^ v\\!--^^^-'^.^H ^v- --^-".^^^^H ^V-'-r:"-^''"'".'-' 'JaBH^^B "^i^ •*v%^teMiQ^^ •''^•jl ' i:-:^^-^ v}^ \ ''■ tp.'i ?«^i;qM}»st^^J5i!cr... / ,' \ '■ HENRY RAND HATFIELD 2695 Le Conte Avenue Berkeley. California Digitized by the Internet Archive in 2008 with funding from IVIicrosoft Corporation http://www.archive.org/details/elucidateddoubOOfostrich 4tk ii tr Jk m ^^ DOUBLE ENTRY ELUCIDATED. BY B. F. FOSTEE, TEACHER OF WBITrNG AND BOOK-KEEPING ; AUTHOR OP " PRIZE ESSAY ON PENMANSHIP, "PENCILLED COPY-BOOKS," "THE COrNTING-HOCSE ASSISTANT," "HINTS TO MERCHANTS AND TRADESMEN," ETC. " From the most elementary knowledge to the highest speculations, one method of instruction is universally applicable. This consists, first, in carefully examining the constituent parts of any object, that is, in ANALYSING it ; secondly, in classifying, and separately considering these component parts ; thiixlly, in reconstructing the object, that is, in operating by Synthesis." TENTH EDITION. LONDON: BELL AND DALDY, 186, FLEET STREET, AND 6, YORK STREET, COVENT GARDEN. 1866. wONDON : PRINTED BY W. CLOWES AND SONS, STAMFORD STREET. HFS-C33 F(o PREFACE TO THE FIFTH EDITION. The design of this work is three-fold : — I. To elucidate the immutable principles of double entiy, and to disentangle them from forms with which they have too long been confounded. II. To point out radical defects in the prevalent modes of TEACHING book- keepings and to suggest the means whereby those defects may be removed. III. To exemplify the modern improvements in the arrangement of accounts, and to exhibit the art as it is actually practised by the most intelligent merchants at home and abroad. In 1732, John Clark published in London a work, entitled "Lectures on Accompts," &c.j which contains the following novel exposition of the theory of double entry : — " I.«ct it be supposed," says Clark, " that the account of Stock is a real person employed to take care of my estate, and to render an account of the improvement he has made of it. In a like manner, Cash, and all other accounts which I may have occasion to keep, may be considered as persons employed by Stock to take care of that part of my estate with which they are entrusted, and to render an account thereof to Stock. Then Cash, or the person entrusted with the care of my money, owes to Stock so much as he is entrusted with. Upon ihis hypothesis every transaction must be considered as though it had been transacted betwccu persons who managed my affairs ; for there can be no business transacted but between two or more persons ; and as there is no such thing as a person being debtor, but that he must owe some other person, and for that reason the person whom he oweth is called creditor : hence, if the ledger is to contain an exact register of all my transactions, they must be doubly or twice entered ; that is, the sum that any person oweth must be entered in his account that oweth, and also in the person's account he oweth it to. " From the supposition that all the accounts are to be considered as persons, and from the nature of debtor and creditor, the following general rules may be deduced : — " I. He that receives and is accountable for what he receives, is Debtor. " 2. He that delivers, or to whom any person is accountable, is Creditor. iv.2a'5876 IV PREFACE. " There is no knowing how to make an entry in the journal without rightly understanding the nature and design of the ledger. 1 shall therefore explain a few of tlie most difficult accounts, and leave those which are easy to be considered after the same manner. " PROFIT AND LOSS. — This account may be considered as a person who is to take all the profits arising from the business and make good all the losses : hence, every account which exhibits gain or loss is to adjust with Profit and Loss, and Profit and Loss is to adjust with Stock, or the person whom I employ to take care of my estate. "BALANCE. — This account may be considered as a person who is to take posses- sion of all my effects and debts, and whatever is owing to me by other persons on adjusting their accounts ; and therefore ' Balance ' is debtor to every account it takes anything from ; and balance, or the person supposed, is also to make good all the demands against my estate. Then the balance account will contain the particulars of my effects and debts ; the difference between the two sides, being my net capital or deficiency, must be adjusted with Stock; and if the difference of Stock and Balance agree, all is right ; — this is the touchstone of the accounts. Thus the value of my estate is ascertained in two (liferent ways : — one is by the Stock account, which contains the value at first setting out, with the profits added to it, which gives its improved value ; the other is by collecting my effects and debts into one total, and taking from thence the total of the debts I owe, which also gives the present value of my estate." Somewhat similar to the above, is Isler's exposition of double entry, which I translate from his work published at Brussels in 1810 : — " Suppose that the Italian method was unknown, and that a merchant named Masner conceived the idea of that method. He divides the objects of his trade into five general classes, with the management of which he charges five of his clerks. These five clerks represent him in their respective departments. But the better to distinguish his cUiKs from other persons who are merely his correspondents, he opens an account for each clerk under the denomination of the branch confided to him, thus : — 1. A's account is called • Cash.' 2. B's »> * Merchandise. 3. C's >> ' Bills Receivable.' 4. D's » ' Bills Payable.' 5. E's 1) ' Profit and Loss.' The merchant is represented by * Stock.' " In the commencement, the merchant's estate or capital is divided between these five clerks ; and as double entry requires that that which receives shall be debited, and that PREFACE. V which gives shall be credited, he debits each clerk, under his imaginary name, for what he the clerk, receives ; and credits himself, that is, * Stock,' for what he entrusts to them, because they must render an account of the manner in which the property is employed. He sells goods on credit to a merchant named X, who receives them from the clerk B. Masner debits X to ' Merchandise' (the clerk B), because B has given up the goods for which he was debited at the time he received them. At the expiration of the term of credit, X pays the sum which he owes to A, the cashier, who thereby becomes debtor to the merchant Masner. At the time of'balancing, Masner charges his book-keeper, F, to close the accounts for him. He, F, opens a general account entitled ' Balance,' to which the debit and credit balances of the respec- tive accounts are to be transferred. Masner orders his representatives A, B, C, and D to return to F all that remains in their hands, and discharges them accordingly. He then examines theii" accounts, and finds that A's is closed by the payments being equal to the receipts ; that B has gained by the sale of merchandise ; that C has four bills on hand ; that D must pay three bills for which he, Masner, is hable. He orders B to transfer the gains to E, who must, in like inanner, account to capital, that is, Masner, for the net gain or loss. He transfers the Ua- bility for the bills outstanding from D to F. To close the personal accounts, F supposes that all who owe have paid over their amounts to Balance, and that he has paid, per contra, all the creditors, or, in other words, that Balance is accountable, ' ad interim,' for all the debts, active and passive. These accounts are therefore closed to or by Balance, which represents the book-keeper. Thus all the accounts except * Stock * are closed, and the book-keeper can say to the merchant, — * Such is your position, supposing you retire from business this day, and are able to sell your goods at their present valuation, and to collect all that is owing to you, and to pay all you owe. Look at the Balance Sheet : it shews a surplus of so much, which it returns to your Capital account. Here is your Capital account ; the credit side of which shews all that you possess, and the debit side all that you owe : the difference is your Net Capital, of which the Balance Sheet gives the particulars. In re-opening the books, Masner orders his clerks to resume their functions, and makes each personal account debtor for that which it owed before the balance, and thus re-establishes his original position with respect to his correspondents and his representatives." My next extract is from De Grange, the most popular of the elementary writers on book-keeping in France : — "The ledger contains five general accounts, which represent the merchant himself, viz., — 1. Merchandisek 2. Cash. 3. Bills Receivable 4. Bills Payable. . 5. Profit and Loss. VI PREFACE. Under some one of these titles he is debited or credited for the effects which he receives and disposes of, as well as for his gains and losses ; and since he keeps, moreover, an account for each person with whom he transacts business on credit, it follows that the scheme of double entry establishes accounts for all the subjects of commercial operations that one peforms. Accordingly, we cannot debit a person, or one of the general accounts, without crediting another person, or one of the general accounts j for it is impossible that a person or a general account can receive any value without its being furnished by another person, or some one or more of the general accounts, and vice versa : hence ' there cannot be a debtor without a creditor.' " Jaclot^ another French author, copies De Grange very closely. His exposition of the ledger is substantially as follows : — " The ledger is simply a collection of facts, which the merchant sets down in order that he may readily ascertain who owes him, and whom he owes. He writes at the top of each of these statements the name of the person to whose business it relates. For the purpose of being clear, he enters on the left-hand column all sums due to him by those persons for whom he opens an account : this he calls the debtor side of the account, and he writes on the top, and before the name of the person, the word Dr. He then carries to the right-hand column whatever he owes to this person : this he calls the creditor side of the account, at the top of which, and at the extreme right, he puts the word Cr. If the total of one column is more than that of another, he adds the difference to the lesser side, and this will be what he owes, or what is due to him on this account. The merchant thus sees at a glance how he stands with each particular person with whom he has dealings. In the same way he opens an account with Cash, and carries to the debtor side all the suras that he receives, and to the creditor side all the sums that he pays, and thus with various other accounts. He opens one likewise, under the term of Bills Payable, for promissory notes, bonds, &c. which he passes to others, and for such drafts upon him as he accepts, and thus obliges himself to pay. The debtor side of this account shews the amount of such obligations retired from circulation ; the creditor side the amount originally issued ; and the difference, if any, the amount outstanding. He opens another account under the title of Bills Receivable, which comprehends promissory notes, and drafts, and the like, payable (o him. The debtor side of this account shews what bills have come into his possession ; the creditor side those bills which he has disposed of; and the difference, if any, the bills in hand. In like manner he opens an account for any other description of property he may acquire ; as goods, ships, houses, lands, bank stocks, public securities, furniture, &c. ; observing that the debtor side of all such accounts shews the cost and expenses they may have exposed him to ; and the creditor side the price he may have obtained upon the disposal of them, or such returns as they may bring him for freights, rents, &c. He also opens accounts for his rains and PREFACE. Vll losses under the title of ' Profit and Loss ;' and an account of his capital under the title of ' Stock.' " These five general accounts represent the merchant himself ; so that when any of them is said to he dehited or credited, it is the merchant that is really debited or credited. Hence, if he purchase merchandise upon credit, he does not say, ' I owe such a person for merchan- dise bought of him ;' he says, * Merchandise Dr. to such a oue ;' if he lend money to A. B. he does not say, * B. A. owes me for cash lent him ;' he says, * A. B. Dr. to Cash.' It is evident that as to setting the contracting parties in their proper places as debtors and creditors, when the merchant says in one case ' Merchandize Dr. to such a one,' and in the other ' x\. B. Dr. to Cash,' it is the same as if he had said, ' I owe such a one,' or ' A. B. owes me.' " " Numerous are the bankruptcies," says Mr. Booth, " that happen in trade from irre- gular accounts only ; and this is not to be wondered at, when persons are employed as pro- fessed book-keepers, who, having got a little more than the theory of the art from some obsolete treatise, soon lead their too credulous employers into a labyrinth from which it i% often impossible to extricate them." — Speaking of partnership accounts, he adds, "On review- ing what has been said, it occurred to me that some objections might possibly be raised upon a mistaken idea of my having treated this part of book-keeping with too much brevity ; but I do aver that, after a long and intimate acquaintance with this subject ; after investigating accounts under every form, and viewing them in every light that folly and ignorance could well h&ve placed them, I never saw any difficulty in stating the joint concerns of a Company, but what originated in the crude notions of the parties themselves. If merchants will not he careful to keep a plain, simple narrative of their daily transactions, it can be no wonder that they so frequently get bewildered. Sometimes, indeed, their aff'airs are thrown into confusion by an ostentatious display of ability in their clerks ; or, rather, by means of an unhappy knack which some people have got of rendering the plainest things unintelligible, and, from an habitual crookedness in their ideas, are always puzzling themselves and others with diffi- culties of their own raising. To attempt to prescribe rules for such persons would be just the same as to instruct those unhappy objects to look straight forward who have unfortunately contracted a habit of squinting. I shall, therefore, take a final leave of this subject after recommending the following maxims to the attention of all persons trading in company, con- scious to myself that I can add nothing further, eitheV by way of precept or example, but what would rather tend to perplex the reader, than convey any useful information : — 1. Let every partnership commence with a new set of books. 2. Never suffer the outstanding debts of a former connection, on any pretence whatever, to be entered in the new books, or reckoned as a part of the joint stock. 3. If the house branches itself ont into several concerns, let a distinct set of books be kept for each, confining them solely to their separate transactions." VIU PREFACE. " One of the greatest errors in business is the suffering accounts to sleep too lotig ; they cannot be too often inspected, nor too frequently balanced and compared. Twelve months is too long an interval for the transmission of accounts-current, — especially where parties reside abroad ; those who owe money in remote places are apt to think that you are dead, or have forgotten them, if you are not frequently quickening their memories with a state of their accounts. Those who object to balancing their books every six months, as being attended with too much trouble, must excuse me if I compare them to the clown, who made a similar objection, though upon a very different occasion : ' I wonder,' said he, * bow those people do who comb their heads every day ; for my part, I find it troublesome enough to comb mine once a week.' " J»»c. IS?:'. AUTHOItS ON BOOK-KEEPING. The following List comprises the names of 159 authors and compilers of works on book-keeping, published in the English language since 1543, of which 156 are in the writer's possession. 1 Names of Authors. Place and Date. London . .. 1543 London . .. 1569 London . .. 1588 London . .. 1596 London . .. 1634 London . .. 1652 London . .. 1675 London . .. 1695 London . .. 1700 London . .. 1701 London . .. 1702 London . . .. 1714 Edinburgh .. 1715 Edinburgh .. 1718 London . ... 1719 Dublin. . . ... 1719 Edinburgh .. 1722 London . . .. 1732 London . . .. 1735 Edinburgh .. 1741 London . ... 1741 London . ,!.. 1749 London . . .. 1750 London . .. 1750 London . .. 1751 London . .. 1754 London . .. 1754 London . .. 1758 London . .. 1760 London . ..1760 London . ..1760 London . .. 1764 London . .. 1764 Edinburgh .. 1764 London . .. 1769 London . .. 177') Cork . . . .. 1774 Edinburgh . . 1774 London .. . 177C London . .. 1778 London . . .. 1778 London . . .. 1778 Names of Authors. Place and Date. Hugh Oldcastle James Peele John Mellis W. P Richard Dafforne . . . . John Collins Stephen Monteage. . . . Edward Hatton R. and John Dafforne. . Charles Snell Thomas Dilworth . . . . A Person of Honour . . Alexr. Magghie Alexr. Malcom Ellis Webster John Vernon Alexr. Brodie John Clark Hustcraft Stephens . . .John Mair Richard Hayes Thomas Crosby James Dodson Anonymous ., . . M. Clare William Weston John Shortland John Loudon S. Dunn Richard Reuse Anonymous W. Everard John Cooke William Gordon A Merchant Anonymous William Kelly William Perry Matthew Quin W. Wood Benjamin Donn Chas. Hutton Robert Hamilton . John Sedger Samuel Edwards . Benjamin Booth. . . Robert Shaw Edward T. Jones . James Mill Joshua Collier . . . Thos. K. Gosnell . J. H. Wicks John Matthew? . - . John Shires John W. Fulton. . . P. Kelly, LL.D . . . William Jennings . W. Board man . '. . Philip Pullen Daniel M' Sweeny . James Luckocke. . . Thomas Turner . . . C. Buchanan P. Deighan R. Hall William Tate Thomas Carpenter. Robert Goodacre . Alexr. Farquharson John Lambert . . . Anonymous Michael Power . . . James Morrison . . . Charles Morrison . P. Comins James Bennett . . . M. Thomas Rev. R. Turner . . . P. Thoreau Chas. Gerrisher . . . F. W. Crouhelm . John Matheson . . . B. Sheys D. Roscoe Edinburgh ..1779 London .... 1779 Dublin 1781 London .... 1789 Leeds 1794 Bristol 1796 London .... 1 796 London .... 1796 London .... 1 796 Egham 1797 Bristol 1797 London 1799 Calcutta 1799 London .... 1801 Dublin 1 802 London 1802 London .... 1803 Cork 1804 London 1804 Portland, U.S. 1804 Edinburgh . . 1 800 Dublin 1807 Wakefield .. 1810 London .... 1810 London 1810 London .... 1810 Edinburgh . . 1811 London .... 1812 London .... 1812 Gibraltar.. .. 1812 London .... 1813 Glasgow .... 1814 Dublin. . ., .. 1814 New York .. 1814 London .... 1814 London .... 1814 London .... 1815 New York . . 1817 London .... 1818 London .... 1818 New York . . 1818 Hagerstown. .1818 ; Names of Authors. Place and Date. Names of Authors. Place and Date. | 1 Thomas Papps James Morrison Elias Johnston J. Alger, jun R. Wiffgins London . . Leeds .... Edinburgh Boston, U. i New York London . . London . . London . . Belfast ., Dublin .. New York Philadelphia London . . London . . London . . London . . London . . London . . London . . Philadelphia Piiiladelphia Baltimore London . . Boston. U. i Troy, U.S. London . . London . . Dublin. ., New York New York GreenfieldU Woodstock Edinburgh Glasgow . . New York New York London . . Glasgow . . . 1818 . 1820 . 1820 5. 1820 . 1822 . 1823 . 1823 . 1825 . 1826 . 1827 . 18-27 I. 1827 . 1827 1828 . 1829 . 1829 . 1839 . 1839 . 1830 I. 1830 . 1 83 1 . 1831 . 1831 3. 1832 . 1833 . 1834 . 1834 . 1835 . 1836 . 1836 .S.1836 . 1836 . 1837 . 1838 . . 1838 . . 1839 . 1839 . . 1839 Isaac P. Cory Theo. Jones B. F. Foster Thomas Smith J. Antrobus Thomas Jones J. H. Shea London . . . London . . . London .... Birmingham London . . . New York . BaltimoreU.S Birmingham Manchester . London . . . Glasgow . . . Philadelphia London . . , London . . . London . . . Manchester. Toronto . . . London . . . Boston, U. S Norwich . . . London . . . Boston Philadelphia New York . Philadelphia Boston Edinburgh . London . . . London . . . London . . . London . . . London . . . London . , . London . . . New York . London . . . London . . . 1839 ; 1840 1840 .1840 1840 1841 .1841 .1841 . 1841 1841 1842 . 1842 1843 1843 . 1843 1843 1844 . 1 845 . 1846 George Wilson Richard Langford .... Richard Roe : W. Auchinleck ..... William Jackson J. T. Goddard John Gibson Edward Lawes P. C. L. Vautro James Morrison Beecher John D. Price George Reynolds .... George Jackson J. Hitchcock B. Morison Smith and Jones A. G. Henderson .... Anonymous John Howatt Joseph Dando Henry Chatteris Anonymous H. Tuck Duncan M'Dougal .... W. Scott Burn William Tate J. Comer Dr. Brewer 1846 ■ Alexr, Pulling J. Batchelder W. P. M. Ross P. Duff 1846 1 C. C. Marsh Edward T. Jones .... Michael Walsh J. T. Bucklin R. Percival . 1847 i .1847 ; 1848 < C. A. Wilson Adams W. Inglis ; . 1848 . 1849 . 1849 . 184-9 . 1849 . 1849 . 1850 . 1 850 . 1850 . 1850 . 1851 . 1851 .1852 ,1 ) John West Anonymous , Lyman Preston B. Edwards J. H. Coffin James William Gilbart J. H. Freese George C. Oke F. Wood ' E. S. Winslow ....!! James Trotter Donald Taylor J. C. Colt J. H. Chauvier Edmund Tayler J. H. Huntington .... Fulton and Eastman . . J. Caldecott B. F, Foster Nicholas Harris Joseph Guy Robert Wallace DOUBLE ENTRY ELUCIDATED. INTRODUCTION. " To the mercantile system of accounts we attach the highest value. As a science it comes to us with the powerful recommendation not only of long exjjerience, but of high authority, — of those engaged in the active pursuits of life, and at those who have surveyed its concerns with the eye of philosophy. The Italian method of book-keeping affords unquestionably valuable facilities for unravelling and elucidating complex accounts ; and we are satisfied that no person without a knowledge of it can be a perfect accountant." — Rkpoet on the Public Accounts. "The counting-house of an accomplished merchant is a school of method, where the science may be learned of arranging particulars under generals, of bringing the different parts of a transaction together, and of shewing at one view a long series of dealings and exchanges. Let no one venture into business while he is ignorant of the method o' regulating books ; ncvei let him imagine that any degree of natural ability will enable him to supply this deficiency." — Db. Johnson. In England, where wealth is a passport to honour, and commerce the surest road to wealth, it is natural that an introduction to a mercantile career should be eagerly sought after, and that a large portion of our youth should be destined to an employment which requires but moderate attainments, and yet holds out a hope of ultimate competence. The qualifications of a clerk are so simple, that, at first sight, it is not easy to account for the reluctance which a merchant feels in receiving a tyro into his counting-house. The problem, however, is readily solved. The diffi- culty in procuring an eligible appointment arises, nine times out often, from the in- competency of the applicants for it. This is a truth universally recognized among men of business : and, from the nature of the so-called commercial education, it is impossible it should be otherwise. To write a rapid, legible hand ; to be expert at arithmetical calculation ; and to po.ssess a thorough knowledge of book-keeping, are indispensable requisites in a clerk. But a youth who possesses these requisites in any degree of perfection is rarely found. His hand-writing, cramped, stiff, and in- elegant — is utterly unfit for the ledger, the day-book, or even a common bill ol XU INTRODUCTION. parcels ; he cannot be trusted to extend an invoice, or too add a column of figures, without revision; and of the science of book-keeping, — i.e., the fixed and immu- table principles upon which every system of accounts is based — he has no notion. Yet these qualifications are as indispensable to the official as they are to the mercantile clerk. By a Minute of the Treasury Board, dated May 7, 1841, the candidate for a clerkship in the Commissariat Department " is required to write a fair, legible hand ; to give satisfactory proof that he is practically acquainted with the ordinary rules of arithmetic ; and that he is familiar with the principles and practice of book-keeping by double entry." Few things are more readily admitted or more generally experienced than the importance of book-keeping. In a commercial community the assistance of the accountant is in constant demand ; and it is worthy of consideration, that a masterly knowledge of this art, with its accompaniments, is a sure resource to the individual who has to depend upon his own exertions for the means of a livelihood. "Those who raise themselves from the condition of daily labour," says the biographer of Burns, ** are usually men who excel in the practice of some useful art, or who join habits of industry and sobriety to a practical acquaintance with some of the most common branches of knowledge. The penmanship of a Butterworth and the arith- metic of a Cocker may be studied in the humblest walks of life, and they will assist the peasant more in the pursuit of independence than the study of Homer or Shake- speare, though he could comprehend, or even imitate, the beauties of those immortal bards." As a branch of general education, book-keeping has hitherto been strangely neglected. It is commonly supposed that no two merchants keep their books alike , that all attempts to master the subject by study will prove futile ; and that a knowledge of accounts is only to be obtained by dint of long practice. That the details of any peculiar plan of keeping books can be made familiar to the uninitiated by practice only, is, to a certain extent, true ; but that a comprehensive knowledge of iJie principles upon which every system of book-keeping is based, cannot be attained in INTRODUCTION. xili the scJiool-room, ts certainly not true. On the contrary, a skilful teacher could im- part more knowledge of double entry in a month, than is ohtained by the majority of clerks in the course of a seven years' apprenticeship in the counting -ho^ise. The teacher, it is true, cannot transform the school-boy into a merchant, but he can enable him to comprehend the nature and arrangement of accounts — he cannot impart a knowledge of the qualities and prices of merchandise, but he can unfold the prin- ciples and exemplify the practice of book-keeping. Book-keeping is not merely an art, it is also a science, and, like all other sciences, founded on immutable principles. While, therefore, experience — that sort of experience which can only be acquired amidst the every-day realities of life— is undeniably necessary to the swift and accurate performance of this art ; the science of book-keeping not only can, but unquestionably ought to be learned as the first step in every book-keeper's education, and apart from business altogether ; for he who clearly comprehends its principles, will experience no difficulty whatever in their practical application.