Here are your short notes on maintaining journal and the ledger

Two books, the journal and the ledger, are sufficient to keep the accounts of a commercial house whose general busi­ness consists of the purchase and sale of goods, to which is generally added a waste book.

The former of such books is a complete record of all the transactions of the firm, chronologically, distinctly, and technically entered from the waste-book, to be after­wards posted to the respective accounts in the ledger.

To this end each account in the ledger bears on the head-line the name of the concern it refers to, and the abbreviations Dr. and Cr. on each of the two line-ends, over the columns for pounds, shillings, and pence; Dr. on the left-hand page, Cr. on the right.

The entries on the debit side are prefaced by the preposi­tion To, meaning Debtor to ; those on the credit side by the preposition By, meaning Creditor by. The page of the journal wherein the original entry was made is usually recorded on the opposite margin, in a special column next to the date.

Every entry in the journal admits only of the debtor form; that is, it begins with the name of the concern representing the receiver, and describes it as a debtor towards the delivering one.

Thus, for in­stance, goods sold for cash are entered as Cash Dr. to Goods, followed, if required, by the particulars of the operation, which are technically called the narration.

The same amount will then be posted in the ledger on the debtor side of the cash account and on the cre­ditor side of the goods account; the record of this, as of any other transaction, would thus be complete.

The number of subordinate books depends on the particular nature of the business of a firm, and on their peculiar way of keeping accounts.

The most commonly used in the counting-houses of English merchants are : the cash book for all cash transactions, to which a petty cash book is usually annexed, as an account of small expenses and disbursements, the amount of which is carried over monthly to the Cash book ; a bought day book or invoice book for credit pur­chases, and a sold day book or sales book for credit sales; the stock book, containing a record of periodical inven­tories ; the bills receivable book and the bills payable book, sometimes joined into one bill book for descriptive particulars of bills.

The ledger is posted directly from these, the journal being used to arrange the totals. In the private ledger are kept property accounts, profit and loss accounts, and proprietors’ accounts.

Auxiliary Books.-

Other auxiliary books are also used for the sake of mere information, being, therefore, quite independent of the book-keeping department.

Among such books are: the letter book, containing copies of all letters sent out by the house; the order book, wherein all orders and commissions received by the house are registered; the debenture book, being a note of all drawbacks to be cashed from the Custom­house; the information book, that is, a memorandum of notes regarding customers or agents, to which the merchant refers for his guidance in granting credit.

The particular branch of trade carried on by a firm may still require the use of other books not mentioned here, which, however, cannot be considered as belong­ing to the usual set.

Other Systems.-

Although the above traced order of entries and postings, viz.: from the waste book to the journal and from the journal to the ledger, is sometimes still followed by book-keepers, it admits of some variations still based on the principle of double entry.

Some of such variations are advocated by experienced teachers, and adopted, no doubt, by a good many; since the British merchant is left by law perfectly free to keep his accounts and record the transactions of his house, in such books and according to such system, as he deems the most suitable to his line of business.

It is worth mentioning, for instance, that some do not use a waste book at all, but enter their transactions directly into the subordinate books, thence to the ledger and in totals to the journal, wherein they also record such operations as, being out of the regular course of their business, would not find a proper place in any of the subordinate books.

Others do away with the journal, posting from the waste look into the ledger, keeping besides a petty journal for the record of transactions not belonging to any of the accounts kept in the subordinate books. Many houses use the single entry system for the ordinary trade ledgers, etc., compiling a journal and ledger for private purposes from the totals, and dealing with the total only in the double entry books. This is done in large houses, and where there are branches doing retail trade.

No distinct narration is strictly necessary for posting into the ledger, be it from the journal or from any of the subordinate books; the creditor’s or debtor’s name and the amount being sufficient for the regularity and exactness of the record.

The accounts in the ledger are closed by ascertaining the difference existing be­tween the totals of the debit and credit entries of each of them, and entering such a difference to balance on the debit side, or by balance on the credit side, accord­ing to the case, which is called : the closing equalizing entry.

Trial Balance, –

When there are not many ac­counts, this is a most effective check on the correct­ness of the entries and postings. It is an index of all ledger accounts with their Dr. and Cr. totals.

The sums of the two columns must agree with each other, and jointly with the total in the journal, or with the totals in the subordinate books, provided all the entries have been correctly posted and summed up.

Balance-sheet.-

The financial standing of a firm is found out by a balance of the accounts, and making out a balance-sheet.

A balance-sheet is a general statement of all the assets and liabilities of the house. The former are repre­sented by the value of property in hand, viz.: estates, money, bills receivable, furniture, goods,- etc. (which is ascertained by taking stock, upon the accuracy of which, and honest and capable valuation thereof, the value of the balance-sheet depends), together with the money due to the firm by sundry debtors ; the latter consist of such sums as are still due by the house on outstanding accounts or bills payable.

With such an enumeration of the assets and liabilities, the journal usually opens at the beginning of every year, the former being entered: sundries to capital; the latter: capital to sundries. The difference between the two amounts represents the net capital of the house.