as they take place. It begins with an inventory of every thing belonging to the owner, a list of the debts due to him, and of the debts he owes to others: It is carried on with a full relation of all the money he receives or pays; of all the goods he buys or sells; and of every other occurrence in his business. Each article should be entered as soon as the transaction takes place, and should be clearly expressed in the plainest language. It should require no supply from the accountant's memory, but should be fully intelligible to any person, however unacquainted with the business; at the same time, it should be written with all convenient brevity; and, therefore, sometimes refers to invoices and other accounts, for particulars. The accountant's first care should be to have nothing defective or ambiguous; his second, to have nothing superfluous.

3. The date is written in text on the top of each page. The articles are separated from each other by a line and the transactions of one day are separated from those of another by a double line, in the middle of which there is left a blank space for inserting the day of the month. This book must be kept with the greater care, as it contains the materials from which the other books are composed; and any error or defect will occasion a like one in the others. Besides, it is the book whose authority is trusted to, and which must be exhibited to judges, or arbiters, when an account is disputed. As the journal is filled up from the wastebook, the authority of the former is esteemed more authentic, unless there be an obvious mistake through hurry; and either of these books is depended on rather than the leger, which, from its form, is more liable to error, and may be more easily vitiated by a fraudulent design.

4. As the waste-book contains the whole substance of the business, it may be applied so as to afford any information that can be wanted: but the labour of consulting it would be very great. For instance, if it were required to know how much any person owes us, we must look over the book from the beginning, and mark down every article in which we have dealt with him; or, if it were required to know what quantity of goods we should have on hand, we must look over the whole book, and mark down every article bought or sold. This operation would not only be found very tedious, but much exposed to the risk of omissions. To prevent these inconveniences, another book is used, in which the articles are arranged in a methodical order. This book is called the Leger, and we shall consider it next; because the journal, though it comes before it in the order of writing, cannot be well understood, till the nature of the leger be explained.

SECT. II. Of the LEGER.

5. In the leger, articles of the same kind are collected together; and, for that purpose, it is divided into many accounts, under which the different branches of business are arranged. Each account is introduced by a proper title, to explain the nature of the articles it contains; and articles of opposite kinds, which belong

to the same account, are placed on the opposite pages Leger. of the same folio: for instance, money received on the one side, and money paid on the other; or goods bought on the one side, and goods sold on the other. The lefthand page is called the Debtor or Dr. side of the account, and the right-hand page the Creditor or Cr. side. The difference between the sums of the Dr. and Cr. sides is called the Balance.

Accounts in the leger are of three kinds, which answer to the three purposes of book-keeping mentioned § 1.

6. First, Personal Accounts. It is necessary to open an account for every person or company with whom there are any dealings on credit. At opening the books, if they be indebted to the owner, the debt is entered on the Dr.; but if he be indebted to them, it is entered on the Cr. During the course of the busineɛs, goods sold on trust, money paid, and every thing for which they are accountable to him, is entered on the Dr.; but goods bought on trust, money received, and every thing for which he is accountable to them, is entered on the Cr. The balance shows how much they owe him, when the Dr. side is greatest and how much he owes them, when the Cr. side is greater.

7. Secondly, Real Accounts. By this we understand accounts of property, of whatever kind, such as ready money, goods, houses, lands, ships, shares in public companies, and the like.

The account of ready money is entitled Cash. On the Dr. side, the money on hand at opening the books is entered, and afterwards every article of money received. On the Cr. side there is entered every article of money paid out; and the balance shows how much ought to be on hand. The sum of the Dr. side of this account is always greater than that of the Cr. side.

8. Accounts of goods are generally ruled with inner columns for entering the quantities. When the books are opened, the goods on hand are entered on the Dr. side of the respective accounts; the quantities being placed in the inner, and the values in the outer column. Goods bought are entered in the same manner, and goods sold are entered on the Cr. side; the quantities and values being placed in the proper columns. Charges laid out on goods are entered on the Dr. side; and, when an incidental advantage arises from them, such as public bounty, it is entered on the Cr.

If the sums of the inner columns on the opposite sides be equal, it shows that the goods are all sold, and then the balance of the money-column shows the gain or loss. If the Cr. side be greater, it is gain: if the Dr. side be greater, it is loss. If the sum of the inner column be greater on the Dr. side, it shows that part of the goods are on hand; and their value must be added to the sum of the Cr. side, in order to determine the gain or loss.

