The Daily times. [volume] (Richmond, Va.) 1886-1889, 1888-01-31
THE BALANCE SHEET.
HOW THE BUSINESS MAI FIGURES
HIS PROFIT AND LOSS.
Information for Those who ha'eh' my
knowledge OF Accounts by ""' """
Koovs-,Jcaning of Taking stock
Gains and Losses tsset-'

Nuo,,I.aoe of Accounts by One VINO
x,o,xs-Neaning of Taking stock"
Gains and Losses-hssets.
Mos, bnsiuess men keep their AFFAIRS
well enough in hand TO be aDle 10 Ten d.
any time about what they are doins, ou.
they all depend upon the balance sheet at
the close Of the year TO show inc cAdco
condition of the business. Indeed 'hcre
il no other means Of a.certainlng II. lor
even the most careful estimates made DUR
inc the year are often misleading, partic-
ularly where the interests are large ana
the details varied.
But WIN, is the balance sheet, ana how
does it show the merchant what ne mas
made or lost? The question 'i no5 IN
timely. for every properly conducted bns'-
ness house IN the country Is now geluhS
things in shape for the preparation oil tils
imnortant statement. 4 brief and simple
exclamation of il and the proper method
of making il may be OF interest to those
who have no knowledge Of accounts, ana
even those who have such knowledge may
find n suggestion here and there which
can be turned TO advantage.
MEANING or "TAEINc sTocK.'
4 prime condition Of the balance sheet
IL to know exactly the value Of the goods
ON hand on the last day Of the year. inns
is found out by taking stock, as the
merchants call il. that IL to say, com
plcte inventory is made of all the goods IN
stock at the prices paid for them when
purchased. or at their present market
prices If there has been any change. For
example. n lot of goods that cost S2,0OO
three months ago may be worth -, 5O0 to-
dav: if so. they should be inyentoried at the
Later price, and the appreciated value Is as
leritinate a profit TO the merchant rs If he
had sold them mt that figure. On the
contrary. if they have deprecated in
value, the depreciation would be n loss.
The entire stock, them must be taken at
its present market value.
In the meantime the bookkeeper has
been getting his books in shape. He car
res into the ledger every item from the
original books Of entry and then takes OFF
n trial balance" to see whether his work
has been correctly done. BY the double
entry system Of bookkeeping, the only
correct method, The sum of the debts
must equal the sum Of the credits, and
the trial balance is made out to prove
this. lie goes through the ledger and
finds the difference between the debit and
credit side of every account, and having
made n complete list Of the accounts, he
sets down opposite TO each one its bal
ance as shown by the ledger, putting the
debts in one column and the credits in an
other. If the work has been correctly
done these columns will agree exactly: If
they do not agree there are errors which
must be found before further progress can
he made
GROSS GAINS OR LOSSES.
The work having been verified the next
step is to find out the gross gains or losses.
There is an account on every ledger, gen
orally called merchandise" which rep
resents the commodity OF goods dealt in
All goods purchased are charged to this
account, and goods sold are credited to it.
As its debit side shows the amount of
money paid for the goods and its credit
side the amount received for what has
been sold, !. is evident that the gains or
losses can be ascertained by adding the
stock on hand to the credit side and then
taking the difference between the two.
If the balance is on the credit side there
is gain; if on the debit side there is a
loss The bOOkkeeper therefore, enters
directly on the credit side of merchandise
account in the ledger the amount of the
goods on hand. If there is a credit bal
ance he carries it to the credit of profit
and loss; if q debit balance he carries it
10 debit of profit and loss. But, as he
entered the stock on hand 10 the credit Of
merchandise directly on the face of the
ledger, he must bring the same amount
down on the debit side of that account as
the stock with which the new year starts
Having reached this point in his work
he has only TO charge up 70 profit and loss
the various expense accounts To ascertain
the net gain or loss, and he is then ready
10 make ont the balance sheet. The fol-
lowing will be the form if "A gain has been
made: Merchandise credit and stock on
hand: from the sum of these subtract the
merchandise debits--thc differences will
represent the gross gains; the various ex-
pense accounts. the sum of them TO be
subtracted from the gross gains-the re-
mainder will show the net gains. Then
should follow statement of the assets
and liabilities, the former consisting OF
cash on hand, stock on hand and the notes
and accounts owing by others. The excess
Of the assets over the liabilities will be The
amount of the net gains. If a loss has
been made the balance sheet is drawn up
substantially the same way, the only diff
ference being change in the order of set
ting down the items. In ihis case the La
bilities will exceed the assets by the
amount of the net loss
The balance sheet, then, is simply an alb
stract of the ledger accounts, showing in a
condensed form the condition of the bust
ness TO a cent ookkeeper' in Phila-
delphia Times.
furions pasSov.r Custo,,