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 Ht QJncneU UniueraUij 
 
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Cornell University Library 
 
 HF 1001.B36 
 
 The American business and accounting enc 
 
 3 1924 013 996 867 
 
Cornell University 
 Library 
 
 The original of this book is in 
 the Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924013996867 
 
The American 
 
 Business and Accounting 
 
 Encyclopaedia 
 
 A Standard Reference Work for Business Men and Account- 
 ants, Profusely Illustrated With Many Special 
 Forms, Tables and Diagrams Never 
 Before Published. 
 
 COMPILED BY 
 
 E. H. BEACH, Editor 
 
 The Business Man's Magazine and 
 President International Accountants' Society, Inc. 
 
 AND 
 
 W. W. THORNE, Secretary 
 
 International Accountants' Society, Incorporated 
 
 Assisted by a 
 
 Corps of Forty-seven Experts 
 
 DETROIT, MICHIGAN 
 
 THE BUSINESS MAN'S PUBLISHING COMPANY, LIMITED 
 
 Publishers of Technical Accountancy Books 
 of All Descriptions 
 
 REVISION FOR 1908 
 
Entered according to Act of Congress, in the year 1901, bjr 
 
 The Book-Keeper Publishing Co.. Ltd., 
 
 Detroit, Mich. 
 
 In the office of the Lforarian of Congress. All rights reserved. 
 
INTRODUCTORY. 
 
 IN presenting the American Business and Accounting Encyclopaedia to the' 
 public, we beg to call attention to the meaning of the words we have 
 
 adopted as the title of this undertaking. "Encyclopaedia" is defined a& 
 a comprehensive summary of knowledge, or of a branch of knowledge." In 
 this encyclopaedia we propose to endeavor to furnish a comprehensive sum- 
 mary of information pertaining to the science of accounts and other matters 
 connected with business management, and, when considered desirable, tO' 
 expand the summary into a description, or discussion, according^ to our 
 judgment. 
 
 It will undoubtedly be found that this work will not cover nor mention 
 everything pertaining to the science of accounts, nor is such the aim of the 
 compilers; but it will include everything of any importance or value that 
 comes within the scope of our own observation and knowledge, and that of 
 the many experts who are associated with us in this enterprise. The 
 Encyclopaedia will include an appendix which will be devoted to filling out 
 any angularities and supplying any omissions which may become apparent as 
 the work progresses. 
 
 Included under different headings will be found a number of special 
 articles of considerable importance and value to the student of accounting, 
 and we hope to give particular attention to subjects not to be found in any 
 detail in the text books on accounting hitherto to be obtained, such as 
 accounting for lumber, iron, and brewing businesses, besides many other 
 interesting and instructive features. Neither time nor expense will be 
 spared to make this work as complete as possible, with a due regard to 
 conciseness and clearness of expression. 
 
 We have also arranged with a competent authority on Commercial 
 Law to supply us with the proper definitions and information on that very 
 important subject to business men. This department of the Encyclopaedia 
 will be distinguished by the abbreviation (com. law) inserted between the 
 word and the definition. 
 
The American 
 
 Business and Accounting 
 
 Encyclopaedia 
 
 ABATEMENT. See Rebate. — A discount allowed for prompt pay- 
 ment; the deduction from fixed debts at the custom house on account of 
 damage or loss to goods while detained in warehouse. A term used to 
 signify a deduction or allowance from the value of goods as invoiced on 
 account of damage, loss, or some kindred cause. 
 
 ABATEMENT (Com. Law).-^In contracts, a reduction made by the 
 creditor, for the prompt payment by the payer or debtor of a debt due. 
 
 ABBREVIATION (Com, Law).— A shortened form of a word, 
 obtained by the omission of one or more letters or syllables from the middle 
 or end of the word. 
 
 The use of abbreviations capable of explanation by parol evidence or 
 usage do not, as a general rule, vitiate a writing or bill. 
 
 Courts take judicial notice of abbreviations ordinarily used to designate 
 time, such as those for month, forenoon, afternoon, etc., and will determine 
 the meaning of customary abbreviations of common words, names of places, 
 and Christian names, without proof. As the form "int." inserted after the 
 words "Value received" in a promissory note is an abbreviation of the word 
 "interest," and should be construed the same as if the word was written out. 
 The letter "a" in a note as "Int. a 6^ p. a." stands for the word "at," and 
 "6^" for "six per cent," and the letters "p." and "a." for "per annum." 
 
 "Com." and "Co." are well understood abbreviations of the word 
 "company," and the use of the abbreviation "dolls" in an assessment was held 
 to stand for "dollars." 
 
 ABODE (Com. Law). — Where^a person dwells. ( See "domicile. ) 
 
ABOUT (Com. Law). — Almost or approximately; near. 
 
 The import of the qualifying word "about" is simply that the actual 
 quantity is a near approximation to that mentioned, and its effect is to 
 provide against accidental variations. When there is a material and valuable 
 variation, a court of equity, upon a petition for specific perforipance, will 
 give the word its proper effect. 
 
 A contract to pay a claim of about one hundred and fifty dollars, was 
 held to cover the claim although it amounted to fifty dollars more, the claim 
 being otherwise identified. 
 
 When an assignment was made "in trust to pay the debts due the 
 following persons, viz.," and then followed the names and debts, and a debt 
 due one creditor was put down "about $ii,ooo" which was in fact upwards 
 of $13,000, it was held that the trust included the latter sum. 
 
 "About to remove" or "about to abscond" in attachment affidavits do 
 not imply the next hour, or day, or week, or month, but that the removal or 
 absconding will shortly occur ; each case, as it arises, to be governed by its 
 own special facts. 
 
 ABSCOND (Com. Law). — To go in a clandestine manner out of the 
 jurisdiction of the courts, or to lie concealed, in order to avoid their process. 
 
 A person who departs from his usual place of abode secretly or suddenly, 
 or retires or conceals himself from public view in order to avoid legal process 
 is held to have absconded. 
 
 A debtor shut up in his own house from his creditors is an absconding 
 debtor. 
 
 ABSENT (Com. Law). — In attachment laws, removed from home to 
 avoid process. 
 
 ABSTRACT. — To abridge, to summarize, to epitomize. 
 
 A term used by accountants to describe their analysis of account books 
 made in connection with an audit. It generally consists of independent 
 postings from original books of entry. Such abstracts are generally con- 
 fined to nominal or impersonal accounts and summary accounts representing 
 customers and creditors' accounts. 
 
 A term used by credit men to describe the report required by them 
 from customers in order to determine the advisability and limit of credit. 
 
 ABSTRACT LEDGER.— A ledger containing only totals of accounts 
 posted from books arranged to furnish such totals, corresponding to Private 
 ledger, Secretary's ledger, etc. 
 
 The utility of this ledger consists in the facility with which, by its use, 
 a trial balance can be obtained from a large set of books, and in the ability to 
 obtain an independent check on the work of individual ledger keepers, the 
 
aggregate of whose balances must agree with the totals obtained from the 
 various books of original entry posted to the abstract ledger. 
 
 ACCEPTANCE. — A written promise to pay in money. 
 
 A form of time-draft made upon a debtor in satisfaction of a debt and 
 accepted payable across its face. 
 
 
 c'te oup> accounP. 
 
 Mo.Jd 
 
 ^1^ y^ifew^o^^^ 
 
 An agreemtnt to pay a draft or note according to its terms. 
 The title given to notes after they have been accepted. 
 
 ACCEPT— ACCEPTANCE.— (Com. Law).— The receipt of a thing 
 offered by another with an intention to retain it, indicated by some act 
 sufficient for the purpose. 
 
 The element of receipt must enter into every acceptance, though receipt 
 does not necessarily mean, in this case, some actual manual taking. To this 
 element there must be added an intention to retain. This intention may 
 exist at the time of the receipt or subsequently. 
 
 Under the statute of frauds, delivery and acceptance are necessary to 
 complete an oral contract for the sale of goods^ in most cases. It is said that 
 such acceptance must be absolute and past recall. If an article is found 
 defective, but is retained and used, it is a sufficient acceptance. If goods are 
 delivered to a third person by order of the purchaser they are deemed to have 
 been received and accepted by the latter, through his agent. 
 
 Acceptance of Bills of Exchange is an engagement to pay the bill in 
 money when due. 
 
 Such acceptances are : 
 
 Absolute^ which is a positive engagement to pay the bill according to 
 its tenor. 
 
 Conditional^ which is an undertaking to pay bills on a contingency. 
 The holder is not bound to receive such an acceptance, but, if he does receive 
 it, he is bound to observe its terms. 
 
Express^ which is an undertaking in direct and express terms to pay 
 the bill. 
 
 Implied, /which is an undertaking to pay the bill, inferred from acts of 
 a character which fairly warrant such an inference, as where one receives 
 and uses goods, knowing that a draft has been drawn on him for their price. 
 The retaining and use of the goods is equivalent to an acceptance. 
 
 Partial, which is^ one varying from the tenor of the bill. As an 
 acceptance to pay a part of the amount for which the bill is drawn ; or to pay 
 at a different place, or time. 
 
 Qualified, which are either partial or conditional, and introduce a 
 variation in the sum, time, mode, or place of payment. 
 
 Supra Protest, which is the acceptance of the bill after protest for non- 
 acceptance by the drawee, for the honor of the drawer or a particular indorser. 
 
 Acceptance, other than supra protest, must be made by the drawee or 
 some one authorized to act for him. The drawee must have capacity to act 
 and bind himself for the payment of the bill, or it may be treated as 
 dishonest. 
 
 The acceptance and delivery of negotiable paper on Sunday is void 
 between the parties, but if dated falsely as of another day, it is good in the 
 hands of an innocent holder. 
 
 Acceptance may be in writing on the bill itself or on another paper, and 
 it seems that the holder may insist on having ? written acceptance, and in 
 default thereof may consider the bill as dishonest. It may be made before 
 the bill is drawn, in which case it must be in writing ; it may be made after 
 the bill is drawn and before it becomes due, which is the usual course, or after 
 it becomes due, or even after a previous refusal to accept. 
 
 Acceptance must be made within twenty-four hours after presentment, 
 or the holder may treat the bill as dishonored. Upon refusal to accept, the 
 bill is at once dishonored, and should be protested. 
 
 The usual form of acceptance is by writing "accepted" across the face 
 of the bill and signing the acceptor's name ; but the drawee's name alone is 
 sufficient, or any word of equivalent force to accepted. 
 
 A parol promise, upon sufficient consideration, to accept a bill of 
 exchange, binds the acceptor. 
 
 ACCOMMODATION. — Temporary pecuniary aid given by one 
 trader to another or by a banker to his customers. The loan of money or 
 value without consideration. 
 
 ACCOMMODATION NOTE.— A term used to describe that class of 
 bills of exchange which represents no actual exchange of real value. Notes 
 or bills drawn for discount without relation to any actual sale of goods or 
 indebtedness. A note given without consideration for the purpose of 
 
raising money by discounting, or obtaining loans, on the security of the- 
 endorser or endorsers, or for mutual accommodation. 
 
 ACCOMMODATION PAPER.— (Com. Law).— A bill of exchange' 
 or promissory note to which the acceptor, drawer, maker, or indorser, as the 
 case may be, has put his name without consideration, for the purpose of 
 accommodating, by a loan of his credit, some other person who is to provide 
 for the bill or note when it falls due. 
 
