It will be seen that the correct entry calls for a new account, "Cancellation Profits," which is intended to receive the forfeited profits from all classes of time sales which may be cancelled during the year. It is extremely useful to have such an account, showing at a glance all cancellations, for the total of these should always be found at each closing of the books and be included in a schedule, in order that the management may have accurate information as to the ratio of such cancellations to the gross sales. In entering items to this account in the ledger, it is convenient to make additional memorandum entries showing the total amount of the sales affected by the cancellation profits, in some such way as the following:

Cancellation Profits

(Credit side of ledger account)

Total

Cancelled

Profits

Monthly Totals

1917

Jan.

10

Contracts (general)...........

$4,200.00

$800.00

20

Kingslake..............

2,200.00

750.00

$1,550.00

Feb.

20

Ladore.............

1,200.00

240.00

From the above figures, it is easy at any time to make an analysis showing the various classes of sales which have been cancelled and the total amount of each.

The principles here laid down for the treatment of contracts apply equally to mortgages. Care should be taken to consider the reduction of the principal debt; and any charges standing in the Income account should be balanced by charging them to the appropriate nominal account, viz., Mortgage Interest Receivable, Taxes, Insurance, etc.

The above remarks apply to general contracts, the details of subdivision properties being considered in the next chapter. For the sake of convenience, however, the cancellation of subdivision time sales is discussed here.