BOOK-KEEPING.

Book-keeping is the art of keeping books of account, whether in public offices, manufacturing establishments, or mercantile counting-houses', but the name is generally applied to the books of merchants, on account of the complexity of their transactions, and the care consequently required to prevent obscurity or confusion. It was accordingly among merchants, and in particular among those of Venice, Genoa, Pisa, and other trading towns in Modern Italy, that book-keeping was first reduced to a system, and that the remarkable refinement of double entry was adopted. This, like the discoveries of the Italians in manufactures, the fine arts, navigation, and commerce, was owing, not, as some imagine, to any peculiarity of disposition, or power of invention, inherent in that people, but [7:4:776]to their country being the part of Europe in which, in modern times, town-population first became considerable, and men derived advantage from living together in large communities. It is in populous towns that employment is divided and subdivided; that discoveries and inventions take place; and that the education of youth exchanges its antiquated and scholastic form for one of direct utility, adapted to the progress and the wants of the existing generation.

The first printed work on book-keeping was the production of an Italian teacher, who, without knowing much of trade by his own experience, observed the manner in which the intelligent merchants of his country kept their accounts. It was published as early as 1495, and was followed in the succeeding century by several works on bookkeeping in French, composed with evident care and solicitude to explain the art, but affording by their complexity a remarkable contrast to the short and clear system afterwards adopted by merchants. English publications on book-keeping came forth somewhat later, but all resembled the foreign treatises in being the composition, not of merchants, but of teachers and accountants. In 1652 Collins, a well-known London accountant, published a long work entitled An Introduction to Merchants Accounts, which, like the work of one of his contemporaries on a very different topic (Rich On Short Handi), continued during a century the best, or, to speak more correctly, the least imperfect publication on the subject of which it treated. About a hundred years later, Mair, a well-known writer of books on education, published his Book-Keeping Modernized, a work containing a correct statement of the principles of double entry, but in other respects much less clear and concise than it might have been had the author adopted the method of our principal merchants, who had now greatly simplified their plan of keeping accounts.

A number of lesser publications on book-keeping appeared in succeeding years, each possessing, in the view of its author, a superior claim to public favour; but all, or almost all, were composed by teachers and accountants. At last, in 1789, appeared the work of a practical merchant, under the title of A Complete System of Pooh-Keeping, by Benjamin Booth, London, 4to. Mr Booth had been long in business, first at New York, and afterwards in London, having at one time managed extensive transactions, and at another kept complete sets of books. “What I now offer to the public,” he observes in his introduction, “has long appeared to be much wanted among our traders. Many are the bankruptcies which happen in trade from irregular accounts only: persons are employed as book-keepers who have got little more than the theory of their art from some obsolete treatise. The desideratum is a system of book-keeping drawn up with sufficient ability and experience, that might be considered as a standard, and received into every counting-house as a decisive authority. How surprising that, in a commercial country like this, there should not be one treatise which, when applied to a large scale of business, can be reduced to practice. Those I have seen appear generally to have been written by persons who never had an opportunity of bringing their theories to the test of experience. On a large scale of business it is almost impossible to prevent the books from getting behind hand when every transaction is entered singly by itself. The system I have laid down possesses the facility of single entry, with the advantages of the double. All extraneous matter is lopt off from the journal, and the ledger is prevented from swelling to¢n enormous size.”

The favourable expectation excited by Mr Booth’s experience in business was fully confirmed by his book, which contained a great deal of information in short compass, unembarrassed either by minute detail or fanciful theory. The plan which he recommended and exemplified was the Italian method of double entry, in conformity with the practice of the first merchants in this country and the Continent, for more than a century. Practical men could no longer complain of the non-existence of a correct summary of the principles and practice of bookkeeping; and the Italian method seemed likely to be as firmly fixed in the admiration of cur young merchants, as it had long been in that of their predecessors, when its title to clearness and accuracy was strongly called in question by a writer at that time unknown to the mercantile public.