 The strict obligations of parties to commercial paper are modified to a. 
 certain degree in the case of accommodation parties. 
 
 The accommodated part} undertakes, impliedly if not expressly, first, 
 that he will provide for the bill or note at its maturity ; and, second, that he 
 will indemnify the accommodation party in case the latter is compelled to 
 take up the paper. 
 
 The accommodation party, by his signature, first confers a power or 
 authority upon the party accommodated to bind him, the accommodatioa 
 party, in favor of third persons by the issue of the paper; and, second, when 
 the paper has been negotiated, he becomes bound to the indorsee or holder in 
 accordance with the rules of commercial law and the position of his name 
 upon the instrument, from the date of the instrument. 
 
 The party for whose accommodation the paper has been made requires 
 no right against the accommodation party, since, as between them, there is 
 no consideration, a fact which is always a defense to a suit upon negotiable 
 paper between the immediate parties. 
 
 When the accommodation party has been compelled to pay the instru- 
 ment, the party accommodated becomes, in consequence of the implied. 
 contract of indemnity, a debtor of the accommodation party, and the latter 
 has a right of action against the former. This relation arises only when 
 payment has been made, and the statute of limitation begins to run from the 
 date of payment. 
 
 ACCORD AND SATISFACTION.— (Com. Law).— In contracts- 
 Accord is an agreement between two parties to give and accept something m-. 
 Satisfaction of a right of action which one has against the other, which, 
 when performed, is a bar to all actions upon this account; generally used 
 in the phrase "accord and satisfaction." 
 
 It must be advantageous to the creditor, and he must receive an actuat 
 benefit therefrom which he would not otherwise have. 
 
 The payment of a part of the whole debt due is not a good satisfaction, 
 even if accepted, unless the amount due is disputed, or contingent, or there 
 are mutual demands. If any additional benefit be received, as payment at 
 some other place or at an earlier time, etc., then a payment in part will be 
 held to be a good satisfaction. 
 
 9 
 
Where the value of services was in dispute, and a check was sent for 
 part claimed, with a statement that it was to be in full satisfaction, and 
 -the check was retained, the debt, which was unliquidated, was satisfied by 
 such retention. 
 
 Accord and Satisfaction, when completed, has two effects ; it is payment 
 .of the debt, and it is a species of sale of the thing given by the debtor to the 
 -creditor, in satisfaction, but it differs from a sale in this, that it is not valid 
 until delivery of the article, and there is no warranty of the thing thus sold, 
 ^except, perhaps, the title ; for in regard to title, it cannot be doubted that if 
 the debtor gave on an accord and satisfaction the goods of another, there 
 would be no satisfaction. 
 
 ACCOUNT. — a. A record of transactions for reference. 
 
 b. An epitome of transactions for reference. 
 
 1. Bill oi? Goods Purchased. A copy of the charge entered up in 
 the books of account of the seller against the purchaser. 
 
 2. Ledger Account With Customer, or Debtor. Account 
 Receivable. An account showing the amount due for goods sold, or consid- 
 >eration parted with. 
 
 An account with a customer comprises all charges, or debits to him, and 
 all credits to him of whatsoever nature, the excess of charges over credits, 
 or of credits over charges, showing the balance of account. 
 
 There are many different styles of personal ledger accounts, but, 
 ^although more room for itemizing purposes, etc., may be given in one style 
 than another, the principle of debit, credit balance is preserved. These 
 -different styles, each suitable to the environment which creates the demand, 
 will be adequately considered and illustrated. 
 
 3. Ledger Account With Creditor. Account Payable. An 
 -account showing amount of liability for goods purchased, or value received, 
 .and possessing the same general characteristics as Account Receivable. 
 
 4. Adjustment Account. — A term used to describe an account 
 which represents the postings in an individual ledger. This account is kept 
 
 Dc 
 
 
 Illustration of Adjustment Account with City Sales 
 
 Ledger. 
 
 
 Go. 
 
 Dite 
 
 
 (SI 10 
 
 Debits 
 
 D=b,+ 
 
 Da-fe 
 
 
 fSlio 
 
 
 
 cJarv 
 
 1 
 
 31 
 
 
 51 
 
 126 
 
 27535 
 
 Is 
 
 eo 
 
 73 
 
 IS926 
 2S2aS 
 
 SO 
 S5 
 
 •Jan 
 
 31 
 
 OouT^r-ual 
 
 \2S 
 51 
 
 I6.5QS 
 1.5S6 
 
 75 
 2,5 
 
 
 
 in what is generally known as a Private Ledger. The principle involved is 
 to make a double posting for every item posted to the ledger represented, 
 l)ut to make such double postings in totals and not in detail. This neces- 
 
 10 
 
sitates separate books of original entry for each ledger, or separate columns 
 in books of original entry, the latter plan being generally used. 
 
 A method devised to render personal ledgers self-balancing, so that 
 errors may be localized and great saving of labor effected in tracing them. 
 
 A memorandum account used by auditors for the purpose of adjusting 
 inaccuracies in books of accounts as they might be discovered. 
 
 5. Balance Account. — The title given to an account into which the 
 balances of all other accounts are transferred. A system used by some 
 accountants who transfer from the balance account the total debits, credits 
 ■and balances of an individual ledger to the nominal or general ledger. As 
 this method involves a great deal of unnecessary work, it is now very rarely 
 used, the columnar books of original entry rendering it practically unneces- 
 sary. The usual plan now used is to draw off the balances of an individual 
 ledger in a separate trial balance book, the aggregate of such balances having 
 to agree with the balance shown by the representative account carried for 
 that ledger in the private ledger. 
 
 6. Current Account. — An active or running account. An account 
 wherein all transactions are itemized. 
 
 7. Impersonal Account. — An account which represents conditions, 
 and records the profits, losses, receipts or expenditures of a business, but does 
 not represent persons. 
 
 8. Negative Account. — An account which reduces the value of 
 some other account. Thus, a negative debit account reduces the value of 1 
 credit account, but is not an asset ; and a credit negative account reduces the 
 amount of a debit account, but is not a liability. Examples of such accounts 
 may be indicated in "treasury stock," which represents stock of a company 
 which has not been disposed of, or which, having once been issued, has for 
 some reason again come into its possession. Expenses of promotion of a 
 company which are carried on the books for the purpose of gradually extin- 
 guishing same by installments are negative accounts to profits. 
 
 When depreciation is charged to profit and loss and credited to a 
 depreciation account, this account becomes a negative to assets. A returns 
 and allowance account is a negative to sales. 
 
 9. Nominal Account. — A synonym for impersonal accounts. Where 
 this title is used the private ledger is frequently called the Nominal Ledger. 
 An account in name only, representing neither asset nor liability values. 
 Samples of such accounts are : Wages, Commissions, Insurance, Interest, 
 Discount, Expenses, etc. 
 
 10. Personal Account. — An account representing indebtedness of 
 or liability to a person. 
 
 n 
 
An account containing charges on which no profits are made, such as 
 personal accounts for salaries, dividends, traveling, salesmen, etc., as dis- 
 tinguished from accounts with customers or creditors. 
 
 11. Real Account. — An account which represents actual values of 
 assets or liabilities, such as plant machinery, real estate, cash, notes 
 receivable, notes payable, customers' accounts. 
 
 12. Representative Account. — An account preferably - whose 
 function is to complete the double entry by representing the' transactions 
 described or recorded as personal accounts. 
 
 ■Thus sales account furnishes the double entry for the customers' 
 accounts, and purchase account that for the creditors' accounts. 
 
 13. Summary Account. — An account dealing with totals and not 
 with items. As the use of columnar cash books, journals, and auxiliary 
 record books increases, the number of summary accounts tends to replace 
 itemized impersonal accounts . 
 
 Balance, or adjustment accounts, are good types of the summary 
 account. 
 
 ACCOUNT.— (Com. Law).— A detailed statement of the mutual 
 demands in the nature of debit and credit between parties, arising out of 
 contracts or some fiduciary relation. 
 
 There are various, kinds of accounts, viz. : 
 
 Open AccouNTS-r-(Com. Law). — Which is an account not stated or 
 agreed upon between the parties. Thus an account is open when some term 
 of the contract is not settled by the parties, whether the account consists of 
 one item, or many. Also, an account is open when there have been current 
 dealings between the parties, which are kept unclosed with the expectation 
 of further transactions between them. Open account seems, also, equivalent 
 to mutual account,. as meaning an account open to entries by either party. 
 
 Current Accounts — (Com. Law). — Are accounts riot stated, running 
 accounts. The difference between a running account and one that does 
 not run is that in the latter each item is a separate cause of action in itself, 
 the minds of the parties are presumed to have concurred only on single 
 transactions ; but in the case of running accounts, according to the doctrine 
 of relation, the subsequent acts relate back each to the preceding act and 
 all the original acts. When each of a series of transactions covering a 
 number of years is separate and distinct from those which precede it, there 
 is no running account. 
 
 Account Rendered — (Com. Law). — Is a statement presented by a 
 creditor to his debtor showing charges of the former against the latter. 
 Merely rendering an account gives it no binding effect upon the debtor, 
 but by his acquiescence, express or implied, it becames an account stated. 
 
 12 
 
Account Stated — (Com. Law). — Is an agreement between parties 
 who have had previous transactions of a monetary nature, that all the items 
 of 'the accounts representing such transactions are true, and that the balance 
 struck is correct, together with a promise, express or implied, for the 
 payment of such balance. 
 
 The respective book-keepers of the debtor and creditor may state an 
 account binding upon the employees as a stated account. 
 
 An account cannot become an account stated with reference to a debt 
 payable on a contingency; there must be an agreement. Yet an account 
 rendered may become an account stated as to the items admittedly correct, 
 although an item of the account may be disputed. 
 
 Where an account is rendered to a merchant, and no objection is made, 
 after sufficient time, acceptance will be inferred, and such an account will 
 be deemed conclusive between the parties. 
 
 An account stated is conclusive as to the liability of the parties, with 
 reference to the transactions included in it; except in cases of fraud, or 
 manifest error. And it is not necessary to say in the statement "E. & O. E." 
 that is irhplied. 
 
 Accounts Setti<ed — (Com Law). — When the balance admitted upon 
 a stated account is paid, the account is deemed a settled account. 
 
 Giving a promissory note is prima facie evidence that the accounts 
 have been settled, but the term is also used in a less strict sense, as where 
 the parties agree and strike a balance they are said to have settled their 
 accounts. 
 
 Account Sales — (Com. Law). — Are separate accounts rendered by 
 a factor, or broker, to his principal, showing goods sold, prices obtained, 
 and the net results after deduction of expenses, etc. 
 
 Book Accounts — (Com. Law). — The word "accounts" includes 
 "book accounts." 
 
 Bank Accounts — (Com. Law). — This phrase designates the fund 
 which merchants, travelers and others have deposited into the common 
 cash of some bank, to be drawn out by checks from time to time, as the 
 owner or depositor may require ; also the statement of the amounts deposited 
 and drawn, which is kept in duplicate, one in the depositor's book and the 
 other on the books of the bank. 
 
 Balancing the debtor's bank-book, and returning it to him, makes 
 an account stated between the bank and the depositor, if the latter retains 
 it without objection. 
 
