general to the business, should be charged to that account. The distribution of expenses to these three controlling accounts should be in accordance with the classification given in § 127.

In addition to this, an analysis of the expenses chargeable to these three accounts should be made at the close of each month, for entry in the analysis book. This analysis should be according to the classifications of § 127 and should be made in the first place on sheets of paper, each separate charge being picked out from the different books of original entry. The analyses should then be summarized in the analysis book under the proper month. Cut No. 20 illustrates a partial sheet of an analysis book and the proper arrangement for the classification of selling expenses. A twelve-column book may be secured from dealers in blank books, and serves the purpose of an analysis book very well. Several pages should be allotted to each of the expense accounts. The footings of the three accounts should agree with the total charges for the corresponding month to the three controlling accounts in the general ledger.

§ 129. Advantages of Analysis Book.

When the analysis book is used, but one controlling account in the general ledger is necessary for recording the expenses of an entire department. Without the analysis book about twelve accounts would have to be kept in the general ledger in order to show a complete analysis of selling expenses alone, or about fifty accounts in order to properly classify the expenses of the manufacturing, selling and administrative departments. Thus by the use of the analysis book the volume of postings to the general ledger is greatly reduced, and the work of compiling monthly trial balances is materially decreased.

The analysis book also provides a comparative analysis of the expenses of each department, month by month, in tabular form, thus enabling one to compare at a glance the respective

expenses of the different months, any material fluctuations being readily noted.

§ 130. The General Ledger.

The general or private ledger is the final resting place of all bookkeeping results from business transactions. It is where the classified results of the business in dollars and cents are assembled. It should be a bound book with regular ledger rulings. For this ledger there are absolutely no advantages to be gained from using a loose-leaf book as there should be no "deadwood" in a general ledger, and the loose-leaf is much more cumbersome and difficult to finger in turning the leaves.

Accounts in the general ledger should be arranged according to the classification given in Chap. XVI of the present volume. They should not be ruled off and balances brought down more often than semi-annually. Transfers from one account to another should be effected by means of transfer entries in the journal and not by cross entries. All profit and loss accounts should be closed into the " Profit and Loss" account semi-annually by means of journal entries.

It is very important that careful attention be given to posting details, such as accuracy in recording the date, folio and amount. Also brief particulars of items posted should be brought in so as to explain their meaning to any one who may have occasion later to refer to the ledger.

§ 131. Subsidiary Ledgers.

These are sometimes known as "Side" ledgers, "Auxiliary" ledgers, etc. The customers' ledger, creditors' ledger, stockholders' ledger, cost ledger, stock ledger and securities ledger, are all subsidiary ledgers. The analysis book is also a subsidiary record and bears the same relation to the corresponding controlling expense accounts in the general ledger as the above-named ledgers bear to the "Accounts Receivable."

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"Accounts Payable," Capital Stock," "Manufacturing," "Purchases," and "Securities Owned" accounts in the general ledger. They are subsidiary to those accounts and support them with details.

§ 132. Controlling and Subsidiary Accounts.

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Any account appearing in the general ledger is termed a controlling" account if it is supported or presented in more complete or detailed form in some subsidiary account or book. Any record which supports in detail a controlling account in the general ledger, is a subsidiary record.

Taking a wholesale grocery establishment as an illustration, the accounts of customers may require five ledgers of 500 pages each. These are subsidiary records. "Accounts Receivable" account in the general ledger is the corresponding controlling account. During the month each separate sale is posted to the debit of the proper customer's account in the subsidiary ledger. At the month's end the total sales for the month are posted to the debit of the controlling account in the general ledger. All cash received and all returns and allowances during the month are separately credited to the proper customers' accounts. At the close of the month the total cash received from customers and the total returns and allowances are credited to the controlling account in the general ledger. Obviously, the aggregate of all customers' balances should exactly equal the balance of the controlling account and this controlling account alone appears in the general trial balance.

Without a controlling account it would be necessary in compiling the trial balance to bring in all the balances of the customers' ledgers. If, then, the trial balance were "out," it would be impossible to tell whether the error was in the general ledger or in the customers' ledgers, and the trouble involved in finding the error would be enormously increased.

With a controlling account the trial balance is compiled without reference to the customers' ledgers, the balance of the controlling account representing the balance of all accounts of the customers' ledgers.

§ 133.

Relations between Controlling and Subsidiary Accounts.

It is not difficult to understand a controlling account or the relations between it and the subsidiary record which supports it, if one will bear in mind the fact that every item charged in the subsidiary record must also eventually be charged to the controlling account and that every credit in the subsidiary record must also eventually be credited to the controlling account in the general ledger. Of course both credits and debits to the controlling account may be and usually are effected in monthly totals rather than singly as in the case of the subsidiary records, but the results are the same. It will thus be seen that the debits and credits of both the controlling account and its subsidiary record are equal, and that the latter is an analysis or a classified record of the former. It follows, therefore, that a trial balance compiled from the subsidiary ledger should exactly agree with the balance of the controlling account. It will be understood, of course, that the two sides of a subsidiary ledger trial balance are not necessarily equal in amount. The difference between the two sides should, however, always equal the balance of the corresponding controlling account of the general ledger.

Trial balances should be compiled from subsidiary ledgers after the general ledger trial balance has been correctly compiled. If, then, there is a difference between the subsidiary trial balance and the controlling account, it may be taken for granted that, in the great majority of cases, it will be located in the former.

§ 134. The Trial Balance Book.

Trial balances should be compiled from the general ledger at the close of each month. The balances of open accounts should be used rather than the footings.

Much labor is saved in the preparation of the general trial balance by the use of a trial balance book. These books are arranged so as to avoid rewriting the headings of accounts each time a trial balance is taken. In the usual form the first sheet extends beyond the margin of the following sheets. The headings of the accounts are written on this extension of the first sheet, and, overlapping as it does the following sheets, the accounts once written do not have to be recopied until a new book is opened.

The treasurer's or accountant's monthly report should be made up from the trial balance of the general ledger. The form and arrangement of this report will depend somewhat upon the nature of the business and the scope of detail required by the management. Exhibit "A" and Exhibit "B" of the audit report shown in Chap. XIX of the present volume, give respectively the form and arrangement of a balance sheet and of a profit and loss statement.