11. Special features of the accrual system.—If each month is to be burdened with its share of the ex penses, and is to be credited with all the revenue pro duced in it, the business must be reviewed carefully at the end of the month and certain adjustments must be made in order that the incompleted transactions may be recorded. These incompleted transactions, affecting the month's condition, when itemized, may be divided into two classes : (1) benefits received but not recorded, and (2) benefits rendered but not re corded.
A record must be made in the books, then, of all assets received and of all expenses incurred during the month, and the liability must be expressed by means of a credit to "accounts payable," even if the bills themselves have not yet been received. If a pur chase book is being operated when these bills come in, the expense accounts would naturally be charged and the vendor would be credited. But if these entries are placed on the books prior to the receipt of the bill, they must be recorded thru our journal. Most fre quently this indeterminate liability is expressed by a credit to a special account known as "unpresented bills," "reserve for unpresented bills," or "reserve for future liabilities." It is probably most satisfactory to express the credit in this form, since the entry itself should be re versed; that is, the expense or asset account should be credited, and the liability account should be charged, at the beginning of the next month. Then, when the bills actually come in they can be recorded in the purchase book, and there will be a complete record of all the bills, as well as a temporary record of all the expenses, of the month in which these ex penses occur. As the expense or asset account is credited with the amount which was previously charged to it, when the second charge is made to that account from the purchase book, the condition of the account in the month in which the charge was received is not affected. The reversal of the journal entry offsets the charge that comes from the purchase book.
12. An entry required for every sale.—It is also important to send each customer a bill for every pur chase that he makes. If any sale is incomplete, the fact must be recorded. For instance, if a contractor is engaged on a job that extends over several months, at the end of each month he will have incurred numer ous expenses. If his contract calls for payment upon the completion of the job, his books will always show a big item of outgo, and little or no income until the job is completed and he is entitled to bill his customers.
This difficulty can be overcome by means of either one of two methods. (1) If the contract can be split up into monthly sections, the contractor can charge on his books each month the section that has been com pleted. He would then be setting against the costs of that period the income accruing to him for the month. (2) If for any reason this is inadvisable, however, and he cannot be certain in regard to his profit or loss until the job is completed, the better method is for him to carry as an asset the expenses which have been incurred on the incompleted job. Then, when the job is finished, he can set his total income against his total expense, and can readily de termine the amount of his profit or loss.
13. Closing out the books.—In closing out the sub sidiary journals—such as the cash book, the purchase book, sales book, petty-cash book—it is unnecessary to make a journal entry either in the main journal or in the subsidiary journal, expressing the various debits and credits from this book in customary journal form. The bookkeeper need only remember that in the pur chase book, for example, the total of the amounts credited column is a credit to the creditor's controlling account, and the total of each of the amounts-debited columns is a debit to the account named at the head of the column. It must be remembered also that all items in the sundries column have already been posted individually, and therefore do not need to be posted again in total.
The postings from these books are made at the end of the month, except, as already indicated, that the sundries columns may be posted more frequently and the credits to the subsidiary personal accounts, may be made daily, or at least very frequently. In post ing, the bookkeeper will place below the total column the folio page of the ledger account to which he trans fers the amount that he posts. This entry will indi cate that the posting has been made. After all the posting for the month has been done, the subsidiary journal should be ruled off, and a new page for the new month should be started. The reader will find in the illustrations given on page 120, Chapter VII, the method of closing and entering posting-checks in a subsidiary journal.