 ACCOUNTANT.— Among the many definitions of the Public 
 Accountant which have been published, the following seems to possess 
 unusual merit : 
 
 13 
 
"The public accountant is the consulting physician of finance and 
 commerce. He understands the anatomy and physiology of business and 
 <:he rules of health of corporation, partnerships and individual enterprises. 
 He diagnoses abnormal conditions, and suggests approved remedies. His 
 study and interest is the soundness of the world of affairs." 
 
 The professional accountant, as now recognized, is of quite recent 
 origin. He is not a book-keeper, but his duty consists in the examination 
 of the work of book-keepers with a view to establishing the accuracy of their 
 work. The official auditor of a corporation should not be confused with the 
 professional accountant. Most large enterprises employ accountants whom 
 they term auditors, but such accountants have generally had very little of that 
 special experience which qualifies the professional accountant to examine 
 the accounts of any business, no matter what system may be employed. 
 Whether official auditors are employed, or not, it is considered desirable to 
 have an independent audit by the professional accountant. The value of the 
 services of the professional accountant is now recognized by all business 
 men, and their recommendations for the improverhent of accounting methods 
 are becoming daily in great demand, as their wide experience makes them 
 particularly capable of recognizing defects and proposing means for remedy- 
 ing such defects. 
 
 ACCOUNTANTS' ASSOCIATIONS.— The establishment of the 
 profession of the accountant has resulted in the organization of a large 
 number of associations and societies intended for mutual benefit. The first 
 of these association in England was established in Liverpool in 1870, and an 
 Institute of Accountants was also established in London during the same 
 year. Other societies were established in Manchester and Sheffield, etc., 
 and a few years later these societies amalgamated and obtained a charter, 
 forming the Institute of Chartered Accountants in England and Wales. 
 This charter confers upon the members the right to use the letters "F. C. A." 
 or "A. C. A." after their names, meaning, respectively, Fellow or Associate 
 of the Institute of Chartered Accountants. At the present date this institute 
 numbers considerably over 2,500 members, including associates not in 
 practice. The Institute has accumulated quite a large fund, having a surplus 
 to its credit at the end of 1898 of not less than $240,000, the greater part 
 of which, however, is invested in the hall and offices of the Institute. From 
 the annual report of the Institute issued in 1899, it appears that members 
 of the Institute are practicing their profession in Bombay, Calcutta, 
 and Jamalphur, India; Boston, Chicago, Denver, San Diego, New York, 
 Omaha, Philadelphia, San Francisco, Sioux City, and other cities in the 
 United States; in the principal cities of South Africa and Australia; Hong 
 Kong and Shanghai, China; Kobe, Japan; Rio Janeiro, Brazil; San Jose, 
 
 14 
 
Costa Rica ; and Canada, so that the operations of members of this Institute: 
 
 are practically distributed all over the world. 
 
 The Institute publishes a weekly magazine, entitled "The Accountant."" 
 As the institution has been so extremely successful in its operations,.. 
 
 we give the fundamental rules on which its business is conducted : 
 
 ( 1 ) A Member shall not allow any person not being either a Member" 
 of the Institute or in partnership with himself as a Public Accountant to 
 practice in his name as a Public Accountant : 
 
 (2) A Member shall not directly or indirectly allow or agree to allow 
 of participation by a Solicitor in the profits of his (the Member's) pro- 
 fessional work or accept or agree to accept any part of the profits of the: 
 professional work of a Solicitor or any commission or bonus thereon ; 
 
 (3) A Member shall not directly or indirectly accept or agree to accept 
 from an Auctioneer, Broker or other Agent employed for the sale of, letting" 
 of, or otherwise in dealing with any real or personal property in the man- 
 agement, administration or disposal whereof such Member or his partner 
 or any of his partners shall be engaged in any part or proportion of or any 
 commission or bonus on the charges payable to such Auctioneer, Broker or 
 Agent ; and the following rule shall also be deemed a fundamental rule ot" 
 the Institute with reference to all Members not being in practise as Public: 
 Accountants at the date of this Our Charter (that is to say) : — 
 
 (4) No such Member shall follow any business or occupation other 
 than that of a Public Accountant or some business which, in the opinion of 
 the Council is incident thereto or consistent therewith. 
 
 The next accountants' organization in importance is the Society of 
 Accountants and Auditors, generally known as "Incorporated Accountants'" 
 of London, England. The membership of this society in 1899 numbered. 
 about 1,200 fellows and associates. Like the Institute "of Chartered. 
 Accountants, members of this society practise their profession throughout: 
 the world, and, as a matter of fact, appear to be more generally distributed. 
 There is a large students' society in connection with both these associations. 
 The Society of Accountants and Auditors has an excellent library, including- 
 both English and American text books. It publishes a monthly journal, 
 the title of which is "The Incorporated Accountants' Journal." The society 
 encourages the organization of affiliated societies, among which may be 
 mentioned the following: 
 
 Manchester and District Society of Incorporated Accountants. 
 
 Sheffield and District Society of Incorporated Accountants. 
 
 Birmingham and Midland Society of Incorporated Accountants. 
 
 Yorkshire and District Society of Incorporated Accountants and- 
 Auditors. 
 
 15 
 
S. Wales and Monmouthshire Society of Incorporated Accountants and 
 Auditors. 
 
 Liverpool and District Society of Incorporated Accountants. 
 
 New Castle-Upon-Tyne and District Society of Incorporated Account- 
 ants and Auditors. 
 
 There are also affiliated societies in Scotland, Australia and South 
 
 -Africa. 
 
 Both the Institute of Chartered Accountants, and the Society of 
 Accountants and Auditors, have a benevolent fund which is used for the 
 assistance of needy members. 
 
 The lectures delivered to the students each year are bound into a volume 
 and placed on public sale. For the year 1899 some of the lectures treated 
 :the following subjects: 
 
 Friendly Societies. 
 
 Profits and Dividends. 
 
 Hire Purchase Accounts. 
 
 Hotel Accounts. 
 
 Reserve and Reserve Accounts. 
 
 Trial Balance and the Localization of Errors. 
 
 What is Gross Profit ? 
 
 The Secretary of the society, Mr. Jas. Martin, has held that office since 
 ;the incorporation in 1885. 
 
 The next society of importance is the Chartered Accountants of 
 -ijcotlahd, whose headquarters are Edinburgh, Glasgow and Aberdeen, 
 Scotland. The membership in this association numbers about 800. The 
 Scottish accountants claim to be of more antiquity than those of any other 
 -country, and refer to a Mr. Chas. Belkrig as a well-known accountant of 
 one hundred years ago. The legislation procured by them provides that 
 "Where in an act of parliament, royal charter, deed, or contract, duties are 
 prescribed to be performed in Scotland by an accountant, such duties shall be 
 held to be intended to be performed only by a person registered under 
 -this act." 
 
 "The Society of Accountants in Edinburgh" was incorporated by 
 Royal Charter, October 23rd, 1854. 
 
 "The Institute of Accountants and Actuaries in Glasgow" was incor- 
 porated by Royal Charter, May i6th, 1855. 
 
 "The Society of Accountants in Aberdeen" was incorporated by Royal 
 ■Charter, April loth, 1867. 
 
 A feature of the English and Scottish societies is that it is almost 
 impossible to become a public accountant without first of all serving a four 
 years' apprenticeship, the cost of which is very much dependent upon the 
 ::standing of the accountant to whom the apprenticeship is bound. In some 
 
 16 
 
cases the premiums are returned as wages, but in other cases as much as five 
 hundred pounds is paid for the instruction which is supposed to be acquired. 
 
 It is only natural that when the profession of accountancy is so much 
 respected in England and Scotland that similar societies should be organized 
 in all parts of the British Dominions. In Canada, we find the Institute of 
 Chartered Accountants of Ontario and the Institute of Chartered Account- 
 ants of Nova Scotia. These societies are organized in imitation of the 
 English societies and the conditions of membership are similar. The mem- 
 bership, however, is naturally somewhat limited, that of the Ontario Institute 
 being about 70, and that of Nova Scotia we understand to be about 50. 
 
 The organization of societies of accountants in the United States for 
 the purpose of giving all members a standing and reputation similar to that 
 possessed by accountants in other countries, is of quite recent date. The 
 oldest society of this kind is the American Association of Public Accountants, 
 whose headquarters are in New York. The American Association originated 
 the efforts (since crowned with success) to obtain legislation in New York 
 state, which makes it a misdemeanor for any person without proper 
 authority to - use the title of Certified Public Accountant or the initials 
 "C. P. A." One of the principal factors in this movement was Mr. Frank 
 Broaker, of the New York firm of Broaker & Chapman. Mr. Broaker was 
 appointed a member of the first Board of Examiners, and from his efforts, 
 and the support of those associated with him, may be dated the extraordinary 
 interest since taken with a view of establishing the profession in the United 
 States. Subsequent to obtaining the desired legislation in New York State, 
 societies of certified public accountants were established which have to a 
 very great' extent taken the place of the American Association of Public 
 Accountants. These societies are entitled respectively: The National 
 Association of Certified Public Accountants, and the New York State 
 Society of Certified Public Accountants. 
 
 Efforts have be'en made to obtain legislation in various other states, but 
 these efforts have so far been successful only in Pennsylvania and Maryland. 
 The cause of failure in other states is not clear, but the desired legislation 
 will undoubtdly be secured before long, as it will certainly aid in the 
 protection of the public interest. Illinois, Massachusetts, Minnesota and 
 Michigan are all endeavoring to secure legislation, and we attach a copy of 
 the bill on which their efforts are based. 
 
 CERTIFIED PUBLIC ACCOUNTANTS. 
 Laws of New York, 1896, ch. 312. 
 
 AN ACT TO REGUI.ATE THE PROFESSION OF PUBIvIC ACCOUNTANTS. 
 
 Sec. I. Any citizen of the United States, or person who has duly 
 declared his intention of becoming such citizen, residing or having a place 
 
 17 
 
for the regular transaction of business in the state, being over the age of 21 
 years, and of good, moral character, and who shall have received from the 
 regents of the University a certificate of his qualifications to practise as a 
 public expert accountant, as hereinafter provided, shall be styled and known 
 as a certified public accountant ; and no other person shall assume such title, 
 or use the abbreviation C. P. A. or any other words, letters or figures, to 
 indicate that the person using the same is- such certified Public Accountant. 
 
 Sec. 2. The Regents of the University shall make rules for the 
 examination of persons applying for certificates under this act, and may 
 appoint a board of three examiners for the purpose, which board shall, after 
 the year 1897, be composed of certified public accountants. The Regents 
 shall charge for examination and certificate such fee as may be necessary to 
 meet the actual expenses of such examinations, and they shall report, 
 annually, their receipts and expenses under the provisions of this act to the 
 state comptroller, and pay the balance of receipts over expenditures to the 
 state treasurer. The Regents may revoke any such certificate for sufficient 
 cause after written notice to the holder thereof and a hearing thereon. 
 
 Sec. 3. The Regents may, in their discretion, waive the examination 
 of any person possessing the qualifications mentioned in Sec. i, who shall 
 have been, for more than one year before the passage of this act, practising in 
 the state on his own account, as a public accountant, and who shall apply in 
 writing for such certificate within one year after the passage of this act. 
 
 Sec. 4. Any violation of this act shall be a misdemeanor. 
 
 Sec. 5. This act shall take effect immediately. 
 