Mr Edward Thomas Jones, educated in Bristol to the business of accountant, had occasion, like Mr Booth, to see a series of perplexities and losses arising from books being badly kept, namely, disputed accounts, actions at law, and occasionally even bankruptcies. In the case of many merchants the books submitted to him had remained for years unbalanced; in others the balancing had been incorrect, and deception had been practised either on a partner or the creditors. Such irregularities, ascribed by Mr Booth wholly to the misconduct of book-keepers, is charged by Mr Jones on the system itself, which (the Italian method) he does not scruple to describe as “insufficient to prevent or detect error, rendering the process of balancing very difficult, and not necessarily correct when the balance is completed.” To find a safeguard against such errors, to devise a method by which accuracy in bookkeeping might be insured, and the perplexity in balancing removed, was, said Mr Jones, a work of great time and difficulty. He began to give his plan to the public in 1796, and improved on it in the succeeding years. For a time he was indefatigable in bringing it, both by explanatory statements and personal application, under the notice of merchants, the result of which was a very long list of subscribers to his first work, and the receipt of what authors so seldom either obtain or acknowledge, a fair remuneration for his labour. This, however, was accompanied by a good deal of jealousy and opposition on the part of rival accountants, and Mr Jones was induced to do what is often done by ardent, inventive, but impatient minds, namely, turn aside from his professional employment, and give a very different direction to his labours. This change of occupation continued during many years, in which the circulation and adoption of his system of book-keeping by merchants was in a great measure suspended. Taught, however, at last, that the obstacles to success in one line of business were as great as, or greater than in the other, il revint sur son erreur, resumed business as an accountant, and fixed his thoughts anew on the means of improving his system of book-keeping. He published on this subject in 1821, but in a much more extended form so lately as last year (1831). The latter work is in 4to., and bears the title of The Science of Book-Keeping Exemplified. It treats first of single entry, and contains formulas evidently superior to most of those which are now in use by the persons who are contented to use this primitive method. Next comes the more difficult department of double entry, exhibiting Mr Jones’ method in contrast with the Italian system, and claiming for it a decided superiority in clearness and accuracy. Of this we shall treat more fully in the subsequent part of the present article, after explaining to our readers the nature of the system in question. The other part of Mr Jones’ volume contains instructions to bankers, manufacturers, public accountants, and retailers, in regard to the mode of keeping their respective accounts, all appropriate and useful to a degree which leaves very little to be complained of except that the volume should be so high priced (L.4. 4s.); an objection [7:4:777]which might be easily lessened by the author dividing the work, and selling the single entry part separate from that of the double entry.

In the earlier stages of commerce, such as the fifteenth and sixteenth centuries were for the north of Italy, and the seventeenth for England, the transactions of merchants, though varied in their nature, were on a small scale as regarded any particular department. The same individual did business in a number of articles, but in none to an extent to require separate books of account. Hence the practice of recording all transactions, whether purchases, sales, receipts, or payments, in a diary, which, from the rough manner in which it was kept, was commonly called a waste-book. The practice in those days was for a merchant or his chief clerk, as soon as any transaction was made or agreed on, to insert a memorandum of it in this book, minuting the particulars correctly, but taking little trouble as to the form of the entry: for that they relied on the book-keeper, who was not then a partner, or even clerk in the house, but generally gave his aid by intervals in different counting-houses, passing one or two days in the week at each, and bringing the rude entries in their waste-books into regular form in the journal. At present, and for a great length of time, each mercantile house has its own book-keeper; the art being simplified so as to be within the attainment of most clerks of ability, instead of being, as in remote times, a mystery to all except men of long standing and more than usual instruction. But in process of time, as mercantile concerns have acquired extension, the art of book-keeping has been simplified, because particular departments of business have required separate books. Thus money receipts and payments, instead of being mixed, in the waste-book, with the amount of invoices, account sales, and other entries quite different in their nature, are all registered in the cash-book, or book for that special purpose. The same principle of division holds in regard to bills; also as to invoices, account sales, and, in short, every department of business.

We shall now give a practical illustration of book-keeping, by exhibiting the course followed by a mercantile establishment. Let the example to be given be a London house under the supposed firm of Baring, Hall, & Co., established during several years, and engaged in the West India and North American trade. Their journal ought to contain, at the beginning of each year, a summary of the monies owing by and to them; in other words, of their debts and assets, in the following form.
[table]
[table]
[7:4:778]

Such is the form of the inventory of the debts and assets of a mercantile house; and the foregoing is, it must be admitted, much more satisfactory than balance sheets in general; because, from the nature of foreign business, the funds of almost every house become unavoidably much more scattered than is stated in this outline. All countries recently settled, such as North America and the West Indies, are bare of capital, and have an interest in drawing money from Europe. This they have found it practicable to do to a great extent from England and Holland, where money is in general abundant, and the rate of interest low. In recently settled countries there generally prevails a spirit of adventure, a strong desire to extend their undertakings; hence a high interest for money, and sometimes little scruple as to the means of obtaining it. To apply to a merchant in London or Amsterdam for a loan of L.2000, for a year, at five per cent, interest, would in general be fruitless; but the case is different when the correspondent abroad holds out the tempting prospect of selling manufactures to the amount of L.2000, and remitting for them in cotton, tobacco, or sugar. Such a transaction offers a double commission, viz. 5 per cent, on the amount exported, and 2∣ per cent, on the amount received in return; advantages which incline a merchant, in particular a young merchant, to take a favourable view of the chances of the proposition. The usual result, however, is, that the balance sheet of a house in such a line of business generally exhibits a long list of debts on the part of correspondents abroad, the recovery of which is more or less doubtful according to the prudence, integrity, or health of the debtor, or according to the degree of prosperity in the country of his residence; for, being obliged to sell on credit, his means are generally dependent on those of his customers.

