2nd. The return of articles from the warehouse to the factory for the various reasons which will

be mentioned.

3rd. The sale or distribution of stock or manufactured articles.

Two prices for same article.

4th. The return to the warehouse of stock issued, or of stock which was originally sold, but has been rejected or returned by the purchaser. All these transactions have to be traced into both the stock books and the commercial books, and in the case of the sale of stock, and in that of the return or rejection of the stock issued or sold (the third and fourth classes respectively), the book-keeping is complicated by the fact that each transaction has to be brought into the Commercial Ledger at two different prices. That is to say, when an article is sold it is taken out of stock at the price at which it stands in the Stock Ledger, and, in the case of an absolute sale, it is invoiced to the customer at a higher price. As a consequence, a sale will appear in the Commercial Ledger to the debit of a customer, and to the credit of trading account, at the invoice price; whilst by a corresponding but independent process of book-keeping, the same transaction will appear at a lower or the cost price to the credit of stock account, and to the debit of trading account. The converse will be the case when stock is taken back from a customer and sent into the warehouse, the price at which it is credited to a customer's account not generally being the same as that at which it is debited to stock. In this way the stock account in the Ledger always shows the aggregate cost value of the stock-in-trade; the personal accounts, the amount received, or to be received, by the

Stock Books.

DISTRIBUTION OF COMMODITIES.

77

firm in respect of the goods sold; while the trading account (which is debited with the items representing the value of goods issued from stock, and credited with the sales debited to personal accounts) will bring out the difference between the cost price and the selling price, which will be carried to profit and loss account, as the gross profit or loss. This process is effected by entering the sales in two separate books corresponding to each other, the one dealing with the invoice prices, the other with the cost prices, and likewise by entering the stock returned to warehouse in two books which perform similar functions for the cancelled sales.

The two books in the first of these cases would be respectively the customary Day Book, containing records of the invoices rendered, and the Sales Analysis Book, containing records of the stock requisition forms (Specimen No. 43) for stock issued. In the case of the return of stock the two books would be respectively the Sales Cancelled Book, containing records of the credit notes sent to customers, and the Stock Returned by Customers Analysis Book, containing records of the Stock Returned Debit Notes (Specimen No. 44). The advantage of carrying out the suggestions made in the introductory chapter as to distinguishing books by their bindings will be manifest in the case of these four books. Stock Issued Book and the Stock Returned Book are kept by the warehouseman, whilst the corresponding books, viz., the Sales Analysis Book, and the Sales Cancelled Analysis Book, are kept in the counting-house. In giving titles to some of these books we do so primarily with the desire to indicate their functions, and, as already stated, the forms suggested must be taken to mark the transactions which it

Titles of books.

The

is necessary to register rather than the outlines of the records.

Posting

of stock

accounts in

Ledger.

The four counting-house books are posted to the Ledger; the Day Book individually to the debit of personal accounts, and collectively, by means of the Journal, to the credit of trading account; Commercial the Sales or Stock Issued Analysis Book to the credit of stock account and to the debit of trading account; the Sales Cancelled Book, the converse of the Day Book, individually to the credit of personal accounts, and collectively to the debit of trading account; and the Sales Cancelled or Stock Returned Analysis Book, being the converse of the Sales Analysis Book, to the debit of stock account and to the credit of trading account. (See Diagram IV.)

We can now proceed to a detailed examination of the book-keeping relating to this branch of our subject. The first class of transactions is, as before stated, the First class of transfer of the finished article from the factory to the warehouse. The form by means of Factory to warehouse. which this transfer is effected has already been referred to as the Stock Debit Note (Specimen No. 35).

transactions:

This debit note is entered by the warehouseman in Stock Re- the Stock Received Book (Specimen No. 36), ceived Book. and posted to the debit of the Stock Ledger.

Upon reaching the counting-house the Stock Debit Note is entered to the credit of the Prime Cost Ledger, Stock Debit as explained in the preceding chapter, and the total debits to stock, in respect of articles finished, are journalised month by month to the debit of stock account in the Commercial Ledger.

Note.

With regard to the return of articles from the ware

TRANSFERS BETWEEN STORE AND WAREHOUSE. 79

of transac

tions: Warehouse to

Rejected stock.

house to the factory, which constitutes the second class Second class of entries, it may be remarked that although the articles made for stock may all have been manufactured under the personal supervision factory. of those who will more or less be connected with their sale, and questions as to the rejection of goods are not likely to be nearly as numerous as if the articles had been made by an outside contractor, still the question of the return to the factory of finished articles, either on account of bad workmanship or alteration of design, may arise and must be provided for in the book-keeping. In all such cases it will be desirable to send into the store, at the time the finished article is refused as stock, a Transfer Note (warehouse debit to store).

In Specimen No. 38 this Transfer Note is shown with a counterfoil; but a duplicate, by means of carbonised paper, can also be used.

The articles rejected as stock having been sent into store, it will remain to be determined what alterations, if any, are to be made. Should further labour or material be required to be expended, a new stock order will be issued, and the recording of the expenditure will follow the routine laid down for the manufacture of commodities.

Transfer

The adjustments as between warehouse and store are best recorded by the warehouseman and storekeeper entering the transfer notes in a Transfer Books and Book. The warehouseman will, of course, enter on the credit side of his Transfer Book the credits to his stock for the finished articles forwarded by him to the store. On the debit side of his Transfer Book he will enter the debit notes received by him from

Notes.

actions.

the storekeeper for articles transferred from store to Retail trans- Warehouse. The latter class of entries arise out of transactions of a retail character, which in the case of a manufacturing concern may be taken to be exceptional, but as the existence of such a combination is possible, the concluding part of this chapter will be devoted to its consideration.

With regard to the Transfer Books, the entries made by the storekeeper will, naturally, be the reverse of those made by the warehouseman, and the store will be credited with all articles forwarded to, and debited with all articles received from, the warehouse. The two Transfer Books will therefore always balance. It will be necessary to post the items in the Transfer Books to the Stores and Stock Ledgers respectively, so as to bring out the correct balances, not only as between these Factory Ledgers in the aggregate, but also as between the individual Stores and Stock Ledger accounts.

The specimen ruling of the Store Transfer Book (No.. 39) will, with necessary alteration of headings, apply equally to the Warehouse Transfer Book of which it is the counterpart.

Whilst we think it necessary to state in full detail the principles to be remembered in dealing with these transfers, it must in any individual case be left to the accountant to determine whether the circumstances of any particular business admit of the functions of the two Transfer Books being adequately performed by one book.

The transfer notes between store and warehouse, and vice versa, can, if the nature and extent of the transactions warrant it, when forwarded to the countinghouse, be entered in a Transfer Analysis Book, and the