 The membership in these American Societies so far is rather small, 
 that of the American Association of Public Accountants being under 90; 
 the Pennsylvania Association under 30; the Maryland Association under 
 20; the Illinois Association under 30; the National Association of Certified 
 Public Accountants under 100; New York State Society of Certified Public 
 Accountants under 100. 
 
 The plan of an institution of Chartered Accountants for Russia is under 
 consideration by the ministry of finance of the Empire. According to all 
 reports, book-keeping in that country is conducted in a very loose manner. 
 In fact, it has been stated that the book-keeping of railway companies is so 
 arranged that it is impossible to discover irregularities when committed. 
 
 That accountants are duly recognized in Italy is only natural, consid- 
 ering the fact that the science of double entry is supposed to have emanated 
 from that country. A National convention of Italian accountants was held 
 at Florence March 29th last, this being the twenty-third year of such 
 conventions. 
 
 18 
 
There is also an organization of Accountants in France, who heLi a 
 convention last year at Lvyons, the result of which, however, we do not know. 
 
 The Associated Accountants of New Orleans is a society of eight years" 
 standing, which meets monthly for the purpose of discussing accounting 
 topics, and holds annual conventions, but so far they have not endeavored 
 to secure any legislation similar to that obtained in other states. 
 
 In addition to the above associations, which are limited exclusively to 
 Public Accountants, there are other associations in the United States 
 intended for educational purposes to which book-keepers are admitted as 
 members. One of these associations is the Institute of Accounts of New 
 York, which held its fourth annual convention last June. This society has 
 organized various branches called "chapters" in various cities of the United 
 States, and is evidently endeavoring to make itself a national body. 
 
 There has also been established a National Association of Accountants 
 and Book-keepers, branches of which have been organized in a number of 
 large cities of the United States, such as New York, Chicago, Cincinnati, 
 Toledo, Minneapolis, St. Paul, Milwaukee, Des Moines, Kansas City, St. 
 Louis, etc., while steps are being taken with a view to organizing similar 
 branches in other cities. This Association is the only one in America 
 which publishes a monthly journal, "Home Study," devoted to subjects in 
 connection with the science of accounts. It has also devised a very popular 
 badge of membership, and now numbers over 10,000 members, so, that 
 so far as numbers are concerned, it is undoubtedly ahead of all other 
 organizations of a similar nature. 
 
 ACCOUNTANTS' INVESTIGATIONS.— Among the principal 
 duties of the expert accountant is the examination of books of account for 
 the purpose of satisfying clients as to the profits which have been made 
 in a business they desire to purchase, and the genuineness of assets and 
 liabilities represented in the book accounts.lt is usual also to make such an 
 investigation on the promotion of a company formed to take over and 
 develop an established business, certifying to the statements published in the 
 prospectus of the promoters as to the profits earned and capital employed. 
 The following rules to be followed in such investigations are very complete, 
 and will form a very valuable guide to those who undertake such investiga- 
 tions. They are quoted from the Incorporated Accountants' Journal. 
 
 "In commencing an investigation of this nature it is reasonable to 
 expect that a fairly complete set of books should be in existence, as a business 
 that cannot afford good book-keeping is not worth floating as a company. 
 Should the case be otherwise, it is right to insist that the accountant be 
 allowed — indeed, it is essential that he should — make up a complete set of 
 accounts before certifying. It is true it may not be necessary to re-post 
 
 19 
 
everything, but the examiner must first spend time in learning from the 
 book-keeper or proprietor the exact methods adopted; if he thoroughly 
 grasps these, and keeps in front of him a complete list of books in use, he 
 should be able to take his own short cuts to ascertain results and to ensure 
 against being misled. 
 
 The ground-work of every business is "Cash" — and further, it is a 
 commodity that leaves traces of its career, the proprietor will say "in 
 profit" — and that is just the point to test. 
 
 If the statement is that "everything goes in the ledgers," a simple 
 method would be to dissect them, and thus, at one stroke, get a check on 
 purchases, sales, discounts, and bad debts — but the schedules at start and 
 finish must be carefully scrutinized, also the purchases and sales just prior 
 to and after the beginning and ending of the period to be reviewed. One 
 may find sales suddenly increase or purchases lighten towards the end. The 
 sales should be tested by noting whether paid for at due date ; the record of 
 returns from sales for the succeeding year should also be examined ; or it 
 may be that an examination of the purchase book for the subsequent period 
 may show an increase ; if so, it would be necessary to call for the production 
 of all invoices for the two or three months after the period under review, so 
 that any indication of goods having been omitted may be cleared up. An 
 instance came under the notice of the writer, in a company of which he was 
 not the a.uditor, where on the last day of the financial year an entry for goods 
 to the extent of some $50,000 or more appeared in the day book with the 
 significant notes against a certain portion "for delivery in January," other 
 .portions in February, March, etc. As a matter oi fact, they were never 
 delivered, but a credit appeared for the same amount two years after. 
 Although not in relation to an investigation for a company flotation, it aptly 
 represents what should be disallowed without the long subsequent credit 
 entry. 
 
 Stock at commencement and end should be inquired into. If taken on 
 the same basis of valuation on each occasion? If stated to be at market 
 value, the state of the market might be noted, a sudden rise, and consequent 
 appreciation firmly resisted; "cost" (or for damaged goods "value") should 
 be the watchword. Before leaving what one may call the trading account 
 or search for gross profit, a comparison of the amount and the proportion 
 the stock may bear to the turnover can be usefully.made ; the rate per cent, 
 of gross profit should also be worked out. If normal, it is a satisfactory 
 indication that there has not been much cooking. The proportion of stock 
 to turnover helps to indicate the correctness of it. If the stock be abnormally 
 large it may result from fraudulent additions, or by reason of the prospective 
 vendor carrying a large proportion of "dead," or non-active stock which it is 
 
 20 
 
sought to sell to the proposed company at cost, truly hanging a mill-stone 
 round the neck of the innocent infant. 
 
 A word as to "work in progress" may well be put in here : It is perhaps 
 the most difficult part to test if proper books have not been kept. Where 
 manufacturing is carried on the cost book is an essential, and should be called 
 for. The percentage added for standing charges throughout should be 
 escertained, and no greater percentage allowed on the cost of works in 
 progress at the end of the period, whilst it should be seen that no unusual 
 amount of profit from any uncompleted contract at the commencement has- 
 been brought in to raise the average. 
 
 The accountant having thus dealt with and satisfied himself as to gross- 
 profit, there remains questions of expense to be looked carefully into. Every 
 class of business has its own ratio of expense, and it is difficult to lay dowa 
 any close rule, but if the cash has been dealt with and tested, what has not been 
 exhausted in the personal trading accounts will fall into capital expenditure, 
 expenses of business and drawings of partners, and the task here is to see 
 that heading No. 2 (expenses) gets its proper share; in consequence all must 
 be looked at. In all investigations it is necessary to keep in view the motives 
 of those who prepared the accounts. In the present case it is to show as good 
 a profit as possible, consequently it may naturally be expected that debateable 
 points have already been decided in favor of the vendor, and unless the 
 accountant raises a protest, judgment "goes by default." An examination 
 of the various accounts showing a capital expended prior to and during the 
 period should first be made ; by this means some general idea of the require- 
 ments of the business will be obtained. Then each item taken or the voucher 
 or invoice examined before the item is passed. The outlay relative to the 
 capital will indicate to some extent the expected life of the machinery or 
 other kind of plant, and be a guide to the vexed question of depreciation. In 
 many businesses the partners are in the habit of making small payments for 
 the purposes or encouragement of trade, some are careless and take no heed, 
 others compoundThe outlay and take a weekly sum to cover it. Naturally it 
 will be wrong to omit these items or allow them as drawings. The expense 
 account may be made up in two ways ; either passed through the dissected 
 invoice book or journal at the time the liability is incurred, or posted direct 
 to the impersonal account from the cash book. If the latter, care must be 
 taken that those outstanding at the end do not exceed the items of a similar 
 character at the beginning, ^t would be better o rectify each period or year, 
 although on average profit it may be enough to add or deduct the difference 
 between the total wrongly included and that left out at the terminating date. 
 
 In the event of the premises occupied by the business being the freehold 
 of the vendor, care must be taken to see that a charge equivalent to rent is 
 
 21 
 
included if the company should not be purchasing the freehold. Rents 
 received from underletting premises^ if included, should be stated separately. 
 
 As regards the question of the accountant's certificate, this should be 
 carefully framed to show exactly what the profits certified to include or 
 exclude, or perhaps it might be better to put it — what has been excluded from 
 expenses before arriving at profit. 
 
 In the certificate of report what is not said is often of greater importance 
 than the actual phrases used. The accountant should strive to make the 
 certificate a record of past facts only, and set out such facts so that they may 
 come up to the desideratum required in the Courts of Justice, viz., that they 
 shall state 'the truth, the whole truth and nothing but the truth." 
 
 In one respect the truth may be told, and yet not the whole truth, that is, 
 in a certificate of average profits that does not give the amount for each 
 separate year. If the profits are gradually increasing, it seems natural that 
 the certificate should say so. If they are not, then a material point necessary 
 to bring out the whole truth has been suppressed. 
 
 Let your certificate clearly state if and how much depreciation has been 
 deducted, and whether manager's or principal's remuneration has been 
 included in the expenses. It is all very well to certify to profits at, say, 
 $100,000 per annum, but if there has first to be deducted $10,000 for 
 depreciation, anything up to $5,000 for manager, and perhaps another $5,000 
 for directors' fees, the anticipated dividend so glowingly portrayed by the 
 company promoter is considerably reduced. The public too often forget 
 the difference between the profit as shown in a private concern and the profit 
 of a company available for dividend. We, therefore, cannot insist too 
 frequently on pointing out the difference. 
 
 In stating that the certificate must only have regard to the past, it does 
 not mean that the accountant having the conduct of the investigation must 
 himself disregard the differing conditions under which it may be contem- 
 plated the business shall be carried on. This leads up to the amalgamation 
 question, which has lately been rather in fashion. 
 
 Unless the certificate clearly shows that every business is making a profit 
 and how much, the statement of a lumped total is valueless, whilst the state- 
 ment as to remuneration to proprietors (whose number is sometimes legion) 
 is even more necessary. Still worse is it when the proposed company has 
 only an option to purchase a certain number of retail corners, which option 
 is probably only exercised in regard to a part of them, and if exercised by 
 unscrupulous persons, it may be by a selection of those most profitable to 
 themselves and most unfit for the purposes of the company. 
 
 Transfer o? Business Undertaking. — Such transfers may be of two 
 kinds, the client may be purchasing the entire undertaking, or he may be 
 
 22 
 
intending to join it in the capacity of a partner ; thus it may be necessary to 
 make a distinction even here. 'Again the chief anxiety must be to see that no 
 legitimate item of expense is omitted, and that the books are true records. 
 Not only should the inner working methods be inquired about, but if it is a 
 ready-money business where there are vouchers or duplicate bills given to 
 customers, or the records of a patent till, these should be examind as 
 vouchers supporting the receipts and showing their nature. A professional 
 man should support his gross earnings by diary or office day books, and so 
 on. The search for expenses follows the line of an ordinary investigation. 
 