* Is there any sound reason why the art and science of book-keeping should not be efficiently taught ? Geometry, Navigation, Surveying, and the like, require far greater powers of mind and thought on the part of the learner, and a much greater exertion of those powers; and yet boys obtain a knowledge of these branches at school. How then is it that book-keeping cannot be taught? I answer, because * "The first introduction of a young man to a merchant's eoimting-house, is a very important cir- cumstance in his life. It is to him an unknown world —a perfect terra incognita. Everything about him is painfully new. He sees books and papers with the nature and object of which he is totally unacquainted ; and he is surrounded by companions who, for the most part, are unwilling to instruct him in their use ; few of them, indeed, being capable of doing so with perspicuity. Clerks who have made their #ay to the knowledge they possess by gradual and slow steps, are anything but anxious to impart information to a new comer. Business with them is sheer habit. Drilled by time and ex- perience into mechanical precision, their opinion is that every raw recruit should undergo the same discipline; and thus, instead oi preliminarily understanding the principle, the why and wherefore, of all he does, the young book-keeper gets into the vvay of fulfilling the duties assigned him by dim of repetition only." — Percioal- XIV INTROrUCTlON. the suhjt^ct is not understood ; rules are substituted for reasons ; particular forms are confounded with general principles ; and the memory is burthened at the expense of the understanding. True, most youth bring from school a fairly written, finely flou- rished set of books ; and these are exhibited as a proof of proficiency ; but, as the fox said of the mask, " quanta species, sed cerebrum non habet" — it is a fine head to look at, but there are no brains within — the boy's hands may have learned book- keeping, but his understanding is perfectly guiltless of it ! The usual mode of proceeding is to commence this study by copying a series of mercantile transactions, comprising receipts, payments, purchases, sales, and the like : after being wearied, secundum artem, with this sort of work, the learner is re- quired to construct a journal ; the substance of his instruction being, that" the thing received is debtor to the thing delivered." But as to the object of making one thing debtor to another thing, he is totally ignorant ; for every entry in the journal has reference to the ledger, which is a sealed book to him. His whole progress through the journal is, therefore, no better than a blind process of guessmg; and when ulti- mately required to balance his books, he does so more like an automaton than a ra- tional being. Now this mode of tuition, if not erroneous ab initio, is at least defec- tive in purpose, and imperfect in its nature. It is an attempt to teach a science by way of synthesis ; a hopeless as well as an impossible task. Synthesis — or, literally, putting together — is the method of self-instruction ; but it never can be the method whereby a scientific teacher would develop the stores of his own mind to his pupils. The terms Dr. and Cr. have proved a stumbling-block to every person who has undertaken to explain the system of double entry. These terms are used merely to distinguish the left from the right-hand side of an account in the ledger ; whilst authors and teachers attempt to preserve their ordinary meaning by shewing that all items in the Dr. columns are in some way indebted to the concern, and vice versfi. Now the debit items of one account are a:collectiou of purchases; of another, losses; of another, receipts; ofanother, bills redeemed ; of another, liabilities. The 2>r. side of Stock shows the merchant's liabilities at the time of opening the books; on the contrary, the Dr. side ol a personal account shows what that person owes to the concern. The Cr. side oJ r j^ri^ fj/ INTRODUCTION. XV Bills Payable shows liabil ties in the shape of bills ; but the Cr. side ofBills Receiv- able shows the amount of bills disposed of. The Dr. side of Cash shows the amount f^tj^,- of cash received, but the Dr. side of Profit and Loss shows losses. In each class of accounts the debit items are different in their nature ; and one debit is like another no farther than as it belongs to the left-hand column of the account. But even if we could point out some hidden relation of owing in each debit entry, we should only be «-« ^ luring the learner from the investigation of principles, by employing his ingenuity on ^"^(J^^ a series of conundrums, not one of which can throw light on the next, the whole 1 being dependent upon an arbitrary use of words. « The explanation which some writers are obliged to give, in order to reduce all Dr. items to things owing, is highly amusing. The following is an example from a recent work. "Day-book entry. — Accepted Henry Austin's bill for J?1,000." "Journal entry. — Henry Austin Dr. to Bills Payable i^l,000." " Elucidation. — Austiti is Dr., because he owes us, we having paid him the amount we owed him Bills Payable is creditor, because the bill has paid Austin for us, therefore we owe it. Before we paid Austin we owed him ^€1,000 ; after we paid him he owes us £\,00Q; if not, then we still owe him ; and as we do not still owe him he must owe us that amount, and by his owing us the ,^1,000 which we owed him, he and we are upon an equality, or the account between us is balanced !" How enlightened a learner must be by this very intelligible explanation ! The rule which the author puts forth as an infallible guide is as follows : " Whatever owes us is debtor, — Whatever we owe is creditor ;" which is equivalent to saying, "Whatever owes us, owes us; and whatever we owe, we owe"! It is difficult to attach any other meaning to the words.* As a further illustration of this sort of mystification, let us suppose that the firsv * It may be said that an unfair specimen has been chosen. — That the objections advanced against th'.s work api)ly to many others in a less degree, is admitted : this was selected as an example of the extreme absurdity to which such a principle will carry a man whose intellect is too dull to be alarmed by the extravagance of his folly ; and if other authors have forborne to out such follv in print, they h&ve left the learner the task of committin«r it on his own account. / XVI INTRODUCTION. entry the tyro has to journalize is as follows: — " Commenced business with a cash capital of £10,000." He refers to his rule, which says, "the thing received is debtor to the thing delivered ;" but here he is completely puzzled, for he cannot perceive that anything was received or delivered. In view of this particular case he may have been required to commit to memory the following rules : — " By journal laws, what I receive, is debtor made to what I give ; Stock for my debts must debtor be, and creditor by property ; Profit and loss accounts are plain, I debit loss and credit gain." But how is the student to obtain a knowledge of the principles which are in- dispensable to correct practice ? He goes patiently through his task, vainly endea- vouring to apply his rule first to this transaction and then to that ; and, without inquiring whether he has gained any real information, good-naturedly places all the difficulties he has to surmount to the debit of his own capacity ! Having journalized many receipts of cash, he becomes familiar with the principle of the cash account ; but not till he has first determined that he must debit it when he receives cash for goods ; and next, when he receives cash from a person ; and then, when he receives cash for a bill ; until at last, omitting all other circumstances, he finds he must debit the cash account whenever he receives cash, no matter for what. He thus accumulates a few principles, slowly and imperfectly ; but to master the science in this way occupies years instead of weeks. It is so in the counting-house, and must be so in the school- room, unless the teacher unfolds the principles which are in reality the object of pursuit. The evils which result from this mechanical mode of teaching, are not limited to its mere negative character. The learner, from the outset, is impressed with false notions. He says to himself, "All things received are debtor, and all things deli- vered are creditor, and consequently the diflference must show how I stand." Great is his perplexity when he discovers that the Drs. and Crs. in the ledger are always equal ! It seems unaccountable that a process of instruction so inadequate, so unscien- tific, so entirely dogmatical, should have been permitted to pass so long unnoticed. INTRODUCTION. XVH [u the whole range of education there is not a similar example of such a loose appli- cation of language; such an utter disregard of everything like rational investigation. Book-keeping has indeed been called a science ; but it is impossible to conceive that the term could be seriously applied to mere exemplifications, without theory or principle. In thus denouncing the practice of my predecessors, it would be improper to rest satisfied with mere assertion; I will therefore endeavour to prove, that the theory of every art must be clearly unfolded before the practice of it can be efficiently taught. By efficiently taught, I mean really, not technically or mechani- cally taught. A good deal of confusion prevails respecting the terms Science and Art. It is too often imagined that they may be used indiscriminately ; but these terms are as distinct as theory and practice, of which they are respectively synonymous. Science is theory, art is practice. They result from the constituent parts of man himself, namely, mind and body. It is not always necessary that science should be reduced to practice, or become art ; yet every art is dependent upon science for its truth and certainty. Now to the proof of this. Man is essentially a reasoning being. If required to do a thing — unless biassed by prejudice, or overruled by authority — he naturally asks why he should do it. If told to believe any pro- position, he asks why he should believe it. He has an instinctive desire to know the why and wherefore of things. He has also implanted in his mind certain first truths, or self-evident principles ; and his whole existence as a reasoning being con- sists in comparing the ideas he receives through the medium of the senses with these first truths and with each other ; and from thence deducing inferences or conse- quences. As these truths accumulate in his mind, he is led to arrange them into classes, according to their relations or resemblances. Now this process of compari- son or reasoning, constitutes what we term Science ; and from this process of classi- fication and arrangement arises what are called the Sciences. Thus our ideas re- specting the nature and operations of the human mind, having undergone the process of comparison, are classed together into the science called Metaphysics ; the truths XVIU INTRODUCTION. we have discovered respecting bodies and external natvire, into Physics, and its va- rious sub-sciences ; the truths we have discovered respecting quantity and number, into that group of sciences called the Mathematics. Now, if we suppose man U consist of mind alone, and consequently not to advance farther than this reasoning and classifying process, we should have nothing but pure, abstract science ; but having a body and its wants to provide for, he proceeds to apply these truths to practical purposes. Science then, and then only, becomes art. Thus when from the Mathe- matics we deduce certain rules, and apply them to the guidance of ships over the pathless ocean, to the measurement of land, or to the construction of bridges ; we then have the art of Navigation, the art of Surveying, the art of Engineering, and the like. But the certainty and success of these arts depend upon the truth of the rules whereby the several operations are performed ; and the truth of the rules depends upon the previous reasoning : these truths constitute what are called the principles of the science. Hence, from the absolute dependence of all rules upon principles, it must be evident that, if we wish to make a learner understand, clearly and fully, any rule or set of rules, and to fix firmly in his mind the nature and operation of any art, we must begin by unfolding the principles upon which these rules are founded, — the truths from which they are deduced.* Here it may not be irrelevant to notice the common notion that practice is superior to theory. The source of this fallacy will be found, I apprehend, in sup- posing that science and art are distinct things — two opposite existences ; for this is * " In all studies the mind must begin by learning principles, without a knowledge of which it will be constantly falling into errors, in spite of its quickness or its diligence ; but principles being fully understood and accurately remembered, will be as useful to the mind as the magnet and chart are to the mariner. For this reason it ought to be the first object of education to give a clear knowledge and ready application of principles, rather than to fill the memory with a variety of unconnected de- tails. For these latter, however imjiortant as facts, can never impart a power or habit of accurate analysing on the one hand, or of careful laying together on the other, which alone can produce sound judgment and good round-about sense. Moreover, when we teach the principles of any science, we are, as it were, raising a wide floodgate through which knowledge may rush in a full and copious flood. When we teach unconnected facts, we are opening little rills through which knowledge will trickle only in scanty streams.'* INTRODUCTION. xix a necessary supposition, when we talk of one thing being superior to another. It has been shown that theory is science ; that practice is art ; and that art is science re- duced to practice. It is absurd, therefore, to talk of art being superior to science, when in fact there can be no art without science. It is true that a man who is ex- perienced in the mechanical operations of an art may be more generally useful at any particular moment, than one who is merely acquainted with its scientific principles ; but this facility of manipulation does not prove the superiority of art over science ; because (he mere practician must have been indebted for his power to exercise the art, to rules deduced by others from the truths of the science : or he must have been at the pains of elaborating those rules for himself. I shall be told, that the instances are numerous in which the most useful disco- veries have been made by practical men ; but if what are termed practical men do not make a discovery by an a priori train of reasoning — i. e. deduce it from some- thing known before, some established truth — they must have fallen upon it by acci- dent. Even those accidents that lead to brilliant results — that give the first germ to improvement — would be totally unfruitful did not they fall upon a soil capable of fructifying them ; and this is necessarily a mind which, to close observation, unites a habit of reasoning and generalizing, — a habit which in fact constitutes a scientific, in contradistinction to a mere practical man. Thousands had bathed before the time of Archimedes ; but it required the scientific mind of an Archimedes to deduce, from the simple fact of displacing the water from the bath, the celebrated discovery that forms one of the laws of Hydrostatics. The accidental bursting of an empty flask may have given the first rude idea of the power of steam ; but it required the com- bined effbrls of many scientific minds to bring it to its present state of perfection. Many an apple had fallen from the tree on which it grew ; but it required the scien- tific mind of a Newton to deduce from that simple occurrence the laws that have held the planetary worlds in their course since the dawn of creation, — to develop with mathematical certainty the system of the universe. Millions had seen the swinging of a lamp to and fro when suspended; but it required the scientific mind of a Gali- leo to deduce from this circumstance the only correct measure we have of time. I might refer to many other discoveries said to have been the result of accident, and show that it was owing to the scientific habits and mental sagacity of those who ob XX INTRODUCTION. served such occurrences, that the world is indebted for their application to aseful purposes, and that otherwise they would have slumbered in the womb of time amid a thousand others ; glimmerings of which may have been seen, but were suffered to «nk into obscurity, and are lost to the world. No one can say what might have been done had every opportunity been improved ; every suggestion sagaciously caught up and followed out. No one can tell how often the uneducated mind has approached to the very verge of a great discovery — has had some wonderful invention almost thrust upon it ; but without effect ; and hence the importance of training youth to habits of close reasoning and scientific investigation. There is no royal road to art, science, or learning. He who would become a clever and expert accountant, must pursue the study with diligence, industry, and perseverance. He must observe attentively, think deeply, reason logically ; his mind as well as his fingers must be active. Science is attained by study, art by practice ; and without a combination of both, the student's attainments must be superficial. Many expedients have been devised whereby the toil of study might be saved. But let no one be seduced to idleness by specious promises. Excellence is only to be attained by labour. " Those who are perpetually in search of short and easy roads to knowledge," says Bailey, *' forget that, from the very nature of the case, science cannot be at- tained without labour ; that ideas must be frequently presented to the mind before they can become familiar to it ; that the faculties must be vigorously exerted, to possess much efficiency ; that skill is the effect of habit, and that habit is acquired by the frequent repetition of the same act. Application is the only means of secur- ing the end at which they aim ; and they may rest assured that all schemes to put them in possession of intellectual treasures without any regular and strenuous efforts on their part, all promises to insinuate learning into their minds at so small an ex- pense of time and labour that they shall scarcely be sensible of the process, are mere delusions which can terminate in nothing but disappointment and mortification. // cannot be too deeply impressed on the mind, that application is the price to he vaid for mental acquisitions, and that it is as absurd to expect them without it, as to hope for a harvest where we hove not sown the seed.*' DOUBLE ENTRY ELUCIDATED. PART I. SECTION I. DEFINITIONS AND GENERAL PRINCIPLES. 1. The end and aim of book-keeping is to exhibit, in a clear, concise, intelli- gible manner, the primary, progressive, and present state of a man's pecuniary affairs. 2. The essentials of this art consist in the classification and arraugement of financial facts in a book called the ledger. Each collection of facts in the ledger is called on account. 3. An account, whether of persons or things, in the book-keeping sense of the term, is a detailed or summary statement of all the transactions and events whereby the property of a concern has been aftected by the persons or things in question. 4. The most important preliminary to the final adjustment of accounts is the registration of all the facts of which they are composed in chronological order, and in language as clear and concise as possible. 5. These primary records are the elements of the accounts ; and the business of the book-keeper is to classify and arrange them in such a manner as to aflPord, with promptitude and facility, a condensed and accurate statement of the result. 6. It is obvious that no result can be satisfactory if facts of a similar character are classed under different heads, or facts of a different character under the same bead. In the one case there would be confusion ; in the other, diffuseness ; and in B both, liability to error : hence receipts should not be blended with payments, pur- chases with sales, or gains with losses ; they are distinct circumstances, and must occupy distinct positions, 7. Each account is designated by its appropriate title, and articles of opposite kinds are placed in opposite columns. For instance, money received in the left, and money paid in the right hand column. To open an account signifies to enter its title, for the first time, in the ledger ; the items belonging to it are then trans- ferred from the subordinate books daily, weekly, or monthly, as may be convenient. This process is called posting. 8. The two sides of an account, when added, will be equal, or they may be made equal by adding the difference to the lesser side.* In the former case the account is closed ; in the latter, it is merely equilibrated : the balance being transposed, or carried to the opposite side, the account is continued as before. This process is called balancing. 9. The receipts and payments of money are recorded under the title of " Cash,*' and a distinct account must be opened for each person or firm with whom you have dealings on trust, under their respective names, or the name of the firm with whom they are connected. 10. "Written securities, such as promissory notes, drafts, and acceptances, are, in mercantile language, called Bills : those received by you, and for the payment of which other parties are responsible, are recorded under the title of " Bills Re- ceivable ;" those issued or accepted by you, for the payment of which you are re- SDonsible, are recorded under the title of " Bills Payable. '* 11. Purchases and sales are recorded under the name of the property bought and sold ; as Cotton, Sugar, Tea, Coffee, and the like ; but when the articles are numerous, the general title of Merchandise is substituted. The capital, or surplus property, is recorded under the title of Stock; and the gains * The mode of adjusting an account maybe more concisely shewn in an algebraic form. Thus: let M b c represent the positive parts or debit items ; I m n the negative parts or credit items; and if the balance. Then a+b +c — {I + m + ji)=+ x. Therefore, a + b-\-c — l~{-m-\-n^x. and losses, under the double title of " Profit and Loss.'