Rules for posting of entries in the ledger

Rules for posting of entries in the ledger.It has been noticed that our Ledger is used but once a month or whenever our books are closed. At this time, each account in the ledger is brought down to date by entering the results obtained by summarizing the accounts contained in the subsidiary books. This operation is called “posting” and will be discussed with reference to each of the foregoing accounts. It will be assumed, in each case, that the balance from the previous month has been brought down correctly.

It will be of great assistance to remember that any account in the General Ledger represents one of the following:—

• 1. An asset; (Resource).
• 2. A liability.
• 3. A Loss.
• 4. A Profit or Gain.

a. Every account showing a debit balance is either an asset or a loss; a “Personal” account showing a debit balance is an asset, an “expense” account showing a debit balance is a loss.

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b. Every account showing a credit balance is either a liability or a profit; a “personal” account showing a credit balance is a liability (something we owe), any sales account showing a credit balance is a profit.

1. Post Exchange Account. Another name for this account is “Net Worth”, or, if the Exchange is out of debt, “Surplus”. It is important that the status of this account be shown on every monthly statement exhibited to the Exchange Council. It is debited at the beginning of the month with the net worth of the Exchange on that date. Credit it with such decreases and debit it with such increases as will be shown on the “Surplus and Adjustment Schedule” on Form 32 and discussed in connection therewith.

2. Bills Receivable, Notes. Debit this account for the amount owed by any organization to the Exchange for Entrance fees, etc., and credit it via the cash book with the amount of payments received from such organizations.

3. Bills Receivable, Charge Accounts. Debit this account, as before described, with the total amount of charge sales made during the month, which amount is obtained from the Charge Accounts book. Credit this account with the total of the “Customers” column on the debit side of the cash book and also with the total of the “Credit” column in the Charge Accounts book.

4. Bills Receivable, Credit Coupons. This account has been exhaustively discussed under “Coupons”.

5. Bills Receivable, Enlisted Men’s Laundry. Debit this account at the end of the month with the gross amount of laundry bills contracted by enlisted men during the month. Credit it with the total of the cash book (debit) column in which are entered the payments by enlisted men for laundry work done. Also credit this account with whatever credits have been allowed for overcharges, damages, etc., these amounts also being charged (debited) against the Laundry account.

6. Check Account. See note under paragraph 4 above.

7. Bills Payable, Merchandise. Debit this account with balance due creditors on 1st of the month and with Cr. Purchase column of Purchase Record. Credit it with amount of creditors column in cash book, and with total of Dr. Purchase column of Purchase Record.

8. Exchange Building. If built and owned by the Government, this item is not an asset of the Exchange. If the building belongs to the Exchange, we debit this account with all amounts spent upon it for additions[76] of any kind, but not for repairs, renewals, painting, etc. Credit this account with all depreciation voted by the Post Exchange Council, and debit this amount against the Depreciation Account.

9. Laundry Building. Same as preceding.

10. Exchange Fixtures. Debit this account through the cash book with the amount of all new fixtures purchased; credit it with the amount of depreciation voted by the Exchange Council, as before explained, also, with the book value of all fixtures scrapped or otherwise disposed of. When an article is merely replaced by a newly purchased one, it is proper to make no change in the value of our fixtures, but charge the whole purchase price against maintenance. The same applies to cost of repairs.

11. Laundry Fixtures. Same as preceding.

12. Laundry. This is a live account against which are charged (debited):—

This account is credited with:—

The balance, showing gross loss or gain, is transferred to the Profit and Loss Account.

13. Store. This and all other departmental accounts should be[77] handled in the manner described in the preceding paragraph except they should receive credit for all coupon and cash sales made during the month.

14. Interest and Discount. Credit this account with the total of the Discount column on the credit side of the cash book; this anomaly being only apparent, not real. Credit, also, the total of the Interest and Discount column on the debit side of the cash book and debit the total of the Interest and Discount column found on the credit side of the cash book.

15. Insurance. Debit this account, through the cash book, with all premiums paid out, at the time they are paid. Credit this account monthly with the monthly share of such premium or premiums, and debit them against Post Exchange. The effect of this method is to show the unexpired policies as assets, as they should be. There can be no doubt that an unexpired policy is an asset, nor is there any question about the propriety of showing the value of this asset by deducting the appropriate amount monthly. The practice of some exchanges of writing such assets off the books immediately upon payment of premiums is not sound.

16. Fuel and Lights. Debit this account through the cash book with all amounts paid out for these items, provided they cannot be properly apportioned to the various departments.