The Cash-Book. —Of the entries for the various receipts and payments which daily occur in a counting-house, the following is a specimen :—
[table]
[7:4:779]

These entries, when transferred to the Journal, are arranged as follows :—
[table]
[table]
[7:4:780]

These entries, few as they are in number, suffice to convey an idea of the advantage of putting them in the journal form. There are, in most of the preceding, two transactions belonging to each account, and these two are merged in the journal in one entry, which abridges and simplifies the posting in the ledger. But in houses of extensive business the cash transactions for a month are as ten, or rather as twenty to one compared to the preceding specimen, and the number of entries collected under one title, such as bills receivable or bills payable for the month, is consequently large. The result is to facilitate greatly the posting in the ledger, and of course the balancing of the books at the end of six or twelve months.

What, it maybe asked, is the rule for making cash debtor in some cases and creditor mothers? The rule is clear and uniform. For all monies received cash is made debtor, or accountable, as these sums arc to be accounted for under the head of cash; while for all monies paid, cash is made creditor, the parties who have to account for the sum being made debtors.

Bill Books. —Next in importance to the cash are the bill transactions of a mercantile house, whether bills receivable or drafts on other merchants, or bills payable, meaning by the latter the acceptances or bills which the house are bound to pay. For each is appropriated a separate book, in which the respective bills are entered, with a minute notice of particulars, thus:
[table]

The preceding bills are to be entered in the Journal as follows:
[table]

Bills Payable are acceptances of the house payable to other parties, and may be termed the reverse of Bills Re- . ccivable. The following is an example of the mode of entering them in the bill book.
[table]

When brought into the Journal, these bills stand thus:
[table]

Bills of Exchange were introduced several centuries ago to enable merchants to make payments to each other without the risk and delay attendant on transmitting the precious metals to a distance. A, a merchant in Liverpool, Dublin, or in Jamaica, having a payment to make in London, instead of collecting and forwarding specie, looks out on his own exchange until he find another merchant, B, who having money to receive in London, is inclined to give him an order to obtain it in his stead. They discuss the terms or rate of exchange; and when these are agreed on, the bill is drawn by B and delivered to A, who then, or soon after, pays the amount to B. The result is, that the one acquits his debt in London, and the other draws his funds from it, without quitting their place of residence or incurring any expense of consequence.

Bills of Exchange firstbccame general in the middle ages, and were used chiefly by Jews. In the case of this, as of many other discoveries, the time and manner of their introduction is uncertain; but the accommodation from them must have been so great, and the mode of obtaining it so obvious, that we may safely take it for granted that they were adopted as soon as merchants accounted each other trust-worthy, or the transactions of towns at a distance from each other became such as to supply sums en any considerable amount to be drawn for.

Town Notes are bills drawn by persons residing in the [7:4:781] same town with the acceptors, generally by the seller of goods on the purchaser, who, instead of paying for them in cash, gives his acceptance, payable in two, three, or more months after date. Take, for example, the draft of a West India merchant in London on a sugar refiner, for sugar sold by the former to the latter; or by a wholesale warehouseman on a West India merchant for linen or cottons supplied to the merchant. It is evident that bills between parties residing in the same town are not strictly en regle, as in their case there can be no expense or risk in forwarding money. Still they can hardly be objected to in transactions like the preceding, which are evidently bona fide from the respective lines of business of the parties. The Bank of England sanctions town notes as regards the metropolis, by appropriating a day in each week (Wednesday) for discounting them, and by often carrying such discounts to a very large amount.. During the war, when monied capital was comparatively scarce, town notes were extremely common. They are still very frequent, but not in so great a degree, first-rate houses being unwilling to give their acceptances where a payment in cash is the regular mode of settling an account. This feeling differs according to the line of business of the parties. Thus, London houses in the East India trade being generally large establishments, confine their acceptances to bills from abroad, and decline giving them to persons in London, such as the wholesale dealers in cloth or hardware, from whom they purchase goods for shipment. They prefer paying such persons in cash, even when not altogether convenient, to the animadversions that might attend thch affixing their acceptance to a town note. On the other hand, London booksellers, though often possessed of considerable capital, are obliged, by the nature of their business, to give such long credits, that the postponement of a payment during several months, obtained by giving their acceptance, is an accommodation they readily embrace. Besides, the custom of the trade, in this as in various other lines of business, prevents such acceptances from being an object of much animadversion.