* " Commission," " Charges," " Interest," " Rent and Taxes," &c., are merely subdivisions of the Profit and Loss account, and the latter is simply a branch of " Stock." 12. The accounts of goods, houses, ships, land, bank stock, shares in public or private companies, and the like, contain on the left-hand side the value of the property at the time of opening the books ; the cost of what is subsequently purchased, and all incidental charges ; and on the right-hand side the value of what is sold or otherwise disposed of, and all other returns, such as rents, freights, divi- dends, &c., together with the value of what is unsold at the time the accounts are adjusted. 13. When goodsare consigned to afactor, orintrusted to an agent to sell onyourac- count, you cannot consistently debit him with the cost ; but the fact must be recorded in such a manner as to shew the value of the property, and the circumstances under which it is placed. It is usual, in such cases, to open an account for each consign- ment, under some appropriate title, which is debited for the cost, and credited for the net proceeds. 14. When goods are consigned to you for sale, you cannot consistently credit the consignor with the cost or invoice price ; for you are only liable for the net proceeds. It is usual, in such cases, to open an account for each consignment under some appropriate title, which is credited for the sales, and debited for the charges, including duty, freight, insurance, commission, &c. The difference, when the sales are complete, is the net proceeds, which is transferred to the credit of the consignor. 15. The whole scheme of book-keeping is but the means of collecting, arranging, and classifying the particular facts which are scattered through the primary books : the ledger, therefore, invariably represents concentrated, and not diftuse, accounts ; it is a book of results, and not of details ; it is, in short, the tabular centralization of the subordinate books, and the final instrument of the balance-sheet. 16. It is a primary axiom of the exact sciences that the whole is equal to the sum of its parts ; and on this foundation rests the entire superstructure of book- keeping. It considers property as a whole, composed of various parts. The Stock account exhibits the capital collectively ; the remaining accounts exhibit its compo- nent parts : hence the whole and its parts mutually check and verify each other. 17. The component parts of property are distributed into debtors and creditors ; the positive parts constituting the former, and the negative parts the latter. The Stock, or net capital, must also come under one of these classes ; for when the assets exceed the debts. Stock or the proprietor is a creditor for the surplus, or, in the event of insolvency, debtor for the deficiency. The direct inference from which is the equilibrium of debtors and creditors throughout the books. 18. But without thus deducing it from the connection of the accounts, this equality is evident from the very signification of the terms debtor and creditor, which being correlative, the one always implies the other, and cannot exist without it. If, therefore, for every debtor there must be an equal creditor, and for every creditor a corresponding debtor, the respective sums of these equalities must also be equal. 19. At the time of opening and closing the books, the equilibrium of debtors and creditors exists in the concern, considered in a state of rest ,• but from the axioms, that if equals be added to equals, the sums will be equal, or if equals be taken, from equals, the remainders will be equal, it is evident that the same equilibrium must exist in all the intermediate occurrences. 20. The component parts of property are in a state of continual transformation and change ; but whatever variations they undergo, and whether the whole capital increase, diminish, or remain stationary, it must constantly be equal to the sum of its parts. Gains increase and losses decrease the capital ; they also increase or decrease the assets in the same ratio, so that an equilibrium is maintained between the whole and its parts under every variation that can occur. 21. In further elucidation of the principle under consideration, let us suppose two equal lines, A B and C D, to represent the debtors and creditors of any set of accounts : thus. Let A !?• I 8.000 ^ 8.60.. -RrpprPSPnt the debtors, and C .J^*! -^ *!*^_!^ J'»^_ D represent the creditors. Let the debtors be divided at «, the creditors at/; and let A e and C /represent respec- tively the debit and credit sides of Stock ; whilst e B and/ D represent the debtor and creditor sides of all the remaining acconuts. It is evident that the difference between A e and C/ is equal to the difference between e B and/ D, and must be equal to it ; let the division be placed at any part of the lines at pleasure ; or if one of the marks be taken away, say /, it must still be evident that A e is equal to the difference between C D and e B. Hence it follows that the balance of the Stock account must always be equal to the collective result of all the other accounts. 22. But this comparative equality is not, as has commonly been supposed, restricted to ** Stock :" the same reasoning holds good with regard to every other account, or to any portion of the accounts. For example, let A e and C /represent the debtor and creditor sides of " Cash," and it follows that the balance of " Cash" is equal to the net balance of all the other accounts, and that the balance of any proportion of the accounts is equal to the net balance of the remaining proportion. 23. The reader may perhaps conceive, that notwithstanding the lines A B and C D are equal at the time of opening the books, yet, as transactions must occur to alter their extent, it is possible for such an alteration to take place as shall operate to the unequal extension or diminution of one line or the other, and of course to the subversion of the whole reasoning founded upon their equality. But such a circum- stance can never happen ; for, in every transaction or adjustment, an equal amount of debtors and creditors must be affected, so that the extension or diminution of the two lines in question must always be equal in regard to each other. 24. The equilibrium of debtors and creditors having been demonstrated, as well from the nature of these relations as from the axiom that the whole is equal to the sum of its parts, and having been shewn to exist essentially in property in every state, whether of motion or of rest, we may justly lay it down as the fundamental principle of book-keeping, — a principle not of mere expediency, but of absolute necessity, and inseparable from the nature of accounts. 25. Accounts, however numerous, diversified, or involved, may be divided into TWO classes,— PERSONAL and IMPERSONAL. The Personal Accounts invariably represent debts receivable and payable ; the Impersonal Accounts consist 6 of outlay and returns. The importance of this classification cannot be too strongly insisted upon ; for without it, it is impossible to attain a comprehensive, well-grounded knowledge of the science of double entry. 26. The first general division of the ledger is limited to the accounts of cash, bills, and persons, which are distinguished by the collective term Personal Accounts. That the accounts of cash and bills are analogous to those of persons will appear from the following considerations : — 1. The account entitled *' Cash " represents the cashier, who debits him- self or cash for all monies received, and credits himself or cash for all monies paid. The balance is cash in hand, for which the cashier is responsible to the concern : hence this is substantially a personal account. 2. The account entitled '* Bills Receivable" represents the persons who are liable for the payment of the bills : the debit side consists of other men's bills which you receive ; the credit side consists of all such bills as are dis- posed of, and the balance shews what is owing to you in the shape of bills : hence this is substantially a personal account. 3. The account entitled " Bills Payable" represents the persons to whom you are liable in the shape of bills. The credit side consists of the bills issued or accepted by you ; the debit side consists of all such bills as are redeemed or withdrawn from circulation ; and the balance is whatyoM owe in the shape of bills : hence this is substantially a personal account. 27. The second grand division of the ledger includes the accounts of goods, ships, houses, land, shares in public or private companies, profit and loss, commission, stock, &c., which are distinguished by the collective term Imper- sonal Accounts, The nature and design of this class of accounts may be inferred from the following considerations : — 1. The cost or value of goods, ships, houses, land, shares in public or pri vate companies, the disbursements for fixtures, tools, raw materials, wages, clerks' salaries, rent and taxes, and every other expenditure consequent upon a man's trade, business, or profession, is comprised under the general term Outlay. 2. The sums received or receivable for the sale of goods or any other pro- perty, for rents, freight, dividends, interest, commission, work done, profes- sional advice, or from any other source consequent upon a man's trade, business, or profession, is comprised under the general head of Returns. 3 The gain or loss resulting from any particular investment or speculation is obviously the difference between the prices at which we buy and the prices at which we sell. In like manner, the gain or loss accruing from any trade, business, or profession is the difference between the total outlay and the total returns consequent upon such trade, business, or profession. 28. A little further consideration will shew that purchases and sales affect both classes of the accounts equally. For instance, goods bought for cash, on credit, or for a bill, must be entered in the debit or left-hand column of the impersonal, and also in the credit or right-hand column of the personal accounts : on the contrary, goods sold for cash, on credit, or for a bill, must be entered in the debit or left-hand column of the personal, and in the credit or right-hand column of the impersonal accounts. 29. Purchases create impersonal debtors, and personal creditors ; sales create personal debtors, and impersonal creditors, receipts convert personal debtors into cash, whilst payments decrease cash and personal creditors in the same ratio. Hence it follows that (with the exception of transfers) the debit items in one class of accounts are credits in the other, and vice versa.* 30. Receipts and payments, so far as the personal accounts are concerned, are merely changes of value, or transfers from one account to another of a similar character, which neither increase nor decrease the capital. When, for instance, a merchant pays a debt, he decreases his cash and decreases his liabilities to the same extent ; when he receives payment of a debt, he increases cash, or some analogous account, and decreases his debts receivable to the same extent. 31. A sura posted to a wrong personal account will not affect the general result in the least. Thus, if A is debited £100 instead of B, and if neither A nor B object to the error, no loss is sustained by the proprietor ; but if £100 is posted to the debit of an impersonal, which should have been placed to the debit of a personal account, the error will increase the losses, and decrease the assets, to that extent. In like manner an item entered in one of the impersonal accounts which belongs to another, will in no way alter the general result ; the account im- properly charged will exhibit less and the other more profit, but the capital will not be increased or diminished in consequence of such errors. * See illustrations, pp. 108, 109. 8 32. The ledger contains a synopsis or condensed history of a man's pecuniary transactions, arranged in systematic order, so that the state of any particular account, as well as the general result of the business, may be readily ascertained. 33. Each account consists of two parts, directly opposite in their nature ; the space or folio which it occupies being vertically divided, the left-hand side is deno- minated Debtor, and the right. Creditor. The positive parts, or debit items, are entered in the left, and the negative parts, or credit items, in the right-hand mopey column. The preposition To is prefixed to the several entries on the left, and the preposition By to those on the right-hand side, thus : — —Dr.— WILLIAM WATSON. — Cr.- 1852. Jan. 1 10. 15 31. To Merchandise To do. To do. To do. To Balance, 1000 1852. Jan. 10. 2000 17. 500 21. 1500 5000 1200 By Cash . By do. . By do. . Balance 3000 500 300 1200 5000 The above is a statement of what Watson owes you, and what you owe him ; the balance, or difference between the two sides, indicates that he is still liable to you for the sum of ^1200. 34. The Cash account is simply a statement of the receipts and payments of money. All receipts are entered in the left, and all payments in the right-hand money column. The balance represents the cash in hand, for which the cashier is responsible. 35. The account entitled " Bills Receivable" is simply a statement of the bills received and disposed of. It is debited for all bills, notes, or acceptances which come into your possession, and credited for all such bills as are paid or otherwise disposed of. The balance of this account invariably represents Assels in the shape of written securities. 36. The account entitled " Bills Payable" is simply a statement of the bills issued and redeemed. It is credited for all bills issued by you, and debited for the ^me when redeemed. The balance of this account invariably represents liabilities Vi the shape of bills. 37. The design of all property accounts, such as Goods, Ships, Houses, Land, Shares in public Companies, and the like, is to shew the gain or loss resulting from each investment or speculation. The outlay or cost is entered on the left, and the sales or returns on the right-hand side ; and the result, when the returns are com- plete, is gain or loss, as the case may be. 38. The Stock or capital account is simply a statement of the surplus property. It represents the merchant's present worth, or, in case of insolvency, his net de- ficiency. The net capital, together with the net gain, is entered on the credit side; and in the event of insolvency, the net loss is transferred to the debit side. Profit and Loss, and its ramifications, are simply branches of the Stock account. 39. It is customary, on opening a set of books, to enter the gross assets to the credit, and the liabilities to the debit of Stock ; — but the grand principle whereby the equality of debtors and creditors is at first established, would be more clearly exhibited by entering the net Capital only to the credit of " Stock." In order to illustrate this view of the subject, let us suppose a merchant's assets and debts, at a given period, to be as follow : — fCash £5000 Assets < Bills Receivable 8000 I Merchandise 7000 20,000 Liabilities. /Bi»«P-y-ble ^6000 1_ Jobn Smith ... 4000—10,000 Net Capital £10,000 In this case the assets amount to £20,000 ; the liabilities to £10,000, which leaves a surplus of £10,000 ; in other words, the net capital and debts equal the gross assets. The usual mode of entering these facts in the ledger is to make " Sundries Dr. to Stock" for the assets ; and " Stock Dr. to Sundries" for the liabilities : but c 10 the better aud more scientiiic plan is to credit Stock, or the proprietor, for the net capital only. A ledger kept upon the principles of double entry is neither more nor less than an account-current, exhibiting, as it does, the state of the accounts, not only individually, but collectively : the net capital or deficiency — which is the balance in favour or against the proprietor — ^being added to the deficient credits or.debits, makes both equal.* For example : — Dr. - Stock. Cr. 10,000 Dr, Bills Payable. Cr. , 6000 1 Dr. John Smith. Cr. 4000 1 Dr. Cash. Cr. 6000 i i I Dr. Bills Eeceivabli -i. Cr. 8000 J Dr. Merchandise. Cr. (Drs ^20,000.) 7000 (Crs. £20,000.) * Let ab c represent the assets, I m the debts, and x the net capital or net deficiency. Then a + b + c- il + m) = X. Therefore, a + b + c = I + m'i x. u GENEEAL PRINCIPLES. I. The terms debtor and creditor are correlative ; the one implies and involves the other: wherever there is a debtor there must be a corresponding creditor; on the contrary, a creditor pre-supposes a debtor. TI. All pecuniary or accountable transactions may be virtually considered under the single denomination of barter, or the exchanging of one thing for another. III. In bartering, whatever is received is debited for its value in exchange, and whatever is given or disposed of is credited for its value. In other words, the thing received is debtor to the thing delivered. IV. Debtors and creditors are opposed to each other ; that is, the debit items in one account are credit items in some other account or accounts, and vice versa : hence the debtors in any set of accounts are equal to the creditors. (See article 18.) V. The balance or net result of any one account, or of any proportion of the accounts, is equal to the collective result of all the remaining accounts, (See art. 22.) VI. The original capital js/w* the gain, or minus the loss, is equal to the present as.Mets minus the debts ; and in case of insolvency, the debts or liabilities minus the assets are equal to the net deficiency.* * Let A represent the original capital. ) B ,, the net gain or loss. J C ,, the present net capital or deficiency. D ,, the gross assets ; and J E „ the debts or liabilities. i it" Then A + B = C, and C = D — E. Therefore D = C E (j/ / i^-X-^ 5 SECTION I «»t?B8IDIARY BOOKS — MONTHLY JOURNAL. The Subsidiary Books required by the General Merchant are — I. The Cash-book, comprising cash transactions only. On the left-hand folio are entered, daily, all sums of money received ; and on the right-hand, all sums dis- bursed, or paid out. II. The Bill-book, in one part of which are entered all bills receivable, and in the other aU bills payable by the concern. III. The Invoice-book, containing the particulars of goods purchased, whether for exportation or otherwise. IV. The Book of Shipments, containing the particulars of goods sent abroad, ^ either m consequence of orders or on consignment. V. The Sales-book, which contains the particulars of goods sold on commission. The charges incurred upon such goods, including factorage, are entered on the left- hand, and the sales on the right-hand, page. The Cash-book is perfectly simple in form and arrangement. Each foUo consists of two pages. The left-hand page exhibits a statement of the money on hand at the beginning of each month, and all sums subsequently received ; and the right-hand page exhibits a statement of all disbursements of money for the same period. The difference between the totals of the two sides is the balance, or cash in hand. For example — 13 Dr. Cash. O. j 1840 Jan. 1 u 5 » 10 » 15 II 25 » 30 « 31 Balance from Dec. . To James Kent, on ac't, . To BUls Receivable, . .No. 77, . To Merchandise Sales, . To James Kent, in full, . To Bills Receivable, . .No. 78, . To Merchandise, Sales, . 1840 10,000 Jan. 2 1.500 » 4 1,750 « 8 1,250 » 10 3,500 II 20 1,000 „ 26 1,800 20,800 By BiUs Payable,. .No. 40, . . By Henry Pope, . .paid him. By Robert Hall, ..paid him, By Bills Payable, . .No. 41, . . By Henry Pope, ..paid him. By Robert Hall, ..paid him. Balance to Feb 8,000 1,300 1,575 1,425 1,000 1,500 6,000 20,800 In journalizing the Cash-book, the receipts and payments for each account are com- bined, -so as to require but one posting for the month ; thus — January, 1840. —Drs.— —Crs.— s 1 Cash Dr. to Sundries, Received this month f- Cash-book, fol. 1, To James Kent, 6th, 1,500 26th, 3,500 10,800 .6,000 2,750 3,050 14,800 To Bills Receivable, 10th, 1,750 30th, 1,000 To Merchandise, 16th, 1,250 31st, 1,800 ! 1 Sundries Dr, to Cash, Paid this month '^ Cash-book, fol. 1, Bills Payable, 2nd, 8,000 10th, 1,425 9,425 2,300 3,075 Henry Pope, 4th, 1,300 20th, 1,000 Robert Hall, 8th, 1,575 26th, 1,500 1 u. — 25,600 26,600 — 14 The Bill-book is ruled with columns for the different details, such as the number, when received, on whose account, the date and term, on whom drawn or to whom granted, when due, the amount, and how disposed of; thus — Bills Receivable. No. When rccM. On acc't ot Dravn by. Date. Term. Drawn on. When due. Amount. When and how diiposed of. 25 26 87 1840 Jan. 1 , 15 « 20 J. Brown T. Ware J. Brown W. Allen J. Hill R. James 1840 Jan. 1 « 10 « 15 30 days 60 » 90 a J. Jones C. Payne F Hope 1840 Feb. 1-4 Mar. 16-19 Apr. 15-18 1,000.0.0 1,200.0.0 3.800.0.0 1840 Feb. 3 Mar. 19 Apr. 18 In cash. a do. • do. Bills P AYABLE. No. Date. Drawn by. To order of. Acc't of. Term. When accept'd. When due. Amount. When and to whom paid. 36 37 38 1840 Jan. 1 « 10 > 12 H. Penn C. Fox G. Hurd B. Hill H. Burr C. Clay H. Penn C. Fox G. Hurd 1 month 2 » 3 • 1840 Jan. 3 » 15 « 20 1840 Feb. 3-6 Mar. 15-18 Apr. 20-23 1,780.0.0 1,220.0.0 1,000.0,0 1840 Feb. 6 Lloyd 85 Co. Mar. 18 Payne & Co. Apr. 23 Lloyd & Co. It is customary to keep a register of both bills receivable and payable in the same book. The journal entries for the above biU transactions are as follows : — January, 1840. —Drs.— 1 Bills Receivable Dr. to Sundries, Received this month '^ bill-book, fol. 1, 6,000 4,800 1,200 4,000 To J. Brown, 1st, 1,000 20th, 3,800 To T. "Ware, , . 15th, Sundries Dr. to Bills Pay able. H. l*enn, 3r(i, 1,780 1,220 1,000 t) C. Fox, 15th, G. Hurd, 20th 10,000 « 10,000 15 The Invoice or Bought-book is generally composed of the original invoices or bills of parcels, pasted into a blank book made of cartridge paper. This book should have its pages numbered, and an index, so that any invoice may be easily referred to. The several purchases are arranged one under the other in regular order, and the totals are placed in a money column, ruled for the purpose^ each amount being ex- tended opposite to its respective bill ; thus — Messrs. Brown, Brothers, & Co. Bought of Johnson ^ Co, 26 pieces Black Cloth, 700 yds. @ 20/ 700.0.0 25 . Blue do. 560 yds. @ 16/ 420.0.0 1,120.0.0 Messrs. Brown, Brothers, & Co. Bought of Fraser ^ Son, 38 pieces Toilinette, . . 570 yds. @ 5/ 142.10.0 60 » Cassimere, 1,100 . @ 10/ 550. 0,0 692.10.0 Messrs. Brown, Brothers, & Co. Bought of James Smith 3f Co, 20 pieces Broadcloth, 500 yds. @ 25/ 625.0.0 20 » do. 520 , @21/ 546.0.0 1,171.0.0 1,120 692 1,171 2,983 10 10 The above purchases are journalized as follows- January, 1840. —Drt.— — c«.— Merchandise Dr. to Sundries, Purchased this month W Invoice-book, 2,983 10 1,120 692 1,171 10 To Johnson & Oo 15th To Fraser & Son, , 16th, To James Smith & Co C5th, 2,983 10 * * 2,983 10 16 The Book of Shipments, or invoice-book outwards, contains copies of all in- voices of goods sent abroad. Some accountants enter the particulars of the ship- ments in the day-book ; but the more common practice is to record transactions of this nature in a separate book, which is journalized monthly. The following is an exemplification of the general form of invoices — Invoice of Goods shipped by Brown, Brothers, 8f Co., on board the Gladiator, Britton master, for New York, by order of R. Johnson, merchant there, for his account and risk, and to him consigned. 11. J. No. 1 , 2 . 3 1 Trunk, containing 50 pieces Cambric Check, amounting as f- B. P. inclosed to 150. 0.0 Trunk, and packing, 1.10.0 1 Trunk, containing 50 pieces Calico Check, amounting as f B. P. inclosed to 160. 6.0 Trunk, and packing, 1. 10.0 1 Bale, containing 50 pieces Broadcloth, amounting as f B. P. inclosed to 1,120. 0.0 Canvass, ropes, and packing, 3.10.0 CHARGES. Cartage, wharfage, and shipping, Custom-house entry and fees, Bills of lading, and agency, Commission, 2^ f- cent on ^1,443.5.0, Insurance on .£'1,500 at 30«. "^ cent, and PoUcy ^4.2.6, . . Commission on Insurance, i '^ cent, London, Feb. 4, 1840. 1.10.0 3. 5.0 2.15.0 26.12.6 7.10.0 151 161 1,123 1,436 10 15 10 34 1,514 15 The journal entry for this invoice is> as folio ws- Februaby, 1840. To Merchandise, To Charges, .... To Coramission, To Insurance, . . Robert Johnson Dr. to Sundries, For Goods #* Gladiator V book of shipments, —Drs.- 1,514 1,514 9 1 —Crs.— 1,43G 15 7 10 43 11 26 13 1,514; 9 17 Sales-book. — ^The arrangement of sales on commission. is similar to the Cash-book. The particulars are recorded upon opposite pages in the form of Dr. and Or., with a preamble over both setting forth the description of the goods, from whom received, &c. The charges are entered on the left, and the sales on the right-hand page; thus — Br. Sales 100 Bales Cotton, "f- St. James from New York, acc't Hone ^ Sons. Cr. 1840 Jan. 1 . 