 Another point to be borne in mind is : What difference will there be 
 after the change that would affect the results ? For instance : Two part- 
 ners may have carried on a business with no charge for services of either, 
 the purchaser, if not intending to have a partner, may be compelled to take a 
 manager, thus at once eating into and reducing the profits that the past would 
 show. It may be thought that private expenditure would be sacred from the 
 gaze of the investigator. I should say, within reasonable limits, "not so." 
 Let me suppose two cases, one where the amount drawn from the business is 
 small indeed, evidently only enough to satisfy the most moderate needs, 
 whilst in another case the total is large. I should look at the surrounding 
 circumstances, and probably place no prying eye on the details of the first 
 supposed case, whilst in the latter I should scrutinize each item. 
 
 When attending on one occasion I was refused access to the private 
 ledger, except as to the purchases, sales, discounts, and fixed charges for 
 rent, etc., on the plea that the other expenses are as the purchaser chooses 
 to make them. I need hardly say I referred back to my principal. On 
 another occasion I was refused access to the pass book, and as I declined to 
 certify without, that business was not transferred. Speaking generally, 
 unless everything is open to the investigating accountant, he should refuse to 
 certify. It is not so much what is placed before him that requires care, as 
 what may not be put forward. Our anxiety should be to leave nothing out. 
 Every trade has its technicalities, and if we are without a special knowledge 
 of the particular trade, justice to the client requires that, before commencing, 
 we should seek to learn all possible about it. When it is a question of 
 partnership, yet another danger has to be looked for and avoided. The 
 actual position of the person already in the business must be ascertained after 
 being satisfied as to the total profits or earnings. Not only will it be necessary 
 to see that the proposed capital of the combined partnership is sufficient 
 to enable the new ship to float, but the personal position of the other man, 
 both in and outside of the business, should be searched for. If he is a man 
 without other means than is already in the business, the client should know 
 that he is not relied upon for further capital if the firm ever get into a tight 
 
 23 
 
corner. Is he in debt outside the business ? Does he habitually overdraw 
 his account of profits ? If so the client should pause, if not retrace his steps 
 altogether. 
 
 These are legitimate and necessary inquiries, and to ascertain them 
 correctly we must of necessity look into the private accounts where periodic- 
 ally recurring payments specially require explanations. Too often a partner 
 retires with a desire to get out of a bad thing, not caring who may be drawn 
 in. If possible, any information gleaned from the books bearing upon his 
 retirement may be useful. 
 
 Are the liabilities being paid as close to due date as, say, at the com- 
 mencement of the three years under investigation ? Are expenses increas- 
 ing? If so, is the increase in points which show carelessness or want of 
 close supervision on the part of the gentleman with whom the client may 
 have to work? All these and many more (whilst not strictly book-keeping) 
 will be valuable information to the client, and perhaps save him from 
 throwing away his money. 
 
 ACCOUNTANTS' ACCOUNTS.— Owing to the peculiarities of their 
 business, it is very desirable that accountants should keep suitable books of 
 accounts, particularly so as it is a part of their occupation to recommend to 
 others proper and efficient methods of accounting. Example is supposed to 
 be better than precept, but we are afraid that if many accountants' clients 
 could have the opportunity to examine the accounting methods in use by their 
 professionall mentors, they would be surprised and disappointed. 
 
 Accountants obtain business by contract and by time, and it is very 
 necessary for them to keep an accurate record of the value of time employed 
 by themselves and their assistants in the work performed, as this time 
 represents the same to them as the cost of production in a manufactory. By 
 contract we mean that the work is done for a certain prescribed fee, whether 
 per annum or for the particular audit or examination. The accountant's 
 Day Book is therefore frequently represented by a specially ruled diary, which 
 contains each day's appointments, and against these appointments are entered 
 each day the time consumed. Money columns are also provided in the diary 
 for the extension of the value of the time, and a folio column is provided and 
 the various amounts charged up to the client's account. Where business is 
 large, it is customary to have a special ruled book or sheet, one column being 
 devoted to each client's account. The amounts are then entered each day on 
 this sheet, or sheets, from the diary, the totals only of the columns being 
 charged to the client's account at the end of the month. If this method is 
 followed for contract work as well as time work, the advantage will be that 
 the contract accounts will always exhibit the loss or gross profit made. 
 Where losses are incurred, the causes can be investigated and precaution taketx 
 
 24 
 
to prevent a recurrence. Such losses are usually the fault of a defective 
 appreciation of the conditions of the work to be done. 
 
 It is a simple matter to devise a suitable cash book and ledger for an. 
 accountant's business, and in one magazine devoted to professional interests, 
 we were surprised to find a form of cash book on the columnar principle, 
 which provided debit and credit columns for both cash and bank accounts^ 
 involving, of course, duplicate entries, and consequent waste of time. 
 
 ACCOUNTANCY. ) „ , ,. , ,, 
 
 ACCOUNTING C ^^'^tmg to the science of accounts. 
 
 ACCOUNTS, SCIENCE OF.— The recording of the transactions, 
 of a business or industry of any nature. The ability to converge all tran- 
 sactions of a business to a focus, which shall embrace the whole and 
 permit of their proper comprehension and classification. The faculty of so- 
 systematizing accounting methods that the best results shall be obtained with 
 the least labor, expense, or possibility of error or fraud. 
 
 Among the many excellent definitions of accountancy may be quoted, 
 the following: "Accountancy thinks out, and thus finds out, with logical; 
 and mathematical accuracy, the condition of affairs of any business enter- 
 prise. 
 
 Accountancy gives account, not only of its employer's affairs, but of its. 
 own accounts ; so that a manager or proprietor, whether nation, municipality, 
 company, body of voters, or individual, may know how matters stand ; may- 
 render in turn the same intelligent account to any third interested or disin- 
 terested party ; and may keep a complete surveilance over all the accountable- 
 agents of the enterprise. 
 
 Accountancy as a profession is brought into very close touch and" 
 relationship with other important departments of business activity, and the- 
 distinction between it and one and another of these is not always clear to- 
 popular apprehension. The accountant's confidential relation is with the- 
 administrator or proprietor, and it is only as the representative or as the 
 helper or advisor, of his client, that he has to do with the functions of others. 
 He is not, for instance, the book-keeper of the concern; nor does the- 
 expression "expert bookkeeper" describe his attitude or relation either to that 
 functionary or to any other corps of bookkeepers, however large and impor- 
 tant, much less to the establishment or enterprise in its entirety. He is, 
 however, a bookkeeper in the sense that he thoroughly understands the ins 
 and outs of that art ; and as the representative, for the time, of the business, 
 he critically examines the accounts as recorded in the books in order that he 
 may give to his employer a scientific showing of the financial condition of the 
 enterprise. 
 
 25 
 
The accountant is not the official auditor. Every great enterprise has 
 its auditor; and in the organization of railway and other administrations 
 there is often an important corps of what are known as traveling auditors. 
 The accountant is called upon, whether these officials exist or not, to make an 
 audit ; or, as it is sometimes called, an independent audit. In the perform- 
 ance of this duty, he must audit the auditor's accounts, and if, as in one or 
 two recent cases, he proves that the auditor has cooked the accounts to his 
 •own pecuniary advantage, and has been false to his trust, the independent 
 accountant, in the exercise of his knowledge and skill, has merely performed 
 his part in the discovery of the truth. 
 
 Commercial law is also studied by the accountant, so that in his advisory 
 
 -capacity, not as a legal practitioner, but as merely knowing what or what not 
 
 is allowable in certain cases, he may assist his employer in steering clear not 
 
 -only of litigation itself, but of complications that may result in financial ruin. 
 
 Accountancy is the element that from the earliest forms of society has 
 
 held trade and commerce in their vari6us orbits. It is the element that has 
 
 "kept our ever broadening and increasing commercial relations from hopeless 
 
 •confusion, and has maintained in harmonious relations the numberless values 
 
 of our economic life. 
 
 The science of accounts is a knowledge of the expression or manifesta- 
 tion of accounting, while bookkeeping is an art involving the practical 
 application of the principles and methods of accounts to the record of 
 business transactions. Thus, the exponent of the science is the professional, 
 ■or public accountant, while the exponent of the art is the bookkeeper. 
 
 The terms "accountant" and "bookkeeper" are commonly used inter- 
 changeably as being one and the same, when, as a matter of fact, the functions 
 of each are separate and distinct, and the lines of demarcation are very 
 sharply drawn. The profession of accountancy and the profession of book- 
 keeping are each a separate profession, although very generally the idea 
 prevails that there is but one profession, which includes both. The work of 
 the bookkeeper is synthetical. He puts together, he compiles the history or 
 record of acts performed. The work of the accountant is analytical. He 
 analyzes the record, proves its correctness, searches for causes and inquires 
 - into methods. The work of the two is not identical, and yet they have many 
 kindred purposes. 
 
 accountancy; ethics of.— it is generally considered by pro- 
 fessional accountants to be opposed to the best traditions of propriety for one 
 professional man to canvass the client of another for business. One of the 
 reasons for this point of etiquette among accountants is that information of 
 the most delicate and momentous nature is frequently committed in confi- 
 •dence by the client to the accountant, the accountant standing in relation to 
 
 26 
 
his client as an advisor and confidant, and it may be readily recognized that 
 under these circamstances it is to the interest of the client to restrict such 
 confidences as much as possible to one reliable person. 
 
 Advertising is also a violation of the accountant's code of ethics, but 
 there appears to be a distinction drawn between direct advertising and 
 indirect advertising, in the way of an accountant keeping his name continu- 
 ally before the public as treasurer or auditor of philanthropical, or charitable, 
 or other public institutions in connection with which he expects to be brought 
 into contact with possible clients. This portion of the code of ethics is not 
 much respected in the United States, where professional men have reduced 
 copies of their photographs, and quotations of their terms, and sometimes 
 even a reduced copy of their certificates of membership in the society to which 
 they may belong, on the back of their business cards. As a rule, it is safe 
 to assume that the accountant who advertises his business and terms in this 
 way, depends rather upon advertising than upon the necessary qualifications 
 in order to obtain clients. It is quite common for bookkeepers, possessing 
 absolutely no experience or ability which would qualify them to describe 
 themselves as accountants, when out of a position to issue cards of this 
 descriptiotL 
 
 Touting is also very strongly condemned by English accountants, and 
 we hear of chartered accountants in New York who would not send a man 
 across the street to obtain business, if the business could be secured in no 
 other way. This extreme delicacy of feeling does not appear to be suitable 
 to the conditions of the United States. If accountants in this country desire 
 to prosper, it is undoubtedly necessary to keep up a persistent campaign so 
 that the business public may be educated to the necessity of efficient methods 
 for keeping a record of their accounts, the accuracy of which should be 
 unquestioned, and this can only be accomplished by a certain amount of 
 touting and advertising. 
 
 ACCOUXTIXG, HISTORY OR— A great deal has been written in 
 regard to the methods used by ancient trading peoples for the purpose of 
 recording their commercial transactions. A very interesting historical 
 sketch will be found in the little book entitled "The Antiquity of Book- 
 keeping," by John ^\"illiam Heaps. ^Ir. Heaps describes discoveries in this 
 direction in connection with Phoenicia, Arabia, Chaldea and China. 
 
 The development of the Science of Accounts, as we know it, has been 
 gradual and slow, but like many another science it may have been discov- 
 ered, lost and rediscovered many times since the world began. It is certain 
 that mankind has always traded and that trading necessitates the keeping of 
 records, and as accounting is so closely allied to mathematics there is every 
 reason to suppose it is of most ancient origin. 
 
