243.

Inventories.-Business establishments make at least once yearly an itemized list, called an invoice, of all their possessions and the value of each. This is called taking stock or taking an inventory.

244. Resources and Liabilities. The resources of a man or of a firm are its possessions. This includes the inventory of goods and the equipment on hand, together with all good notes and accounts payable to it. These are called notes and accounts receivable. Liabilities are the negative of possessions; they are what the person or the firm owes. Notes, bills, and accounts which the person or the firm owes are called notes, bills, and accounts payable. Resources less liabilities give net present worth. Most establishments issue a statement of their resources and liabilities from time to time to those interested. Many of these statements, like the bank statement found on page 103, are published in the papers. Study carefully the bank statement on page 103 and the statement given below. Complete the statement below.

EXERCISES

1. Make a statement of resources and liabilities for the following conditions on Jan. 1, 1919: Invoice of goods on hand $1275; cash on hand $107.64; accounts receivable $ 678.34; Liberty Bonds $ 400; bills payable $ 456.08; note payable $600; interest on this note due for 6 mo. at 8%.

2. Make a statement of resources and liabilities for the Roskay Dry Goods firm according to the following items: Inventory of equipment $ 1500; inventory of goods on hand $ 2350.67; cash on hand $415.74; Liberty Bonds $1500; accounts receivable $ 678.34; notes receivable $ 845; total interest due on bonds and notes $74.58; bills payable $ 2845.67; notes payable and interest $ 678.54.

3. Jan. 1, 1919, the books of M. V. Koleys show the following for which he desires you to make out for him a statement of resources and liabilities, showing his present worth: Inventory $2342.48; Liberty Bonds $900; cash on hand $219.67; accounts receivable $456.73; notes receivable $850; interest due on notes receivable $42; bills payable $947.69; note payable $1200; interest on note payable $ 72.

4. Make out a resources and liability statement for a farmer, Jan. 1, 1919: Owns farm of 240 A. worth $85 per acre; stock valued at $ 1650; grain valued at $1250; implements valued at $ 625; household goods valued at $ 400; cash in the bank $34.24; Liberty Bonds $400; owes a mortgage note for $9600; interest on this note for one year at 5%; owes General Merchandise Emporium $117.45; owes the Grange Harvester Co. $ 98.45.

245. Solvency. If the resources are greater than the liabilities, the debts can all be paid and the business is said to be solvent. If its liabilities are greater than the resources, all of the debts cannot be paid and the business is said to be insolvent or bankrupt. When the liabilities become very much greater than the resources, the business is often placed by the court in the hands of some one called a receiver. The receiver closes out the business and pays to each creditor the per cent of his bill that the resources are a per cent of the liabilities.

EXERCISES

1. State which of the following firms are solvent:

2. The resources of a firm are $ 5650 and the liabilities $7425. How much does it lack of paying all debts?

3. What per cent of its debts can the firm of Ex. 2 pay to its creditors?

4. State by an equation in terms of resources, liabilities, and expenses of closing out a business, what part of the debts will be paid. Also, express by an equation how much of any bill payable will be paid.

5. The Wampum Dry Goods Co. was closed out by a receiver at $ 5670.34. If the expenses connected with closing out the business were $ 845.73, what were the net resources? If the total liabilities were $ 8325.87, what per cent of the debts were paid? How much will the receiver be able to pay of its bill of $ 356.82 to the Tower Manufacturing Company?

XIX

PARTNERSHIPS

246. Partnerships.-Two or more persons entering into an agreement to carry on some business together form a partnership or firm. The agreement stipulates the investment of each partner, the activities of each partner, and the distribution among the partners of any profits. Often one partner furnishes all or part of the capital without entering into the activities of the firm. Sometimes such a partner desires that his connection with the firm is not to become known and his name does not appear with that of the firm. Thus, Black, Brown, and White may enter into a partnership to be known as Black, Brown, and Company. White is then called a silent partner.

If a partner desires to withdraw from the firm at any time, he must either sell his holding to some one agreeable to the other members, to the other members themselves, or the business as a whole must be sold.

247. Liabilities. In most states each partner is individually responsible for any and all debts of the firm, regardless of any agreement between the partners. Suppose that a partnership with several partners becomes bankrupt and that only one partner has any private funds. This partner must pay all of the debts, or as far as his resources permit, even though the failure of the firm was brought about through an act of one or more of the other partners.

248. Dividing Profits and Losses. Suppose Mr. Green, who is earning $ 40 per week, invests $ 3000 in a partnership with Mr. Grey, who is earning $30 per week and invests $5000. How are they to divide any profits at the end of the year? Together they earn $70 per week. As Mr. Green earns of their joint weekly income, should he receive and Mr. Grey of any profits? Would this be just to Mr. Grey, who has furnished of the capital? Or should they base the division of profits on capital invested, thus giving Mr. Green and Mr. Grey of the profits? Would this be just to Mr. Green, who has the higher earning capacity?

There are several plans to which both partners may be willing to agree, of which the following is one: The partnership may give each partner a note for the amount he invested bearing a current rate of interest. This interest becomes then an expense to the partnership. The firm can further pay each partner weekly what he earned or can earn. Any further profits can finally be divided evenly or according to some other agreed ratio.

249. Withdrawals of Funds. Small withdrawals, either in cash or in the form of purchases from the firm, are merely debited to that partner's account with the firm. If the withdrawal is large, the partner may give the firm a note for the time he will hold the money out of the business, or his percentage of the share of profits may be altered.

EXERCISES

1. Three men decided to go into partnership and buy out a dry-goods business. The stock on hand invoiced at $ 12,350 and the firm selling the business asked $ 3500 for their good-will. The partners decided further to invest $7000 for carrying on the business. If the partners make equal investments, what will this be for each?