Nov. 1On hand commencing 3,000 00 Nov. 2 Paid........ Paid. 2,000 00 Nov. 1On hand commencing 4,000 00 Nov. 11 Disposed of 2 notes.... 3,000 00 EXPLANATION OF THE LEDGER The grand business of bookkeeping is to dispose of the matter of the Day-book in the form of accounts, which accounts collectively constitute a Ledger. The ledger is designed to show the financial position of the owner, either as regards his whole business or its several parts, each part having its own particular account. Accounts are of two kinds, having two distinct objects; the one kind we denominate Primary, the other Secondary accounts. The primary accounts constitute a single-entry Ledger. The primary and secondary together constitute a double-entry ledger. So if we had arranged the preceding day-book by single-entry, you would have had none of the secondary accounts in the ledger. Each account in the ledger may occupy a distinct folio; but we have arranged those of the same kind under each other, in order that you may see their analogy and be careful not to confound the two kinds, for you will soon see that secondary accounts are duplicates of the primary, only the items are not placed in the same order of succession; so if you confound the two together, you may as well make two accounts against one person, and charge him with both. : The primary accounts are the Cash Account, Bills Receivable, Bills Payable, and the accounts of individuals. All other accounts are secondary. This distinction is very easily remembered, therefore let it be carefully noticed. Now before we proceed to describe the operations in the preceding led. ger, let us consider what it is we desire to accomplish. We have in the day-book a correct history of every transaction that has made the minutest change in the property or financial position of the concern, and we now wish to find out, after all these changes have taken place, what is our present worth. A very little reflection will enable you to see that this can be accomplished in two different ways: 1st. If we can find out what are our Resources and what our Liabilities, our present worth must be the difference between the two. The primary accounts enable us to find out our Resources and Liabilities. 2d. If we can ascertain what we were worth when we commenced, and what we gained since, the sum will be our present worth, or if we lost, their difference. The secondary accounts enable us to fulfil these latter conditions; and having our present worth derived from two distinct sources, we have presumptive evidence that all is right, and our books are said to balance. We now proceed to show how we obtained the requisite results by the primary accounts. In the debit or left hand column of the Cash account, you will find that we have set down every sum of cash received from the beginning. And in the right hand or credit column, we have set down every payment since that time. We find the whole amount received, to be. ... 7,885 .... $2,158 Hence we must now have on hand as RESOURCES... In the debit column of the Bills Receivable account we have entered, as you will find by referring to the respective dates in the day-book, every note we received from the beginning, and in the credit column we have placed every one we disposed of. The amount of notes we received, is.... ... 7,300 Consequently we must have on hand as RESOURCES... $3,300 In the credit column of the Bills Payable account we have entered the amount of every note we issued from the beginning, and in the debit column we entered the amount of every one we redeemed or took up. We find the total amount issued, to be. And the total amount redeemed... .... Consequently we still have to redeem, which is an item of our LIABILITIES.. 10,050 $7,550 In the debit column of John Thompson's account we have entered every sum for which he became accountable to us, and in the credit column every sum for which we became accountable to him. We find we are now accountable to him...... 4,600 4,100 Consequently we owe him, which is another item of our LIABILITIES. $0,500 James Brown's account, being arranged on the same principle, shows that he is accountable to us, which is an item of our RESOURCES. .... $1,000 But the primary accounts do not show our whole Resources, unless all our property be sold; now, in this case, we find we have a ship and merchandise, which we set down as Resources according to present valuation. Here, then, we have shown how you may under any circumstances get at your Resources and Liabilities by making these few accounts according to the above principles. Is there any difficulty to apprehend? Look at each account singly, and see if it is not the plainest way of telling the story that could be devised. Be assured that when the plan of these four accounts is familiar to you, there is no difficulty whatever; but if you attempt to make them before you know how they ought to be made, or for what purpose you are making them, you deserve to be defeated, and that you most undoubtedly will be. THE LEDGER. Secondary Accounts.-Having proceeded so far with our subject, without encountering any difficulty to discourage the student, let us examine the remaining part. The secondary accounts, it will be remembered, were to show what we were worth at the outset, and how much we gained or lost since. In the credit column of the Stock account you will see that we have recorded what we were worth at the outset. The remaining secondary accounts are titles we have fixed upon to describe the different portions of our business. In the debit columns we have put all we laid out under each head, and if we expended any sum for which we had provided no particular head, we entered it under Profit and Loss. Thus we had no head for discount, and we entered it as loss. Hence the secondary accounts are made to show on the debit side all we expended or lost in the business or its parts, and the credit column shows the whole returns of the business or its parts; and after all the transactions have been recorded, we enter, as returns, the valuations of each part unsold, (see Merchandise and Ship ;) we then take the gain or loss on each account, separately, and place all gain on the credit side of Profit and Loss, and all losses on the debit side. We have now shown all the accounts that are necessary to enable us to elicit from any transactions a statement of Resources and Liabilities, and also of the Gains, Losses, and Original Capital; hence in assigning debits and credits to the different accounts, that is, in forming a journal, we have only to consider what accounts are affected by a transaction: for example," Bought merchandise amounting to $2,000; for which we paid in cash." Required the journal entry. Now look at the Merchandise account and you will see that the debit side must contain all it cost you, and therefore you will debit Merchandise. And if you turn to the Cash account you will be reminded of the necessity of entering all payments in the credit column of cash account ; hence your entry will be to debit Merchandise and credit Cash. It would be useless to multiply examples. It is easy to see that you are to be guided entirely in your journal entries by your knowledge of the ledger accounts; and therefore, if you would avoid continued reference, you must, as soon as possible, get the whole plan of the ledger accounts well impressed on your mind. Its outline may be thus briefly stated. We have shown that all financial transactions whatever, are to be separated into Cash receipts-Cash payments-Other men's notes received-Other men's notes disposed of Our own notes issued-Our own notes redeemed-What we are indebted to others-What others are indebted to us-Expenditures in the business, or losses-Returns of the business, or Gains. There is a proper place in the ledger provided for each of these classes, and you have only to inform yourself of these places and enter accordingly. The double entries that you perceive each single transaction requires is only a necessary consequence of your double set of accounts, the debit side of one set being the credit side of the other set: thus what sums you enter in the debit side of the secondary accounts, as expenditures or outlay, you are also required to enter in the credit columns of some of the primary accounts, to show how you made your payments or to whom you are indebted, for you could not make any investment in your business or its parts, but you must either pay cash, give notes, or become indebted to some one; and any of these cases require credits in your primary ac |