3 • 31 Freight 38,180 lbs, ® |d. #" ft. and Primage 5 W cent, . . Weighing, and delivery Landing, wharfage, housing, .... Sampling, mending, &c Rent, 4 weeks, at Id. ^ Bale,. . 83 2 5 6 1 1 61 1,368 1,530 10 10 5 5 13 10 2 4 8 1840 Jan. 31 Sold West & Co., at 1 month, 100 Bales, weighing, cwt. qrs. lbs. Gross, 340 . 3 . 16 Draft, 3 . 16 ® 1ft ^bale. 1,530 340 . . Tare, 12 . . 16 ®4fts^cwt. Commision, and guarantee, 4 W cent, Net. 327 . 3 . 18, or 36,720fts at lOd. Vft, in bond,.... London, Jan. 31, 1840. Brown, Brothers, & Co. To HoNB & Sons, net proceeds, 1,530 In the Sales-book the different articles are necessarily entered as they occur, but in rendering the account of sales, they are arranged in any way that perspicuity or custom may dictate. The entries which arise from adjusting the above sales are jour- nalized as follows: — January, 1840. —Drs.— —Crs.— West & Co. Dr to Cotton "^ St. James, 1,530 1,530 100 61 1,368 13 4 2 4 8 J. 1,530 For adjustment of Sales, 100 Bales *" S. B. 3,060 3,060 The Day-book contains such occasional entries as do not properly belong to either of the other subsidiary books, such as insurances, discounts allowed, and the like. The books here described are the authorities from which it is now customary, in extensive concerns, to compose the Journal. It must not be supposed, however, that all these books are requisite in every establishment. In domestic or inland trade, where the transactions are confined chiefly to purchases and sales, receipts and payments, the principal subsidiary books are the Cash-book, Bill-book, and Day-book. There are also several books which do not form any part of the materials or vouchers for the journal; namely — 1. The Account-current-book, containing duplicates of the accounts fur- nished to correspondents. 2. The Letter-book, containing copies of all important letters, dispatched. 3. The Order-book, containing copies of all orders received. 4. The Petty Cash-book, or account of petty disbursements. 5. The Cash Sales-book, containing cash sales of merchandise. The old method of journalizing and posting each transaction separately unneces- sarily swells the accounts in the ledger with a multiplicity of figures, which greatly increases the difficulties of balancing ; and — to say nothing of extra labom- and loss of time — the habihty to error is always in proportion to the number of entries, and vice versd. If a hundred sums are posted when one would answer, then a hundred chances of error are incun-ed where only one was necessary ; and in the event of an error in adjusting the accounts, a hundred entries must be called over and examined SECTION Til. JOURNALISINO AND POSTING ELUCIDATED. The design of the journal is to facilitate) the process of posting ; in other words, to designate on which side of each account in the ledger the respective values are to be placed. The accounts to be debited and credited* are indicated by writing their titles ; and the side of the account is designated by placing the abbreviation Dr. after the title of that which is to be debited, and the preposition io before the title of that which is to be credited: then follows a brief statement of the transaction : In the modem practice of this art several books are used for the primary entries, each appropriated to a distinct class of affairs. In consequence of this subdivision of the waste-book, the form of the journal is changed from a daily record to a monthly abstract of the subsidiary books ; and the entries are classified so as to comprise under one head a number of transactions oc- curring at different dates. Thus the collective entry of Cash Dr. to Sundries, exhibits, successively, aU the receipts of money dming the month, the tota' sum of which is car- ried to the debit of ^Cash;' and the collective entry. Sundries Dr. to Cash, exhibits, in like manner, all the payments of money, the aggregate alone being posted to the credit of ' Cash.' The same combination of entries is made in every department of business : all similar items relating to each account are classed together, and posted in one sum to the ledger. * To debit an account, means to enter a sum on the left-hand side of the ledger ; and to credit an account, means to enter a sum on the right-hand side. Although the abbreviation Or. is never expressed m the journal, yet it is always understood to follow the word, to. D 2 20 The chief requisite in forming a journal entry is to know at once, from the nature of the transaction, not only what particular account is to be debited and credited, but also on which side of the account each item should be placed. The following illustrations exhibit the technicalities of the journal : — !.-r-Bought of Thomas Brown & Co. a quantity of hardware, at 90 days' credit, amounting, as "^ invoice, to dS 1,000 In journalizing this transaction first consider under what heads this sum must be placed, both on the debtor and creditor sides of the ledger. It is obvious that the concern is indebted to Brown & Co. for the amount, :6l,000 ; for which value has been received in hardware. All purchases of goods may be entered on the debtor side of ' Merchandise,^ and all sums for which we are accountable to individuals or firms are entered on the creditor side of their respective accounts : therefore, the journal entry is — Merchandise Dr. to Thomas Brown, i^ Co., For hardware, "^ invoice, ^1,000 i In posting this entry we turn, by the help of an index, to the merchandise account, and on the lefl hand, or debtor side, write 'To Thomas Brown & Co., £1,000.* We next turn to Brown & Co.'s account, and on the right hand, or creditor side, enter *By Merchandise, £1,000:* prefixing dates, &c., &c. 2. — Sold for cash, a quantity of hardware, as 1^ sales-book, amounting to ^800 Here, again, let us consider the nature of the transaction in reference to the classifica- tion and arrangement of the ledger, and no difficulty can occur in making the journal entry. We have increased the amount of cash in our possession, and diminished the quantity of goods in our warehouse, and as all moneys received are entered on the 21 debtor side of * Cash,' and all goods disposed of on the creditor side of *^ Merchandise,' we say — Cash Dr. to Merchandise, For sales this day, T S. b., -€8tH) In posting this entry first timi to the cash account, and on the debtor side wiite * To Merchandise, £800/ We next turn to the merchandise account, and on the creditor side write ' By Cash, £800/ See II . General Principle. 3.— Paid Thomas Brown & Co. as f- receipt, cash in full, ^£1,000 This debt, when contracted, was entered to the credit of Brown & Co., and formed a part of our habilities. The debt is now discharged ; but, in the operation, we have diminished our cash : and both of these facts must be recorded. All sums for which an individual is responsible to us are entered on the debtor side of his account; and all disbursements of money are entered on the creditor side of ' Cash / hence we say — Thomas Brown & Co. Dr. to Cask, Paid them in fidl, ^1,000 In posting this entry turn to Brown & Co.'s account, and on the debtor side write *To Cash, £1,000/ Next turn to the cash account, and on the creditor side write * By T. Brown & Co., £1,000/ See II. General Piinciple. 4. — ^Accepted Jones, Lloyd, and Co.'s draft, in favour of H. Felt, at 30 days' sight. No. 1, ^6,000 All bills for the payment of which, at maturity^ we are responsible are entered, when issued or accepted, on the creditor side of ' Bills Payable,^ and to the debit of the drawer, or payee ; hence the journal form of Ibis entry is — Jones, Lloyh, & Co. Dr. to Bills Payable, For our acceptance at 30 days' sight. No. 1, ,^5,000 Entries of this description are not readily comprehended by learners, owing tr» the 22 confused notion which they have of the nature of bills or acceptances. A little reflection, however, will show that the concern is still liable ; but not to Lloyd & Co. In fact, this transaction is merely a transfer of a debt from the party with whom it nq& originally contracted to the holder of our acceptance. We therefore debit Lloyrt & Co., and also enter the value of the bill on the credit side of a general account which is opened for sucn obHgations, under the title of ^ Bills Payable. 5. — Sold goods to Thomas Brown & Co. as "^ sales-book, and received their bill at 90 days' date. No. 4, ^1,500 A bill represents value, and is a negotiable document. We do not, in this case, debit Brown & Co. for the goods, because we have received a bill in settlement, and they are responsible only to the party who is the holder of the bill at maturity. As the value of all bills which we receive are entered on the debtor side of an account entitled * Bills Receivable,' and all goods disposed of on the creditor side of * Merchandise,' the journal form of the entry is — Bills Receivable Vr. to Merchandise^ For Brown & Go's acceptance. No. 4, ^l,60(i In posting this entry turn to ' Bills Receivable,' and on the debtor side write ' To Mer- chandise, £1,500;' and next to ^Merchandise,' and on the creditor side write ^By Bills Receivable, £1,500.' See II . General Principle. 6. — Paid our acceptance, No. 1, in favour of H. Felt i£6,000 When a debt or obhgation is entered on the creditor side of any pai'ticular account, the value must be entered on the debtor side of the same account, if it be paid or otherwise discharged ; and vice versa. This acceptance when issued was entered on the creditor side of ' Bills Payable' and formed a part of our liabilities. It is now 23 redeemed. We are therefore no longer liable for the amount, but our cash has beeii diminished by the operation. In journalizing the transaction, we say — Bills Payable Dr. to Cash, Paid our acceptance. No. 1, ^6,000 As this is simply a transfer between two accounts, the sum must be inserted on the debit side of the one and on the credit side of the other. See III. General Principle. 7. — ^Received payment of Brown & Co.'s acceptance. No. 4, ^1,500 This, like the sixth example, is merely a transfer between two accounts, namely, the receipt of money and the disposal of a bill. The journal entry is — Cash Dr. to Bills Receivable^ Received payment of bill. No. 4, <€1,500 In this transaction 'Cash' is increased, and the bills in our possession equally diminished; and therefore the cash account must be debited, and ' Bills Receivable' credited for the amount. The foregoing are illustrations of what may be termed simple journal entries. A complex entry is one in which there is two or more debtors to the same creditor, or, two or more creditors to the same debtor, as is often the case when several sales are made to different persons, or when a number of purchases, payments, &c. occur at one date, or even at different dates. The followirg are examples : — 8. — Sold goods this day at 3 months' credit, as '^ sales-book, namely to — Walter Holmes, amount of invoice, 600 Henry Brown, « .... « 700 John Smith, . . 800 ^2,000 ' Merchandise ' is credited for the total sales, .£2,000, and each person debited for his 24 respective share. See V. General Principle. The form of the entry is-- SuNDRiEs Dr. to Merchandise, For sales this day, "f- S. B. Walter Holmes, 500 Henry Browii, 700 John Smith, 800 j€2,000 The term Sundries is used in such cases merely to avoid recapitulating the same cre- ditor. Thus, instead of saying, 'Walter Holmes Dr. to Merchandise/ 'Henry Brown Dr. to Merchandise/ and * John Smith Dr. to Merchandise/ we avoid this repetition by using the word sundries. 9. — Received cash this day of the following persons, as "^ cash-book; namely — Stephen Hunter, 1,000 Charles Brewer, 3,000 » William Watson, 2,000 ^6,000 As we are supposed, in this case, to have open accounts with the parties, each person must be credited for his payment, and the cash account is debited for the whole sum, in one mass. See V. General Principle. In the journal we use the term sundries as before; thus — Cash Dr. to Sundries, Received f- C. B. To Stephen Hunter, 1,000 To Charles Brewer, 3,000 To William Watson, 2,000 ^£6,000 In journalizing it is often found expedient to class several debit items against se- veral credit items — even when the respective amounts are various — by prefacing the entry with the phrase 'Sundries Dr. to Sundries,'^ and then describing two * This IS an abbreviation for ' Sundry Accounts Dr. to Sundry Accounts.' It is used when there are several Drs. as well as several Crs. in the same entrv- Sis or more debtors against two or roore creditors. For exampi 10. — Shipped '^ Neptune, for Havanna, by order, and on account and ris^c, of the following persons, goods as '^ Book of Shipments, namely— For Thomas Trueman, Goods, amounting to, 1,600 Charges, paid at shipping, 120 Commission, on goods, &c 48 Insurance, and policy, 42 — 131^ For Henry Jones, Goods, amounting to, 3,000 Charges, paid at shipping, 150 Commission, on goods, &c 93 Insurance, and policy, 82 — 3,325 4^5,136 This shipment might be journalized similar to the ninth example, by making Trueman and Jones, respectively. Dr. to Sundries, each for the amount of his invoice, but se- veral postings to the ledger are avoided by arranging the items in the following manner: — v Sundries Dr. to Sundries, For shipment, "^ Neptune, for Havanna, "^ order. —Drs.— Thomas Trueman, Henry Jones, ... —Crs.— To Merchandise, . . To Charges, , To Commission, . . To Insurance, . . . , 1,600.0.0 3,000.0.0 4,600.0.0 Charge!. 120.0.0 150.0.0 270.0.0 48.0.0 93.0.0 141.0.0 42.0.0 82.0.0 124.0.0 1,810 3,325 6,135 26 SECTION IV. POSTING — TRIAL BALANCE BALANCR. ITie process of transferring the items to their respective accounts is called posting-, und the Foubnal has been contrived to facilitate this operation— In posting proceed as follows: 1. When the journal entry contains only one debit and one credit item. For example — Richard Simonbs Dr. /o Cash. Paid him in full, f- C. B 1,000 In this case turn, by the help of the index, to R. Simonds* account, and on the Dr. side write ^To Cash, . . . £1,000.^ Place the date, page of the journal, &c., in the proper columns. Then for the second entry or counterpart, turn to the Cash ac- count, and on the Cr. side write ' By R. Simonds, . . . £1,000,' prefixing the date and reference as before : thus — Dr. 1840 Jan. 1 To Cash, K. Simonds. 1,000 Cr. Dr. Cash. 1840 Jan. 1 _ By B,. Simonds, . . . . < i Cr. ,000 27 2. When the journal entry contains one debit and two or more credit items. See ejuunple, page 13, Cash Dr. to Sundries. In this case turn to the Cash account, and on the Dr. side write ' To Sundries, £10,800;' then turn to the accounts of James Kent, Bills Receivable, and Merchandise, and on the Cr. side write ' By Cash,' each for its respective sum, prefixing dates iand references as before. 3. When the journal entry consists of two or more debit items and but one credit item. See example, page 13, Sundries Dr. to Cash. In this case turn to the Cash account, and on the Cr. side write 'By Sundries, JE14,800;* then turn to the accounts of Bills Payable, Henry Pope, and Robert Hall, and on the Dr. side write ' To Cash,' each for its respective sum, prefixing dates, &c. 4. When the journal entry is composed of several debit and several credit items. See example, page 25, Sundries Dr. to Sundries. In this case turn to each account which is to be debited, and on the left-hand side write ' To Sundries;' and then turn to the accounts which are to be credited, and on the right-hand side say ' By Sundries,' for their respective sums When the space allotted for an account is filled up it must be re-opened in another loHo of the ledger. For this purpose add both sides, and opposite to the totals write, * Transferred to fol. — .' Then open the account anew, enter the foho in the index, and on the Dr. side of the new account say ^ To am't from fol. — ' and on the Cr. side 'By am't from fol. — ' insert the foho of the old account, and place the sums thus transferred in the proper money columns. E 2 28 'ITie first thing to be done in balancing the books, after taking an mventory of the goods on hand at their market prices, is to prove the accuracy of the ledger entries, by forming what is called a Trial Balance, the design of which is to ascertain if any errors have been committed in posting, in other words if the aggregate amounts of the debtor and creditor sides of the ledger correspond. For this purpose prepare a sheet of paper as follows : — ) —Dr$.— Trial Balance. -Crt.- 1 (Titles of the Accounts.) Write the titles in the centre, and place the total sum of the debtor side of each account in the left, and the total sum of the creditor side in the right-hand money column ; add the two columns, and if no mistake has been committed in posting, the amounts will correspond. See V. General Principle. Wlien all the accounts are adjusted, the ledger is said to be balanced. This operation is simply the collection of the scattered balances into one general result, called the ^Balance Sheet.' The object in balancing is to ascertain, 1st. The present amount of assets and Ua- bilities ; and 2nd. The gains and losses for the given period. The assets, or balances in favour of the concern, are placed on the Dr. or left-hand side of the ' Balance Sheet,' and the habUities on the Or. or right- hand side : the dif- ference is the net capital or present worth. 29 The gains and losses are collected on a separate sheet called the * Profit & Losa Sheet ;^ every item of loss being placed on the Dr. side, and every item of gain on the Cr. side : the difference is the net gain or loss, as the case may be. Having ascertained the exact state of the business, proceed to close the books. The items of gain and loss are to be transferred, from the particular accounts in which they appear, to ' Profit & Loss ;' and then the difference between the two sides shows the net gain or loss ; and to close * Profit & Loss' transfer t this diflerence to ' Stock.* In order to preserve the equilibrium of debtors and creditors in closing the re- maining accounts it is necessary to open another account in the ledger under the title of ' Balance,' to which the balances of the several accounts for min g the assets and liabiUties of the concern are to be transferred, and entered in the same manner as in the Balance Sheet. The difference between the two sides of the * Balance' account is transferred to ' Stock' and then all the accounts will be equilibrated, and they are closed by setting down the equal sums opposite to each other. The accounts opened under the titles of Stock and Balance are used merely on opening and closing the books. They are in fact both statements of the merchant's afiairs, the one being the converse of the other. The Stock account exhibits his whole capital abstractedly considered, and the Balance account exhibits its component parts, that is, the specific items of which the capital is composed. When the two results, ootained by methods so totally independent of each other, agree, it affords the strongest proof of the accm-acy of the books. If they do not agree, it shows that some error has been committed ; and the accounts must be re- examined in order to discover it. t In these transfers the recipient account is always made Dr. to the imparting account. For instance 'Balance' is debited 'To Cash,' and 'Cash' is credited 'By Balance' for the money in hand when the accoimts are closed. ' Bills Payable' is debited ' To Balance,' and ' Balance' is credited ' By Bills Pay- able,' for the amount of bills outstanding. ' Commission is debited ' To Profit 8f Loss,' and ' Profit & Loss' is credited ' By Commission.' for the gains by commission, &c. 30 The general form and arrangement of the Profit & Loss, and the Balance Sheets are as follows ; namely — Profit & Loss Sheet. ! — iMsses. — —Profits.— ~ Balance Sheet. — Assets. — - — Liabilities.-r- 1 1 ...11 \ 1 DOUBLE ENTRY ELUCIDATED. PART II PROCESS OF INSTRUCTION. Thb subject taught is of less consequence to the learner than the manner of teaching it ; that is, in teaching it so as to make the process of instruction the means of inducing correct habits of thinking and reasoning. That method of teaching, therefore, which forms habits of order, regularity, and industry, giving at the same time vigour and promptitude to the mental powers, is the only method worthy of attention ; all others are futile and illusory. Education embraces many arts ; but the art which is of the most importance in the business of life it utterly neglects ; — the art I mean, is the art of thinking. The method of instruction developed in Part II. differs from the blind guess- work of the school-room on the one hand, and the mechanical routine of the counting- house on the other. Instead of perplexing the student with the details of the subor- dinate books, and resorting for aid to arbitrary rules, the constniction of the journal and ledger is postponed until he has investigated the principles of the science, and is enabled to grasp the subject in his mind as a connected whole. The accounts are first considered abstractedly ; that is, merely as collections of financial facts ; they are next combined in the form of ledgers — the titles and amounts only being given. The student's attainments are now put to the test, for he is required to analyze each 32 account, to distinguish one class of accounts from the other, and to produce a sys- tematic, self-verifying statement of the assets, liabilities, gains, losses, and present net capital. He cannot do this unless he comprehends the means and the end — the process and the result — the whole and its parts. The great defect in the ordinary mode of teaching book-keeping is, that the instruction consists of rules, and nothing else. It would appear that the mere mechanism thus applied is looked upon as the beginning and end of iLe science ; no provision is made whereby a student may be enabled to go alone ; the little that is acquired, therefore, becomes practically useless. The following hints may prove useful to the learner. In double entry there can be no debtor without a corresponding creditor ; and hence every transaction must be entered twice tn the ledger. The thing received is always Dr.; and the thing delivered is always Cr. All this is intelligible enough so far as it relates to tangible things ; but it frequently happens in buying and selling that there is nothing received, and vice versa, nothing delivered. In such cases the names of the parties to whom we are responsible, or who are responsible to us, are sub- stituted: thus, if you buy goods of A. B. on credit, you receive the goods, bui deliver nothing. The journal entry is — " Goods Dr. to A. B." If you sell goods to C. D. on credit, you deliver the goods, but receive Jiothing. The entry is — " C. D. Dr. to Goods." The first object to be accomplished by the student, is to obtain a clear and dis- tinct notion of the nature and arrangement of the ledger, and the relation which one class of accounts bears to the other. To effect this object is the design of the following exercises. In constructing the accounts, the learner is simply to place each sum in its proper column, and to exhibit the result agreeably to the explanation. Details may be omitted ; all that is essential being the dates and amounts. 33 CASH. The object of this account is to show the Cash in hand. The cash in hand and all recei]5ts of money are I All disbursements or payments of cash are entered on the Dr. side. j entered on the Cr. side. I *>jc* The balance, or difference between the two sides, shows the cash in hand. January 1 . 1840. The amount of cash in hand at this date is j^lO,000. — 2. Paid for merchandise, ^3,600.-3. Received for J. Smith's bill, ^600.-8. Paid for repairs of ship Hope, ^900.-9. Paid Harrison & Co. .i€l,500. — 10. Received for goods sold this day, .5^300. — 11. Paid my bill in favour of Hunter, ,€1,700. — 12. Received payment of Arnold and Co.'s acceptance, j€500. — 16. Paid my accept- ance in favour of Thompson, .€3,000; received for freight of ship Hope, .€1,800; received for sales this day, .€200.-19. Lent Henry James, .€750.-23. Received the amount of Hill's acceptance, .€2,000.— 31, Borrowed of James Ford, .€190. — Required the balance. Ans. £4,140. Dr. Cash. Cr. 1840 Jan. 1 ) 1840 Jan. 2 ■ ■! 1 1 1 1 ! ! j 1 1 - S4 r- BILLS RECEIVABLE. The object of this account is to show the bills on hand. T^e amount in hand at commencing, and all bUls subsequently received, are entered on the Dr. side; and llie amount of every bill disposed of, or for which payment is received, is entered on the Cr. side. *:(.* The balance is the amount of bills unpaid or owing to the concern. January 1. 1840. The bills in hand '^ inventoiy is .5^8000. — 3. Received Charles Boyd's acceptance at 30 days' date, ^3000. — 3. James Smith has paid his bill in my favour, .^600. — 10. Received from George Dean, Hill's acceptance, at 10 days' date, .