The Invoice Book. A mercantile house connected, as we have supposed, with North America and the West Indies, receives from time to time requisitions, or, as they are commonly termed, orders, from their correspondents abroad for manufactured goods, whether woollens, linens, cottons, or hardware. An order of only moderate amount is generally of the length of several pages, embracing both a number of different articles and various qualities of each particular article. The first step on the part of the London merchant is to analyse this order, and to share or distribute its various parts among a number of wholesale dealers, whether in London, Manchester, Birmingham, or Sheffield, that each may supply the articles in his line of business. A few weeks suffice for their getting ready the goods, when they send in their several accounts, or bills of parcels, as they are termed, thus:

London, lst February 1831
[table]

(From another dealer.)
[table]

These are specimens of the simplest class of accounts— of those accounts which form the groundwork of the “Invoice,” or general statement of the shipment. The form of that statement is as follows:

Invoice of goods shipped by Baring, Hall, & Co. in the Hector, James Robertson, from London to New York, on account and risk of Messrs Archibald Dixon & Co. there.
[table]
[7:4:782]

Invoices are in general much longer and larger in amount than the preceding, but they are almost always drawn in the same form, containing many particulars in short compass; viz. the mark, numbers, and value of each package, also the nature of the goods contained in it, as far as can be expressed by a short general notice. It was formerly the practice to make invoices very long, and to copy into them each bill of parcels literally; but the usage is now to assign only one or two lines in the invoice to the articles supplied by each dealer, and to send out duplicate bills of parcels by the vessel. The house abroad has thus the satisfaction of seeing the different bills of parcels exactly as furnished by the dealer or tradesman.

The sum insured is somewhat more than the amount of the Invoice, that, in the event of a loss, there may be enough to pay two per cent, commission for recovering it from the underwriters.

Journal Entries from the preceding Invoice.
[table]

Account of Sales. —Having seen in the invoice a specimen of the mode of conducting our exports, we are now to show the manner of disposing of our imports. While our exports are generally in manufactures, our imports are commonly in raw produce, because, except in silks, and a few petty articles of manufacture, foreigners are quite unequal to a competition with the capital and machinery of this country. Cotton, sugar, coffee, rice, indigo, form the main articles of import to England from tropical latitudes; while wine, brandy, olives, drugs, are sent to us from temperate climates; and corn, timber, hemp, flax, tallow, hides, reach us in large quantities from the Baltic. We shall take, as an example, an account sale of the staple article of our West India colonies.
[table]

In former times the form of an account sale was somewhat different from the above. It began with a statement of the contents of the packages sold, and the charges were subjoined; but the plan of putting the goods on one side, and the charges on another, on the principle of debtor and creditor, is evidently an improvement. Several[7:4:783] other entries in this account are entitled to the attention of a commercial student. The freight is charged, not, as might naturally be expected, on the total weight brought home, but on the weight of the goods exclusive of the packages. Of the allowances for weight, the larger, tare, is the exact weight of the cask; the lesser, draft, is a deduction made by the seller to the buyer, its rate being fixed by custom, and bearing no reference to the weight of the package.

If there be found a deficiency in the original weight, from sea damage, from waste, or any other cause, the amount of such deficiency, and the manner of its occurring, must be explicitly stated in the account sale. The same holds in regard to coffee, of which we shall now exhibitanaccountsale∙
[table]

Journal Entries resulting from the preceding Account Sales.
[table]
[7:4:784]

We have now given examples of journal entries from the principal books in a counting-house; from the cashbook, the invoice and account sales book, as well as from the bills payable and receivable. After these comes the petty journal or record of such occasional entries as do not belong to the preceding, or any other subsidiary books. Such entries are in general very few, because, in every regular counting-house, the subsidiary books contain almost every transaction that takes place.

Insurances.— It is customary to have an insurance policy book, a folio book of the length and breadth of a printed policy, and containing a quantity of such policies bound up, unstamped. In these are filled in, by a clerk, literal copies of the insurances effected by the house, with the names of the underwriters, and the amount of their respective subscriptions. From this is posted the insurance ledger, containing the accounts of the underwriters for premiums and returns.

