Balance:

Note:

Represents the cost of stable supplies on hand.

If stable supplies are purchased in small quantities, sufficient to last a month or so, the above account should be eliminated from the general ledger.

161. Insurance.

Debit With:

(1) Cost of insurance.

Credit With:

(1) The correct proportion of premiums charged to this account, credits being made at the close of each month. Balance:

Represents the cost of insurance unexpired.

Note:

A record of each policy should be kept in a book provided for the purpose, showing the policy number, name of the company, date of policy, date of expiration, amount of insurance, total premium, property covered (buildings, machinery and equipment, raw materials and supplies, finished products, stable equipment, etc.), and monthly premium. The object of this record is to provide an index of all policies, the expiration date of each, and the proper monthly proportion of premiums which should be credited to "Insurance" account.

In the case of mutual insurance, it is necessary to estimate the cost of insurance according to past experience. An adjustment should be made when annual settlements are made by the mutual insurance companies.

§ 162. Treasury Stock.

Debit With:

(1) Cost of stock issued and subsequently purchased by the company. (2) With the market value of stock issued and subsequently donated to the treasury.

Credit With:

(1) Cost of treasury stock, which was formerly charged to this account, sold. If sold in excess of the amount at which it was carried, credit "Surplus" with the excess, and vice versa. (2) If treasury stock is retired, credit this account with the amount at which it was carried, charge or credit "Surplus" account with difference between that amount and the par value of the stock retired, and debit "Capital Stock" account with the par value.

Balance:

hand.

Note:

Represents the cost or actual value of treasury stock on

Stock which has a real market value is very seldom donated to the treasury. Such donations usually represent stock which is to be sold for working capital at whatever it will bring. It is invariably sold below par and sometimes includes a generous amount of water."

66

If stock donated to the treasury is of this nature or has no positive or ascertainable value at which it can be disposed of, a purely nominal entry should be made upon the books until it is sold, at which time "Surplus" account should be credited with any excess amounts realized. It is radically wrong to carry as an asset treasury stock at a fictitious or anticipated value. (See § 186.)

Charging "Treasury Stock" account and crediting “Surplus "account affords a very convenient and (to some persons) alluring way of creating a surplus, but the real value of such a surplus is strictly limited to the amount of money that can be realized from it. So long as the stock remains in the possession of the treasurer, it is nothing more than paper.

It must be borne in mind that unissued certificates are not treasury stock. In other words, if an authorized issue be $150,000 and the par value of stock issued be $100,000, then the difference of $50,000 represents absolutely nothing of

value. It merely represents a privilege to issue additional stock at par to the extent of that amount.

§ 163. Stocks of Other Companies.

Debit With:

(1) Cost of stocks and bonds of other companies purchased.

Credit With:

(1) Cost of stocks and bonds of other companies disposed of. The difference between the cost and selling price should be charged or credited to "Profit and Loss" or "Miscellaneous Income" account.

Balance:

Represents the cost of stocks and bonds of other companies on hand.

(1) Par value of preferred shares retired.

Credit With:

(1) Par value of preferred shares issued. Balance:

Represents the par value of shares outstanding.

(b) Common Stock.

Debit With:

(1) Par value of common shares retired.

Credit With:

(1) Par value of common shares issued.

Balance:

Represents the par value of common stock outstanding.

§ 165. Mortgages Payable.

Debit With:

(1) Payments on account of the principal of mortgages given.

Credit With:

(1) The principal sum of each mortgage given.

Balance:

Represents the amount owing on account of the principal of mortgages given.

(1) The amount of mortgage bonds retired.

Credit With:

(1) The amount of mortgage bonds issued.

Balance:

Represents the amount of mortgage bonds outstanding.

(b) Accumulative.

Debit With:

(1) Moneys paid to retire accumulative bonds. (2) Payments forfeited by bondholders.

Credit With:

(1) Moneys received for account of accumulative bonds. (2) Semi-annual compound interest computed on the amount paid in on bonds.

Balance:

Represents the total amount of money received on account of accumulative bonds in force plus the accumulated interest on payments up to and including the last semi-annual interest date.

§ 167. Notes Payable.

Debit With:

(1) The face value of all notes redeemed. Credit With:

(1) The face value of all notes issued. Balance:

Note:

Represents the aggregate face value of notes outstanding.

A subsidiary record is kept for the purpose of showing the details of all notes of others received, and of all notes issued. Such a record, commonly termed a bill book, may be purchased from dealers in blank books. One part of the book is devoted to "Notes Receivable" and the other part to "Notes Payable."

§ 168. Accounts Payable.

Debit With:

(1) Footing of "Accounts Payable" column per cash book. (Entry made at close of each month.) (2) Amounts allowed by creditors for goods returned, damaged, etc.

Credit With:

(1) Footing of "Accounts Payable" column per voucher register or summary of purchases book, depending upon the purchase system in use. (Entry made at close of each month.) Balance:

Represents the amount owing to creditors for goods received, and should exactly agree with the aggregate amount of