^2000. — 12. Ai-nold & Co. have paid their bill, due this day, i€500. — 15. Received Barclay & Co.'s acceptance, at 90 days date, .5^1600. — 18. Received from Henry Brovra, three promissory notes : the 1st. for ^126, at 3 months' date ; the 2nd. for ^500, at 6 months' date, and the 3rd. for £^175, at 9 months* date. — Received payment of Hill's acceptance, £2000.— Required the balance. Am. J?12,200. Dr. Bills Receivable. Cr. 1840 Jan. 1 1840 Jan. 3 35 r BILLS PAYABLE. The object of this account is to show the liabilities in the shape of bills. ~] The amount of all such bills, when paid or I The amount of all bills or acceptances issued otherwise redeemed, is entered on the Dr. side. I by the concern is entered on the Cr. side. *;(.* The balance shows what the concern owes in bills or acceptances. January 1, 1840. — I owe at this date in the form of bills, .5^5,000. — 6. Accepted Henrj- Bell's draft at 30 days' sight, ^300. — 6. Bought goods this day for which I gave my promissory note at one month's date, JiSOO. — 11. Paid my acceptance in favour of Hunter, i^l,700. — 13. Accepted three drafts drawn by Harrison & Co.: the first at 20 days' date, jgl50; the second at 30 days' date, ,€250; and the third at 90 days' date, ^600.-16. Paid my bill in favour of Thompson, due this day, €3,000.— Sold goods to Henry Bell, and received in payment my own acceptance in his favour, dated the 5th instant, €300. — Required the balance. Ans. €2,100. Dr. Bills Payable. Or. ! 1 i i i - 1 i -J 36 PERSONAL ACCOUNTS. The object of this class of accounts is to show what is owing either to or by the party. All sums for which the person is indebted to All sums for which the concern is indebted the concern are entered on the Dr. side ; and to the person are entered on the Cr. side. *4:* The result, or difference, is the sum due to or by the merchant, as the case may be. January 1, 1840. The balance due to Harrison & Co., at this date, is i€l,500. — 3. Sold them a par- cel of sugars amounting to .£1,000. — 4. Bought of H. & Co. a quantity of merchandise, as '^ invoice, i€800. — 8. Granted them my promissory note, at one month's date, .£800. — 9. Paid H. & Co. cash, ^1,500. — 12. Bought of them cotton amounting to ^9,000. — 13. Accepted their three drafts, amounting to ^1,000. — 25. Allowed H. & Co. an abatement of £,bO on sugars. — 29. Gave them my draft on Henry Jones, at sight, for ^2,050. — Required the balance. Ans. ^5,000. Dr. Harrison & Co. Cr. 1840 Jan. 3 / CT'. 1840 Jan. 1 37 MERCHANDISE. The object of this account is to show the gain or loss on merchandise.* The cost, or outlay, is entered on the Dr. side ; and The sales, or returns, are entered on the Cr. side. *:{-* The diflference between the two sides, when the returns are complete, shows the gain or loss. * The design of all property accounts, such as ships, houses, lands, adyentures, &c., &c,, is similar to the above. The cost or value is entered on the left, and the sales or returns on the right, hand side. The estimated value of the property unsold is, in all such cases, the balance of the account, January 1, 1840. Bought goods amounting to ^^8,500. — 2. Bought goods this day "^ invoice^ .€3,600.-5. Sold linen to A. B., ^3,000.-7. Shipped merchandise to Jamaica, It invoice, .€8,000.— 10. Sold goods for cash, as '^ S. B., jg300.— 12. Purchased goods at auction, as It bill parcels, .€6,300. —15. Sold goods for cash, as "^ S. B., jg200. Sold the remainder of the goods on hand for .€8,400.— Required the gain or loss. Ans. j€ 1,600 gain. 1 Dr * s Merchandise. Or. 1840 Jan.l I i ! 1 1840 Jan. 5 1 ! i 1 i 1 i _ J a» KEY TO PART 11. The learner will bear in mind that the terms Dr. and Cr. refer only to the Ledger, and are used merely to distinguish one side of an account from the other. The exercises, pages 33 to 37, Part H., are designed to unfold the principles of the science, and to impress upon the mind the plan and object of the accounts, considered abstractedly, i. e simply as a collection of financial facts. The questions should be worked upon a slate, and, when correct, transcribed into the printed book, in the following manner. Dr, ^CASH. — ^-,-.^... Cr. - Receipts. — — Puyvicnts. — Jan. 1 10,000 Jan. 2 3,600 3 600 8 900 le. 300 9 1,500 12 500 11 1,700 15 1,800 15 3,000 15 200 15 750 23 2,000 n,4Sft- 31 190 Balance 4,140 15,590 15,590 m Dr. 39 —BILLS RECEIVABLE. Cr — Received. — Jan. 1 8,000 3 3,000 10 2,000 15 1,500 18 125 18 500 18 175 15,300 —Disposed of. — Jan. 3 600 12 500 18 2,000 3.10O— Balance 12,200 15 300 Dr. BILLS PAYABLE. Lr. — Redeemed. — Jail. 11 1,700 15 3,000 15 300 s.ofio— Balance 2,10(J 7,100 — Issued. — Jan. 1 5,000 5. 6. 13. 13. 13. 300 800 150 250 600 7,100 Dr. — ' HARRISON & CO. Jan 3 1,000 Jan. 1 8 800 4 9 1,500 12 la 1,000 25. 21) 2,050 Ralance 5,000 11^50 Cr. . . 1,500 . . 800 . . 9,000 50 11,350 40 Br VERCHANDISli:. Cr. — Outlay. — — Returns, — Jan. 1 8,600 Jan. 6 3,000 2..... 3,600 7 8,000 12 6,300 10. 300 18.400- 15 200 Gain 1.600 16 8,400 19,900 l'J.9f^0 ELUCIDATION. In the left hand or debit column of the Cash account, we enter every sura of money received ; and in the right hand, or credit column, every sum of money paid. "We find the cash received amounts to . ■ 15,690 And the cash paid, or disbursed, to 1 1,450 Consequently the cash in hand is 4,140 In the left hand, or debit column of the Bills Rec-ipivable account, we enter the amount of every bill received ; and in the right haird, or credit column, the ■amount of every bill disposed of. In this case we find that the Amount of bills received is 16,300 Amount of bills disposed of is 3,100 Consequently the amount of bills in hand is 12,200 In the right hand, or credit column of Bills Payable account, we enter the 41 amount of every bill issued ; and in the left hand, or debit column, the amount of every bill redeemed, or retired from circulation. We find the amount of biEs issued is 7,100 And the amount of the bills redeemed is 6,000 Consequently the bills outstanding amount to 2,100 In the debit column of Harrison & Co/s account we have entered every sum for which they are accountable to us ; and in the credit column, every sum for which we are accountable to them. We find that we owe H. & Co 11,350 And they owe us 6,350 Consequently the balance due to H. & Co. is 5,000 In the left hand column of the Merchandise account, we enter every sum expended in the purchase of goods ; and in the right hand, or credit column, all the returns or sales. The returns amount to 19,900 The outlay or cost is 18,400 Consequently the result is a gain of 1,500 All financial transactions whatever, are comprised in cash receipts and pay- ments, — bills received and disposed of, — bills issued and redeemed, — debts re- ceivable and payable, i. e. debts due to and by our correspondents, — outlay and returns. There are appropriate headings in the Ledger, termed accounts, under which to place the respective items relating to each department of the business ; and when the design of these accounts is once familiar to the learner, the details and technicalities of book-keeping will be readily comprehended. 42 As a general rule, every account of Merchandise must contain on .he Dr. side, 1*^, the value of the article on hand at the lime of opening the books ; 2dly, the value of all that is purchased from time to time ; Sdly, all charges connected with its cost : — ^and, on the Cr. side, 1 st, the value of what is sold ; 2dly, the value of what is unsold, or on hand, at balancing ; and ^dly, all other returns, such as drawbacks, bounties, and the like. Accounts of houses, lands, &c., contain on the Dr. side the value of the property at the time of opening the books, together with the amount paid for repairs, taxes, and improirements, and also the value of any other property that may have been annexed to it by purchase ; and, on the Cr. side, the amount received for rents, for the sale of any part of the produce or of the property, and also the value of what remains unsold at the time of balancing. Accounts of property in the funds, or in public or private companies, contain on the Dr. side the value of the shares at the time of opening the books ; and, on the Cr. side, the amount of all dividends received, together with the value of the stock unsold at the time of balancing. In the same manner, accounts of ships contain on the Dr. side the value of the vessel at the time of opening the books, together with all sums paid for repairs, seamen's wages, provisions, and any other incidental charges ; and, on the Cr. side, the amount received for freights and the like, and also the value of the ship at balancing. * The outlay for any description of property or adventure is entered on the Dr. side, and the returns on the Cr. side; the difference between the two sides of the account, when the returns are complete, shows the gain or loss resulting from the transaction ; but, when only a part of the property is disposed of, this difference is devoid of mean- ing — ^it shows neither the value of what is on hand nor the gain or loss. In all case& of this nature, the value of the property unsold at the time the account is adjusted constitutes the balance, which must be entered on the Cr. side ; the returns are then complete, and the difference is gain or loss. 48 Cash, Buis Receivable, Bills Payable, Merchandise, and the personal accounts are common to the books of almost every description of merchants or tradesmen ; but when an individual transacts business as an agent or factor, it is reqmsite, in recording his transactions, to create several distinct accounts wliich are not necessary in inland or domestic trade. For example, if I intrust goods to a factor to sell on my account and risk, or, which amounts to the same thing, ship goods abroad on consignment, it is obvious that the agent, or person to whom such property is entrusted or shipped, ought not to be debited for the cost : — he has not pm-chased the goods, and is only respon- sible, when they are sold, for the net proceeds."^ In this case, however, the property has gone out of my possession, and must be recorded in such a manner as to show its value, and the circumstances under which it is situated. To accomphsh this object it is usual to open an account for each consignment under some appropriate title — as ' Shipment to •' or, 'Adventure to ' (naming the place), or ' Consignment per ' (naming the ship). All accounts of this nature, under whatever title they may be opened, are analogous to the general accoxmt of merchandise, and are managed precisely in the same manner : that is to say, the account is debited for the cost or value of the goods, and all charges incmred upon the shipment, and credited for the net proceeds. In joint speculations, where two or more merchants engage to share the gain or loss resulting from any particular shipment or adventm-e, it is usual for the party who is the manager, if he furnish the merchandise, to debit his partners personally for their respective proportions of the original outlay, and the speculation in company, imder some appropriate title, for his proportion ; but in such transactions when an individual is not the managing partner, he records his share of the speculation only. On the other hand, when goods are intrusted to me for sale as an agent or factor, although the property comes into my possession, yet it does not belong to me, and forms no pEu-t of my assets or liabilities. I have made no such purchase, and it is therefore obvious that the cost or value of goods received on consignment should not * Goods when sent to an agent for sale and returns are said to be consigned to him. The person who sends the floods is called the consigner, the goods his consignment, and the person to whom they are sent the consignee. The account transmitted by the consignee to the consigner, which contams the particulars of the sales and charges, is called an account sales. The sum that remains, after deducting factorage and all other charges, is the net proceeds, due to the consigner. 44 be entered on the debtor side of my bdger. But when the goods are sold I am then accountable to the consigner for the net proceeds. In recording transactions of this nature an account is usually opened for each separate consignment under some appro- priate title, such as 'A.B.'s Sales,' or ' Sales '^ Nero,' or ^ Cotton ^ Neptune,' which is debited for all charges, including factorage, and credited for the sales. The difference, when the sale is adjusted, is the net proceeds, due to the consigner. Every description of outlay for which no returns are to be received, or of income for which no property is exchanged — such as rents, taxes, postages, clerks' salaries, interest, discounts, commission, &c. — must have an account opened for it : that is, if it be important to ascertain the exact amount of each ; but if the total sum only of such receipts and expenditures be required, they may be entered at once in the Profit and Loss account. All accounts of income or outlay — such as Commission, Interest, Charges, Rent, &c. — are subdivisions of Profit and Loss; and the latter is simply a branch of the Stock account. On the debtor side of ' Charges ' are entered all sums paid for rent, clerks' salaries, postages, stationery, advertising, &c. ; and on the creditor side, all sums which are charged to correspondents for postages, and the hke. On the debtor side of * Interest ' are entered all sums paid, and on the creditor side all sums received, for interest or discount. On the creditor side of ' Commission ' are entered all sums received by or due to the concern, for transacting business as factors. The result of all accounts similar to the above, which merely record income or expenditure, is transferred at every general balance to the proper side of ' Profit and Loss ;' and when all the gains and losses for any given period have been entered in the latter account, the difference between the debtor and creditor sides is the net gain or loss, which must be transferred to ^ Stock.' The Stock account will then exhibit the merchant's present worth : that is, his original capital increased by the net gain, if his business has been profitable ; or diminished by the net loss, if the reverse. 45 Dr. Stock. Cr. Capital invested, By Profit <§• Loss, (d) 10,000 1,196 Dr. Profit & Loss. Cr. To Charges, ..(a). To Stock, ..(d). 240 1,196 1,436 By Interest, . . . . (b). By Commission, (^). 575 861 1,436 Dr. Charges. Cr. 600 ' an 140 300 125 100 75 360— By Profit 4" Loss, (a) . . 150 210 240 600 600 Dr. Interest. Cr. 145— To Profit 8f Loss, (bj . . 110 35 575 -20 145 W5 375 125 100 120 1 01 720 720 Dr. Commission. Cr. 1 1 I To Profit i^ Loss, (c) .. 861 i 1 1 488 105 118 150 1 861 861 46 The debtor side of 'Charges' amounts to £600, and the creditor side to £360; the difference, £240, is loss, which is transferred to ' Profit & Loss/ The recipient account is debited and the imparting account credited. See II . General Principle. The debtor side of ' Interest' amounts to £l45, and the creditor side to £720 ; the difference is gain, and is transferred to the credit side of Profit & Loss. The amount received for ' Com- mission' is £861 , which is also gain, and is transferred accordingly. The accounts of Charges, Interest, and Commission, are now closed, and the difference between the two sides of ' Profit & Loss' is the net gain, which is transferred to Stock, and this closes the Profit & Loss account. All other items of gain or loss are transferred, in a like manner, from the respective accounts in which they appear to Profit & Loss. Absolute perfection in accounts has often been arrogated by writers upon this sub- ject ; but perfection in any thing human never has been, and never can be, attained. However correct an art may be in theory, its practice is inevitably subject to errors, and no system of accounts is secure from the designs of the fraudulent or the conse- quences of carelessness — from intentional neglect or accidental perversion. The fun- damental principles of double entry are as infallible in their application as their opera- tion is extensive ; but in practice they are exposed to all the moral and mental imper- fections of the accountant. The equaHty of debits and credits is the great systematic proof in book-keeping. This proof, however, is of a negative nature. Without it, the accounts cannot be cor- rect; but vnth it, they may be incorrect. It affords no check whatever on the original or primary entries, nor against those errors which are neutralized by counter entries so as not to affect the equilibrium of the ledger. The principal cases in which errors can be committed in the ledger, without affecting the equality of debits and credits, are — 1. A debit entry may be short-posted and another over-posted for a like amount. 2. A credit entry may be short-posted and another ov^cr-posted for a hke amount. 3. A debit and credit entry may be equally short-posted, equally over-posted, or wholly omitted. 4. Similar cases may occur in the addition as well 5S in the transfer of accounts. 47 QUESTIONS FOR EXAMINATION. What is the ohject of the Cash account ? What do you enter on the Dr. side of this accoirat 7 What do you enter on the Cr. side ? What does the difference hetween the two sides show ? What do you understand by the term Bills Receivable ?* (See page 34.) What is the ohject ot this account ? What items are entered on the Dr. side ? What on the Cr. side ? Wliat does the difference between the two sides show ? What is understood by Bills Payable ?* Under what title do you record your own acceptances ? When you issue a promissory note, or accept a bill, on which side of the ledger is it placed ? What is the object of the account entitled Bills Payable ? What is entered on the Dr. side ? What on the Cr. side ? What does the difference between the two sides of this account show ? What is a personal account ? What is the object of this description of accounts ? When a person gets into your debt, on which side of the account is the sum placed ? When you purchase goods of a person, on credit, where do you enter the amount ? When the Cr. side of a personal account exceeds the Dr. side, what does the difference show ? If the Dr. side of A.B.'s account amounts to ^^100, and the Cr. side to jSbO, what would the result exhibit ? What does the balance of a personal account show ? What do you call the balance of an account ? Under what general title do you enter the purchase and sales of goods ? What is the object of the account of Merchandise ? What items are entered on the Dr. side? What on the Cr. side? What con- stitutes the balance of Merchandise account ? When the goods are all sold, what does the difference between the two sides-of this account show ? What is the design of all property accounts, such as houses, ships, lands, shares in public companies, &c. ? Wheu merchandise is sent abroad as an adventure, or consigned to an agent for sale, in what way would you record the transaction ? Under what head is it usual to enter goods when consigned ? What do you enter on the Dr. side of such an account ? What do you understand by the net proceeds ? What is an account-sales? Where do you enter the net proceeds of a shipment when the account-sales is received? Wliat does the difference between the two =!:des of the iwscount then show? * Written obligations or engagements to pay money at a future period, such as bonds, promissorv notes, drafts, or acceptances, are, in commercial phraseology, called bills; — ^those received by, and payable to, the merchant, are called Bills Receivable; and those which he issues or accepts, and for the payment af which he consequently becomes responsiUe, Bills Payable. The accoimts of bills receivable and bills payable are analogous to personal accountf^, and njerely show the debts due to or by the concern, in Hie shape of bills. 48 When you act as an agent or factor, and receive goods on consignment, in what manner do yon aiTange the accounts ? Is the cost or value of property thus intrusted to you entered on the Dr. side of your ledger ? Under what head do you enter the Sales ? When you pay charges — ^that is, duty, freight, insurance, &c. — on goods consigned to you, on which side of the account do you place the same ? What is the ohject of an account which you open for goods consigned? When the account is adjusted, what does the difiFerence between the two sides show ? What account exhibits a statement of tht merchant's assets and liabilities on commencing business ? On which side of the Stock account do you enter the liabilities or debts of a concern, on opening the books ? What do you enter on the Cr. side of this account ? What does the difference between the two sides show ? What accounts are subsidiary to Stock ? What is the object of Profit and Loss account ? What is entered on the Dr. side ? Wliat on the Cr. side ? What does the difference between the two sides show ? What accounts are subsidiary to Profit and Loss ? When the resiUt of the Profit and Loss account is transferred to Stock, what does the latter account then exhibit ? Under what title do you record the receipts and disbursements of money ? When you receive a bill, under what head does it belong ? When you accept a draft, or issue a promissory note, under what title is it recorded? When the learner is so far master of the subject as to answer these questions understandingly, he will be prepared to andyse the following ledgers without difficulty: that is to say, he must exhibit in each case the assets and liabilities, the gains and losses, and the present net capital. The manner of doing this is sufficiently exemphfied in the Analysis of ledgers 1. and II. If he finds himself at a loss in adjusting any particular account, he must first con- sider the nature and object of it — ^what items are entered on the Dr. side, and what on the Cr. side — and the result, whether it constitutes a part of the gains or losses, the effects or the debts, will be apparent. Care must also be taken in this operation to distinguish between the two distinct classes of accounts in the ledger, and to keep the items of each class separate. ^9 LEDGER I. Dr, James Nichols. Cr. ! Dr. <, STOOit. r>. I 1 ! 10,000 ! i i Dr. Merchandise. Cr. 5,000 6,000 n ; 3,000 4,000 8,000 9,000 1 18,000— 2,000 20,500— 1,500 1 1 Dr, Cash. Or. 6,000 . 8,000 ol » 6,000 1.000 9,000 1,500 i 1 S2.000— 2,000 11,000— 500 1 t 1 1 13.500— i 1 1 4,000 1,000 1,500 7,(K)0 12,000— 3,000 2,000 4,000 3,000 ; L. [ 1 11 50 EXPLANATORY REMARKS. We have .shown in Part I., that, by the scheme of double entry, the ledger contains two distinct histories of the merchant's assets and liabilities: namely, 1. A record of the whole capital collectively ; 2. A record of each of its constituent parts. In the progress of business the transactions are classified and arranged con- formably to the above scheme, each item being entered under the respective head to which it belongs. Hence the state of any particular account as well as the general result may, at any given period, be readily ascertained. ITie following is an analysis of ledger I. — ^ 1. Merchandise. 2. Cash. 3. J. Nichols. Returns, 20,600 Receipts, 22,000 Owes me, 13,500 Outlay, 18,000 Payments, 11,000 I owe him, 12,000 Gain, 2,500 In hand, 11,000 Balance, 1,500 Tlie assets, deducting the liabilities, can be nothing more or less than a substitute for the original capital, increased by the gains, or decreased by the losses; thus — I. Assets. Cash, in hand, 11,000 J. Nichols, owes me, 1,500 Net Capital, 12,500 II. Stock. Capital, Commencing, 10,000 Grain, by Merchandise, 2,500 Net Capital, as before . 12,500 51 LEDGER II. J>, Stock. Cr. — 1 I 1 10,000 60,000 1 1 Dr, 1 Profit & Loss. Cr. 1 1 600— 300 180 120 1 Dr, Cotton. Cr. 1 19,000— 10,000 7,500 1.500 17.000— The cotton unsoM it Talued at £4,000. 8,000 3,000 6,000 Dr, Sugar. 1 Cr. 1 18.000— 12,000 5,300 700 18,000— 9,000 2,500 3,600 The tngar untold is valued at £3;8(X). 1 J V, 62 LEDGER U.— Continued Dr, Cash. Cr. 15,000 (* 8,600 6,000 1,800 17,000 1,600 y 41,400— 4,400 • 13.000— 1 1,000 Dr. Bills Receivable. Cr. 9,000 6,000 6,000 1,500 18,000— 4,000 • 9,000— 2,600 u 1 1 Dr. Bills Payable. Cr. 8,000 10,000 1,700 1,000 11.000— 1,300 i 13,000— 2,000 i Dr. William Thomson. Cr. 4,000 3,000 150 2,000 1 6.000— 1,850 1 7,000— 2,000 1 53 ANALYSIS OF LEDGER II. 1. Cash. Receipts 41,400 Payments 13,000 Cash in hand 28,400 4. William Thompson. I owe him 7,000 He owes me 6 000 Bulunce due W T. . . 1,000 2. Bills Receivable. 3. BilU Payable 18,000 9,000 Issued 13,000 Disposed of Redeemed 1 1,000 Bills in hand 9,000 Bills unpaid 2,000 5. Cotton. 6. Sugar. Amount of sales .... Cotton on hand* .... , 17.000 4,000 Amount of sales .... 16,000 Sugar on hand* ,... 2,800 Deduct cost 21,000 19,000 . 2000 17,800 Cost ., 18,000 Gain by Cotton Loss hy Sugar 200 -'■Assets. — Cash 28,400 Bills Receivable 9,000 Cotton 4,000 Sugar 2^800 Total assets ■11,200 — Liabilities. — Bills Payable 2,000 W. Thompson 1,000 Present worth 41,200 Equilibrium 44,200 — Losses. — On Sugar 200 Posted to P. & L 600 By Cotton. . Deduct loss — Gahf.