Bought Booh, or Booh of Bills of Parcels.— In former times, when mercantile transactions were on a limited scale, the practice of a merchant, as of private individuals at present, was merely to fold up the bills of parcels, or accounts delivered to him by dealers, in a uniform size, and, after writing on the back the names of

• the parties, to put them away in bundles. But the preferable plan, wherever such accounts are numerous, is, after arranging them alphabetically, to have them pasted in a large quarto or folio volume of blue or sugar-loaf paper. A surprising number of accounts may be contained in one of these books; and its pages being numbered, any account may, by the aid of an alphabetical index, be referred to with the same ease as an entry in a ledger.

Drawbacks payable at the custom-house on goods exported, and for which the merchant holds a debenture or acknowledgment of debt on the part of the custom-house. Of these a list or register should be kept, either in a small separate book, called the debenture booh, or in a specific part of one of the larger books.

The petty cash-book contains the disburse for postages and other small matters; the amount is entered weekly or monthly in the regular cash-books.

We have now recapitulated the various subsidiary books which form the groundwork or authorities for the journal. The ledger comes next, and by way of affording a specimen of this, the finale of book-keeping labour, we shall exhibit the preceding journal entries, carried to their respective heads in the ledger.

LEDGER.
[table]
[7:4:785]
[table]
[7:4:786]
[table]
[7:4:787]
[table]
[7:4:788]

The entries in the ledger are very concise, containing generally nothing more than the head or title of the entry in the journal to which they refer. It was formerly the practice of book-keepers to insert some explanatory words in almost every line: thus under profit and loss, instead of such short notices as
[table]

a book-keeper in a former age would have thought it ne-cessary to write
[table]

Such explanations are not without their use, as by means of them a person looking over the account is quickly informed of the nature of the different entries. They may therefore be inserted wherever the business is on a small scale, because in such a case they do not add much to the labour of the kook-keeper; but wherever the business is extensive, all detail in the ledger ought to be avoided, and the entries made in the most concise form possible, for the following reasons.

1. The explanations never can be so full and circumstantial as to supersede the necessity of an account-current book.

2. Nor can they supersede a reference to the journal in what may be called collective entries, such, we mean, as the bills payable discharged, or the bills receivable encashed, in a particular month; entries in which a number of particulars are collected in the journal, and carried to the ledger in one sum. And,

3. It is desirable to have as many of such collective entries as possible, limiting thereby the number of postings in the ledger, and lessening the difficulty of balancing it at the end of the year. Such was the recommendation of Mr Benjamin Booth, in his printed work, nearly half a century ago; and such had long before been the practice of our best merchants.

It follows therefore that the ledger ought to be merely an index to the journal, exactly as the journal is an index to the various subsidiary books of the house. To aim at more, and to repeat in any one of these books statements or particulars already contained in the other, would be quite a work of supererogation.

JBalancing the Ledger.— At the end of each year, and, in some houses, of each half year, the ledger is balanced; that is, the debtor and creditor side of each account in the ledger is added up, and the balance or difference entered in a general list or balance-sheet. Thus a few accounts taken from the preceding fragment of a ledger exhibit the following balances :—
[table]

The balance-sheet is generally very long, comprising on one side or the other every open or unclosed account in the ledger. The rule in all regular counting houses is to make the sum of the debtors in the balance-sheet correspond with the sum of the creditors, and to spare no pains to accomplish such agreement, because until it be done there must evidently be an error in some part or other of the journal or ledger. Unluckily, the amount of the difference gives almost no clue towards tracing either how it has taken place, or the part of the journal or ledger where it is to be looked for: it may be in any day of the year, or in any of the entries (1000, 2000, or perhaps 3000) w 7 hich the ledger for the year contains. The dif ference is sometimes very small; a few pounds, a few shillings, or a few pence; but the fractional errors are often as difficult to detect as a large sum; and in fact it is not unfrequent, in the process of examining, to discover new errors, which, instead of diminishing, add to the amount of the existing difference, carrying it from L.10 to L.100, or even to L.1000. Hence the necessity of experience and habitual accuracy in a book-keeper. To one deficient in these respects balancing a ledger of length is generally a most laborious and tedious task, requiring week after week to be passed in the dry labour of collating, adding, and subtracting. Mr Jones’ method will, it is to be hoped, be the means of preventing the continuance of these unprofitable searches; for we are satisfied that the labour given to the precautionary arrangements recommended by him will be saved, and doubly saved, in the final winding up of the books.

