CREDIT BALANCES Proprietor (Investment) 2,500.00 Bills Payable 2,000.00 Sundry Accounts Payable 1,761.60 Sales 6,913.65 -------- $13,175.25 The inventory at the end of the year was $4,962.30; at the beginning of the year, there was no merchandise in stock. The books are to be closed into trading and profit and loss, and a balance sheet prepared. When closing the books, all entries necessary to adjust the balances of ledger accounts should be made through the journal. When an audit is made, it is difficult to trace the entries unless they are plainly stated in one group, which is provided when they are made in the journal. The making of entries in the ledger directly, also increases the opportunity for fraudulent entries. _Never make original entries in the ledger._ EXAMPLE FOR PRACTICE From the following trial balance prepare trading account; profit and loss account; and balance sheet. TRIAL BALANCE Proprietor (Investment) $7,600.00 Bills Payable 4,000.00 Accounts Payable 1,470.00 Bank $1,262.84 Accounts Receivable 2,693.11 Bills Receivable 4,360.00 Merchandise Inventory 6,277.76 Furniture and Fixtures 750.00 Purchases 7,105.78 Expense 1,416.30 Discount on Sales 112.65 Interest 44.20 Sales 10,985.70 Cash 121.46 ---------- ---------- $24,099.90 $24,099.90 Inventory at end of year $6,493.06. [Illustration] [Illustration] [Illustration] [Illustration] [Illustration: CASHIER TERMINAL, LAMSON MOTOR-DRIVEN CABLE CASH CARRYING SYSTEM FOR DRY GOODS, GENERAL, OR DEPARTMENT STORES Lamson Consolidated Store Service Co.] JOURNALIZING NOTES =85.= When a note is received by us or we give our note to another, it is necessary to make a journal entry in order that there may be a proper record of the transaction on our books. Careful study is sometimes necessary to determine just how the entry should be made, and the following illustrations will serve as a guide. =86. When Received.= When we receive a note, we debit bills receivable and credit the maker--that is, the person who gives us the note. We receive a note from Samuel Smart for $100.00 payable in 30 days. The journal entry is: Bills Receivable $100.00 Samuel Smart $100.00 30-day note dated Sept. 10 =87. When Paid.= When this note is paid, we debit cash and credit bills receivable. The entry is made in the cash book on the debit side which debits cash and credits bills receivable.