- 800 Totalloss 800 Net gain 1,200 Not capital commencing , . ., , . , , 40,00(1 Add subsequent gain 1.20fl Present worth, as before ,. , 41,200 * The value of the property unsold must iu all esses of this nature be added to the sales ; the differ -nee between the two sides of the account will then shew the gain or loss on the investment 54 LEDGER III. 1 Dr. Stock. Cr. 9,000 ! 50,000 1 Ih'. Profit & Loss. Cr. 376 400 126 200 1 260 150 1.250— 600 " 875— 125 Dr. i Merchandise. Cr. 7,000 10,000 8,000 1,500 1,000 1,250 4,000 2,160 22,000— 2,000 16,000— The Goods unsold are valued at 1,100 Dr. Ship Nelson. Cr, 16,000 3,000 1,200 1,600 17,500— 1,300 6.500— The Ship Nelson is unsold and 1,000 valued at £16,000. 55 LEDGER in.— Continued, Dr. Cash. Cr. 34.000- 1S,0(X) 6,000 6,000 1,250 3,750 ia,375 — 7,000 6,375 1,000 2,500 2,600 Dr. Bills Receivable. Cr, 28.600— 6,000 10,000 5,600 3,400 4.600 •i 1 ii 1 1 1 8,000 2,000 1,100 5,900 1 1,000 1 Dr. Bills Payable. Cr. n.ooo— 6,000 2,600 1,600 1,000 15,b00- 1,000 9,000 2,000 3,600 Dr. James Harvey. Cr. 7.000— 1.000 500 1,600 2,600 1,400 i s.ooo— 500 1,500 1,600 1,400 3,000 56 LEDGER I J T .—Continued. Ih\ WiiiiiiAM Brown. Cr. i 3,000 1.500 ! 1 1,600 1 600 1 \ 900 1 1,000 700 j 1,800 6,400— 300 1 5,000— 200 i ! f Dr. Thomas Jones. Cr. 1 1 2,000 1,600 1,600 1,400 1,400 2,500 1,500 1,500 8,000— 1,600 ■0 8,400— 1 1,400 i 1 Dr. Robert Morris. ■ ! Cr. ' 4,600 1 3,000 n 1,400 1 1,000 3,250 1 1 4,600 11,000— 1,750 ■ 9,000—! 1 1 400 *^* Required a statement of the assets and liabilities, the gain or loss, and the present net capital. Ar.s. Assets, £53,000; Liabilities, £6.000: iNet gam, £6,000; Present worth, or net capital, £47,000. 57 ANALYSIS OF LEDGEK III. 1. Casft. Received 34.P00 Paid 19,375 In hand 14.625 2. Bills Receivable. Received 28,600 Disposed of 18,000 In hand 10,600 3. Bills Payable. Issued 15,600 Redeemed 1 1,000 Outstanding 4,600 4. James Harvet/. 1 owe hnn 8,000 He owes me 7,000 Due to J. H 1,000 5. William Brotvn. lie owes me C,40C I owe him 6,000 DuebyW.B 1,400 6. Thomas Jones. I owe him. 8,400 He owes me 8,000 Due by T. J 400 8. Robert Monis He owes me . .'. ..11,000 I owe him 9,000 DuebyR.M 2,000 Memorandutr.. Goods unsold, value d at 8,t)J6 Ship, unsold, valued at 16,00(1 58 The results of foregoing accounts, together with the property unsold, consti- tute the assets and liabilities at the time of balancing. The surplus is the present net capital ; thus : — Assets. — Cash in hand. . . , 14,635 Bills in hand 10,600 W. Brown • . owes 1,400 R. Moms . . owes 2,000 Goods unsold* 8,375 Ship unsold* 16,000 — Liabilities. — Bills outstanding 4,600 J. Harvey due to 1,000 T. Jones due to 400 Total liahilities 6,000 Net capital 47,000 Total assets 53,000 Equilibrium : 63,000 In order to prove the accuracy of this statement, we next proceed to analyse the other class of accounts ; the design of whitih is to show the gains and losses on the business, and by adding the net gain to the original capital, we ascertain the present net capital as before. (See page 7, Part I.) The result of all accounts which consist of outlay and returns, must beeithsr gain or loss. 8. Merchandise. Returns 16,000 Unsold, and valued at* 8,375 24,375 Outlay, or cost 22,000 Gain 2,376 9. I^ip Yekon. Returns 6,500 Unsold, and valued at* 16,000 21,600 Outlay, or cost 17,500 Gain 4,000 * These items may be considered as anticipate I returns, and in all such cases they constitate th» oalance of the accouDt. 59 When the gains or losses are collected, the result is as follows : — — Losses. — — Crrtins. — im«. posted to P. & L. . ,..lj250 Am', posted to P. & L 875 By Merchandise 2,3/5 Net gain 6,000 By Ship Nelson 4,000 7,250 7,250 Capital commencing* 41,000 N(;t gainf , , . ; ^ . . . , 6,000 Fiesent worth, or net capilal, aa )>ef(:m ......... c 47,000 * 50,000 — 9,000 ~:i: 4lJ«M). ] 7,250— IJt&t) ~ 6,(100 60 LEDGER JV, 1 Dr, Stock. 1 Cr. 25,000 j 1 76,000 1 Di: Profit & Loss. Cr. \ 1 1,300 1,000 1,600 600 «.900— 1,100 ^600— 2,000 u \ Dr. Commission. Cr, 637— 237 100 300 1 Di', Charges. Cr. 1 1,300 1 1,100 o! 1,157 1,150 Oi 1,143 600 o! 1,376 oJ 1,270 6.575— 1,600 1) a j 6.225— 1 ! I 1,106 u 1 1 i i 61 LEDGER JY.— Continued. Dr. Merchandise. Cr. 30,600— 8,600 1,250 9,750 500 1,000 1,500 8,000 32,600— 1,700 1,800 8,300 1,200 6,000 4,600 10,000 Dr. Ship Nero. Cr. 16,450— 15,000 1,450 8,000— 5,000 3,000 Ih-. Adventure to Halifax. Cr. 6,300 As no returns liaTe been rec*d from this adrenture, it is valued at cost. 1 S. (\.LES OF Consignments. Cr. 1,250 2,000 8,250 7,500 01 600 1,500 1,500 1,140 13,500— 1,900 13,500— 1,360 62 LEDGER iy.~~(hntinmd. Dr, Cash. Qr. 30,000 4,000 2,600 3,000 8,000 6,100 1,200 6,000 50,000— « 8,300 «1,000— 2,900 1 1 1 Dr. Bills Receivable. Cr. } 3,700 1 , 3,600 6,000 1 2.900 I 4,000 1 1,700 1,700 200 17,200— 3,900 10,400— 1,000 1 Dr. Bills Payable. Cr. i 4,000 8,000 3,500 3,500 1,600 8,013 2,500 7,500 19.513— &,(a3 31,526— 4,513 1 Dr. Brown & Brothers. Cr. 6,000 6,000 i,3;)o 4,600 4,000 1,000 2,700 4,000 2,500 6,000 ! 7,500— 1,000 81,000— 1,600 63 LEDGER lY, —Continued. ! 1 Jh: 1 John Taylor. Cr. 13.700— , 1,800 3,900 I 2,300 j 6,700 i 12.700— 7,000 1,800 900 3,000 Dr. Samuel, Johnson. - 1 16.550— 3,000 4,000 7,000 1,550 1,000 14,550— 1 6,000 3.000 4,000 1,260 1,300 Dr. Peterson & Co. Cr. 1 18.550— 4,000 5,000 5,900 1,100 2,660 12.450— 1,900 4,000 3,600 1,600 1,650 ol o' Dr. * Thomas Fyfe. Cr. 6.100— 1 1,000 1,950 1,150 2,000 1 7 1)50 — 1,500 1,450 3,000 1,100 1 /' 64 LEDGER I Y .—Continmd. Dr. Edward RUSSEL.1.. Cr. 15,300— 6,000 4,000 6,300 1,000 15.600— 4,000 3,000 2,300 6,300 { 1 1 Dr. Jackson & Homer. Cr. 20.450— i 1 4,000 4,200 1,000 6,000 6,260 12,350— •• 1 i 1,000 1,100 4,ono 3,760 2,500 1 The assets, as exhibited in Ledger IV., amount to £74,300; the debts or Habilities to £16,763; — ^the difference, £57,537, is the net capital. The gains, including the total sum posted to ^Profit & Loss,' amount to £12,787 ; and the losses, including the total posted as before, amount to £5,250. The dif- ference, £7,537, is the net gain, which must be transferred to ' Stock.' In analysing the accounts which compose ledger IV. we have supposed the goods to have been all sold or otherwise disposed of^ consequently the difference between the two sides of * Merchandise,' shows the gain or loss resulting from the transaction* which are classed under this head. The ship is unsold, and valued at cost, £15,000, which sum must therefore be added to the Cr. side of the account, and also placed with the assets 6d ANALYSIS OF LEDGER IV. [Pages 60—64, Part n.] In the present instance we commence our analysis with that class of accounts which consists of outlay and returns, and thus ascertain the net capital abstractedly, that is, without reference to its constituent parts. 1. Charges. Outlay 6,676 Returns 5,225 Result, loss 1,360 3. Ship Nero. Returns 8,000 Present value 15,000 23,000 OulUiy 16,450 Result, gain ...... 6,550 2. Merchandise, Returns 32,600 Outlay 30,60(5 Result, gain 2,000 4. Comiriission. Result, gain 637 Gross capital at the outset 75,000 Less, liabilities 25,000 Net capital, commencing 60,000 ITie Stock account is a mere abstract record of the state of the concern on opening and closing the books ; and exhibits neither outlay nor returns. K 66 The result, then, of this division* of the accounts is as follows !- — Lo$se».'~— Am». postedtoP.&L 3,900 Charges ^,.,^ 1,350 5»250 Net gainf 7,537 12,787 — Gams. — Am*, posted to P. & L 3,600 1 By Merchandise 2,000 By Ship Nero 6,550 By Commission 637 12,787 Capital commencingj 60,000 Add net gain, as above 7j637 Present net capital 57,537 The next step in our investigation is to analyse that class of the accounts which exhibits assets and liabilities ; that is, the component parts of the capital. 1. Cash. Received 60,000 Paid 21,000 In hand 29,000 2. Bills Receivable. Received 17,200 Disposed of 10,400 In hand , 6,800 3. Bilk Payable. Issued 31,526 Redeemed 19,513 4. Brown 4 Brothers. I owe them 21,000 They owe me 17,500 Outstanding 12,013 Due to B. & B 3,500 * The Ledger, in fact, contains a double set of accounts. Each set is composed of the very same items; but they are differently arranged : thus, one set consists of outlay and returns, and the result is either gain jrJoss. The other set exhibits assets and liabilities. The Dr. side of one class of the accounts is composed of the same items as the Cr. side of the other, and utce versa. t 75,000 — ?5,000 = 50,000. + 12,787 — 5,250 = 7,537. 67 5. John Taylor. He owes me 13,700 I owe him 12,700 6. Samuel Jolunuu. He owes me lG,55(i I owe him 14,550 DuebyJ.T 1,000 Due by S. J. 2,000 7. Peterson Sf Co. They owe me 18,550 I owe them 12,450 Due by P. & Co 6,100 8. Thomas F^fe. I owe him .... 7,050 He owes me 6,100* Due to T. F. 950 9. Edward Russell. I owe him 15,600 He owes me 15,300 Due to E. R. 300 10. Jackson Sf Homer. They owe me 20,460 I owe them 12,350 Due by J. &H 8,1U0 — Assets. — 1. Cash in hand 29,000 2. Bills in hand 6,800 5. J. Taylor owes 1,000 6. S. Johnson owes 2,000 7- Peterson & Co owe 6,100 10. Jackson & Homer . . owe 8,100 Advr. to Halifax cost of 6,300 Ship Nero value of .... 15,000 74,30) — Liabilities. — 3. Bills outstanding. 4. Brown & Brother. . due to 8. Thomas Fyfe . 9. Edward Russell due to. .due to. 74,300 16,763 57,537 Net capital 12,013 3,500 950 300 16,763 57,637 74,300 C8 EXERCISES FOR PRACTICE. The following questions are designed to exercise the learner still fm*ther in ana- lysing and investigating accounts, preparatory to his commencing with the details and arrangement of the subsidiary books. It is not necessary for him to arrange the items in the ledger form; but merely to ascertain the result upon a slate, in the same manner that questions in arithmetic are performed. 1. A merchant commences business with a capital of £10,000. His purchases of merchandise amount to £18,000; and the sales to £20,500. The receipts of cash amount to £22,000; and the payments to £11,000. J. Nichols owes him £13,500; and he owes J. Nichols £12,000. — Required a statement of his assets, his gains and losses, and his present net capital. 2. A merchant's assets on commencing business amount to £50,000 ; and his lia- biUties to £10,000. His purchases of cotton amount to £19,000; and the sales to £17,000; and the cotton unsold is valued at £4,000. His purchases of sugar amount to £18,000; and the sales to £15,000; and the sugar unsold is valued at £2,800. His outlay for charges, salaries, and the like, is £600. The receipts of cash amount to £41,400; and the payments to £13,000. The bills received amount to £18,000; and those disposed of to £9,000. The bills issued by him amount to £13,000; and he has redeemed bills to the amount of £11,000. He owes W. Thomson £7,000; and Thomson owes him £6,000. — Required his present worth. 3. The Dr. side of Stock in a merchant-s ledger, on commencing busuiess, amounts to £9,000 ; and the Cr. side to £50,000. The Dr. side of Profit & Loss, at the time of adjusting his books, amounts to £1,250; and the Cr. side to £875. The Dr. side 69 of Merchandise amounts to £22^000; and the Cr. side to £16,000; the goods on hand are valued at £8,375. The Dr. side of Ship Nelson's account is £l 7,500; and the Cr. side £5,500; the Ship Nelson is unsold and valued at £16,000. The Dr. side of Cash amounts to £34,000; and the Cr. side to £19,375. The Dr. side of Bills Receivable amounts to £28,600; and the Cr. side to £18,000. The Dr. side of Bills Payable amounts to £11,000; and the Cr. side to £15,600. The Dr. side of J. Harvey's account is £7,000 ; and the Cr. side £8,000. The Dr. side of W. Brown's account is £6,400; and the Cr. side £5,000. The Dr. side of T. Jones's account is £8,000 ; and the Cr. side is £8,400. The Dr. side of R. Morris's accoimt is £11,000; and the Cr. side £9,000. — Required a statement of the assets and liabilities^ the gains and losses, and the merchanfs present net capital. 4. A merchanfs property on commencing business amoiuits to £75,000 ; and his debts to £25,000. The result of his several transactions is as follows : namely, his purchases of merchandise amount to £30,000 ; and the sales to £32,000. The cost and outlay for ship Nero is £16,450; and the returns £8,000; the ship is imsold and valued at cost, £15,000. He ships goods as an adventure to Halifax, the cost and charges amounting to £6,300. His receipts of cash amount to £50,000 ; and the dis- bursements to £21,000. The bills received from his correspondents amoimt to £i/,200; and those disposed of to £10,400. He has issued or accepted bills to the amount of £31,526; and the amount of such bills as have been redeemed or retired from circulation, is £19,513. Brown & Co. owe him £17,500 ; and he owes them £21,000. J. Taylor is indebted to him £3,000 ; and he owes Taylor £2,000. S. Johnson owes him £6,000; and he is indebted to Johnson £4,000. Peterson & Co. owe him £8,500 ; and he owes them £2,400. He owes T. Fyfe £950. Jackson & Co. owe him £8,100; and he owes E. Russell £300. His gains as a factor amount to £637 ; and his outlay for rents, clerks' salaries, postages, &c. amoxmts to £1,650. — Required the present amount of his assets and liabilities, his gains and losses, and his net capital. For answers to these questions, see pages 50, 53, 57, and 67* In the last example the totals are different from the accounts in ledger IV.; but the result is the same. ^0 5. A merchant commences business with a capital of J6l0,000. His purchases of merchandise amount to £24,844.10.0; and the sales to £16,130.7.0. The receipts of cash amount to £19,127.0.0; and the disbursements to £16,197.18.9. The bills re- ceived amount to £6,302.0.0; and the bills disposed of to £4,552.0.0. The bills issued or accepted amount to £9,890.0.0; and the biUs redeemed to £5,890.0.0. J. Andrews & Co. owe him £7,575.0.0; and he owes them £7,662.0.0. W. Smith owes him £1,500.0.0; and he owes Smith £2,135.0.0. Bird & Beardsley owe him £890.0.0; and he owes them £3,090.0.0. B. Canfield owes him £1,509.2.0; and he owes Canfield £745.0.0. J. Harris owes him £1,885.0.0; and he owes Harris £1,220.0.0. C. Drummond owes him £1,338.0.0 ; and he owes Drummond £1,052.0.0. E. Ford owes him £805.15.0; and he owes Ford £650.0.0. J. Thomson & Son owe him £1,566.10.0; and he owes them £204.0.0. His outlay for rent, postages, salaries, &c., is £295.8.9. The merchandise unsold is valued, at the time of balancing the books, at £11,714.3.0. — Required a statement of his assets and liabilities, his gains and losses, and his present worth. — Ans. Assets, £19,626.11.3 ; liabilities, £6,922 : gains, £3,000 ; losses, £295.8.9: present worth, £12,704.11.3. 6. A merchant's net capital, on commencing business, is £15,000. On balancing his books, 31st January, he finds that his purchases of goods amount to £14,036.12.0 ; and the sales to £11,073.9.0. The receipts of cash amount to £17,663.6.3 ; and the disbursements to £9,465.5.1. The bills received amount to £6,128.14.0 ; and the bills disposed of to £2,572.3.7. The bills which he has issued amount to £5,884.8.9 ; and of those bills he has paid, or retired from circulation, to the amount of £884.8.9. C. Hammond owes him £8,936.7-5 ; and he owes Hammond £9,122.0.2. Bruce & Co. owe him £3,526.10.0 ; and he owes them £1,978.4.5. James Peters owes him £1,246.9.7 ; and he owes Peters £350.2.2. Buchanan & Co. owe him £3,438.5.0 ; and he owes, them £78.2.5. G. Smith owes him £2,853.3.6; and he owes Smith £3,820.6.7. The merchandise on hand amounts, as f' inventory, to £5,786. He has expended for clerks' salaries, rents, and the like, £1,267.12.9 ; and he has received for factorage, £637.7.1. — Required his present worth. Ans. £17,192.11.4. Tlie assets!, in example 6, amount to £23,345 .7.2 ; and the liabilities to £6,1 52.15,10.- Tlie gains amount to £3,460.4.1 4 and the losses to £1,267.12.9. 71 7. The Dr. side of Stock account, in a merchant's books on commencing busmess, is £12,000; and the Cr. side £42,000. In adjusting his affairs at the end of the year the res\ilt of his transactions is as follows : — ^The Dr. side of Cash account is £34,474; and the Cr. side £22,860.5.0. The Dr. side of Bills Receivable is £18,537.19.9; and the Cr. side £13,000. The Dr. side of Bills Payable is £5,900; and the Cr. side £8,400. The Dr. side of Allen & Co.'s account is £1,443.10.0; and the Cr. side £1,000. The Dr. side of Henry & Son's account is £1,500 ; and the Cr. side £1,441.6.6. The Dr. side of S. Homer's account is £2,073.12.0; and the Cr. side is £1,200. The Dr. side of W. Watson's account is £2,373.18.0; and the Cr. side £,1500. The Dr. side of J. Robert's accoimt is £4,218.15.0; and the Cr. side £3,500. The Dr. side of W. James' account is £4,047.10.0 ; and the Cr. side £4,000. The Dr. side of T. Brown's account is £2,647.10.0 ; and the Cr. side £1,900. The Dr. side of Williams & Co.'s accoimt is £2,531.5.0 ; and the Cr. side of E. Smith's account is £131.6.0. The Dr. side of Hope & Son's account is £4,503.2.0; and the Cr. side is £2,114.11.8. The Cr. side of Brown & Go's account is £291.3.9. The Dr. side of Ship Hector's account is £9,250 ; the Cr. side £2,000 ; and the ship is unsold, and valued at £9,000. The Dr. side of Merchandise account is £10,114.11.8; the Cr. side £9,630.1.9; and the Merchandise unsold is valued at £1,500. The Dr. side of Three f' cent Consols is £9,012 ; and the Cr. side £9,437. The Dr. side of tht Profit & Loss account is £2,787.16.6 ; and the Cr. side is £2,529.15.3. The Dr. side of Adventure to New York is £1,520; and the Cr. side £2,000. — Required a state- ment of his assets and liabilities, his gains and losses, and his present net capital, or real worth. Ans. Total amount of assets, £36,334.18.7 ; amount of liabilities, £2,922.9.9. Total amount of losses, £2,787.16.6; and gains, £6,200.5.4. Net capital, or piesent worth, £3.3,412.8.10. 72 The theory and practice of book-keeping have been fully discussed m the preceding pages. The following recapitulation, however, may assist the learner, and serve to fix the principles of the science more firmly in the mind. It is but a repetition, in a more concise form, of the reasoning contained in Part 1. The original capital, plus the gain or minus the loss, is equal to the present capital, which present capital consists of the excess of assets over the liabilities. This may be demonstrated as follows : — Let A = the original Capital, B = the Gain or Loss, C = the present Capital D = the gross Assets, E = the Liabilities. Then A + B = C, which equals D — E, therefore D = C + E. It is self-evident that the surplus property, at the time of closing the books, is equal to the original capital, increased by the gain, or decreased by the loss ; and this can be neither more nor less than the difference between the assets and liabilities. For whether the capital increase, diminish, or remain stationary, it must always be equal to the sum of its parts. Gains increase, and losses decrease, the capital ; they also increase or decrease the assets in the same proportion ; so that an equilibrium is maintained between the whole and its parts, under every variation or transformation that can occur. The accounts in the Ledger, denominated *' Stock," and '* Balance," are but different views of the same thing — one being the converse of the other. The first 'exhibits the value of the whole capital collectively ; the second its component parts. [f, therefore, an extract be made of the latter, the two results must agree : in this equality consists the great proof of book-keeping. DOUBLE ENTRY ELUCIDATED. PART TIL PRACTICAL EXEMPLIFICATIONS MEMORANDUMS OF TRANSACTIONS, INLAND AND FOREIGN TRADE. For the purpose of instruction it has been found expedient to arrange the transactions promiscuously in the order of dates, in what may be termed a waste- book. It would be a useful exercise for the learner to construct the subsidiary- books from these materials, agreeably to the exemplifications in Section II. page 12, by entering the receipts and payments in a cash-book; the bill transactions in a bill-book; the purchases and sales in a day-book; and then journalize monthly from these subordinate books. This, however, is not very important, as the journal may easily be composed from the memorandums ot transactions as they stand in the printed work. It must be borne in mind that while the plan and arrangement of accounts in the ledger are the same throughout the commercial world, the form and details of the primary books, as well as the journal, are varied in every instance to suit the particular business in which the merchant is engaged. "The most difficult task in introducing the system of double entry," says Sir Henry Parnell, y^ "consists in arranging the number and form of the subsidiary-books, and in T. 74 making a proper condensation of details so as to avoid repetition, and the over- loading the journal and ledger. Although the business of keeping books is extremely easy, when once the accounts are properly arranged, yet the adaptation of the principles of double entry to extensive and complicated transactions, so as to secure the full benefit of the system, is a process which requires the most com- plete knowledge, not only of the practice^ but of the science, of book-keeping. In point of fact, among the great number of persons who have acquired the reputation of being good accountants, there are very few who possess that peculiar skill, and those general and enlarged views of the subject, which are indispensably necessary for so dividing, classifying, and arranging a multitude of transactions, as to frame a complete system of accounts." "Too much care cannot be bestowed in the preparation of the subsidiary books. This first step is an indispensable auxiliary not only to the system of double entry, but also to the proper working of the business of any office. It is particularly important that this point should be well understood, because most of the prejudices of those who are unfavourable to double entry, rest upon a very superficial study of this part of the system. They fancy that double entry cannot exist without invoice-books, sales-books, books of shipments, and the like, for- getting that the same subsidiary books are scarcely applicable to two different branches of trade. The subsidiary books of a broker are different from those of a wine merchant, and these again diflfer from the subsidiary books of a general trader ; every merchant adapting them to his own particular wants, or the nature of the business to be transacted, without affecting the general principles. It is impossible to give specific instructions as to the number and classification of the subsidiary-books, but a few general rules may be enumerated as essential to be attended to in conducting this part of the undertaking. They should be framed in the first place in reference to the bulk of the details to be recorded, and to the sub-division of the business in the department ; a second object should be to secure as far as practicable a classification of entries, so that the monthly totals only may be carried to the ledger ; and a third, to frame them in harmony with the principal '(iooks"— Report on the Public Accounts. 75 In Set I. the merchant is supposed to commence business with a cash capital of ^10,000, and the books are opened by simply debiting Cash to Stock tor that amount. The transactions in this Set are of a simple nature, being chiefly confined to purchases, sales, receipts, payments, drawing and accepting bills and the like. The entries in the ledger relate, 1st, To the state of the concern at the time of opening the books ; 2nd, To the things received and delivered ; 3rd, To the persons from v<^hom they are received or to whom delivered ; and 4th, To the thhigs unsold at the time the accounts are adjusted. Hence the following general rule for journalizing : — The RECIPIENT Account is always debtor to the imparting Account: in other words, the thing received is dehtor to the thing delivered. The Stock Account is simply a statement of the original capital. It is credited on opening the books for the total amount of the merchant's property, and debited for what he owes. The Cash Account is simply a statement of the receipts and payments of money. It is debited for all cash received, and credited for all disbursements of money. The Bills Receivable Account is simply a statement of the bills received and disposed of. It is debited for the amount of other men's bills that come into vour possession, and credited for the same when disposed of. The Bills Payable Account is simply a statement of the bills issued and 76 redeemed. It is credited for the amount of all bills for the payment of which you are liable, and debited for the same when redeemed or retired from circulation. An Account of Property is simply a statement of its cost and returns. It is debited for the original cost and all charges connected with its cost, and credited for the sales or other returns. An Account of a Person is simply a statement of what he owes you and what you owe him. It is debited when he is accountable to you, and credited when you are accountable to him. When a clear, definite knowledge of the principles of accounts, as developed in the ledger, is attained, the details of the journal and the subordinate books will be readily comprehended. Book-keeping, like all other arts, can only be mastered by industry, perseverance, and attention. The learner must think for himself, and endeavour to understand the why and wherefore of all that he does, instead of resting satisfied with vague notions and words devoid of sense. The study of book-keeping aflfords an excellent means of intellectual discipline ; that is, when its principles are exhibited, as well as their application — when ihe reasoning powers are called into exercise, as well as the memory. The student who has carefully attended to the instructions, and who is the master and not the slave of rules, will experience no difficulty in unravelling or adjusting any set of accounts, however complicated or diversified. The following directions for monthly journalizing will enable the learner to classify and arrange the entries in a proper manner : — 77 Cash is debited for all moneys received, and credited for all moneys j)aiil, therefore, to journalize the cash transactions for the month, say — CASH Dr. to SUNDRIES, For the receipts ; SUNDRIES Dr. to CASH, For the disbursements.