Book-Keeping

Book-Keeping Made Simple, Revised Edition covers all the basic principles of elementary book-keeping. The book describes the requirements and process of starting a business, including ledger accounts, classifying the assets, the balance sheet, buying assets, and transactions involving liabilities. The text also discusses the double-entry systems; subsidiary books and original documents; the reduction of work-on day book entries; and the three-column cash books. The journal proper, the Imprest system, the trial balance and its limitations, and the bank reconciliation statements are also considered.

The book further tackles analytical or columnar day books; the principle and layout of the cash book; the adjustments in final accounts; and partnership accounts. The text also discusses departmental-, manufacturing-, and control accounts and accounts of limited companies; the amalgamation of businesses; the purchase of a business; and the bills for exchange.

Students of book-keeping will find the book invaluable.

Foreword

1 Starting a Business - A Capital Idea

1.1 Starting a Business

1.2 Business Transactions

1.3 Keeping a Record of Transactions - The Ledger Accounts

1.4 The First Transaction - The Contribution of the Assets by the Proprietor

1.5 Classifying the Assets - Current and Fixed

1.6 Opening the Ledger

1.7 The Balance Sheet - and an Oddity of History

1.8 Buying Assets for Use in the Business

1.9 Transactions Involving Liabilities

1.10 Classification of Liabilities - Current Liabilities, Long-Term Liabilities, and Capital

1.11 Buying Assets on Credit and Borrowing Money

1.12 A Page to Test You on Capital, Assets, and Liabilities

1.13 Answers to Exercises in Book-Keeping Made Simple

1.14 Opening Balance Sheets

1.15 Exercises Set 1.1 - Opening Balance Sheets

2 The Ledger - The Main Book of Account

2.1 Introduction

2.2 Use of the Accounts

2.3 The Three Types of Account

2.4 How to Keep a Ledger Account

2.5 Personal Accounts - Debtors

2.6 Exercises Set 2.1 - Simple Debtors' Accounts

2.7 Personal Accounts - Creditors

2.8 Exercises Set 2.2 - Simple Creditors' Accounts

2.9 Real Accounts - Accounts That Record Assets

2.10 Folio Numbers

2.11 The Busiest Real Accounts - The Cash Account and the Bank Account

2.12 Double Entry Book-Keeping

2.13 Folio Numbers and Double Entry Book-Keeping

2.14 Exercises Set 2.3 - Simple Cash Accounts

2.15 The Bank Account

2.16 Exercises Set 2.4-Simple Bank Accounts

2.17 Nominal Accounts - Accounts That Record Losses and Profits

2.18 'Continuous Balance'Ledger Accounts

2.19 Exercises Set 2.5-Continuous Balance Accounts

2.20 A Page to Test You on the Ledger

3 How Double Entry Book-Keeping Works

3.1 The Double Entry System

3.2 The Original Documents (1)

3.3 The Books of Original Entry (2)

3.4 Posting the Day Books to the Ledger (3)

3.5 The Trial Balance (4)

3.6 Final Accounts - The Trading Account (5a)

3.7 Final Accounts - The Profit and Loss Account (5b)

3.8 The Balance Sheet (5c)

3.9 Computerization of Book-Keeping

4 Subsidiary Books and Original Documents

4.1 Introduction

4.2 The Pattern of Business in an Established Trading Firm

4.3 Documents for Sales and Purchases - The Invoice

4.4 Cash Discounts, Settlement Discounts and Trade Discounts

4.5 The Debit Note - A Document Very Like an Invoice

4.6 Value Added Tax and Invoices

4.7 The Purchases Day Book

4.8 Posting the Purchases Day Book to the Ledger

4.9 Exercises Set 4.1 - The Purchases Day Book

4.10 Invoices for Services - The Expenses Journal or Expenses Day Book

4.11 The Sales Day Book

4.12 Posting the Sales Day Book into the Ledger

4.13 How to 'Carry Forward' from One Page to the Next

4.14 Exercises Set 4.2 - The Sales Day Book

4.15 Documents for Returns - The Credit Note

4.16 The Purchases Returns Book

4.17 Posting the Purchases Returns Book into the Ledger

4.18 Exercises Set 4.3 - The Purchases Returns Book

4.19 The Sales Returns Book

4.20 Posting the Sales Returns Book into the Ledger

4.21 Exercises Set 4.4 - The Sales Returns Book