We have already adverted to Mr Jones’s first publication on book-keeping; his second, in 1821, was intended to counteract the inconvenience attendant on the form of his ledger, which required that the accounts should be opened anew each year. His third work, published so lately as last year (1831), is of a much more comprehensive character, and may be said to exhibit the result of more than thirty years’ experience as a public accountant. It is printed in the quarto form, and consists of a number of distinct parts; first, explanatory statements of his mode of book-keeping by single as well as double entry, with a number of formula, in which the same transactions are exhibited by the Italian and by his method, so as to bring into view the various advantages of the latter. These are followed by a series of instruction to persons in different branches of business, viz. bankers, manufacturers, brokers, wholesale and retail dealers, in regard to the books of account best fitted to their respective occupations; the whole followed by a treatise in the form best adapted to the government offices. Such are the contents of the first or printed half of Mr Jones’s book; the other half is lithographed, and exhibits two sets of books, each for a year, one kept by single, the other by double entry. Along with these are given a balance-book and an abstract-book, devised for the purpose of leading promptly to the detection of errors or false entries. This they will fully accomplish if the plan laid down by Mr Jones is carried into effect; and they seem to us also well calculated to save the perplexity and loss of time at present so often incurred in efforts to find the general balance. The Italian method, ingenious as it was, and a surprising improvement at the time on the primitive system of single entry, is not an effectual preventive of erroneous or fraudulent insertions in the books; nor does it present any ready method to facilitate the laborious task of balancing the ledger. It is consequently the practice of Messrs Barings, and several mercantile houses of the first rank, to keep two sets of books as a check on each other; but the object of Mr Jones is to attain correctness in the first instance, by submitting to some extra trouble as the posting of the books proceed. Thus, his abstract-book is a classed epitome of his journal, and forms the first check against posting -entries to wrong accounts; while his balance-book is an epitome of the ledger, and forms another check, both against carrying entries to a wrong head, and making a mistake in the figures so carried. In many counting-houses the uncertainty of the Italian method is counteracted by habitual accuracy in the book-keeper; but Mr Jones’s auxiliary books are devised with the view 7 of enabling even a mediocre book-keeper to avoid mistakes, or to detect them soon after they are made. By means of these books he may prove his ledger not only in any month, but in any week, or even in any day, of the year.

Nothing is more desirable than frequent balancing of [7:4:789]the books of a merchant, and frequent transmission of accounts to his connections. A year is evidently too long for accounts-current to remain open; six months are a more suitable period; and if the improvements we have described have the effect of lessening the difficulty of general balances, an important service will thereby be rendered to persons in trade.^[1. The title of Mr Jones’s publication is the Science of Book-keeping Exemplified, 4to, London, 1831, L.4. 4s. ]

An index is indispensable to a ledger, but it ought to be very short and plain, containing merely the titles of the accounts; thus,—

Index to the preceding portion of a Ledger.
[table]

Size of the Ledger.— In some houses of very extensive business the rule is to have a new ledger for every year; but three or four years are the more usual time of a ledger remaining in use. The latter has the advantage of showing the transactions of a long period in succession, as well as of saving the repeated opening of the same accounts.

The stock account has no entries during the currency of the year, but at its close (on 31st December) the balances of profit and loss, bad and doubtful debts, and a few such accounts, are carried, as the case maybe, to its debit or credit.

Collective Entries in the Journal.— It may be proper to explain what is meant by such entries in the journal. While in the bill-books every bill is entered the day it comes to hand, and in the cash-book every payment or receipt is entered on the day it takes place, the journal entries are made to comprise in one amount a number of transactions occurring at different dates in the course of the month. Thus the entry of “Sundries Drs. to Bills Payable” exhibit in succession all the bills accepted during the month; they are then added in one sum, which sum alone is carried to the ledger. In like manner, in the entry of “Bills Receivable Drs. to Sundries,” the aggregate alone is posted in the ledger; and the same in a variety of cases, the effect of which is to lessen greatly the difficulty of agreeing the books at the end of the year. We cannot, therefore, approve of the practice of those book-keepers who, to save themselves the trouble of re-writing the cashbook in the journal form, are content to post each separate sum directly from the cash-book to the ledger. They thus avoid, it is true, the copying of eight or ten folio pages a month; but by giving up the advantage of joining in one sum the different payments made under such heads as bills payable, charges, house expenses, they have to carry to the ledger during the month above 100 entries instead of perhaps only thirty or forty.