* The general account of Merchandise is debited for the cost of goods purchased and credited for the sales or returns : therefore, say — MERCHANDISE Dr. to SUNDRIES, For the purchases j SUNDRIES Dr. to MERCHANDISE For the sales or returns. The account entitled Bills Receivable is debited for all bills received, and Bills Payable is credited for all bills issued or accepted by yourself ; therefore, say — BILLS RECEIVABLE Dr. to SUNDRIES, For the bills received ; SUNDRIES Dr. to BILLS PAYABLE. For the bills accepted. • See pages 13 to 15, for illustrations of mouthly jourualiziug. 78 When cash has been received or paid more than once upon the same account during the month, the sums are short-extended in the journal, the total only being posted to the ledger. The same rule applies to purchases, sales, acceptances, &c. See illustrations, pages 13—17. To facilitate the process of journalizing, fold a sheet of paper, and after writing the several heads a^ under, commence with the first transaction in the month, and arrange the items by means of the dates: thus — Cash Dr. to Sundries. To Stock 1st. To J. Harris 14th. To E. Ford 24th. To B. Canfield 2£th. To Merchandise 31st. January, 1847. Merchandise Dr. to Sundries. To Andrews & Co 1st, 21st. To William Smith 4th, 24t.h. To Bird & Beardsley 8th, 17th. To Bills Payable 30th. Sundries Dr. to Cash. Merchandise , 3rd. Charges 11th. Andrews & Co 14th. W. Smith 28th. Sundries Dr. to Merchandise. Thomas Harris lith, 16th, 19th. B. Canfield 10th, 15th, 22nd. Edward Ford . . 12th, 18th, 23rd, 31st. C. Drummond 25th. Bills Receivable 29th. A similar index should be prepared at the end of each month, by means of which the book-keeper is enabled to combine and classify the entries with facility. The title to a journal entry always has reference to the manner of entering the items in the ledger. For example, in posting the cash entries we turn to the cash account, and write on the debtor side, * To Sundries, for the total sum received during the month.' We next turn to the accounts of Stock, Harris, &c. which are to be credited, and write * By Cash,' each for its respective sum. xSET I- MEMORANDUMS OF TRANSACTIONS. INLAND TRADE. ABBREVIATIONS, The follow! nar abbreviations are used in Merchant's accounts :— B. P. for bill of parcels ; C. B. cash-book ; B. B. bill-book ; T. B. invoice-book ; 1). B. day-book ; S, B. sales- book ; P. C. B. petty-cash-book ;-~-Bof. for bought ; yds. for yards ; pes. for pieces ; — Hhds, for hogsheads ; Bbls. for barrels ; — Gns. for gallons ; qts. for quarts ; pts. for pints ; gro. for gross ; ea. for each ; @ for at ; ■^ for per; fol. for folio; nvt, qrs. Ih. oz. for hundred weight, quarters, pounds, and ounces. N/P. for net-proceeds ; A/S. for account-sales ; J/A. for joint account. Shillings are expressed by an oblique line, thus 10/, and per cent, thus %i. In bill transactions d/d is used for days-date, and mo. for months. SET I.— INLAND TRADE. MEMORANDUMS OF TRANSACTIONS. January 1, 1S47. Commenced business this day, with a cash Capital of. Bought of James Andrews & Co. Goods amounting, "^ B. P. to. Paid for Goods bought this day. Cash, as f- C. B., Bought of WiUiam Smith, Goods amounting, 1^ B. P. to. Bought of Bird & Beardsley, 25 pieces Cassimere, as 1^ B. P., 10 Sold Benjamin Canfield, 1 piece Cassimere, 29 yds @ 10/ , 11 Sold Thomas Harris, 2 pieces Blue Cloth, 56 yds @ 20/ , Paid for Shop Fixtures, &c. In Cash, '^ C. B. . . IT 10,000 3,500 1,750 1,500 850 14 10 56 J50 82 January 12, 1847. Sold Edward Ford, 3 pieces Cassitaere, 80 yds @ 10/ 14 40 Paid James Andrews & Co., Cash, •^ C. B 1,500 Received from Thomas Harris, (3ash, on account, '^ C. B. 15 50 Sold Benjamin Canfield, 2 pieces Casssimere, 56 yds @ 10/ . : 16 28 Sold Thomas Harris, 8 pieces Cassimere, 200 yds w(ib, 16/ . 17 Bought of Bird & Beardsley, 1 Bale Cotton Sheetings, as "^ B. P. 18 150 40 Sold Edward Ford, 2 pieces Cassimere, 58 yds @ 10/ 29.0.0 2 , Blue Cloth, 48 yds @ 20/ 48.0.0 19 Sold Thomas Harris, 20 pieces Black Cloth, 500 yds @ 30/ 750.0.0 20 « Blue do. 480 yds @ 20/ 480.0.0 77 1,230 21 Bought of James Andrews & Co., Goods amounting, as 1^ Invoice, to, 2,500 83 January 22, 1847. Sold Benjamin Canfield, 60 pieces Cotton Sheetings, @ 20/. 23 Sold Edward Ford, 5 pieces Black Cloth, 140 yds @ 10/ 70.0.0 5 » Blue do. 125 » @ 8/ 60.0.0 6 » Brown do. 105 » @ 6/ 26.5.0 5 « Cassimere, 130 , @ 4/ 26.0.0 24 Bought of William Smith, Goods, as '^ Invoice, Received from Edward Ford, Cash, on account, "^ C. B. 26 Sold Charles Drummond, 6 pieces Black Cloth, 168 yds @ 24/ 201.12.0 8 . Blue do. 220 « @ 20/ 220. 0.0 8 . Brown do. 420 . @ 30/ 630. 0.0 Canvass, and Packing, 8.0 ■28- Received from Benjamin Canfield, Cash, on account, "^ C. B. . . Paid William Smith, Cash, Y- C. B. 29 Sold James Robinson, a quantity of Goods, and received in payment his promissory note, at 90 days' date 60 172 560 150 1,052 20 600 1,350 84 January 30, 1847. Bought at public sale t lis day, 3 bales Broadcloth, for which I gave my acceptance, at 30 days' date 31 Sold Edward Ford, 12 pieces Black Cloth, 318 yds @ 15/ 238.10.0 3 » Blue do. 126 @ 20/ 126.0.0 Received for Goods, sold this day, Casfef-CB 31 -February 1, 1847- Discounted bill No. 1, drawn bv James Robinson, and received in Cash, Paid discount on bill No. 1, as above. Sold J. Thomson & Son, 4 pieces Cassimere, 108 yds (g 10/. Sold Benjamin Canfield, 6 pieces Black Cloth, 168 yds. 8 » Cassimere, 140 » Received from J. Thomson & Son, Cash in full, to date, ,20/ 168.0.0 ,10/ 70.0.0 Accepted a bill, drawn by J. Andrews & Co., at 30 day's date 3,000 364 10 1,500 1,350 64 238 64 2,000 85 February 5, 1847. Sold for Cash, a quantity of merchandise, '^ S. B. 7 Sold J. Thomson & Son, 6 pieces Blue Cloth, 160 yds @ 24/. Received from Thomas Harris his acceptance in my favour, at 90 davs' date. No. 2, 1,260 192 1,000 Allowed T. Harris in settlement this day, an abatement of 10 Bought of James BrowTi & Co., 20 pieces Black Cloth, 480 yds. @ 6/ 120. 0.0 20 » Blue do. 500 , @ 10/ 250. 0.0 20 » Brown do. 460 . @ 16/ 337.10.0 Received from J. Thomson & Son, Cash, f- draft on Hill, 11 Discoimted bill No. 2, Thomas Harris, and received in Cash, 20 707 160 1,000 10 Paid discount on bill No. 2, f- 0. B., K Sundry charges, "^ P. C. B., . . 12.0.0 13.0.0 14 Accepted Brown & Co.'s draft, payable 90 days from this date, in favour of Walter Johnson 25 500 86 February 15;, 1847. A.ccei)ted William Smith's draft, in favour of T. Jones, at 60 days' date 16 Sold Benjamin Canfield, 15 pieces Blue Cloth, 420 yds @ 15/ 315.0.0 10 . Black do. 300 @ 10/ 160.0.0 17- Received B. Canfield's acceptance, at 30 days' date 18 Sold John Thomson & Son, 10 pieces Black Cloth, 280 yds @ 20/ 280. 0.0 6 . Blue do. 160 , @ 30/ 240. 0.0 8 . Cassimere, 230 . @ 10/ 115.0.0 Canvass, and Packing, 10.0 Paid sundry charges, 1^ P. C. B. 19 Received from Edward Ford, his promissory note, payable 1 month from date 24 Accepted Bird & Beardsley's draft, favour of H. Smith, payable 10 days from date 25 Paid for goods bought this day. Cash, as ^ C. B -26- I Sold at public sale, 10 bales Cloths and Cassimere, and received for the ] I ' net proceeds. Brown & Son's acceptance, at 3 xconths' date ' 1,000 465 150 635 10 15 500 890 1,600 1,750 i J 87 February 27, 1^7. T" Sold Benjamin Canfiekl, 2 pieces Brown Cloth, 56 yds @ 30/ 84.3.0 2 » Blue do. 65 « @ 20/ 55.0.0 Paid James BrowTi & Co. Cash, in full, 28- Received for Goods sold this day. Cash, as ^ C. B., Sold Edward Ford, 4 pieces Black Cloth, 1 10 yds. @20/. Accepted a bill, dra\vn by J. Andrews & Co. in favour of themselves, at 30 days' date , Bought of Bird & Beardsley, Goods ^ B. P., amounting to. March 1, \f47 Sold Thomas Harris, 2 pieces Broadcloth, 62 yds @ 90/ 52.0.0 2 . ^t> MERCHA,i«r>iOE i When one account is to he debited, and two or more accoimts are to be credited ; as, • ;ash Dr. CO Sttndr/rs 3. When two or more accounts are to be debited, and one account credited ; as, SuNDKifcs Ur. t( Cash. 4. When two or more accounts are to be debited, and two or more accounts credited ; an, Sundries hr. to Sui^urtss. 93 LONDON, JANUARY, 1647. Cash Dr. to Sundries To Stock l&t,.. To Thomas Hams 14th,. To Edward Ford 24th,. To B. Canfield 28th,. To Merchandize 3 1st, . Sundries Dr. to Cash Merchandise 3rd,. Profit and Loss 1 1th,. J. Andrews and Co. 14tk,. William Smith 28t]i,. Sundries Dr. to Merchandise 4 B. Canfield 1 0th,. . l.'jth,. . —Drs.— 11,720 1,750 50 1,500 500 14 lu 1>8 {)U 4 Thomas Harris. Edward Ford 11th, oG 16th, 150 19th, 1,230 12th, 40 18th, 77 23rd, 172 5 31st, 364 10 C. Drummond 25th,. Bills Receivable. . 29th,. 102 1,436 653 1,052 1,350 Forward I 20,114 10 —Crs.- 1 i 10,000 50 150 20 1,500 3,800 4,594 20,114 0; ._.J V-i LONDON, JANUARY, 1847. Brot. forward. Merchandise Dr. to Sundries. To J. Andrews and Co. 1st, 3,500 21st, 2,500 To William Smith 4th, 1,500 24th, 560 To Bird and Beardsley .... 8th, 850 17th, 40 -Drs. — 20,1141 5 11,950 To Bills Payable 30th,. FEBRUARY, 1847. Cash D/. to Sundries To Bills Receivable 1st, 1,350 nth, 1,000 To J. Thompson and Son . . 2nd,. nth,. 54 150 To Merchandise 5th, 1,250 28th, 500 32,064 4,304 20,114 6,000 2,060 890 3,000 Crs.— 5 32,064 Sundries Dr. to Cash Profit and Loss 1st,. nth,. i7th,. 1 7 25 15 1 Merchandise. . . . 5 J. Brown and Co. 25th,. 28th.. Forward. 41 1,500 207 6,052 2,350 204 1,750 1,748 17 6,052 17 95 LONDON, FEBRUAKY, 1847. Brot. forward. Merchandise Br. to Brown & Co For Invoice of Broadcloth lOth, Sundries Br. to Merchandise Thompson & Son 1st, 54 7th, 192 18th, 635 10 B. Canfield 2nd, 238 Ifith, 465 27th, 139 Edward Ford 23th,. Sundries Br. to Bills Payable Andrews & Co 5th, 2,000 28th, 2,500 Brown & Co 14th,. WilUam Smith 15th,. Bird & Beardsley 24th,. Profit & Loss Br. to Thomas Harris , For abatement allowed him . . 9th, Forward. 3 -Brs.— ■Crs.~ 6,052 707 881 842 110 4,500 500 1,000 890 20 15,503 6,052 707 1,833 17 10 10 10 6,890 20 01 17 15,503 17 3 96 LONDON, FEBRUARY, 1847. Brot. forward. Bills Receivablf, Dr. to Sundries To Thomas Harris 9tb,. ToB. Canfield \7tK- To Edward Ford 19th,. To Merchandise 26th,. MARCH, 1847. Cash Dr. to Sundries. To Bills Receivable 4th, 1,052 20th, 500 22nd, 650 To Thomas Harris 6th,. To Merchandise 13th,. 29th,. To B. Canfield 18th,. 176 500 —Drs. 15,503 17 3 3,40o! 18,903 3,103 Sundries Br. to Cash. Bills Payable 4th,. 9th,. Profit & Loss .- 4th,. loth,. 29th,. Andrews & Co 9th,. 3,000 890 9 1 6 25 150 500 . 25th, 1,075 Merchandise 19th, Forward. 3,890 184 17 ■Crs. 15,503 17 1,000 150 500 1,750 18,903 17 2,202 150 676 75 10,649 1,575 5,000 13,752 13,752 Ij 6j 97 LONDON, :MARCH, 1847. Brot, forward. Merchandise Dr. to SuNDRtES To Bird & Beardsley ' ist, i,/GO 6th, 500 To Andrews & Co 8th, 1,200 18th, 462 -Brs. — —Crs.— 13,752 3,937 3 i To William Smith 12th,. Sundries Dr. to Merchandise. Thomas Harris 2nd,. . . . 5c'i,. . . . 2nb, ... 85 309 10 54 10 Bills Payable 9th, B. Canfield 9th, 15th, Thomson & Son .^.. 25th, 29th, Edward Ford 26th, C. Drummond 21st, 28th, Bills Receivable Dr. to Sundries To C. Drummond 3rd,. To B. Canfield 7th, 492 72 12 461 224 246 40 Sundries 449 2,000 564 685 42 286 1,552 13,752 1 2,200 1,662 75 4,026 12 12 23,267 13 6 1,052 500 23,267 LEDGER.— SI I L INDEX. A. H. Andrews 4 Co 3 Harris, Thomas 4 B. Bills Receivable 2 Bills Payable 2 Merchandise Bird & Beardsley 3 Brown & Co 5 Balance »,-,-.,..,, 1 06 P. -, Profit & Loss Cash 2 Canfield, B 4 IX Stock I Smith, William 3 Drummond, C. b F. T. Ford, Edward 4 Thcmsou & Son lOI Dr. Stock. Cr. 1847. Mar. 31 To Balance 12,704 11 3 1847. Jan. 1 Mar. 31 12,704 11 3 By Cash By Profit & Loss. 1 Ii 10,000 2,704 12,704 Dr. Profit & Loss. Cr. 1847^ Jan. 11 To Cash Feb. a To Cash 9 To T. Harris Mar. 29 To Cash 31 To Stock 50 41 20 184 2,704 3,000 1847. Mar. 31 By Merchandise 3,000' 3,000, Dr. Merchandise. Cr. 1847. Jan. 3 30 25 10 19 18 31 Feb, Mar To Cash To Sundries. . . . To Cash To Brown & Co. To Cash To Sundries .... To Profit & Ix)ss 1,750' 11,960 1,500 70710 5,000 3,937 3,000 27,844 10 1847. Jan. 31 31 Feb. 28 28 26 Mar. 13 29 31 By Cash l By Sundries ' 1 By Cash \2 By Sundries 13 By Bills Receivable . . ' 4 By Cash ,4 By Sundries i 5 By Balance { I I 1,500, 4,594 5 1,750 1,^33 10 1,7501 676| 4,02612 ll,714l 3 27,844101 I 102 Dr. Cash. Cr, 1847. Jan. 31 Feb. 28 Mar. 29 To Sundries 1 To Sundries 2 To Sundries 4 11,720 4,304 3,103 19,127 1847. Jan. 28 Feb. 28 Mar. 29 31 By Sundries By Sundries By Sundries By Balance 3,800 1,748 10,649 2,929 19,127 Dr. Bills Receivable. Cr. 1847. Jan. 29 Feb. 26 Mar. 7 To Merchandise To Sundries . . . . To Sundries . . . . 1,350 3,400 1,652 r»,3>>2 1847. Feb. 11 Mar. 22 31 By Cash . By Cash . By Balance 2,350 2,202 1,760 6,302 Dr. Bills Payable. Cr. 1847. Mar. 9 9 31 To Cash To Merchandise To Balance . . . . 3,890 2,000 4,000 9,890 1847. Jan. 30 Feb. 28 By Merchandise By Sundries . . . . 3,000 6,890 9,890 103 Dr. Andrews & Co. Cr. 3 1847. Jan. 14 Feb. 28 Mar. 25 31 To Cash To Bills Payable To Cash .' To Balance 1 3 4 1,500 4,500 1,575 87 1847. Jan. 21 Mar. 18 By Merchandise .... By Merchandise 2 5 6,000 1,662 7,662 7,662 Br WiT.n.\M Smith. Cr. 1847. Jan. 28 Feb. 15 28 To Cash To Bills Payable .... To Balance I ll 3 500 1,000 635 1847. Jan. 24 Mar. 12 By Merchandise .... By Merchandise .... o 6 2,060 76 2,136 ! 2,135 j i ! Dr. Bird & Beardsley. Cr. \ 1847. Jan. 24 .31 To Bills Payable To Balance 3 8y0| 2,200! 1 1847. Jan. 17 Mar. 6 By Merchandise .... By Merchandise 2 5 890, 2,2001 3,090 3,090[ • _ J 104 Dr. Thomas Harris. 1847. Jan. 19 Mar. 27 To Merchandise To Merchandise l,43(i 449 1,885 1847. Jan. 14 Feb. 9 9 Mar. 6 31 By Cash By Profit & Less. . By Bills Receivable By Cash By Balance Cr. 1 i 50 3 20| 4 1,000 4 150i 665 1,886 1 Dr. Benjamin Canfield, Cr. 1847. Jan. 22 Feb. 27 Mar. 15 To Merchandise To Merchandise To Merchandise 102 842 664 1,509 1847. Jan. 28 Feb. 17 Mar. 18 7 31 By Cash By Bills Receivable By Cash By Bills Receivable By Balance 20 150 75 500 764 1,509 Dr. Edward Ford. Cr. 1847. Jan. 31 Feb. 28 Mar. 26 To Merchandise To Merchandise To Merchandise 663 110 42 805 1847. Jan. 24 Feb. 19 Mar. 31 By Cash By Bills Receivable. By Balance 150 500 155 806 105 Dr. Charles Prtjmmond. Cr. '! 1847. Jan. 25 1 Mar. 28 '■ To Merchandise .... To Merchandise 1 5 1,052 286 1847. Mar. 3 31 By Bills Receivable. . By Balance 5 1,052 286 1 1,338 1,338 o' ■ Dr. Thomson & Son. Cr. ! 1847. Feb. 18 To Merchandise .... To Merchandise 3 5 881 685 10 0|0 1847. Feb. 11 Mar. 31 By Cash 2 204 1,362 10 Mar. 29 By Balance 1,566 10 1,566 10 Dr. Brown & Co. Cr. 1847. Feb. 28 14 1 I To Cash To Bills Payable 2 3 207 500 10 1847. Feb. 10 By Merchandise .... 3 707 10 707 10 707 10 JIH» TRIAL BALANCE AND BALANCE SHEET.— SET L —Drt.- 295 24,844 19,127 6,302 5,890 7,575 1,600 890 1,509 1,885 1,338 805 1,666 73,528 Trial Balance. , Stock , Profit & Loss,. . . , Merchandise, ... , Cash, , Bills Receivable, . , Bills Payable, . . . , J. Andrews & Co. , WiUiam Smith, . , Bird & Beardsley, , B. Canfield, , Thomas Harris, . , C. Drummond, . . Edward Ford, . . . , Thomson & Son, , T. Brown & Co.,. . Equilibrium, , . . —Crs.- 10,000 16,130 16,197 4,552 9,890 7,662 2,135 3,090 745 1,220 1,052 650 204 73,528 *«* Whea the two sides of an account are equal it is unnecessary to enter the amounts in the Trial Balance. The Goods unsold are valued at £11,714.3.0. Balance Sheet. 1840 Mar. 31 ^Assets.— To Cash To Bills Receivable To Merchandise, . , To B. Canfield To T. Harris, To C. Drummond, To E Effected insurance with the London Insurance Co. on .^,000, at 60/ '^ cent, on 100 hhds. Sugar, consigned to us by J. Henry & Sons, of Jamaica, ■^ the Marv. Paid premium and policy duty, in cash, fiS i 114 January 3, 1847. Paid bill No. 160, J, Harrison, dut J.I3 dry^ 4 Received from Stephex> Homer, Cash on accoimt, '^ C. B., 5 — Insured with the London Insurance Co., .^00, at 40/ per cent, on 10 tierces Coffee, consigned to us by W. Brown & Co., 1^ the Jane, from Jamaica. Paid premium and policy duty, in cash, ' 7 Indorsed to William Jai es the followine bills, viz. — No. 2.'30, on Lloyd & Co., T. 1,100.0.0 u 231, on Brown & Co., 900.0.0 9 Paid the balance due W. James, in cash, "^ C. B., 12 . Received pajrment of the following bills, in cash, viz. — No. 232, on Masterman & Co 1,500.0.0 » 233, on Drummond & Co., 6,700.0.0 15 Insured with the London Insurance Co. ^4,250, on goods shipped '^ St. James, for New York, as '^ Invoice-book. Paid premium and poUcy duty, in cash, 24 Paid John Roberts, Cash in full, -^ C. B., Paid petty charges this month, # P. C. B 1,000 600 U u 16 2,000 300 8,200 100 3 9 3,500 160 115 t—- January 30, 1847. Shipped on board the St. James, for New York, sundry Goods, by order and on account and risk of the following persons, as '^ invoices dated this day : viz. — For James Allen 8f Co., Goods, amounting to 1,284.18.3 Charges, at shipping, 60. 8.0 Insurance, on ^1,500, and policy, 33.18.9 Commission on ^€1,335, @ 5 ^ cent, 66.16.0 on.£l,600, insured at 4-^ cent, .. 7.10.0— 74. 6.0 For Thomas Hope Sf Sons, Goods, amounting to 2,352.10.0 Charges, at shipping, 21. 0.0 Insurance, on ^2,650, and policy, 67.10.0 Commission, on ^2,374, @ 2^ "^ cent, 59. 7-0 on ^2,650, insured at ^ 1?- cent, . . 12. 16.0— 72. 2,0 For Homer Sf Patterson, Goods, amounting to 431. 8.6 Charges, at shipping, 11. 3.0 Insurance, on .£500, and policy, 8.15.0 Commission, on ,£443, @ 5 ^ cent, 22. 3.0 on .€500, insured at i f- cent, . . 2.10.0— _ 24.13.0 31 Paid charges on shipments, &c., "^ C. B., fEBRUARY 1, 1847- Received for Freight, &c., "^ ship Hector, . 3 ._ Paid charges on Consignments, viz. — Freight, primage, entr>', &c., on Coffee, "^ Jane, 28. 9.9 Duty, freight, primage, &c., on Sugar, "^ Mary, ^867.14.4 1,443' 10 2,503 2 475 4,422 82 19 11 11 1,500 1,896 116 February 4, 1847. Received payment of bill No. 234, J. Brown,. . 6 Insured with the London Assurance Co. ^1,575, on goods shipped this day, ■^ the Hero, & paid premium and policy duty, in Cash, Shipped on board the Hero, for New York, consigned to Hope & Sons, for sale on our account and risk, 10 bales Broadcloth, as '^ Invoice-book, fol. 3. Goods, cost of 10 bales Cloth, 1,430. 0.0 Charges, at shipping, 54. 2.0 Insurance, on ^^1,675, and policy, 35.18.0 Sold William James, 60 hhds. Sugar, consigned "^ Mary, Net 624 cwt. Oqrs. 12ib., @ 56/ "^ cwt. 10 Received William Watson's acceptance. No. 237, at 90 days' date, : 12 ^ Paid for brokerage, rent, &c. on Sugar "^ Mary, ^ C. B. 16 Sold Stephen Homer, 26 hhds. Sugar, consigned 1^ Mary, Net 312 cwt @ 56/ f- cwt. Sold William Watson, 26 hhds. Sugar, consigned "^ Mary, Net 312 cwt. Oqrs. 12 ft @ 66/ f- cwt. 26 Paid bill No. 161, Stephen Price, due this day. 500 36 18 1,620 1,747 1,000 33 873 873 10 11 12 18 1,700 117 February 96, 1847. Paid cash for ^10,000 Stock in 3 "^ cent Consols, at 90 "^ cent, and J '^ cent for brokerage, Received from Stephen Homer, Cash, in full, J^C.B.,... 9,012 10 700 Accepted Thomas Brown's draft, at 16 days' sight. No. 164, due March 14—17, •28- Received from W. Watson, Cash, in full, as f- C. B., 1,900 500 Paid for repairs of Ship Hector, f- C. B. 250 March 1,1847 — Closed the account of Sugar consigned to us, '^ Mary, and rendered Henry & Sons a statement of charges and net proceeds, as 1^ S. B. fol. 1.— Total sales being ^^3,496. Insurance, premium, and policy, 55.0.0 Charges, duty, freight, primage, &c 1,901.6.0 Commission, on sales, and insurance, 97.7.6 J. Henry & Sons,. ... for net proceeds, 1,441.6.6 Piu-chased on joint account with Edward Smith, each one half concerned, 250 bbls. Pot and Pearl Ashes, weighing, net 1,150 cwt. @ 20/ f- cwt. as f- I. B., fol. 2.— Paid in Cash, 3 Received from William James the following bills, as "^ B. B. viz. — No. 238, dated Feb. 8, on J. Lloyd, @ 3 months, 1,000.0.0 No. 239, « » 28, on T. Jones, @ 2 months, 700.0.0 3,495 1,150 1,700 118 i>. March 4, 184/., Sold J . Hill, a quantity of our goods as '^ I. B., and received his promissory note, at 6 months' date. No. 240, Received for Freight, f- ship Hector, f- C. B. 6 Paid bill No. 152, Clark & Sons, f- C. B. _ 7 _ Received payment of the following bills : viz. — No. 235, on Barings & Co 1,500.0,0 » 236, on W. Smith, 800.0.0 Sold for cash .£5,000 Stock, in 3 f- cent Consols, at 94 f- cent, less brokerage, | '^ cent, 10. Sold at public sale 10 tierces Coffee, consigned 1^ Jane, weighing net 62 cwt. @ 110/ 1^ cwt., less brokerage and petty expenses, as "^ S. B. Received in Cash, 11 Accepted a bill drawn by J. Henry & Sons of Jamaica, No. 155, payable to Drummond & Co. London, at 10 days' sight, 12 1,600 500 1,300 2,300 4,693 336 1,500 Closed the account of Coffee 1^ the Jane, and rendered W. Brown & Co. a statement of charges and net-proceeds, as '^ S. B. fol. 2. — Total sales being .€336.10.0. Insurance, premium, and policy, 6.16.f Charges, freight, primage, &c. , 28. 9.9 Commission on sales, and insurance, 10. 0.0 W. Bro^.„, for net-proceeds, 291.3.9 11 336 15- Paid petty charges this month, f- P. C. B.,. 87 15 10 10 10 J 119 March 16, 1847. L_ Sold juiiii lioberts, 125 hbls. Pot & Pearl Ashes, weighing net 575 cwt. at 2.i»/ "^ c^. as f S- B. fol. 4 17 Received from James Allen & Co. a bill on R. & J. Black, dated Feb. 1, at 3 months. No. 240, Paid our acceptance. No. 154, J. BrowTi, 18- Ordered from Thomas Hope & Sons, New York, 200 bales Georgia Cotton, which they advise having shipped '<^ Ontario for Liverpool; amounting, with charges, &c. as '^ invoice, to =8*10,150, Exchange at 50d. '^ dollar, 20 Sold for Cash, ^5,000 Stock in 3 "^ cent Consols, at 95 f- cent, less brokerage i 1^ cent, •21 Sold Thomas Brown, 125 bbls. Pot & Pearl Ashes, weighing net bib cwt. at 26/ 1^ cwt., as -^ S. B. fol. 4 28 Received from T. Hope & Sons, New York, an Account-sales of 10 bales Broadcloth, consigned to them '^ the Hero, net-proceeds being #9,600, at 60d. •^ dollar, 29 : Closed the account oi Ashes in Co. and credited as follows. Interest, on cost till in cash, 17- 0.0 Commission, 2^ '^ cent on sales, 36.13.0 Edward Smith's, i net gain is, lol. 6.0 Profit & Loss, for our ^ net gain, 131. 6.0 718 15 1,000 1,900 2,114 4,743 11 16 74/ 10 2,000 316 120 March 30, 1847. Homer & Paterson having become insolvent, we agree to accept 10/ "^ pound on the amount they owe us, being ,5€475.19.6, our loss is, Received a bill at 60 days' sight, on Barings & Co., No. 241, for the balance, . . 31 John Williams & Co., brokers, Liverpool, advise us that they have sold oiur 200 bales Cotton, received "^ Ontario, the net proceeds amounting, as ■^ account-sales, to, Paid sundry charges for salaries, postages, rent, &c., as "^ P. C. B. . , 237 237 2,631 300 N.. U, The Ghiods unsold are valued at jBl.SOO ; and tho SM]! Hector at ^9,000, Ihete two itenui aie to be itiaceti amons the assets on balanoiDS. Xlit Search* JOUKKAL.— SET lU B 123 LONDON, JANUABT, 184/, ) 1 i 3 ' 3 ! 3 ! 2 W Sundries Dr. to Stock. Cash ] st,. Bills Receivable 1st,. Ship Hector 1st,. Merchandise 1st,. Stephen Homer 1st,. WilUam "Watson 1st,. Stock Dr. to Sundries. To Bills Payable 1st,. To John Roberts 1st,. To William James 1st,. To Thomas Brown 1st,. Cash Dr.. to Sundries To Stephen Homer 4th, To Bills Receivable 12th,. Sundries Dr. to Cash Insurance 2nd,. 5 th,. loth,. ■^Drs.- —Crs.— \ 10,000 13,000 9,000 8,000 1,200 1,500 12,700 55 6 16 6 100 3 9 Bills Payable 3rd, William James yth, John Roberts 24th, Charges ; 28th, 150 31st, 82 11 Forward. 8,700 162 1,000 300 3,500 232 69,294 42,700 11 11 3 69,294 \ 5,000 3,500 2,300 1,900 500 8,200 5,194 11 11 124 LONDON, JANUARY, 1847. Drs.