4.22 Recapitulation

4.23 A Page to Test You on the Journals

4.24 A Page to Test You on Invoices and Debit Notes

4.25 A Page to Test You on Credit Notes

5 Reducing the Work on Day Book Entries

5.1 Saving Work on the Day Books

5.2 Using the Documents Themselves as Day Books

5.3 Slip Systems of Book-Keeping

5.4 Simultaneous Records

5.5 How Book-Keeping Records are Computerized

5.6 Exercises Set 5.1 - Saving Work on the Day Books

6 The Three-Column Cash Book

6.1 Introduction

6.2 Cashiers, Bound Books, and Fidelity Bonds

6.3 Why Have a Three-Column Cash Book?

6.4 Original Documents for the Three-Column Cash Book

6.5 Explanation of the Three-Column Cash Book - Including Contra Entries

6.6 VAT and the Three-Column Cash Book

6.7 Posting the Three-Column Cash Book to the Ledger

6.8 Why Do the Discount Figures, When They are Posted, Not Cross Over to the Other Side?

6.9 Bank Overdrafts

6.10 Exercises Set 6.1 - The Three-Column Cash Book

6.11 A Page to Test You on the Three-Column Cash Book

6.12 A Page to Test You on Statements and Receipts

6.13 A Page to Test You on Discounts

7 The Journal Proper

7.1 Introduction

7.2 Journal Proper Paper

7.3 Journal Entries No. 1 - The Opening Journal Entry

7.4 Exercises Set 7.1 - Opening Journal Entries

7.5 Journal Entries No. 2 - Closing Entries

7.6 Journal Entries No. 3 - Purchases of Assets

7.7 Exercises Set 7.2 - Purchases of Assets

7.8 Journal Entries No. 4 - Depreciation of Assets

7.9 Exercises Set 7.3 - Depreciation of Assets

7.10 Journal Entries No. 5 - The Sale of Worn-out Assets

7.11 Exercises Set 7.4 - The Sale of Worn-Out Assets

7.12 Journal Entries No. 6 - Simple Bad Debts

7.13 Exercises Set 7.5 - Simple Bad Debts

7.14 Journal Entries No. 7 - The Correction of Errors

7.15 Exercises Set 7.6 - The Correction of Errors

7.16 Journal Entries No. 8 - Dishonored Checks

7.17 Exercises Set 7.7 - Dishonored Checks

7.18 Journal Entries No. 9 - Bank Loans, Interest, and Charges

7.19 Exercises Set 7.8 - Bank Loans, Interest, and Charges

7.20 VAT in Cash Takings

7.21 Exercises Set 7.9 - Exercises on VAT in Cash Takings

8 The Columnar Petty Cash Book - Imprest System

8.1 Introduction

8.2 The Imprest System

8.3 Original Documents - The Petty Cash Voucher

8.4 The Columnar Petty Cash Book

8.5 A Page to Test You on the Petty Cash Book

8.6 Exercises Set 8.1 - The Petty Cash Book

9 Book-Keeping to the Trial Balance

9.1 Introduction

9.2 What is Involved in Book-Keeping to the Trial Balance?

9.3 Tidying up the Ledger Accounts and Extracting a Trial Balance

9.4 How to Keep a Sole Trader's Books for One Month and Check for Accuracy

9.5 What to Do if a Trial Balance Does Not Agree

9.6 A Specimen Exercise to the Trial Balance

9.7 Exercises Set 9.1 - Book-Keeping to the Trial Balance

10 Limitations of the Trial Balance: Suspense Accounts and the Correction of Errors

10.1 Introduction

10.2 Errors That the Trial Balance Does Not Disclose

10.3 Suspense Accounts and the Correction of Errors

10.4 A Page to Test You on the Trial Balance

10.5 Exercises Set 10.1. Trial Balances and Suspense Accounts

11 Bank Reconciliation Statements

11.1 Introduction - The Meaning of Reconciliation

11.2 Why Do the Cash Book Figure and the Bank's Figure Disagree?

11.3 How to Draw up a Bank Reconciliation Statement

11.4 Exercises Set 11.1-Bank Reconciliation Statements

12 Analytical or Columnar Day Books

12.1 Introduction

12.2 Columnar Sales and Purchases Rulings

12.3 Posting the Totals of an Analysis Book

12.4 Computerized Analysis of Retail Trade

12.5 Exercises Set 12.1 - Analysis Day Books

13 The Bank Cash Book

13.1 Introduction

13.2 The Principle of the Bank Cash Book

13.3 Layout of the Bank Cash Book

13.4 The Cash Book as a Book of Original Entry

13.5 Exercises Set 13.1 - The Bank Cash Book

14 More about Depreciation

14.1 A 'True and Fair View' of the Assets

14.2 The Equal Installment, or Straight Line, Method

14.3 The Diminishing Balance Method

14.4 The Revaluation Method

14.5 Providing for the Replacement of an Asset

