must be so
constructed as to furnish complete information relative to the cost of
the different classes of work. Elaborate systems for gathering records
of time on each detail of the work are employed in most modern
factories, and the pay-roll record or time book is arranged for a
consolidation of these detailed records.
Fig. 26 illustrates a form used in one factory for a distribution of
time records where men are employed on different kinds of work in
different departments, and on both day wage and piece work plans. In
this form provision is made for the record in each department, and each
day's record is divided between time and piece work. Several lines are
set aside for each employe, so that the record will be complete for each
kind of work. At the extreme right, department totals are extended.
These are quickly calculated for the reason that while an employe may do
different kinds of work and in different departments the same operation
is not performed in more than one department. To provide for records of
more kinds of work this principle can be carried still farther by
allowing more space for each employe, and in some cases a full sheet is
assigned for each. In one factory the pay-roll book is loose leaf, one
sheet being used for each employe. Each side of the sheet holds the
record for two weeks, and by using both sides, it gives a complete
record for four pay-roll periods.