17. Freight and Express. Same as preceding, except that all such charges on incoming merchandise should be charged to the goods in question, just as if they cost us that much more. “Out” freight, etc., is a legitimate charge against this account.

18. Printing and Stationery. Same remarks as under 16.

19. Telephone and Telegraph. Same as under 16.

20. General Expense. Debit this account with all items of expense that cannot properly be placed under one of the other expense accounts.

21. Depreciation. Debit this account with the total amount of depreciation voted by the Council, and as this entails a corresponding credit elsewhere in the ledger, the respective accounts affected must be credited to a corresponding amount. When the books are closed, the balance of this account is transferred to Profit and Loss by crediting Depreciation and debiting the latter account. This Depreciation account can be eliminated entirely, if desired, by crediting Exchange Fixtures or what not with the amount of depreciation decreed by the Council and debiting this amount straight against Post Exchange. This is the usual method.

22. Lost Accounts. Debit this account with all bad debts which we have decided we cannot collect. This, of course, necessitates a corresponding[78] credit entry in some other account, such as Bills Receivable Credit Coupons or Charge Accounts, etc., as the case may be. When the books are closed, this account is balanced and transferred to Profit and Loss, as explained in 21. If any of these accounts are afterwards collected, we must credit this account, via the cash book, with the proper amounts.

23. Athletics. Credit this account with all amounts voted by the Exchange Council for the support of athletics and charge or debit the same amount against Post Exchange (Account No. 1, above). At the end of each month, pick out of the Appropriations column on the credit side of the cash book, all amounts which were spent for athletics during the month and debit them to this account. The credit balance of this account is a liability against the Exchange.

24. Dividends. Credit this account with the amount of dividends declared by the Council and debit the same amount against Post Exchange account. Debit this account with all dividends paid to organizations. If the dividends have not been paid out by the end of the month, they will show up in this account as a credit balance, a liability against the Exchange; if they have been paid, there will be no balance left to this account.

25. Sick in Hospital. Same as preceding.

26. Regimental Fund. Same as 24.

27. Wages. It will be remembered that each department was debited with its share of all labor charges incurred during the month. These “accrued wages” are credited to this account in the Ledger. Debit this account with the total of the Labor column on the credit side of the cash book. Any credit balance remaining (as when part of the pay due an employee is held back) is a liability against the Exchange.

28. Profit and Loss. This account is ordinarily posted only upon closing the books. To this account, we post the balances of all those Ledger accounts which show a profit or a loss to the Exchange. These include all departmental accounts and also accounts numbered 14 to 29, inclusive, except Nos. 15, 21, 23, 24, 25, 26 and No. 28, which is now under discussion. Remember that each of these accounts which shows a debit balance is a loss and each that shows a credit balance is a profit or gain. After all of these accounts have been balanced and brought into Profit and Loss, the latter is balanced and the balance transferred to Post Exchange. Before this last named operation is performed, however, a trial balance should be taken, because, for reasons before explained, the books will never[79] balance to the cent, and the entry of a small item, usually “income not otherwise accounted for,” is necessary in this account before the books will balance.

29. Maintenance. This is really in the nature of an expense account and we should debit it with the amounts shown on the credit side of the cash book as paid out on this account. Credit this account for such items as can be and are debited against any of the departments (see 12 d); credit this account for the balance remaining at the end of the month and charge same against Profit and Loss.

Balancing the Ledger.

It has been stated above, that all “Expense” accounts are balanced monthly and posted to Profit and Loss, and that after a trial balance has proved the Ledger to be in balance, the balance of the Profit and Loss account is transferred to the “Post Exchange” account. The remaining accounts, Nos. 1-11, inclusive, etc., represent assets and liabilities and are not transferred at all, although they are balanced every month.

We now come to the book-keepers’ bug-a-boo, the “Trial Balance”. This is a simple thing (to describe), consisting merely going through our ledger, taking the total of all the totals on the credit side of all our ledger accounts and seeing if this equals the total of all the totals on the debit side. If these totals do not agree, the book-keeper must run down the error and correct it. There are no rules for this procedure that would be of practical benefit. This trial balance does not necessarily mean that the ledger is correct, it simply proves that for every debit item entered a corresponding credit entry has been made; it does not prove that these entries have been made in the proper accounts.

A sample trial balance sheet, worked out by Mr. Parker, cashier of the Fort Slocum Exchange, is shown herewith.

After the ledger is balanced, we proceed to get out our monthly statement. If it is a case of an inspector, we can get all the data he needs by simply taking our statements since his last visit and combining the results shown by same.

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