The Waste-Book.— This book has long been disused by regular merchants, and the name itself would have been forgotten, had it not been reprinted from one work on bookkeeping to another, the authors of which, being generally teachers, were unacquainted with the improvements introduced into the practice of merchants. The wastebook of former times consisted of a series of memoranda, so miscellaneous as to comprehend every transaction of the house, whether a sale, a purchase, a payment, or a receipt. From this general receptacle the book-keeper composed the journal, which was then, as at present, a narrative or record, in regular form, of the transactions of the house. As mercantile establishments acquired extension, separate books became necessary, as well for the cash and bills as for goods exported and imported. These books were found the fittest authorities for the journal, and the waste-book or diary fell altogether into disuse.

Single Entry.—A. wholesale dealer occupying a warehouse, and whose business consists in supplying such articles as woollen, cotton, linen, or hardware, to exporting [7:4:790]merchants, is generally satisfied with few books. He is accustomed to enter each delivery of goods in his daybook, and to get copied into his invoice-book the bills of parcels made out for his customers, of which examples have been given above in the names of Balmanno and Oakey & Company. He seldom keeps a journal, but a ledger is indispensable, though not kept by double entry. It consists on one part of the names of his customers (the exporting merchants), and, on the other, of those of the manufacturers from whom he makes his purchases. From the latter he receives credit, and to the former he gives it; hence the necessity of opening accounts for both. At the end of the year, a person in such aline of business is accustomed to form an estimate of the state of his affairs by adding up on one side the sums due by him to the manufacturers, and on the other those due to him by the merchants. He takes, moreover, an account of his stock, or goods in hand, which being valued, and the amount added to the sums due to him, the difference between their conjunct amount and the total of his debts affords a tolerably correct idea of the state of his property. It would, however, be much more clear and satisfactory were his books kept by double entry, that is, were every debtor to have a creditor, or, in other words, were every entry to have its counterpart. Suppose him, for example, to make a purchase from Messrs Greenup of Halifax, for L.1250 of the coarse woollens called penistones, he merely enters in his ledger that sum to the credit of Messrs Greenup; but the proper course would be to find a debtor for the same amount by such an entry as “Penistones Dr. to Messrs Greenup, L1250.” Subsequently, on effecting sales of the article to exporting merchants, the proper course would be to make entries such as “Baring, Hall, & Co. Drs. to Penistones for L.225 and by continuing such entries, that is, by crediting the account of Penistones for the sales as successively made, until the whole was disposed of, the ultimate result would be that the creditor side would exhibit a total equal to the L.1250 paid to Messrs Greenup, and’ to the profit accruing from the transaction.

Double Entry has farther and more important advantages to a merchant than to a tradesman, because his dealings are much more varied and complicated. It forms the connecting link of his accounts, and shows in what manner his funds have been successively invested. As every debtor in his books has a creditor, no part of his property is unaccounted for; and when in doubt as to any specific portion, he will find a solution of the difficulty in his own journal. Those who know how soon money becomes absorbed, or at least appropriated in business, and in how few years a large sum may be vested in machinery, shipping, or other fixed capital, are aware that merchants would often consider themselves deceived, if they had not in double entry an unfailing clue to the appropriation of their capital. .

Next, as to the degree of intricacy in double entry. In the case of a shipment of goods, the merchant abroad who receives the goods is made debtor to the several dealers at home who have supplied them; e. g. A. Dixon & Co. of New York are Drs. to Spitta & Co., Jobson & Co., &c. In like manner, in the case of produce imported, the brokers, Trueman & Cook, who sell it and receive the amount, are made debtors to Simon Fraser, for whose account the produce was shipped. All this is clear and free from intricacy, as also such farther entries as Cash Dr. to Trueman & Cook, on their paying over the proceeds of the sale, or Bills Receivable Drs. to A. Dixon & Co., on their remitting or sending home a bill for the amount of the goods forwarded to them. It is true that a young merchant beginning to study book-keeping will not all at once comprehend such an account as Bills Receivable, nor its counterpart Bills Payable, nor a few other accounts, such as Charges and Merchandise; but practice will convey a distinct conception of them, and render them in time as clear as personal accounts.

The advantages of double entry may fortunately be imparted to almost any account-books, without sacrificing much time and labour. Persons engaged in such business as that of wholesale warehousemen, manufacturers, or retailers, may keep the chief part of their books by single entry, making use of double entry to the extent of a few pages at the end of the month or quarter, to obtain a clear and summary view of their transactions.

As to the money or currency in which the books of a merchant should be kept, it is evident, first, that it can be money of one kind only; and, next, that it must be the money of the country in which the merchant resides Thus, an English house in Bordeaux must keep its accounts in French money, although its chief business may be the export of wines to London and Dublin.

