CHAPTER XII

THE GENERAL LEDGER

ACCOUNT GROUPS AND JOURNAL ENTRIES

Description

The accounts carried in this ledger are either the general accounts, or those controlling the subsidiary accounting ledgers and the individual cost ledgers. The general accounts include expense and income accounts, capital, profit and loss, cash, and other miscellaneous asset and liability accounts.

A loose-leaf ledger has many advantages. Such a ledger' is recommended provided that it can be taken to court, supported by proof that the sheets contained therein are original sheets, without substitution or omission of sheets.

Control of Loose-Leaf Sheets

Proof of the originality and completeness of sheets can be obtained by having the printer stamp and number them in the upper left-hand corner with the same kind of distinctive symbol as is used in loose-leaf minute books.

The identification marks on the special sheets are listed on a control sheet as soon as the sheets are received from the printer. All unused sheets are kept in the binder. Each sheet is accounted for when used by indicating on the control sheet the number of the account of which it forms a part. A system of numbering accounts is given below. A lock should be placed on the ledger. The printer's bill will act as the check on the number of loose-leaf sheets which are to be accounted for by the control sheet.

Systematization of Accounts

The general theory of systematization of accounts can be more readily followed when a loose-leaf ledger is used. The ledger accounts are divided into a few groups such as cash group, accounts receivable group, accounts payable group, expense and income group, etc. A prefix letter is given to each group. An index sheet for each group is used for a record of the accounts, which are then listed and numbered in the order in which they are opened.

The accounts in the cash group could be numbered C-1, C-2, etc., and those in the accounts payable group, AP-1, AP-2, etc.

This systematization of accounts is an aid when closing accounts for a fiscal period and when preparing balance sheets.

Posting Sources

Postings to the accounts in this ledger are made exclusively from the cash book, the journal, and the purchase register summary. The sources from which the postings to individual accounts are taken is indicated by the pro forma accounts given in the next chapter.

Outline of Discussion

The treatment which has been adopted in this and the following chapter as the basis of discussing the accounts in this ledger will aid the reader to grasp more quickly and understand more thoroughly the accounts and their correlation, and will be as follows:

I. To give a brief description of each account.

2. To express certain transactions in journal-entry form.

3. To set up pro forma accounts to which the entries are posted.

4. To complete the pro forma accounts by illustrating other entries usually appearing in them.

5. To indicate the meaning of the entries in, and the balance of, each pro forma account.

Grouping of Accounts

The accounts are divided into the following groups: Cash, Accounts Receivable, Construction, Securities, Equipment, Accounts Payable, Capital, Profit and Loss, and Procedure Controlling.

CASH GROUP

Cash Account-Total of balance in all banks.

Office Impressed Fund-Petty cash fund in office.

Job Impressed Fund-Separate account for fund on each job, or at the yard.

ACCOUNTS RECEIVABLE GROUP

Owners' Controlling-Debited with total of bills rendered to all owners and credited with payments made by them; controls the owners' contract ledger.

Accounts Receivable Controlling and Accounts Receivable Accrued Controlling-Control accounts receivable ledger.

Deposit Account-Deposits on plans, and on construction permits subject to adjustment.

Unadjusted Permit Deposit-Controls unadjusted deposits for construction permits.

Notes Receivable-Controls notes receivable record.

Notes Receivable Discounted-Controls contingent liability on notes receivable discounted.

Interest on Notes Receivable Discounted-Contains interest on notes discounted.

Doubtful Accounts Controlling-Controls amounts which have been charged off as uncollectible and suspense ledger.

CONSTRUCTION GROUP

Construction Accounts-Separate account for each job, containing : 1. Cost of construction

2. Amount billed owner

3. Profit or loss.

Construction Expense-Expenditures for construction not chargeable to owners under cost-plus contracts (separate account for each contract affected).

Cost of Finishing Closed Contracts-Allowances for construction charges (on physically completed contracts) not entered on ledger when profit is determined.

SECURITIES GROUP

Securities Investment-Stock exchange or other securities purchased in open market.

This form is part of the "De Luxe" loose-leaf systems and can be purchased at stationers.

Securities Temporarily Held-Securities taken in part payment of contracts with owners, but which are to be sold to others. Stocks, Bonds, and Mortgages-Securities taken in part payment of contracts with owners and to be retained by contractor. Stock, Bond, and Mortgage Price Adjustment-Adjustment of difference between par value and real value of stocks, etc. Note: Securities ledger contains details of first, second, and third accounts. The securities ledger sheet is as per Form 23.

EQUIPMENT INVENTORY GROUP

Power Equipment-Rental equipment in store yard and on operations-separate account for each place where equipment is located.

Tools-Inventory of tools in yard at beginning of fiscal year, plus purchases, less sales.

Lumber-Inventory of lumber in yard at beginning of fiscal year, plus purchases, less sales.

Perishable Equipment—Inventory of perishable equipment in yard at beginning of fiscal year, plus purchases, less sales. Automobiles-Inventory of automobiles in yard at beginning of fiscal year, plus purchases, less sales.

Inventories-All annual inventories (used for annual closing only). Inventories Price Adjustment-Adjustment of prices on inventories (used for annual closing only).

Equipment Price Adjustment-Adjustment of prices on equipment (used throughout fiscal period). Earned rentals on equipment, difference between purchase and inventory prices of new equipment, value equipment salvaged.

Automobile Price Adjustment-Adjustment of prices on automobiles and trucks (used throughout fiscal period).

Note: Tools and lumber comprise the general equipment class mentioned in Chapter VII.

ACCOUNTS PAYABLE GROUP

Creditors' Controlling-Controls creditors' ledger containing accounts with supply houses, material men, etc.

Subcontractors' Controlling-Controls subcontractors' ledgers containing accounts with subcontractors.

Notes Payable-Bank loans.

Taxes

Separate accounts for the accrual of different tax liabilities. Titles of officials to whom taxes are payable are preferably used as ledger titles.

Dividends Payable-Liability for dividends declared but unpaid. CAPITAL GROUP

Capital Stock-Amount paid in on capital stock, separate accounts for each class of stock.

Branch Office Capital-Accounts with each branch office for capital advances-Minor transactions appear in current accounts with each office.