Cash in Office $575.00 Bank 8,750.00 Accounts Receivable 8,871.00 Bills Receivable 5,000.00 Inventory (Jan. 1) 12,500.00 Furniture and Fixtures 2,250.00 Bills Payable $4,000.00 Accounts Payable 3,325.00 Capital Stock $25,000.00 Purchases $6,750.00 Sales 15,000.00 Advertising 960.00 Salesmen's Salaries 450.00 Traveling Expense 190.00 Office Expense 46.50 Office Salaries 225.00 General Expense 34.20 Rent 175.00 Taxes and Insurance 21.30 Discounts Allowed 47.90 Interest Paid 33.10 Interest and Discount Earned 54.00 Administrative Salaries 500.00 On Feb. 1st the inventory shows a decrease of $3,500.00. A reserve of 3% on accounts receivable is to be created to provide for uncollectible accounts. To make these adjustments the following journal entries will be required: Trading _a/c_ 3,500.00 To Inventory 3,500.00 Decrease in Inventory A study of this entry will show that the result is the same if we make up the trading account by using purchases and adding or subtracting the decrease or increase in inventory, or if the preceding inventory is added and present inventory is deducted. The result in either case is the turnover and the above entry makes the necessary adjustment in the inventory account without closing the account through the trading account. The entry for the reserve for uncollectible accounts is Profit and Loss 266.13 To Reserves 266.13 Reserve of 3% to provide for uncollectible accounts. At the end of the next month this account will be adjusted by charging or crediting the amount necessary to maintain the total at the desired percentage of accounts receivable. [Illustration: UNDERWOOD TYPEWRITERS USED IN MELBOURNE UNIVERSITY COMMERCIAL EXAMINATIONS ] [Illustration: Ledger with Accounts Classified ] [Illustration: Ledger with Accounts Classified ] [Illustration: Ledger with Accounts Classified ] [Illustration: Ledger with Accounts Classified ] [Illustration: Ledger with Accounts Classified ] REVERSE OR SLIP POSTING