9. If there be two or more kinds of the same sort of goods, they may be entered in the same account, allowing as many inner columns as there are kinds, and entering the quantities of each kind in the inner column reserved for it. This method exhibits the gain or loss on the whole goods; but does not show how much of it arises from each kind.

Or, a separate account may be opened for each kind, distinguishing the titles by the qualities, or by some other mark. Thus, one account may be kept for fine linen, another for coarse linen; one for port-wine crop 1787, another for port-wine crop 1788; one for rum from Jamaica, another for rum from Barbadoes. This method shows the gain or loss on each kind.

When there are more kinds than can be conveniently introduced in the same account, they may be divided into several classes, each class being placed in a separate account and the particular kinds distinguished in inner columns. Thus the account of fine linen may be divided into several columns, for different kinds, distinguished by the number of threads in the breadth, or by any other convenient character.

10. Accounts of ships contain on the Dr. the value of the ship when the books are opened, and all expences laid out thereon; on the Cr. all freights received. In like manner, accounts of houses or lands have the value of the subject, and all repairs or other charges, entered on the Dr. and all rents or other profits received on the Cr. If the subject be sold in whole or in part, the sale is entered on the Cr. And the balance after valuing the subject (if any) on hand, shows the gain or

loss.

Accounts of property in the public funds, or shares in companies, public or private, contain the value, or money paid in, on the Dr. and the dividends received on the Cr. and are balanced as other real accounts.

Some persons open accounts for household furniture, plate, jewels, books, or the like. The entries on these accounts are made in the same manner.

In general, real' accounts contain the value of the property, and all charges, on the Dr. and the sales and other returns on the Cr. When the account is to be balanced, if any property remains, the value thereof is placed on the Cr.; and then the balance shows the loss or gain, according as the Dr. or Cr. side is great

est.

11. Thirdly, Accounts of STOCK, PROFIT and Loss, and its subsidiary accounts, which are sometimes called fictitious accounts.

The stock account contains on the Dr. the amount of the debts which the owner owes when the books are opened; and on the Cr. the amount of ready, money, goods, debts, and property of every kind belonging to him: therefore the balance shows what his nett stock is; or, in case of bankruptcy, how much his debts exceed his effects. There is nothing further entered on this account till the books are balanced: and then, if the business has yielded profit, the nett gain is entered on the Cr.; if it has been unsuccessful, the nett loss is entered on the Dr.: after which, the balance shows the nett stock at the time the books are closed.

12. The Profit and Loss account contains every article of gain on the Cr. and every article of loss on the Dr. The balance shows the nett gain or loss, and is transferred to the proper side of the stock-account, as mentioned above. This account is partly composed of articles that occur while the books are running. For example, legacies received are entered on the Cr. goods destroyed on the Dr. The rest of the articles are those

of gain and loss, arising from the real accounts, which are collected when the books are balanced.

13. It has been found convenient to open several subsidiary accounts, in order to shorten and methodize that of profit and loss. These contain certain articles of gain or loss, which may be reduced under distinct heads. They are in effect so many parts of the profit and loss account, and their balances are entered on the proper side of that account when the books are closed. The chief of these accounts are the following.

Interest account, Which contains on the Dr. sums paid or incurred for interest; and on the Cr. sums received, or become due for the same.

Commission account, Which contains on the Cr. articles of gain received or owing us for our trouble in transacting business for others. There are seldom any entries on the Dr.

Charges merchandise, Which contains on the Dr. all charges paid or incurred on the business, which do not belong to any particular account, as shop-rent, public burdens for trade, clerks wages, postages, and the like. If any of these should afterwards be charged to some other account, the sum so charged is entered on the Cr.

Proper expences, Which contains on the Dr. money or any thing else, withdrawn from the trade for our private use. There are seldom any entries on the Cr. The amount of this account, as well as the former, is not properly loss; but as it has the same effect in diminishing the stock, it is placed in the same manner to the Dr. of profit and loss.

Loss by bad debts, Which contains on the Dr. such debts as we reckon desperate; and on the Cr. any of these which may happen to be unexpectedly recovered.

Account of abatements, Which contains on the Dr. discounts allowed by us on payments received; on the Cr. discounts (if any) allowed to us on payments made. It is particularly useful in retail business, where discounts are often given, to show how much they amount

to.

Insurance account, Which contains on the Cr. premiums received for making insurances; and, on the Dr. losses sustained on the same. There may be several accounts of this kind, such as insurance against sea-hazard, which is the most common; insurance against fire; insurance of lives; and insurance of debts. The balance shows the gain or loss which arises from being concerned in insurance.