14.6 Leases - A Special Case of the Straight-Line Method

14.7 Exercises Set 14.1 - Depreciation

15 The Wages Book and Wages Systems

15.1 Introduction

15.2 Wages Calculations

15.3 Exercises Set 15.1 - Simple Wages Calculations

15.4 The Traditional Wages Book

15.5 Exercises Set 15.2 - Simple Wages Books

15.6 The Kalamazoo Wages System

15.7 Exercises Set 15.3 - The Kalamazoo Wages System

15.8 Wages and the Bank Giro Credit System

16 Book-Keeping to 'Final Accounts' - Part One: The Trial Balance

16.1 Introduction - What are Final Accounts?

16.2 A Closer Look at the Trial Balance

16.3 Causes of Confusion in the Trial Balance

16.4 Exercises Set 16.1 - The Trial Balance

17 Book-Keeping to 'Final Accounts' - Part Two: The Trading Account

17.1 The Profit on a Simple Transaction

17.2 Final Accounts and Closing Journal Entries

17.3 The True Sales Figure

17.4 The True Purchases Figure

17.5 Finding the Cost of the Sales

17.6 Some Definitions Connected with the Trading Account

17.7 Exercises Set 17.1 - Trading Accounts

18 Book-Keeping to 'Final Accounts' - Part Three: The Profit and Loss Account

18.1 A Revised Trial Balance

18.2 Finding the Net Profit - Stage I: Transferring the Losses

18.3 Finding the Net Profit - Stage II: Transferring the Profits

18.4 Closing the Profit and Loss Account and the Drawings Account

18.5 A Trading and Profit and Loss Account

18.6 Exercises Set 18.1 - Profit and Loss Accounts

19 Book-Keeping to 'Final Accounts' - Part Four: The Balance Sheet

19.1 The Residue of the Trial Balance

19.2 History Makes a Mess of Things - The Balance Sheet Reversed

19.3 The Order of Permanence and the Order of Liquidity

19.4 For Which Type of Business is Each Method Suitable?

19.5 Book-Keeping to Final Accounts

19.6 Exercises Set 19.1 - Simple Final Accounts

20 Capital and Revenue Expenditure and Receipts

20.1 Introduction

20.2 Capital and Revenue Expenditure Defined

20.3 Capital and Revenue Receipts

20.4 The Revenue Account

20.5 The Importance of Distinguishing between the Two Types of Expenditure and Receipts

20.6 The Rules with Capital and Revenue Items

20.7 The Capitalization of Revenue Expenditure

20.8 Revenue Expenses That Show up as Reduced Stock

20.9 Exercises Set 20.1 - Capital and Revenue Expenditure

21 The Valuation of Stock

21.1 Introduction - The Importance of Correct Stock Valuation

21.2 The Basis of Stock Valuation

21.3 Stock Records

21.4 Stock-Taking at the End of the Financial Year

21.5 A Stock Valuation Question

21.6 Delays in Stock-Taking

21.7 Burglaries, Floods and Fires

21.8 Exercises Set 2 1.1 - Stock Valuation

22 Adjustments in Final Accounts

22.1 Introduction - Why are Adjustments Necessary?

22.2 Payments in Advance by the Firm

22.3 Payments in Advance to the Firm

22.4 Exercises Set 22.1 - Payments in Advance

22.5 Accrued Expenses Owed by the Firm

22.6 Accrued Receipts Due to the Firm

22.7 Exercises Set 22.2 - Accrued Expenses and Accrued Receipts

22.8 Exercises Set 22.3 - Final Accounts Exercises with Payments in Advance and Accrued Expenses

22.9 Bad Debts

22.10 Provision for Bad Debts

22.11 What Happens to Provision for Bad Debts in the Next Year?

22.12 Exercises Set 22.4 - Bad Debts and Provision for Bad Debts

22.13 Provisions for Discounts

22.14 Depreciation of Assets

22.15 Goodwill, and Depreciation of Goodwill

22.16 Exercises Set 22.5 - Final Accounts with All Types of Adjustment

23 Partnership Accounts

23.1 Introduction - Why Take a Partner?

23.2 The Partnership Act of 1890

23.3 The Partnership Deed

23.4 The Capital of the Partnership

23.5 The Final Accounts of a Partnership Business

23.6 The Appropriation Account of a Partnership

23.7 Exercises Set 23.1 - The Appropriation Account

23.8 The Current Accounts of the Partners

23.9 Exercises Set 23.2 - Current Accounts of Partners

23.10 The Balance Sheet of a Partnership

23.11 Exercises Set 23.3 - The Final Accounts of Partnerships

24 The Accounts of Clubs and Non-Profit-Making Organizations

24.1 Non-Profit-Making Organizations