^ — CVK.— Brot. forward. William James Br. to Bills Receivable . . . G!),294 2,000 For Nos. 230 & 231 7th,. Sundries Dr. to Sundries. — Drs. — James Allen & Co 30th,. Thomas Hope & Sons Homer & Patterson 1,443 2,503 475 — Crs. — Merchandise ,30th, Charges Insurance Commission FEBRUARY, 1847. 75,717 Adventure to New York Br. to Sundries. 1,520 To Merchandise 6th,. To Charges To Insurance Sundries Br. to Sugar per Mary William James 8th,. Stephen Homer 15th,. WilHam Watson 15th,. 1,747 873 873 Forward. 5,015 (i9,294 2,000 4,068 82 100 171 75,717 1,430 54 35 3,495 5,015 11 O! 125 LONDON, FEBRUARY, 18^7. Brot. forward. Cash Br. to Sin dries. To Ship Hector 1st,. To Bills Receivable 4th,. To Stephen Homer 27th,. To WiUiam Watson 28th, Sundries Dr. to Cash Charges 3rd,. . . 12th,. . . . Insurance 5th,. Bills Payable 26th,. Three »< Cent. Consols 26th,. Ship Hector 28th,. 1,896 4 33 11 8 -Drs.- 5,015 3,200 Bills Receivable Dr. to W. "Watson 1,929 35 1,700 9,012 250 1,000 — Crs. 5,015 1,500 500 700 500 12,928 0| 0; For his Acceptance, No. 237 . . 10th, . . 1,000' Thos. Brown' Dr. to Bills Payable. For our acceptance. No. 154 . 27th, l,900i o; 24,043 3' 9 1,900 0| 24,043 3! 9 126 LONDON, MARCH, 1847. Cash Dr. to Sundriks To Ship Hector 5th,. To Bills Receivable 7th,. To Three F Cent. Consols 9th,. 20th,. To Coffee ^ Jane 10th,. 4,693 15 4,743 15 Sundries Br. to Cash Ashes in (/0 2nd, Bills Payable 6th,. . . . 1,300 17th,. . . . 1,900 Charges 15th,. ... 87 10 31st, 300 Sugar ■8*' Mary Br. to Sundries. To Insurance 1st,. To Charges To Commission . To Henry & Sons Bills Receivable Br. to Sundries To William James 3rd,. To Merchandise 4th,. To Allen & Co 17th,. -Drs. 12,574 1,150 3,200 387 3,495 10 4,300 Forward. 25.106|10 -Crs.— 500 2,300 9,437 336 4,737 55 1,901 97 1,441 1,700 1,600 1,000 25,106 10 10 127 LONDON, MARCH, 184; Brot. forward. Henry & Son Dr. to Bills Payable For our Acceptance, No. 155 . . 1 1th, Coffee ^ Jane Dr. to Sdndries To Insurance 12th,. To Charges ; To Commission To W. Brown Sundries Dr. to Ashes in Co. John Roberts 16th,. Thomas Brown ... 21st,. Cotton Dr. to Hope & Sons For 200 Bales, per Invoice .... 18th,. . i 1 I 1 Ashes in Co. Dr. to Sundries. —Drs.— 25,106 1,500 10 336 To Commission 29th, To Profit & Loss For gain 131 6 For interest 17 To Edward Smith . . . For his \ gain Forward. 718 747 2,114 10 11 316 30,840 —Crs.— 25,106 1,500 6 28 10 291 10 Oi 1 8 1,466! 5 2,114 36 148 131 30,840 11 13 128 LONDON, MARCH, 1847. Brot. forward. . Hope & Sons Dr. to Adv. to New York For net proceeds of broadcloth . . 28tb Sundries Dr. to Homer & Patterson Profit & Loss 30th,. Bills Receivable Williams & Co. Dr. to Cotton For net proceeds 30th,. . . . CLOyiNG LNlillES. [Instead of transferring the results from one account to another in the Ledger, as is dune in Set 1., it is usual to enter the particulars of the Profit and Loss and Balance Sheets in the Journal, and then to post each item to its proper account, as follows i Sundries Dr. to Profit & Loss For gains to 31st, as ^ Ledger. Ship Hector Merchandise Cotton Commission Three F Cent. Consols. . Adventure to New York Forward. —Drs.- 'Crs.— 30,840 2,000 237 237 2,531 35,847 1,750 598 416 315 425 480 3,985 10 30,840 2,000 475 19 2,531 35,847 3,985 10 3,985 10 129 LONDON, MARCH, 1847. — Drs.— —Crs.— Brot. forward. Profit & Loss Dr. to Sundries 3,985 3,89o To Charges for loss on this account, To Stock for net gain, transferred Balance Dr. to Sundries For balances in our favour, 31st. 36,334 To Cash To Bills Receivable To Ship Hector . . . To Merchandise . . To Allen & Co To Henry & Sons . . To S. Homer To W. Watson To John Roberts . . To W. James . . . , To Thomas Brown To Williams & Co, To Hope & Sons . . 10 16 10 18 Sundries Dr. to Balance For Balances against us, 31st. Bills Payable . . Edward Smith W. Brown . . . . 1 Stock net capital 2,500 131 291 33,412 80,551 3,985 483 3,412 10 7 8 810 810 4 7 11,613 5,537 9,000 1,500 443 58 873 873 718 47 747 2,531 2,388 36,334 18 80,551 J LEDaER.-SET II. 132 INDKX. A. Adventure to New York 2 Allen & Co 5 Ashes in Co 7 B. Bill Receivable 3 Bills Payable 4 Brown, T 5 Brown W 7 Balance . . 8 C. Commission 1 Chai-ges H Cotton 3 Cash 3 Coffee F Jane 7 H. Heniy & Sons 6 Homer, S 4 Hope & Sous 6 Homer &, Patterson 6 1. Insurance > 1 i. James, W , •....<*. 5 M. Merchandise 3 P. Proiit & Loss 1 Roberts, J 4 S. Stock 1 Sugar ^ Mary 7 Ship Hector 3 Smith, E , 5 T. Three per Cents ^..... ••« 2 W. Watson, W 4 Williams & Co 6 133 - Dr. Stock. 1 Or, 1847. Jan. 1 Mar. 31 To Sundries To Balance 1 7 12,700 33,412 SjlO 1547. Jan. 1 Mar. 31 By Sundries By Profit & Loss. . . . 1 7 i 42,700 3,412 8 10 46,112 810 46,112 8 10 1 i Dr. Profit & Loss. Cr. 1847. Mar. 30 31 To Homer & Patterson To Sundries 6 7 I 237 3,895 19 16 9 10 1847. Mar. 29 31 By Ashes in Co By Sundries 6 6 j 148 a; 3,985 10| 7 4,133 16 7 4,13316| 7 Dr. Insurance. Cr. 1847. Jan. 15 Feb. 5 To Cash 1 3 162 35 18 3 1847. Jan. 30 Feb. 6 Mar. 1 12 By Sundries By Adv. to New York By Sugar ^ Mary . . By. Cofifee ^ Jane . . 2 2 4 5 100 35 55 6 3 18 16 9 6 To Cash 197 18 3 197 18 3 1 1 Dr. Commission. Cr. 1847. Mar. 31 To Profit & Loss .... 6 315 6 1847. Jan. 30 Mar. 1 12 29 By Sundries By Sugar ^ Mary . . By Coffee F Jane . By Ashes in Co ; 2! 4i 51 5 171 97 10 36 7 13 6! 315 6 315 6 J 134 2 Dr. ... ... — -1 Charges. Cr. \ 1847. Jan. 31 Feb. 12 Mar. 31 1 To Cash I 3 4 232 1,929 387 11 16 10 9 1847. Jau. 30 Feb. 6 Mar. 1 12 31 By Sundries ByAdvr. to New York By Sugar ^ Mary . . By Coffee ^ Jane . . By Profit & Loss 2 2 4 5 7 82 64 1,901 28 483 11 2 b 9 8 o! To Cash To Cash 2,649 16 9 2,549 16 9 1 Dr. Thpee ^ Cent. Consols. Cr. 1847. Feb. 26 Mar. 31 To Cash 3 6 !>,012 425 10 (• 1847. Mar. 20 By Cash 4 9,437 10 To Profit & Loss 9,437 10 9,437 10 [ i i : Dr. Adventure to New York. Cr. 1847. Feb. 6 Mar. 31 1 To Sundries To Profit & Loss 2 6 1,520 4«0 1847. Mar. 28 By Hope & Sons. . . . 6 2,000 2,000 2,000 Dr. Ml ^rchandise. Cr. 1847. Jau. 1 To Stock 1 6 8,000 598 16 9 1 1847. Jan. 30 Feb. 6 Mar. 4 By Sundries By Adv. to New York By Bills Receivable . . By Balance . . 2 2 4 7 4,068 1,430 1,600 1,600 16 9 Mar. 31 To Profit & Loss.... 8,598 16 9 8,598 16 9 135 Dr. (•OTTON. Cr. 1847. Mar. 18 31 To Hope & Sons. To Profit & Loss . 2.11411 416 13 2,531 1847. Mar. 30 By Williams & Co. 2,531 2,531 Dr. Ship Hector. Cr. 1847. Jan. 1 Feb. 28 Mar. 31 To Stock To Cash To Profit & Loss. 1 3 6 9,000 250 1,750 1847. Feb. 1 Mar. 5 31 11,000 By Cash . . By Cash . By Balance 1,500 500 9,000 11,000 Dr. Cash. Or. 1847. Jan. 1 12 Feb. 28 Mar. 20 To Stock . . To Sundries To Sundries To Sundries 1847. 1 10,000 Jan. 31 1 8,700 Feb. 28 3 3,200 Mar. 31 4 12,574 31 1 34,474 By Sundries By Sundries By Sundries By Balance 5,194 12,928 4,737 11,613 34,474 Dr. Bills Receivable. Cr. 1847. Jan 1 Feb. 10 Mar. 17 30 To Stock To W.Watson To Sundries To Homer & Patterson 13,000 1,000 4,300 237 18,537 19 1847.^ Jan. 7 12 Feb. 4 Mar. 7 31 By W. James By Cash . . . By Cash . . By Cash ... By Balance . o 2,000 X 8,200 3 500 4 2,300 7 1 5,537 19 18,537 1 19 1 136 4 Dr. Bills Payable. Cr. 1847. • Jan. 3 To Casli 1 3 4 7 1,000 1,700 "3,200 2,600 1847. Jan. 1 Feb. 27 Mnr 11 By Stock 1 3 5 i 1 6,000 1,900 1,500 ( Feb. 26 To Cash By T Brown Mar. 17 To Cash By Henry & Sons . . ; '' To Balance 0, « 8,400 8,400 Dr. Stephen Homer. Cr. 1847. j Jan. 1 To Stock 1 2 1,200 873 I o'o 19; n 1847. Jan. 4 Feb. 27 Mar. 31 By Cash 1 3 7 500 700 873 12 1 Feb. 15 To Sugar W Mary . . By Cash By Balance 2,073 12 2,073 12 Dr. Vl'ii.LiAM Watson. Cr. ! 1847. i Jan. 1 To Stock 1 2 1,500 873 18 1847. Feb. 28 10 Mar. 31 By Cash 3 3 7 500 1,000 873 18 1 Feb. 15 i To Sugar ^ Mary . . By Bills Receivable. . By Balance ■ 2,373 18 « 2,373 18 1 Dr. Jo HN R OBERTS. Cr. 1847. Jan 24 To Cash To Ashes in Co 1 5 3,500 718 15 1847. Jan. 1 Mar. 31 By Stock 1 1; 7 3,500 718 15 Mar. 16 By Balance 4,218 15 4,218 15 i < 1 137 Dr. William James. Cr. 1847. Jan. 9 7 Feb. 8 To Cash To Bills Receivable. . To Sugar ip Mary . 300 2,000 1,747 4,047 10 1S47. Jan. 1 Mar. '\ 31 By Stock By Bills Receivable. By Balance By Stock By Balance By Ashes in Co. . . . 2,300 1,700 47 4,047 Dr. Thomas Brown. 1847. Feb. 27 Mar. 21 To Bills Payable To Ashes in Co 1,900 74710 2,647jl0 1847. Jan. 1 Mar. 31 Cr. 1,900 2,647 Dr. Edward Smith. Cr, 1847. Mar. 31 To Balance 131 6 1847. Mar. 29 131 Allen & Co. 2 1,443 10 1847. Mar. 17 31 1 1 1,443 10 Cr. By Bills Receivable. By Balance 1,000 443 1,443 10 138 rQ Dr. Henry & Sons. Cr, 1847. Mar. 11 To Bills Payable 1,500 1,500 1847. Mar. 1 31 By Sugar ^ Mary By Balance 1,441 58 1,500 Dr. Williams & Co. Cr. 1847. Mar. 30 To Cotton 2,531 1847. Mar. 31 By Balance 2,531 Dr. Hope & Sons. Cr. 1847. Jan. 30 Mar. 28 To Sundries To Adv'. to New York 2,503 2,000 4,503 1847. Mar. 18 31 By Cotton By Balance 2,11411 2,388:10 4,503 2 Z>". 1847 Jan. 30 To Sundries. Homer & Patterson, I i 47519 1847. Jan. 30 By Sundries. Cr. 475 19 6 139 1 — 1 Dr. Sugar «»' Mary. Cr. i \ 1847. Mar. 1 To Sundries 4 3,495 1847. Feb. 15 By Sundries 2 3,4ii5 Dr. Coffee ^ Jane. Cr. 1847. Mar. 12 To SunJiies 6 336 10 1847. Mar. 10 By Cash 4 336 10 1 ! Dr. Ashes in Co. Cr. 1847. Mar. 2 29 To Cash 4 5 1,150 316 f) 1847. Mar. 21 By Sundries 5 1,466 5 To Sundries 5 1,466 5 1,446 5 Dr. W. Brown. Cr. 1 ' 1847. ' Mar. 31 To Balance 1 7^ I 291 3 9 1847. Mar. 12 By Coffee ^ Jane . . 6 291 3 9 ' • -J 140 Balance. Cr. 1847. Mar. 31 To Sundries 36,334 18 1847. Mar. 31 By Sundries ■ :6,334 18 141 TRIAL BALANCE.— SET IL —Drs.— TriAI* BALAlNCli. 12,700 237 2,549 8,000 2,114 9,012 1,520 9,250 34,474 18,537 5,900 1,443 1,500 2,073 2,373 4,218 4,047 2,647 2,631 4,503 129,635 19 19 • 16 11 10 19 10 12 18 15 10 10 V 5 2 11 . Stock . Profit & Loss, . Commission, , Charges, . Merchandise,* . Cotton, , Three '^ cent Consols, . . . Adventure to New York, , Ship Hector,* , . Cash, . Bills Receivable, . Bills Payable, , J. Allen'& Co., . J. Henry & Sons, , S. Homer, , W. Watson, , J. Roberts, . W. James, , Thomas Brown, , E. Smith, , J. Williams & Co , J. Hope & Sons, . W. Brown Equilibrium, • The Merchandise untold is valued at £1,500 at £9,00'J. See remarks, and the Ship Hector is valued p 49. -Crs.— 42.700 148 315 2,(V"? 7,098 2,531 9,437 2,000 2,000 22,860 13,000 8,400 1,000 1,441 1,200 1,500 3,500 4,000 1,900 131 2*114 291 01 61 0| 6 8! 9 9 129,63519111 142 ANALYSIS OF LEDGER-SET II 1. Chargeu Outlay 2,649 16 9 Returns 2,066 8 9 Loss 483 8 3. Merchandise, Returns 7,098 16 9 Unsold 1,600 8,598 16 9 Cost 8,000 Gain 598 16 9 5. Tliree ^ Cent. Consols, Returns 9,437 10 Cost 9,012 10 Gain.... 425 2. Cotton, Returns 2,631 5 Cost 2,114 11 8 Gain 416 13 4 4. Ship Hector. Returns 2,000 Valued at 9,000 11,000 Cost 9,250 Gain 1,750 6. Adventure to New York. Returns 2,000 Cost 1,520 Gain 480 The gains and losses are transferred from the several accounts, at the time of balancing, and entered on the proper side of Profit and Loss ; the result is then transferred to the Stock account. These items are first arranged on a sepa- rate sheet, called the Profit and Loss sheet. See page 145. The net U3 caj/ital, or present worth, is as fo'lows :-- Capital commencing 30.000 Subsequent gain .« 3,412 8 10 Present net capita! 33,412 8 10 1. Cash. Ileceived 34,474 Paid 22,860 5 In hand 11,613 15 2. KlU Receivable. Received 18.53? 19 9 Disposed of 13,000 In hand 5,53? 19 9 6. Bills Payable. Issued 8,400 Redeemed 5,900 2,500 4. Allen ^ Co. The)' owe us 1,443 10 We owe them 1,000 443 10 5. Henry 4" Sons. They owe us 1,500 We owe them 1,441 6 6 Due by H.& Sons 68 13 6 7. W. Watson. He owes us 2,373 18 We owe him 1,600 Due by W. W 873 18 6. S. Homer. He owes us 2,073 12 We owe him 1,200 DuebyS. H 873 12 8. J. Roberts. He owes us 4,218 15 Weowehim..... 3,600 DuebyJ. R 718 16 144 9. IV. Jamei. He owe us 4,047 10 We owe him 4,000 Due bv W. J 47 10 11. Hope 4* Sons. They owe us 4,503 2 We owe them 2,114 11 8 Due by H. & Sons 2,388 10 4 10. Thomas Brown. He owes us 2,647 10 We owe him 1,900 DuebyT. B 747 10 Williams & Co. owe us 2,531 We owe E.Smith 131 6 W. tirown 291 3 9 *;^* The Assets and Liabilities constitute what in technical language is called the Balance Sheet. — See next page. The property unsold being obviously an Asset, its value must be entered accordingly. The result of the Merchandise accounts is the difference between the two sides, after the value of the goods, sold or unsold, has been entered on the Credit side. The Cash, Bills Receivable, Bills Payable, and Personal accounts exhibit Assets or Liabilities ; all other accounts consist of Outlay and Returns, and the result of them is either Gain or Loss. If property be sold for cash, then the Cash account contains the representation of its value ; if sold on credit, then the Purchaser's account ; but whether sold on credit or for cash, there must be a result of profit or loss, and it is this result which connects tiic Property accounts with the Stock account. 145 PROFIT & LOSS AND BALANCE SHEET.— SET IL Profit &, Loss Sheet. — Lotses. — Mar. 31 | Am't posted To Charges, . . . . . To Stock • {net gain) 237 483 7ai 3,412 4,133 Mar. 31 — Gains. — Am't posted ^ By Ship Hector, By Merchandise, By Cotton , By Commission By Three #" Cents By Adventure to New York, 148 1,750 598 416 315 425 480 4,133 16 Balance Sheet. Mar. 31 To Cash , To Bills Receivable, To Ship Hector, ., To Merchandise, . , To J. Allen & Co., To J. Henry 85 Son, To S. Homer, . . . , To W. Watson To John Roberts, . , To W. James, . . . , To Thomas Brown, To Williams & Co., To Hope 8e Sons, . , 11,613 5,537 9,000 1,500 443 58 873 873 718 47 747 2,531 2,388 36,334 Mar. 31 — Liabilities, By Bills Payable, . . . By E. Smith By W.Brown By Stock 2,500 131 291 2,932 33,412 36,334 10 18 APPENDIX. I. EXAMINATION OP GOVERNMENT CLRRK8. The following regulation applies to the Admiralty; the Audit office; Excise; Stamps and Taxes; and all other departments of Government where accounts are kept : — " My Lords considering that, in addition to the other qualifications now required of the " clerks who are admitted into this office, it is very important that they should possess a com- " petent knowledge of book-keeping by double-etitry, are pleased to direct that before the " appointment of any clerk shall be confirmed, an examination, in such manner and form as " one of the secretaries of this board shall think best calculated for the purpose, shall take " place, and the result be reported to My Lords." — Treasuri/ Minute, 14 Jan. 1840. The questions proposed at the examination of candidates for a clerkship in the Commissariat Department, are as follows : — 1. — Define the terms double-entry, debit, and credit, and explain why two entries are required in every transaction under this system. 2. — Describe what is usually understood by "real accounts;" " personal accounts j" and " fictitious accounts." 3. — Describe the books of account which are necessary in the most simple form of double-entry. 4. — Prepare specimens of such books, and state the purposes which each book is intended to answer. 5. — State the diflFerence between the mode of entering a transaction m the waste- book, and in the journal. u 2 148 5. — What are the two first entries made in the journal by a merchant or tradesman on commencing business ? 7. — In "real accounts/'* on which side of the ledsjer are articles received and delivered to be entered ? E. — If a merchant wishes to ascertain the profit or loss on any description of mer- chandise, how must he set about it ? 9. — How is the ledger balanced and closed ; and what accounts exhibit a statement of the gains and losses ; assets and liabilities ; and present net capital ? 1 0. — If a real account closes with a loss, to which side of the profit and loss account should the result be carried? 11. — What object is the balancing of the accounts in the ledger intended to accomplish ? 12. — If the result of a merchant's business be a loss, from what account is the information obtained ? 13. — If a merchant, banker, or trader becomes insolvent, in what account would that result appear ? * What is usually uuderstood by "real accounts" are the accounts of property, such as "' merchandise," " ships," " houses," and the hke. " The division of accounts into real, personal, and fictitious, is one of the most ludicrous that ever enlivened the gravity of the scientific page. Are the personal accounts unreal ? or rather are they neither real nor fictitious? Is the stock account a mere fiction? Is the profit and loss account of the same romantic nature? In cases of loss it would be some consolation to con- sider it in this poetical light; but when a profit occurs, the pleasure would not be heightened by this view of the subject. The merchant reasonably expects to find something substantial in his stock account ; but the professors of book-keeping, faithful to the Berkleian theory, gravely assiu-e him that it is fictitious or imaginary !" — Cronhelm. 149 II. EXERCISES IN JOUBNALIZINO. The student who can journalize the following transactions with promptness and accuracy, must necessarily possess a thorough knowledge of the fundamental prin- ciples of double entry. 1. — Sold Baring, Brothers, and Co., ^ of my ship Nero, for the sum of £8,000; and received in payment as follows, namely, Cash, in part, £l,500; a bill drawn by John Smith, in favour of Thompson, for £1,000 ; my own acceptance in favour of Jones for £3,000; 10 pipes of wine valued at £500; and 15 hhds. sugar valued at £600. The balance, £1,400, is to be paid in three months. Required, my journal entiy, and also Baring, Brothers, and Co.'s journal entry. 2. — Bought of Stephen Simpson, 100 pipes of Wine, amounting, as per in- voice, to £4,000, and paid for the same as follows, namely : — Cash, in part, £300 ; 20 bales cotton, valued at £500 ; my draft at 10 days' sight on William Brown and Co. for £1,000 ; my own acceptance at 3 months' date for £1,500. The balance is to be paid in 4 months. Required my journal entry, and also that of S. Simpson. 3. — A. B. and C. are not partners, but in the course of business they — i. e. the three — jointly and severally accept bills to the amount of £15,000. These bills are discounted at the Bank of England, and A., who managed the transaction, paid over to B. and C. each ^ of the proceeds, being £10,000, — less the discount. The whole discount was £187. 10*., of which each party paid ^. Required the respective journal entries of A., B., and C, supposing yourself to be the manager. 4. — In pursuance of an agreement between Henry Jones and myself, to spe- culate in company, the gain or loss to be shared equally, and the business to be superintended by me, I have purchased a quantity of corn, amounting to £5,000, and gave in payment as follows, namely: — Cash, in part, £2,000; my draft on 150 Brown, Brothers, and Co., for £1,000 ; a bill drawn by John Thompson and Sons, for £1,500 ; and my own acceptance at 3 months' date, for the balance. Required the journal entry in my books, and also that of H. Jones. 5. — Shipped per the Venus, for New York, and consigned to S. Smith, merchant there, for sale on account and risk of William Hunter, John Harris, and myself, each ^ concerned, 100 bales of broadcloth, amounting to £3,000. Paid shipping charges in cash, £45 ; the insurance amounts to £32 ; and my commission to £77- Required each partner's journal entry, supposing yourself to be the manager. In due course I received S. Smith's account-sales of the above consignment, the net proceeds to his debit being £4,200. Required an adjustment of the trans- action, and also the requisite journal entries in each partner's books. 111. PARTNERSHIP SETTLEMENTS. The science of book-keeping is thought by many to be of easy attainment, and that little study or experience is requisite to give any one a competent knowledge of it. This, however, is so far from being true, that in complicated transactions, and more particularly in the adjustment of partnership accounts, questions daily arise which puzzle the clearest head, and to solve which requires the most intense effort of a sagacious and profound mind. The following questions will serve to test the student's skill in accountantship. 1. — A. and B. constitute a firm. In the investigation of their books, prior to a dissolution of partnership, it is found that A. has withdrawn from the concern £780, and paid in £2,860 ; B. has withdrawn £1,200, and paid into the concern £50 ; A. owes to B. on an old account £4,300. They, i. e. the firm, bought goods which cost £1,590, and sold the same for £l,200. The profit and loss they are to share equally, and no interest is to be charged or allowed for moneys withdrawn or 151 advanced. Required, the amount payable by one partner to the other, in order to close the accounts equitably. — A. must pay to B. £2A15. 2. — C. and D. were partners in trade for nine years : a dissolution of the firm then took place. C. put into the concern during that period £47,000, and drew out £50,000. D. put into the concern £65,000, and drew out £35,000. The interest on the respective personal accounts of each partner was duly paid up to the end of the eighth year. The conditions of the co-partnership are that C. is to share ^ and D. |- of the gain or loss ; but there was to be no fixed capital. After paying all demands against the concern, their assets, consisting of money, goods, and debts receivable, amount to £55,000. Required, an equitable adjust- ment of their affairs, not only with regard to the interest on all moneys advanced or withdrawn, but also as to each partner's share of the assets. — C.'s share is £7,510; D.'s share is £47,490. 3.— E. and F. were joint partners, and at the dissolution of the partnership the summary of their accounts was as follows : — E. put into the concern £25,500, and drew out £2,000. F. put in £20,200, and drew out of the concern £1,200. Their net gain was £21,780, which is to be shared equally. After paying all demands against the concern, their assets amount to £64,280. Required a settlement of the accounts, i. e. what each partner is to have of the property remaining.* — E.'s share is £34,502. 10.«f.— F.'s share is £29,777. lO*. IV. OFFICIAL BALANCE SHEETS. '1'he balance sheet of a bankrupt or an insolvent differs from the ordinary balance sheet of the merchant inform and substance. Instead of being simply a statement of the assets and liabilities, the official balance sheet comprises, in sepa- rate schedules, particular statements of the bankrupt's debts, capital, and profits, * In questions 2 and 3, one year's interest, at 5 per cent, is to be charged on the balance of each \)artner's personal account. 152 on the one hand ; and his credits, profit?; losses, and expenses, on the other. The general form of a bankrupt's balance shf-et is as follows : — BALANCE-SHEET OF A. B., BANKRUPT. ■Dr. To Creditors. . per list A To Capit.ll To Profits ..per listF. 10,000 5,000 3,000 18,000 Cr. By debtors,. . . . per list B : — Good Doubtful Bad By Property, . . per list C . . . By Losses, .... pei list D . . . By Expenses . . pet list E . . . £. \s. "■ 2,000 3,000 7,000! 0; 500: o; i,6oo; 4,000 18,000 " The lists or statements referred to are to be annexed to the balance sheet, and must contain the following particulars ; 1st. The names and address of the bank- rupt's creditors, and the amount of their claims ; 2nd. The names and address of his debtors, the amount due from each, distinguislied as good, doubtful, or bad, as the case maybe, and also the araounf of their counter claims, if any; and the other schedules or lists must contain the particulars of the property coming to the assignees, and the bankrupt's actual losse-? pnd expenses. The firm of A. B. and C. was compelled to stop payment on the 1st of January, 1847. On investigating their affairs the results were as follows: — The concern owed to sundry persons, £80,000; the surplus capital was £10,000, and the gross profits £30,000. The cash in hand was £11,000 : owing to the concern by sundry debtors, £.34,000 ; of which £30,000 is good, £1,500 doubtful, and £2,500 bad; the doubtful debts are estimated to produce £500. They have bills of exchange to the amount of £9,000, and property valued at £12,000. The losses amount to £6,000, and the trade charges to £14,000. A. drew from the concern £8,000 ; B. 12,000; and C. £14,000. Arrange these items in form of an ofiicial balance sheet, and also in the usual mercantile form. I-ONDON ■• PUISTED BY WILLtAM CLOWES AMD SONS, ST.UIFORD STItlCiiT AND CHARIKG CKOSS. RETURN CIRCULATION DEPARTMENT TOi— i^ 202 Main Library LOAN PERIOD 1 ~ HOME USE 2 : 3 4 5 ( b ALL BOOKS MAY BE RECALLED AFTER 7 DAYS Renewals and Recharges may be mode 4 days prior to the due date. Books may be Renewed by calling 642-3405. DUE AS STAMPED BELOW JUL 261989 RECEIVED BTf r., : 1 1989 CIRCUlATinM nnrr UNIVERSITY OF CALIFORNIA, BERKELEY FORM NO. DD6 BERKELEY, CA 94720 Y£ 15267 U.C. BERKELEY LIBRARIE: CDQ7D5t.872 IV1283876 THE UNIVERSITY OF CAUFORNIA UBRARY ^>- ■* !'■ <> in ' s i 5 / \