More or fewer of these accounts may be used, according as the articles are frequent; and others may be invented to suit the purposes of the business which the books are kept for.

14. Every simple transaction in business belongs to two accounts, and must be entered on the Dr. of the one and on the Cr. of the other. Thus, when a person becomes indebted to us, the article he owes must be entered on the Dr. of his account; and, if it be for money paid him, it is also entered on the Cr. of cash; if for goods sold, it is entered on the Cr. of the account of goods; if for any thing delivered him by another person at our desire, it is entered on the Cr. of the deliverer's account; if for any wager or bargain, by which we are gainers, it is entered on the Cr. of profit and

A 2

loss.

In like manner, when we become indebted to any person, the article we owe must be entered on the Cr. of his account. If it be for money received, it is also entered on the Dr. of cash; if for goods bought, it is entered on the Dr. of the account of goods; if for any thing delivered to another person at our desire, it is entered on the Dr. of the receiver's account; and if it be in consequence of a losing bargain, it is entered on the Dr. of profit and loss.

Again, when goods are received, the transaction is entered on the Dr. of the account of goods. If they be bought for ready money, it is also entered on the Cr. of cash; if on trust, it is entered on the Cr. of the seller; if they be exchanged for other goods, it is entered on the Cr. of the goods delivered; if they be obtained by some profitable business, without any return, it is entered on the Cr. of profit and loss.

When goods are delivered, the transaction is entered on the Cr. of the account of goods; and, if they be sold for ready money, it is also entered on the Dr. of cash; if on credit, it is entered on the Dr. of the purchaser; if exchanged for other goods, it is entered on the Dr. of the goods received; and, if they be given gratis, or destroyed, it is entered on the Dr. of profit and loss.

Lastly, When any article of loss occurs, the transaction is entered on the Dr. of profit and loss; and as we must either pay it in money or goods, or remain indebted to some person for it, it must be entered on the Cr. of cash, or of goods delivered, or of the person entitled to receive it. And, when an article of gain occurs, it is entered on the Cr. of profit and loss, and also on the Dr. of cash or goods, if money or goods be received; and on the Dr. of the person accountable for it, if not immediately paid.

Thus, every article in any account, whether personal or real, or belonging to profit and loss, corresponds to some other article on the opposite of a different account. The same sum is entered on the Dr. of one account and on the Cr. of the other; and it follows from this, that, If all the accounts in the leger be added, the amount of the sums of the Dr. will be equal to those of the Cr.

SECT. III. Of the JOURNAL.

15. THE journal is a fair record of all the transactions compiled from the waste-book, in the same order as they stand there; but expressed in a technical style, that it may be transferred to the leger with more ease.

When we are to enter any article in the journal, we must consider which accounts in the leger it will require to be placed to, both on the Dr. and Cr. and write [the former account] Dr. to [the latter account]; then we annex an explanation of the article, and place the sum in the money-column.

EXAMPLE.

Waste-book). Sold for ready money, 30 yards linen, at 39. L.4. 10

39.

L.4 10

-

Here we consider, that the article must be entered on the Dr. of cash, because money is received; and on the Cr. of linen, because linen is delivered: Therefore we write Cash Dr. to Linen, to which we annex the nature of the transaction. The article thus entered is called a journal-post; Cash is called the Dr.; Linen the Cr.; the words "Cash Dr. to Linen," the Entry, and the following words the Narration.

The purpose of expressing the article in this form, is to point out the accounts in the leger, to which it will require to be posted, and thereby enable the accountant to write the leger with more ease than be could do if it were filled up immediately from the waste-book.

The learner will be able, from this example, to enter any simple article in the journal, providing he knows the accounts to which it should be posted on the Dr. and Cr. of the leger. This must be collected from the description of the leger accounts already given § 6—13. and the nature and tendency of the article.

16. GENERAL RULES for the JOURNAL-ENTRIES.

I. Every thing received, or person accountable to us, is Dr.

II. Every thing delivered, or person to whom we are accountable, is Cr.

17. As the whole art of writing the journal depends on a proper choice of the Drs. and Crs. we shall give some particular rules for the most common cases, and a few examples for the illustration and practice of each.

Rule I. The person to whom any thing is delivered is Dr. to the thing delivered, when nothing is received in return.

Therefore when money is paid, the receiver is Dr. to cash.

When goods or other property is sold on credit, the purchaser is Dr. to the thing sold. Thus,

Waste-book.) Paid John Bell in full
Journal.) John Bell Dr. to Cash, paid
him in full

Waste-book.) Sold 50 yards cloth to
J. Hill, at 12s.
Journal.) J. Hill Dr. to Cloth, sold
him 50 yards, at 12s.