24.2 The Cash Book of a Club

24.3 The Receipts and Payments Account

24.4 Exercises Set 24.1 - Receipts and Payments Accounts

24.5 Limitations of the Receipts and Payments Account

24.6 The Accumulated Fund of a Club

24.7 Trading Accounts of Clubs

24.8 The Income and Expenditure Account

24.9 Exercises Set 24.2 - Club Final Accounts

25 The Increased Net-Worth Method of Finding Profits: Single Entry or Incomplete Records

25.1 Introduction

25.2 Profit as an Increase in Net Worth

25.3 Calculating the Profits by the Increased Net-Worth Method

25.4 Adjustments with the Increased Net-Worth Method

25.5 Exercises Set 25.1 - Finding Profits by the Increased Net-Worth Method

25.6 Unsatisfactory aspects of the Increased Net-Worth Method

25.7 Producing a Full Set of Final Accounts from Incomplete Records

25.8 Exercises Set 25.2 - Producing a Full Set of Final Accounts from Incomplete Records

26 Departmental Accounts

26.1 Introduction

26.2 Departmental Accounts - The Basic Figures

26.3 A Set of Departmental Final Accounts

26.4 Exercises Set 26.1 - Departmental Accounts

27 Manufacturing Accounts

27.1 Introduction

27.2 The Vocabulary of Manufacturing Accounts

27.3 The Preparation of Manufacturing Accounts

27.4 Taking Manufacturing Profit into Account

27.5 Break-Even Analysis

27.6 Exercises Set 27.1 - Manufacturing Accounts

28 The Accounts of Limited Companies

28.1 Introduction - What is a Limited Company?

28.2 Special Features of Company Accounts

28.3 The Appropriation Account of a Limited Company

28.4 The Balance Sheet of a Limited Company

28.5 Exercises Set 28.1 - Limited Company Accounts

29 The Interpretation of Final Accounts: Statistical Control Figures

29.1 Introduction - Controlling a Business

29.2 The Gross Profit Percentage

29.3 Gross Profit Percentage on Cost

29.4 Absolute and Relative Changes

29.5 Exercises Set 29.1 - Gross Profit Percentage

29.6 The Net Profit Percentage

29.7 Exercises Set 29.2 - Gross and Net Profit Percentages

29.8 Turnover and Rate of Turnover, or Rate of Stock Turnover

29.9 Exercises Set 29.3 - Rate of Stock Turnover

29.10 Terminology Used in the Interpretation of the Balance Sheet

29.11 Appraising a Balance Sheet

29.12 Cashflow

29.13 Exercises Set 29.4-Balance Sheet Interpretation, and General Questions on the Interpretation of Final Accounts

30 Control Accounts

30.1 Introduction

30.2 The Sub-Division of the Ledger

30.3 Control Accounts - The Basic Idea

30.4 Where Do We Get the Total Figures Tor the Control Accounts?

30.5 A Simple Control Account

30.6 The Accountant Who is Wrong

30.7 Exercises Set 30.1 - Simple Control Accounts

30.8 Contra Entries in Control Accounts

30.9 Exercises Set 30.2 - More Difficult Control Accounts

31 The Amalgamation of Businesses

31.1 Introduction

31.2 Drawing up the Statements of Affairs on Amalgamation

31.3 Amalgamating the Two Businesses

31.4 Exercises Set 31.1 - Amalgamations

32 The Purchase of a Business

32.1 Introduction

32.2 The Purchase Price and the Goodwill Figure

32.3 Opening the Accounts of the New Business

32.4 Exercises Set 32.1 - Purchase of a Business

33 Accounting for Bills of Exchange

33.1 What is a Bill of Exchange?

33.2 The Use of Bills of Exchange

33.3 Recording Bills of Exchange 1 - Recording Bills Payable

33.4 Recording Bills of Exchange 2 - Recording Bills Receivable

33.5 More about Bills Receivable

33.6 Dishonored Bills

33.7 Exercises Set 33.1 - Accounting for Bills of Exchange

34 The Concepts and Principles of Accounting

34.1 The Philosophy of Accounting

34.2 The Concept of Business Entity

34.3 The 'Going Concern' Concept

34.4 The Duality Concept

34.5 Substance and Materiality

34.6 The Objectivity Concept

34.7 The Consistency Concept

34.8 The Prudence Concept in Accounting

34.9 The Accruals Concept

34.10 The Stable-Money Concept

34.11 The Distinction between Capital and Revenue Expenditure

34.12 Exercises Set 34.1 - The Concepts and Principles of Accounting

34.13 Conclusion about Double-Entry Book-Keeping

Answer Section

Index