transferred to general profit and loss account. The same is done if a loss is shown.

Selling the Goods.

We are now ready for the selling of the goods. Department C takes them over and they of course constitute a debit in its departmental stock account in the departmental ledger. In Department C's ledger the stock account is opened as soon as the department begins to take over goods from other departments. Credit entries will be made in this account as the goods in stock are drawn off for sale to the public. Of course other accounts will be entered in this ledger. There will necessarily be a wages account and a rent account, for the use of the premises used as sales rooms, which is debited with the outlay for rent. Expenditures for advertising will be debited to an advertising account which will be written up from some record showing the space used in various advertising media. An account corresponding to the production account but which may be called sales account will be raised. The entries on the debit side of this sales account will be all of the credit entries that have been made in the various outlay accounts as rent, wages, advertising, etc., etc. On the credit side will appear the actual cash values of the goods as they are parted with. We may now turn to the general ledger once more. On the debit side of Department C's accounts have been entered the actual total cash outlays as they have been made in behalf of Department C. These outlays have of course given rise to corresponding credits in general cash account as the money was parted with. The credit side of Department C's departmental account can be written up from day to day, week to week, or month to month as is desired. The credit entries are the goods which have been supplied by Department C to the general public, that is to say, which have been parted with by it. The account is completed and balanced in exactly the same way as those of

B-VIII-8

Departments A and B. Here however is an additional problem. The goods parted with by Department C are not turned over to another department as was done by Departments A and B but are sold to the outside public which pays for them in cash or gets them on credit. As fast therefore as credit entries are made in Department C's departmental sales account in its departmental ledger, corresponding entries are made on the debit side of general cash or bank account because cash has been received or checks deposited as they have come in from the general public in payment for the goods. If the public has not paid in cash or checks but has obtained the goods on credit, personal accounts are opened. These belong to the general ledger and not to the accounting system of Department C. Department C deals only with the operation of selling. The general accounting system takes charge of what is obtained from this operation of selling whether it be cash, bank credits or claims against individuals. It is clear that the departmental sales account of Department C will, if the business has been successfully carried on, show a balance on the credit side which is transferred to profit and loss as a profit. It has been preceded there by the profits shown by Departments A and B which were described as "technical." They were "technical" simply because they were made at the expense of the business itself. That is to say if Departments A and B had turned their output over to C at exact cost as measured by outlay the whole profit would have been made by Department C and would have been equal to the difference between the final cost of the goods and the amount finally realized for them. The profit made by Department C is smaller, in proportion as technical profits have been made by A and B, but inasmuch as these elements of profit are all united on the credit side of profit and loss in the general ledger the result so far as the general business is concerned is the same. The results of the ac

counting as shown in the manufacturing and trading accounts and through them in profit and loss are illustrated below.

Contents of General Ledger.

What is left under these conditions for the general ledger? We had the capital and cash accounts to start with, bank account and the like. There will also be the departmental profit and loss accounts which gather the results of A, B and C. The relation of the several production accounts or manufacturing accounts or sales or trading accounts found in the several departments and carried by each in its special ledger (or if the bookkeeping is all done in one ledger, then in the general ledger), is thus obvious. These accounts are ultimately of the same kind that were studied in connection with the trading account of retail business. They are accounts showing gross results of business operations, that is to say, they supply the information for the preparation of profit and loss account. They have grouped on their respective debit sides the current special expenses incurred in manufacturing and on their respective credit sides the income from manufacturing, packing, selling, or whatnot, or they may merely show the balances drawn from the several departmental ledgers. They thus furnish when summarized the materials for a final profit and loss account or at least for preliminary work toward such a profit and loss account. As a result of the working out of these trading accounts it would be possible to carry to profit and loss, statements no entry because these were carried at cost of manu

In this case

facture.

showing the expenses of manufacture incurred in Department A and the value of product turned out in Department A, while the same is done for Department B and in the case of Department C in our illustration the expenses show on the debit side while the income from sales shows on the credit side, such income having of course been debited, as received, to general cash account. In the general ledger, also, will be found the personal accounts of those individuals who have had dealings with the firm by taking its finished product. If instead of paying cash for machinery, supplies, etc., for the several departments these items were obtained on credit, there would be personal accounts with the individuals who supplied them. Beside these there will be accounts with all those expenses which are not capable of analysis and distribution to the several departments. An example of such expenses might be found in the case of the salary of the president of the concern. If it were deemed possible to apportion this salary in equal amounts to the different departments, it might when paid be entered as a debit in due proportion to the departmental accounts. This would of course give rise to a corresponding entry either in the wages account of the department (debit) or a debit entry in some account specially raised for the purpose, as, for example, "managerial expenses." It is much more likely that the concern will prefer to retain this and other outlays that are not easily apportioned, such as interest on bonds, etc., in accounts in the general ledger which represent nonapportionable outlays and which therefore go to make up the debit side of general profit and loss. That is to say, they act as deductions from the gross profits reported by the three departments of the concern and when they have been offset against these gross profits the result is the net profit of the business which presumably is available for dividends. What has been gained by this scheme of analyzing the accounts as has been done? Merely the arrange