Morris tribune., 1888-03-07
THE BALANCE SHEET.
HOW T1E BUSINESS MAN FIGURES
His PROFIT AND Loss.

III ~
Informatlon Tor Those who Haven't Any
knowledge of Accounts by One Who
Knows--Meaning of Taking stock"
Gains and Losses-Assets.
Most business men keep their affairs
well enough in hand to be able to tell at
any time about what they are doing, but
they all depend upon the balance sheet at
the close of the year to show the exact
condition of the business. Indeed, there
is no other means of ascertaining It, TOR
even the most careful estimates made DUR
ing the year are often misleading, partic-
ularly where The interests are large and
the details varied.
But what is the balance sheet, and how
does IL show the merchant what he has
made or lost? The question Is not un-
timely. for every properly conducted bush
ness house in the country is now getting
things in shape for the preparation OF this
important statement. A brief and simple
explanation of it and the proper method
Of makirg it may be of interest to those
who have no knowledge of accounts, and
even those who have such knowledge may
find suggestion here and there which
can be turned to advantage.
- MEANING OF taking STOCK"
A prime condition Of the balance sheet
is to know exactly the value OF the goods
on hand on the last day Of the year. This
is found out by taking stock, " as the
merchants call it, that is to say, a COM
plete inventory is made of all the goods in
stock at the prices paid for them when
purchased, or at their present market
prices il there has been any change. For
example, lot of goods that cost $4,000
three months ago may be worth 81, 500 to-
| day; if SO, they should be inventoried at the
latter price, and the appreciated value is az
| legitimate profit to the merchant as If he
| had sold them at that figure. On the
contrary, If they have deprecated In
| value, the depreciation would be loss.
/ The entire stock, then, must be taken at
| its present market value.
In the meantime the bookkeeper has
| been getting his books in shape. He car
ries into the ledger every item from the
original books of entry and then takes OF
4 a trial balance to see whether his work
i has been correctly done. By the double
entry system of bookkeeping, the onlJ
correct method, the sum of the debts
must equal the sum of the credits, and
/ the trial balance is made out to prove
this. He goes through the ledger and
finds the difference between the debit and
credit side of every account, and having
made 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; il
they do not agree there are errors which
must be found before further progress car
be made.
GROSS GAINS OR LOSSES.
The work having been verified the mex
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 or goods dealt in
All goods purchased are charged to thii
account, and goods sold are credited to it
: AS its debit. side shows the amount d
money paid for the goods and its. credi
side the amount received for what ha!
been sold, it is evident that the gains o.
losses can be ascertained by adding til,
stock on hand to the credit side and thel
: taking the difference between the two
If the balance is on the credit side ther,
is a gain; if on the debit side there is
loss. The bookkeeper, therefore, enter,
directly on the credit side of merchandis,
account in the ledger the amount of tn,
goods on, hand. If there is credit bal
ance, he carries it to the credit of prof
and loss; if debit balance, he carries 4
to debit of profit and loss. But, as h
entered the stock on hand to the credit o
merchandise directly ON the face of tn,
ledger he must bring the same amour
down ON the debit side of that account q
the stock with which the new year starts
Having reached this point in his worl
he has only to charge up to profit and los
the various expense accounts to ascertain
the net gain or loss, and he is then read.
to make out the balance sheet. The fol
lowing will be the form if gain has beef
made Merchandise credit and stock OF
hand; from the sum of these subtract tn,
merchandise debits-the differences viii
represent the gross gains; the various ex
l.ense accounts, the sum of them to b.
subl-~acted from the gross gains-the re
mainder viii show the net gains. Thel
should folssaW o statement OF the asset
and liabilities, the former consisting o
cash on hand, stock on hand and the note
and accounts owing by others. The exces
of the assets over the liabilities will be tn
amount of the net gains. If o loss ha
been made the balance sheet is drawn u
substantially the same way, the only diff
ference being a change in the order OF set
ting down the items. In this case the liza
bilities will exceed the assets by tn
amount of the net loss.
The balance sheet, then, is simply an alb
stract of the ledger accounts, showing in
condensed form the condition of the bust
ness to cent Bookkeeper" in Phila