 27 
 
One of the earliest actual traces of a record of receipts and payments 
 appears to be found in the Assyrian tablets discovered by Sir Henry Rawlin- 
 son, and supposed by him to be "personal expense" books. Even so, these 
 tablets would indicate a great familiarity with the subject of accounts, for if 
 a strict account were kept of personal expenses there would doubtless be 
 more elaborate and thorough methods of dealing with commercial tran- 
 sactions. 
 
 The first record of a sale in exchange for money appears to be the sale of 
 the field and cave of Machpelah to' Abraham for four hundred pieces of 
 silver, but there is no doubt that all the great ancient trading nations from 
 Babylon to Rome had more or less elaborate systems of book-keeping or 
 accounting. That the Babylonians kept books of account is certain, as some 
 of their ledgers are now deposited in the British Museum,- London. They 
 consist of tablets, each set being deposited in a separate jar, probably so that 
 they could be "balanced separately" and any "errors easily located." Here 
 may perhaps be traced the origin of the card system. Part of the business 
 carried on was in the real estate line, the rent of a moderate sized house being 
 one-third of a shekel of silver per year. As a shekel of silver is valued at 
 about sixty cents, we can appreciate what we miss by living in the twentieth 
 century of the Christian era. 
 
 The first treatise on bookkeeping is said to have been a translation from 
 an Arabian original, but no copy is in existence. The first actually known 
 work on double entry is supposed to have been written by Lucas de Burge, 
 an Italian friar, and was published in Venice, A. D. 1495. The first treatise 
 on the subject in the English language was published in London by John 
 Gowghe in 1543. It was afterwards repubHshed in 1588, by John Mellis. 
 The system taught thereby required the use of three books, named the 
 Memorial, Journal, and Ledger. We suppose the Memorial to be another 
 name for "Day Book." The treatise of Stevinus, published in 1605, applied 
 the double entry system to the accounts of public or government offices. The 
 work of Mr. E. T. Jones, of Bristol, published in 1796, is spoken of very 
 highly as being a long step in the direction of our present practice, which 
 appears to be almost, if not quite, the perfection of analytical and mathema- 
 tical science as applied to accounting. 
 
 Dr. Kelly's "Elements of Bookkeeping" may also be mentioned, 
 which appeared in 1 80 1 . This work contains a short history of the literature 
 of bookkeeping, and is perhaps the most comprehensive account of the 
 subject to be found in any work on bookkeeping. 
 
 This work is considered as the first attempt to introduce the practice of 
 the counting-house, or office, into schools, by a person who derived his infor- 
 
 28 
 
mation on the subject merely from the hints of merchants, without having 
 actual practice. The work is arranged according to the methods in use in 
 some counting-houses, but no attempt has been made to improve or remedy 
 any defect in practice. 
 
 Following Dr. Kelly is Mr. James Morrison, a Glasgow accountant, who 
 published his Complete System on Merchant Accounts and Modern Princi- 
 ples of Bookkeeping in 1808 ; this work ran through several editions, and was 
 adapted for school use. Mr. Morrison is spoken of as being in his later 
 editions one of the best authorities on the subject, as his work was doubtless 
 at the time of its publication the most comprehensive work upon the duties 
 required of a merchant's bookkeeper, treating of the various documents 
 required in commercial transactions, as well as "in bookkeeping, by several 
 methods. 
 
 ACCOUNTING SYSTEMS.— There are several so-called systems of 
 accounting, which are really nothing more than systems of record, such as 
 the Loose Leaf System, the Card System, the Safeguard, or Self-proving 
 System, the Voucher System, etc. These various systems of record will be 
 treated under their respective headings. 
 
 Practically, there are but two systems of accounting in use in the com- 
 mercial world, viz., single entry and double entry. These two systems will 
 also be described hereafter under their respective titles. 
 
 The difference in the "requirements of manufacturing, trading, and non- 
 trading enterprises is so great, however, that the system of accounting 
 required varies greatly both in scope and detail, so that it might with pro- 
 priety be said of many businesses that their accounts were arranged on a 
 special system. It would be utterly impossible to attempt to set down the 
 differences to be found by a comparison of such systems, for obvious reasons, 
 but so far as possible a number of such systems will be described in detail as 
 this Encyclopaedia proceeds. The accountant will bear in mind that the 
 object of all systems of accounts is to exhibit the result of the transactions of 
 the business during specified periods, arranged in such a manner as to inform 
 the proprietors of the business of the amoimt of revenues and how they have 
 been produced, the amount of expenditures and their details, and the net 
 income remaining. The best system of accounting, therefore, is the one 
 which will furnish these particulars in the clearest possible manner, with the 
 smallest expenditure of time and labor. 
 
 ACCOUNT BOOKS. — Far more attention is given in these days than 
 heretofore to the manufacture of account books. While the value of statis- 
 tical records remained unrecognized by the commercial community, it was 
 quite natural that none but the cheapest kind of account books should be 
 
 29 
 
considered necessary. It is easily within recollection that important houses 
 used the same form of ruling for ledger, cash, and journal (regular two- 
 column journal). 
 
 The advance in the science of accounting, however, has brought with it 
 an equivalent advance in the kind of blank books used. In the year 1799 
 there was but one account book manufacturer in London. Now every small 
 cit}- has its high-class representative, and the account books made are very 
 superior and elaborate productions. 
 
 The paper is first ruled and printed and then passes to the folders. If a 
 small lot. folding is done by hand; if a large lot, the operation is done by 
 machine. When folded into sections, the paper is made up into books 
 ^^'aste papers are added, and the books are sent to the sewers. Most of the 
 small jobs are sewed by hand, while the large ones are handled by machinen.-, 
 if within a certain size of thickness. The books then go to the forwarding 
 department, where they are lined with muslin. The latter being dry, they 
 are cut on front and then glued up. \\'hen dried again, the books are 
 rounded, cut on the ends, greened and boarded, and (if half-bound) put in 
 leather after boarding. They are next sided with cloth, paper, canvas, cor- 
 duroy, and like material, and after drying are sent to finishers, who do the 
 lettering in gold and apply the minute details of completion and elaboration. 
 The books are pasted up and placed in the press to ensure smoothness to the 
 waste papers, as well as solidity to the volume. If full-bound, the books are 
 strapped after they have been cut and greened. When dried they are then 
 boarded and patent backs are made, consisting of one or two extra tar trunk- 
 boards, made for the purpose, according to the thickness of the book. 
 
 \\^ith regard to the separate processes, ruling is a distinct art in itself, 
 entirely independent of, although intimately associated with, blank-book 
 making. It is, moreover, the first process to which paper is subjected in 
 producing- books wherein records of income and expenditure, etc., are to be 
 kept. As a strictly mechanical process, it requires the niceties of delicately 
 adjusted machinery to give best results. As an art demanding some chemi- 
 cal and expert knowledge, it requires supervision of an intelligent kind. It is 
 divided into classes, according to the character of the lines ruled and the 
 directions thereof. \\"here a ruling is given the paper, which covers it along 
 its entire length or width with parallel lines (usually ruled on witlj pale 
 blue ink), the method is known as "faint lining." ^^"here the paper is ruled 
 with vertical lines, beginning or terminating at one or more definite points 
 on the sheet, the method is called "down lining" or "stopwork." The latter 
 ruling is variously done in dark blue, red or green inks. 
 
 Ruling is done, with the general run of job-work, upon pen-ruling 
 machines for one side, and the large runs sent to automatic machines, tech- 
 
 30 
 
1 
 nically known as "double-deckers," into which the sheet is fed automatically, 
 ruled up-and-down and across by the same means, and then i-eversed and. 
 operated on the other side, making the process a perfecting .^ne. In pen- 
 ruling machines the pens, which are a special device, are carried in a 
 clamp, and receive ink from a piece of flannel saturated with the color. At 
 each end ofvthe machine are two wooden rollers, around which revolves a 
 web of moleskin cloth, a series of cords holding the paper where it belongs 
 and feeding it along while being ruled. The paper is fed by means of a 
 guage in front of the machine, so that it accurately enters and is borne by the 
 cloth beneath the pens, receiving the ruling, and passing to the back end of 
 the machine, where it is carried by cords to the front again. The ruled sheets- 
 pass around the front roller, are carried by another traveling cloth through 
 the machine and deposited in a receptacle, to be jogged up by what is known . 
 as a "lay-boy," which evens up the sheets in a pile so that they will lay- 
 uniformly. 
 
 Blank-Book Sewing. — In the process of blank-book work, books to- 
 receive printed headings are sent to the printing departments first of all ; but 
 those not to be printed go direct to the folders, and are then made up. The- 
 sheets are scrutinized carefully by the operative at this point, no finger-marks 
 or stains being permitted, nor any imperfect ruling or printing. Folding is. 
 a skilled operation, as uniform margins must be obtained. When this has- 
 been effected, the books are counted off and are properly divided. If heavy, 
 small straps of muslin are pasted into the first and last several sections of the- 
 book to give strength, as soon as folding is done. The sheets are then lejEt. 
 to dry. If the books is to have divisions with lettered tabs, these are fastened 
 to the book by two strips of muslin applied on either side of the leaf. The- 
 sections are next well-rubbed down with a tool called a "folding stick," and 
 the heavy books pressed to give solidity and firmness. Sewing is now pro- 
 ceeded with. The mode of sewing varies in accordance with the style of" 
 binding determined upon, whether "half-bound" or "full-bound." Half- 
 bindings are those with leather backs and corners, and the sides of other- 
 materials, such as cloth, paper, etc. Full-bindings are those of full canvas 
 or leather, with corners of Russia leather, or ends or bands of the samt 
 material; they also include those where "full extra Russia" constitutes the 
 appellation. It is unnecessary to give the variety of technical classes into 
 which bindings for blank-books are grouped; those given are the broad 
 classifications. 
 
 Before sewing the books end-papers are inserted as leaves both at the- 
 front and back of the book, and the substantiality of the stitch exactly 
 parallels the weight of the book to be unified. The larger the book the 
 stronger the sewing. No flimsy catches of thread will do here. One of the- 
 
 81 
 
luge ledgers or registers which go out of this establishment to banks and 
 kindred institutions is intended for rough handling and constant usage. 
 Everything entering into it, whether of material or of handling, must be 
 the incarnation of permanency and flexibility. The book must not only be 
 impervious to careless treatment; it must lie open easily and flatly. The 
 covers must not warp ; the backs must not crack off and split away from the 
 paper; all attributes must be just so. As direct consequences of these 
 requirements, the amount of skill and ingenuity which enters into the produc- 
 tion of a blank-book of the better class is well nigh incredible. 
 
 The difference in strengths of blank-book sewing resides in the niunber 
 of bands upon which the book is stvm, as well as the strength of the tapes and 
 thread employed. The object in view must be v>'ell kept in mind, viz., that 
 the union of each single part must be effected not only among themselves, 
 but with relation to the finished book. To disregard any one of the processes 
 is to admit an element which can never be rectified when its stage has been 
 passed. 
 
 From time to time, as the sections are sewed, they are tapped down well 
 with a hammer and rubbed, so that the glue will have no difficulty in entering 
 where it belongs. Swell enough is left at the back to furnish the spring 
 -needed to the bound book. When sewn, the slips are tightened, small muslin 
 straps are pasted where the end papers join the back, and the books are 
 trimmed at fronts and edges. 
 