L. 52

52

30

30

21. Rule V. When rents of houses or lands, freights of ships, bounties on goods, or any other profits from real accounts, are received, Cash is Dr. to the account from which the profit arises: if any thing besides money be received, the article received is Dr.: if they remain unpaid, the person who owes them is Dr. Thus,

Waste-book.) Received freight of the

ship Traffick for a voyage to London L. 35 Journal.) Ship Traffick Dr. to Cash, received freight to London Waste-book.) Received 100 barrels

35

salmon, being the rent of Inver fish

Waste-book.) Given my daughter at her marriage Journal.) Profit and Loss Dr. to Cash, given my daughter at her marriage Waste-book. Taken for family use from my granary 3 bolls meal, at 13s. 4d. Journal.) Profit and Loss [or Proper expences] Dr. to Meal, taken for family use, 3 bolls, at 13s. 4d. Waste-book.) Due James Rich for a year's interest on rocol. at 4 per cent. Journal.) Profit and Loss [or Interest account] Dr. to James Rich, due him a year's interest on 1000l. at 4 per cent.

L. 500

500

2

40

40

23. Rule VII. When an article of gain occurs, that is the article received, or the person accountable for it, is Dr. not immediately connected with any real account, Cash, to Profit and Loss, or to some subsidiary account. Thus,

Waste-book.) Received in a gift from
my father

Journal.) Cash Dr. to Profit and Loss,
received from my father
Waste-book.) Received in like manner
at opening shop, 100 yards cloth at 12s.
Journal.) Cloth Dr. to Profit and Loss,
received from my father at opening
shop 100 yards, at 12s.
Waste-book.) James Barbour owes me
a year's interest of 1000l.

Journal.) James Barbour Dr. to Profit
and Loss [or Interest account] due by
him for a year's interest of 1000l.

L. 100

100

60

60

50

50

24. Rule VIII. When one person pays money, or delivers any thing else to another on our account, the person who receives it is Dr. to the person who pays it. Thus,

Waste-book.) James Goldsmith has paid

100

the Bank of Scotland on my account, L. 100Journal.) Bank of Scotland Dr. to James Goldsmith, paid them by him Waste-book.). Arthur Young has delivered James Baker 100 qrs. wheat for which I am to account to him, at 30s. Journal.) James Baker, Dr. to Arthur Young, for 100 qrs. of wheat delivered him on my account, at 30s.

150

150

25. These examples will make the learner acquainted with the form of the journal, and the rules extend to the greatest part of the simple transactions that occur in domestic trade. We may observe, that the technical sense of the words Dr. and Cr. has an analogy to their meaning in common language, but is not precise

ly the same. Thus in Ex. 1. Rule VIII. the journal entry is, Bank of Scotland Dr. to James Goldsmith; by which we are not to understand that the bank is indebted to James Goldsmith; for a debt between them has no connection with our business, and therefore ought not to be entered in our books: the meaning of the entry is, that the bank becomes indebted to us by the transactions narrated; and that we become indebted to James Goldsmith by the same.

26. An article which contains more Drs. or more Crs. than one, is called a complex post. The form of these will appear from the following examples.

Ex. 1.] Sold William Drapier,

25 pieces cloth, at 15l.

per piece

130 stones wool, at 5s. 6d.

per stone

L.375

62

-

-L.421

L.109 2 →→→.

This example also falls under Rule II. There is only one Dr. wheat being the only thing received; and two Crs. because it is received from different persons.

Wheat Dr. to Sundries,

To J. Tull, for 50 qrs. at 35s. L.87 10

To E. Ellis, for 12 qrs. at 369.

--

62

21 12

-L.109 2

In like manner, examples might be given of complex posts under every rule, which contained either several Drs. or several Crs. ; but as it is unnecessary to enlarge so far, we shall only add a few examples of cases, in which the different parts of the complex article fall under different rules.

Ex. 5.] Sold 150 qrs. beans to A. Arnot,

Here beans are delivered, some to different purchasers on trust, and some for ready money. purchasers are Drs. for the quantity sold to each, by Rule I.; Cash is Cr. for the quantity sold for ready money, by Rule III.; and beans are Cr. for the whole.

Sundries Dr. to Beans, A. Arnot, for 1 50 qrs. at 138.4d. L.100 S. Berry, for 75 Cash, for

18

13s.4d. 139. 2d.

-L.161 17