=9.= Having no nominal accounts, we cannot close through trading account into profit and loss, but must use another method to find the profit or loss for a given period. It will be necessary to first ascertain the present worth of the business. Therefore the first step will be to take an inventory, just as we would if closing a double entry ledger. Our inventory shows merchandise $1,042.77. Next, we will make a statement of assets and liabilities, following the same form as the balance sheet when the books are kept by double entry. This will give us the present worth.
From the present worth, we will deduct the capital investment (or the present worth at the time of making the last statement) which will show the profit for the period. If the present worth is less than the capital investment, the business shows a loss.
It will be noted that while this method shows net profits, it does not show how those profits were made. Having no accounts with purchases and sales, we can have no trading account to show gross profits, and without expense accounts there is no data from which to make up a detailed profit and loss statement. Herein is one of the shortcomings of the single entry method of bookkeeping.
=10.= To close a single entry ledger, all that is necessary is to credit the proprietor's investment account, or any account representing capital, with the net gain, or debit the account with the net loss. Then rule the personal accounts and bring down the balances.
On a certain date the assets and liabilities of David Henry are as follows:
_Assets_ Cash $450.00 Due from sundry debtors 75.20 Merchandise per inventory 762.50 _Liabilities_ Due sundry creditors 144.00
Sales to sundry persons on account 44.71 Bought from sundry persons on account 337.54 Sold for cash 94.90 Received cash on account 62.00 Paid cash on account 132.50 Paid cash for rent 35.00 Paid cash for clerk hire 7.00
At the close of the period in which these transactions were recorded, the inventory of merchandise on hand was $987.75.
_First._ Open single entry books, entering these transactions in the journal and cash book.
_Second._ Post to ledger using the terms _Debtor_ and _Creditor_ to represent account of customers and those from whom goods were purchased.