 Notwithstanding the indefinite meanings of trade phraseology to the 
 la)mian, the terms employed in blank-book making are quite simple and 
 appropriate. There are two broad processes that await us as we follow the 
 blank book through its various stages, and these are known respectively as 
 "forwarding" and "finishing." By the first is meant all operations connected 
 with covering the bodk, putting it between boards, etc., etc. It is the series 
 of steps whereby the book is carried forward to the point when finishing 
 touches are applied. By "finishing" is meant this last chain of operations; 
 it is the work of the artist rather than of the artisan. 
 
 Here are introduced those artistic elements which converts the blank- 
 "book into a thing of beauty. The "forwarder" then is the handicraftsman 
 who cases the book and covers it; the "finisher" is the artist who ornaments 
 and completes it. Both processes are carried into effect upon the sixth floor 
 of the establishment, and here also it will be remembered that "full-bound" 
 yvork is done. A large corps o ^ adepts in each branch of the art is employed, 
 beneath whose dexterous hands the unshapely masses of sewn paper assume 
 form and comliness. 
 
 Our blank-book has been sewn ; it must now be forwarded. The book, 
 as made up, is first of all lined up with muslin, after which the front is 
 
 32 
 
trimmed. Gluing is the next operation. Tiie functions of this very essential 
 manual process is self-evident ; the sewn sections must be both firmly and 
 closely united to each other, strength being a consideration which no for- 
 warder will dare to disregard. When dry, the book is rounded in order to 
 give the curvatures at the back and foredge. The workman places the book 
 upon a solid table or an iron block, and with the fingers of the left hand 
 gently urges the foredge towards him, the right hand in the meanwhile 
 swinging an implement known as a "bench hammer," with which he taps the 
 book along its back until the latter is so perfectly rounded that the arc of a 
 pair of compasses equals the curve effected, and until the foredge will exhibit 
 a smooth and uniform curve with no protruding surfaces. The books are 
 laid between boards and subjected to a moderate pressure for some hours 
 before the next operation begins. They are cut or trimmed at head and tail 
 (the ends), and are ornamented on the edges with the color that is desired, 
 green being, mostly used in this establishment. There are three ways of 
 imparting decorative finish to the edges of a blank book : the first of which 
 is "marbling," the second "dyeing," and the third, or most expeditious and 
 substantial, the operation called a "waxed edge." This latter, which we 
 alone need describe, is done by dissolving beeswax over heat, and sprinkling 
 it evenly but lightly over the edge to be colored. The color is then passed 
 over the edge with a brush or sponge, without regard to the spots of wax 
 beneath. After drying, the wax is scraped off and by burnishing a brilliant 
 gloss is imparted. 
 
 The book, being "greened," is next strapped-ofif on the back, and making 
 the "lugs" or "stays" is proceeded with. The covers must be prevented from 
 bending in on the book when closed, and so it is necessary to effect an 
 elevation between them and the book at that point. Accordingly, the work- 
 man glues the outermost leaf of the book, laps it around and around until the 
 folding brings it close to the edge of the back, making.a stiff stay at that point. 
 This is later on glued between the boards forming the cover. 
 
 The forwarder now takes a piece of leather (flesher or split goat) and 
 presses it well dov^rn on the back, letting it overlap about two inches on either 
 side. He glues this plentifully, draws it rapidly and tightly over the back, 
 and rubs it down well to ensure adhesion. The boards are next applied, 
 already previously cut to the proper size and strength in accord with the 
 weight of the book to be made. 
 
 Being trimmed to the proper size, the boards are ready for use. Patent 
 backs are made — the trade name being "spring backs" — by cutting tar 
 trunk-boards the same length of the boards for the front and back, letting 
 them be slightly wider than the back of the book so as to overlap oh either 
 
 33 
 
edge. The tar boards are moistened with water, subjected to heat and 
 formed to suit the curve of the back. They are drawn on the book with a 
 piece of canvas after this is done. 
 
 On large ledgers and similar books there are raised projections, called 
 "hubs," at the back. These are glued onto the back of the book. Russia 
 leather is then put on and well rubbed down, when the book is again placed in 
 the standing press. The leather or canvas covers are then applied, when the 
 book leaves the forwarder to be finished. 
 
 Taking the book, which is yet far from complete, the finisher first of all 
 trims down the Russia leather with neatness and dispatch, buffing ofif the 
 flesher with powdered pumice to freshen and clean it. The black bit of 
 leather to receive the title is then cut to fit into the panels between the bands 
 and is pasted on. The ornamentation of the back is now in order. Good 
 taste dictates that the decorative scheme shall be simple and yet beautiful. It 
 is the function of the upper blank to receive the designation of the book ; that 
 is, what purpose it is intended to conserve. In the center panel appears the 
 year, etc., while the panel at the bottom receives the firm name. These are 
 stamped on or impressed on by hand, in gold. Russia leather on the sides 
 is treated in the same way as the back. The tooling is done upon the scale 
 of elaborateness or simplicity desired by the customer, who may either wish 
 to have a perfectly plain front and back, or covers of more decorative char- 
 acter. There are many ways in which geometrical figuring is laid on, and 
 each different. Heated rollers enter into almost all of them, a small tool 
 being used to impress a section of the decoration if hand-tooling is employed. 
 An artist first draws the design, after which the finisher interprets it upon 
 the book cover. When finished, the blank-book is pasted up to give smooth- 
 ness to the waste-papers, and is placed, with its fellows, in the standing press. 
 It is then paged, examined by the foreman, and passed down to the shipping 
 department. 
 
 ACCOUNT BOOK— (Com. Law).— A book in which accounts are 
 kept ; a book kept by a merchant, trader, mechanic or other person, in which 
 are entered, from time to time, the transactions of his trade or business. 
 Such books, when regularly kept, may be admitted in evidence. 
 
 ACCOUNT SALES. — An itemized statement of account of goods 
 held on consignment (or to be sold on commission) sent by consignee to 
 consignor. 
 
 ACCOUNTS RECEIVABLE ACCOUNT.— (a) The ledger account 
 with a customer, or debtor. A sales account. 
 
 (b) A sundry accounts receivable account is one in which a number 
 of small accounts are bunched, the balance being drawn at the close of the 
 
 34 
 
month by subtracting the total of the credits to all the accounts as if it were 
 an account with one individual. 
 
 The credits to sundry accounts receivable account should be posted 
 consecutively, and checked alphabetically, or numerically, with the debits 
 to which they relate. When the system is adopted of placing each' credit 
 opposite to its corresponding debit, the entire account to be footed anew 
 every time a balance is taken, the account is always in great confusion and 
 a prolific source of error. 
 
 There are many ways of treating accounts receivable from the time the 
 letter is received which contains the remittance in payment of the account to 
 the posting of same to the ledger. As a rule the letter and check are handed 
 to the cashier (or book-keeper when he combines the duties of cashier and 
 book-keeper), and he makes a notation on the letter of the page of the Cash 
 Book on which the remittance is entered, and at the same time examines the 
 correctness of all deductions for discount, freight, allowances, claims, etc. 
 After the entry has been made on the Cash Book, it is desirable to file the 
 letters in a special Accounts Receivable file, where they may be traced as 
 vouchers, which will show the net amount of check received in case any 
 question should hereafter arise in regard to the amount of deductions as 
 shown on the Cash Book. Where deductions have to be referred to a 
 traveling salesman or other party for O. K., the amount of remittance will 
 be entered on the Cash Book and posted to the ledger, leaving a balance 
 outstanding until the claim can be O. K.'d or refused. 
 
 ACCOUNTS RECEIVABLE BOOK.— Generally a book designed to 
 keep track of credits for the use of the credit man. 
 
 It is usually ruled for months, the customer's name and amount of bill 
 being entered under the due date. 
 
 Each month, therefore, this book furnishes a list of collections to be 
 made during that month, and space is provided in which to record the steps 
 taken for collection and their result, together with other memoranda. 
 
 ACCOUNTS PAYABLE ACCOUNT.— The ledger account with the 
 creditor, a purchase account, a representative account to which are posted 
 the totals of accounts, payable columns from Cash Book and Journal. 
 
 ACCOUNTS PAYABLE BOOK.— The record of accounts payable is 
 sometimes called a Purchase Record, or Voucher Record. The distinguish- 
 ing features of these records will be considered under their appropriate 
 headings. In some businesses the record of purchases is called an Accounts 
 Payable Record. All invoices are entered in this book as received and 
 columns are provided for rebates, allowances, cash discounts, transportation, 
 deductions, etc. Distribution columns are also provided for the different 
 
 35 
 
accounts to which the goods purchased are to be charged. In most cases the 
 gross amount of the invoices (less legitimate trade discounts) is credited 
 to the Accounts Payable account in the general ledger, the posting being 
 the total of the amount column in the Accounts payable Record. The totals 
 of the columns provided for cash discounts, rebates, allowances, etc., will be 
 posted to the debit of Accounts Payable account or charged to accounts 
 which are negative to Accounts Payable account. 
 
 The particular usefulness of the Accounts Payable book appears to be in 
 the facility afforded for the proper distribution of purchases to the different 
 departments of the business, the totals of such columns . being posted 
 to their respective accounts once a month. It is quite usual, however, 
 to enter all bills in the regular cross-entry journal (which is a coun- 
 terpart of the old-fashioned sales book). At the end of each month 
 the total of the invoices entered is debited to merchandise account just as 
 the total of the sales book is credited to merchandise account. This 
 method, however, is gradually getting out of date, for the reason that modern 
 systems of accounting require a distribution of purchases and sales in order 
 to thereby obtain more particular information as to what classes of goods are 
 selling the best and which are yielding the most profit. A proper Accounts 
 Payable or Purchase Record also saves the book-keeper a large amount of 
 time which must necessarily be ^ent where all invoices are first of all entered 
 in a journal and then posted from that journal to separate accounts in the 
 ledger, while all checks issued in payment for bills are in like manner posted 
 from the Cash Book to the debit of the purchase accounts kept in the purchase 
 ledger. Where the Accounts Payable record is kept as above indicated, the 
 total of the invoices entered therein is at the close of each month credited to 
 an Accounts Payable account kept in the general ledger. A special column is 
 provided in the Cash Book headed "Accounts Payable" and the total of this 
 column is at the close of each month posted to the debit of the Accounts 
 Payable account in the general ledger. Allowances, discounts, etc., are 
 credited to interest and discount, or similar accounts, and debited to Accounts 
 Payable account, so that the balance of this account will always reveal the 
 amount of outstanding indebtedness on accounts payable. The Accounts 
 Payable account on the general ledger will, therefore, show as per example 
 given above : 
 
 This method is particularly convenient where it is customary to discount 
 all bills, or for taking care of small accounts payable where they are very 
 numerous. The balance of the account can always be verified by inventory 
 of unpaid bills on file. 
 
 ACCRUED. — Increased by effluxion of time; something added. In 
 accounting, generally applied to amounts earned, but not received or entered 
 
 36 
 
on the books (such as rent, wages, interest, etc.), at any given date on which 
 the balance sheet is compiled. 
 
 ACCRUED— (Com. Law).— Means due and payable, vested. The 
 phrase "The dues of members of the lodge accrue weekly," was held to 
 mean that the dues are estimated or measured weekly, and not that they 
 were payable weekly, 
 
 ACCRUING INTEREST— (Com. Law).— Running or accumulating 
 interest, as distinguished from accrued or natural interest. 
 