We come, in the last place, to Accounts-current, which, though a most important portion of the accounts of a merchant, are rather the result than a constituent part of his system of book-keeping, being in general written out from the ledger and journal, with very slight variation or addition. Accounts-current are prepared for transmission to the correspondents whose names they respectively bear, and contain the various receipts, payments, and other transactions on their account during the proceeding six or twelve months; thus—
[table]
[7:4:791]
[table]

It is a rule in the best managed counting-houses to dispatch the accounts-current to the different correspondents as soon as possible after the day to which they are made up. To effect that, they ought to be copied out, in part at least, before the 31st December or 30th June, the dates at which they generally close, particularly as the interest and commission cannot be calculated until they are written out; and the whole has then to be copied into the account-current book.

Mode of computing Interest.— To do this correctly on the different sums in an account-current, it is requisite to take the number of days between each transaction, and the state at which the account-current is closed. Take, for example, a sum of L.531 paid on 5th October, and bearing interest consequently during eighty-seven days, until 31st December. On ascertaining the number of days, compute the interest, either by referring to a book of interest tables, or by the following operation.

Multiply the pounds, 531, by 87, the number of days, and the product will be 46,197; divide that sum by 7300, and the quotient, L.6. 6s. 7d., will be the interest required. The reasons for this process are as follows: interest at 5 per cent, for one year forms a twentieth part of the principal, there being a shilling of interest for every pound of principal. On multiplying the number of pounds by the number of days, the product 46,197, is so many 365th parts of a shilling; divide it by 365, and the quotient, L.126. 7d., will be the interest. But as it is desirable to have the quotient in pounds, alter your divisor so as to obtain it in that form; that is, multiply 365 by 20, and make the product 7300 your divisor, or, preferably, 73 by striking off two figures from it, and the same from the dividend; the quotient is the interest in pounds, shillings, and pence.

As to the comparative ease of the two processes, where the entries are few the interest tables may be used with advantage; but whenever they are numerous, as they very often are in accounts-current, it will save time to multiply and divide as above.

A compounding subtraction will give the interest at other rates, such as 3∣, 3, or 2⅜ per cent.; so that the plan of multiplying the pounds by the days, and dividing by 73, is applicable to any of the different rates of interest.

When accounts-current are made out, as in general they ought to be, every six months, the 30th June is the concluding date for the earlier half year. West India houses are accustomed to balance their books and close their accounts-current once a year, viz. on 30th April.

There are two modes of preparing accounts-current in a counting-house. The more usual course is to write l them out from the ledger and journal, and afterwards to copy them into the account-current book. The other plan is to make no reference, in the first instance, to the ledger or journal, but to post the account-current book from the cash-book, bill-books, account-sales, invoices, and other authorities in the counting-house, so as to render it (the account-current book) a check on the ledger. This, however, is of less importance than may at first be thought, because, from the plan of the journal and ledger, omissions are not so likely to occur in them as in the account-current book; and the chief advantage of a separately posted account-current book consists in having it brought up to a day, as it may easily be at a time that the journal and ledger are in arrear.

Boohs of Account required by a Merchant.— Journal; ledger; cash-book; bills payable, or book of his acceptances; bills receivable, or book of bills on other merchants, to be paid to his order; order-book, with copies of all orders received; bought-book, or book for bills of parcels delivered in; letter-book, having copies of all letters to the correspondents of the house; invoice-book, or account of goods shipped or sold; account of sales-book; insurance policy-book; petty journal, or book for such occasional entries as are not inserted in the other books; petty cashbook, or book of petty disburse.

Cronhelm ’ s Booh-Keeping.— It remains that we notice a recent work on book-keeping, which has attracted attention in Germany; we mean that of Mr F. W. Cronhelm, published at Hamburg in 1818. The author makes use of terms that are new and somewhat strange to an English book-keeper, giving the name of “additive property” to the assets of a mercantile house, viz. goods, cash, or bills receivable; while the debts, such as bills payable, are termed “subtractive property.” Still his work is the result, not of theory, but of a series of improvements on the books of an extensive mercantile house. A clear and circumstantial publication it certainly is, yet not materially different from the systems of book-keeping adopted during many years in respectable counting-houses in England and Holland. Mr Cronhelm’s cash-book, bill-books, and his ledger-accounts of merchandise, profit and loss, stock, commission, interest, are all on a plan similar to those of our regularly managed counting-houses; and had the author resided in London or Amsterdam, he would probably have been aware that many of his improvements had been anticipated under a different name. (μ. μ.)