 ACKNOWLEDGE— (Com. Law).— To admit; to confess, to give 
 a receipt for money; to own; so to assent to a legal instrument as to give 
 it validity. 
 
 ACKNOWLEDGMENT— (Com. Law).— The act of acknowl- 
 edging the state of being acknowledged, or the thing acknowledged. 
 
 The admission of having received money, whether owing to one or 
 bestowed as a gift ; the admission of having received a benefit of any kind ; 
 also the receipt for such money, the expression of gratitude for such favor. 
 
 The admission of an act to take the responsibility of it, as the admission 
 of a debt. No verbal acknowledgment of a debt more than six years old 
 will bar the operation of the statute of limitation. It requires the 
 acknowledgment to be in writing. 
 
 The act of one who has executed a deed or other legal instrument, in 
 going before some competent officer, or court, and declaring it to be his 
 act and deed. In most states such act is held t;o be a judicial one, while 
 in some it is held to be a ministerial one. 
 
 Tbe object of acknowledgment is two fold: first, to entitle a deed to 
 be recorded; and, second, to make it competent evidence without further 
 proof of its execution. 
 
 The practice of acknowledging instruments is a creation of modern 
 statutes, being unknown to the common law. It arose from a desire to 
 prevent fraud and litigation in establishing title to lands, by providing 
 reliable evidence of such title. 
 
 Acknowledgment is not an essential part of the instrument ; and as to 
 parties to the instrument, and persons with actual notice, neither an 
 imperfect acknowledgment nor the total want of any acknowledgment 
 affects the validity of the conveyance. 
 
 ACKNOWLEDGMENT, FORM OF.— On this day of 
 
 , A. D. one thousand eight hundred and ninety , before 
 
 me, , a Notary Public, in and for said County, 
 
 residing therein, duly commissioned and sworn, personally appeared , 
 
 known to me to be the President, and , known to me to be the 
 
 37 
 
Secretary of the , the corporation described in and that executed 
 
 the within and annexed instrument, and severally acknowledged to me that 
 such corporation executed the same. 
 
 In Witness Whereof, I have hereunto set my hand and affixed my 
 
 official seal, at my office, in the City of , County of , 
 
 State of , the day and year in this certificate first above written. 
 
 Notary Public. 
 
 ACQUAINTANCE — (Com. Law). — Acquaintance is familiar 
 knowledge, a state of being acquainted, or of having intimate or more than 
 slight or superficial knowledge ; as I know the man but have no acquaintance 
 with him; familiarly knowing; to know personally. 
 
 ACQUIESCENCE — (Com. Law). — A silent appearance of consent; 
 submission to; express or tacit consent, assent to; tacit acceptance of. 
 
 Acquiescence in the acts of an agent, or one who has assumed that 
 character, will be equivalent to an express authority. Mere delay in 
 repudiating an agent's unauthorized contract will not ratify it, but is 
 evidence from which the jury may infer such ratification. 
 
 ACQUITTANCE — (Com. Law). — An agreement in writing to dis- 
 charge a party from an engagement to pay a sum of money. It is evidence 
 of payment, and differs from a release in this, that the latter must be under 
 seal, while an acquittance need not be under seal. 
 
 The act of acquitting or releasing from a charge or debt. 
 
 ACT OF GOD — (Com. Law). — Any accident due to natural causes 
 directly and exclusively, without human intervention, such as could not 
 have been prevented by any amount of foresight, and pains, and care 
 reasonably to have been expected; such as those caused by lightning, 
 earthquakes, and tempests. 
 
 Where the law casts a duty on a party, the performance shall be excused 
 if it be rendered impossible by the act of God ; but where the party, by his 
 own contract, engages to do an act, it is deemed to be his own fault that 
 he did hot thereby provide against contingencies, and exempt himself from 
 responsibilities in certain events ; and in cases of absolute general contracts, 
 the non-performance is not excused by an inevitable accident, or other 
 contingency, although not foreseen by, nor within the control of, the party. 
 
 Contracts for strictly personal services, marriage, etc., are discharged 
 by death or incapacity. 
 
 ACTIVE PARTNER. — One who has a direct interest in a business 
 through investment, being proportionately responsible for the liabilities, and 
 sharing proportionately in the profits of the business, and who takes part in 
 the daily management of such business. '~~ 
 
 38 
 
ACTUAL — (Com. Law). — Something real, in opposition to con- 
 structive or speculative; something "existing in act." The actual possession 
 by a person of any property creates the presumption that he is the rightful 
 owner thereof; hence the necessity of recording bills of sale, chattel 
 mortgages, etc., to give third persons notice of rights of lienors. 
 
 ACTUAL DAMAGES— (Com. Law).— The damages awarded for 
 a loss or injury actually sustained; in contradistinction from damages 
 implied by law, and from those awarded by way of punishment. 
 
 ACTUAL DELIVERY— (Com. Law).— Actual delivery is held 
 commonly to apply to the ceding of the corporal possession by the seller, of 
 his servants, and the actual apprehension of corporal possession by the 
 buyer, or his servant, or by some person authorized by him to receive the 
 goods as his representative, for the purpose of custody or disposal, but not 
 for mere conveyance. 
 
 ACTUARY. — An official who calculates and tabulates for insurance 
 companies the average risks on which all insurance premiums are based. 
 
 ADDITIONS AND BETTERMENTS.— A term sometimes used to 
 describe expenditures which increase the value of equipment, and are not 
 merely replacements or renewals. 
 
 ADDITION. — The uniting of two or more numbers in one sum. 
 
 A recent work on Higher Arithmetic says : "In computing, bookkeepers 
 whose business leads to rapid addition, omit much that would seem necessary 
 to the ordinary student, and not infrequently add two columns at once, a 
 power gained only by practice in their profession." It is undoubtedly the 
 aim of every bookkeeper and office man to attain a high rate of speed in 
 addition, coupled with accuracy, and various methods have been devised to 
 facilitate both speed and accuracy. While methods for effecting accuracy 
 will be considered under the head of "check figure," etc., those which relate 
 to attaining speed in addition may appropriately be considered here. 
 
 The most common method used and recommended by experts in this line 
 is the learning of combinations of figures, so that 9+8+7, for instance, will 
 be read as 24 by one operation of the mind. Thus, in reading, we do not say 
 O+N+E equals ONE; neither should we say 9+8+7 equals 24. 
 
 Numerous tables have been prepared to aid the student in making 
 himself thoroughly familiar with the various combinations of numbers, and 
 in Soule's Philosophical and Practical Mathematics are given extensive drill 
 tables which should be found of great assistance. Drill tables are also 
 constructed on cards, each card bearing a combination of two 01' more figures. 
 By shuffling and reshuffling these cards the drill exercises are constantly 
 varied, which is certainly an advantage over printed tables where the relative 
 position of the combinations never changes. 
 
 39 
 
The dropping of tens is also frequently used by experts who keep 
 account of the tens dropped in a column with the fingers of the left hand. It 
 requires considerable practice to become efficient with this device, and at 
 first the frequent miscalculation of the number of tens dropped will be apt 
 to discourage the student. Another method of dropping tens which will 
 perhaps be better for beginners to use is to place a dot against the figure 
 where the ten is dropped. Thus : 
 
 4 
 
 S- 
 
 6 
 
 Another method in considerable favor is the grouping of figures above 
 lo and under 20. By this method 8+7 becomes 10+5. While this particu- 
 lar principle does not appear to be entitled to much credit in single column 
 addition, there is no doubt of. its usefulness in double column addition. In 
 the following example the operator adds both columns by the following 
 process : 
 
 46 
 
 83 
 
 27 
 
 34 
 
 76 
 
 266 
 
 46+80+3+20+7 
 +30+4+70+6 
 
 which he reads: 46, 126, 129, 149, 156, 186, 190, 260, 266. 
 
 Proficiency in this method will soon enable the student to add double 
 columns without separating each number as above shown, the mental process 
 becoming practically instantaneous. 
 
 Under the heading of Amusing Arithmetic will be found a description 
 of some of the tricks which have been used to mystify the public. 
 
 ADJUST. — To regulate ; to bring to a proper relative position. 
 
 ADJUSTING BOOKS.— Preparing statements based upon data 
 obtained from books of account which shall indicate and settle the different 
 interests of a business, and to which statements the books must be made to 
 conform. 
 
 A number of useful examples of such adjustments of both corporation 
 and partnership accounts will be found in Eddis' Manual of Accountants. 
 
 The principal statements used in adusting books of accounts are the 
 Profit and Loss statement and Balance Sheet. 
 
 40 
 
ADJUSTING ENTRIES.— Entries necessary for the adjustment of 
 the respective interests of a business. A cross entry made in the journal tO' 
 correct an error, or rectify an overcharge, etc. 
 
 ADJUSTING FIRE LOSS.— See fire insurance. 
 
 ADJUSTMENT ACCOUNT.— A term used to describe an account tO' 
 which adjusting entries are debited and credited for the purpose of adjusting 
 or correcting books of account. In auditing, it is a common practice to open 
 such an account, charging and crediting to same all dififerences or errors, 
 which may be discovered in the course of the audit. Where such an account 
 is carried it will be found of great assistance to the accountant, as this account 
 not only contains the details of every difference, but at the same time" keeps- 
 the books in balance. 
 
 A title used by accountants to describe Balance Accounts with ledgers, 
 which are used to assist in locating errors which may have occurred. The 
 original idea was that each departmental ledger (wholesale, retail, city, 
 country, state, etc.) should contain a General Ledger adjustment account,, 
 while the General Ledger should contain an adjustment account with each 
 departmental ledger. In practice, however, it has been found unnecessary- 
 to carry the adjustment accounts with the General Ledger in the departmental 
 ledgers, as this merely involves a duplication of work. The adjustment 
 account in the departmental ledger has been discontinued also with the object 
 of preventing the bookkeeper keeping the departmental ledger from knowing- 
 whether his work is correct or not until it has been incorporated in the 
 General Ledger and compared with the' postings to the adjustment account 
 from the total columns of the books of original entry. So far as this is 
 concerned, however, the desired object cannot be obtained, as any bookkeeper 
 can prove his own work if he has any wish to do so. If he cannot obtain the 
 actual balance of his ledger as a basis for proving his postings, he can- 
 establish an imaginary basis which will answer the purpose just as well. 
 The assertions, therefore, of some accountants that they can introduce 
 systems of accounting by which the various bookkeepers will be dependent 
 upon the head accountant for the knowledge of the accuracy or inaccuracy 
 of their work are entirely specious and unjustifiable. 
 
 To the adjustment account in the General Ledger will be debited and 
 credited the totals of columns provided in the books of original entry for 
 the purpose of keeping departmental sales, purchases, receipts and payments 
 separate, the balance of the adjustment account thus representing the total 
 fo the balances in the departmental ledger with which the account is kept. 
 
 Such accounts may be kept with great advantage where a number of 
 traveling salesmen are employed, each having a certain territory. In this 
 case the sales ledgers should be subdivided, so many pages being allotted to. 
 
 41 
 
"the customers of each salesman. Separate columns should be provided in 
 sales books, cash book and cross-entry journal for each section, and a repre- 
 sentative, or adjustment account opened with each section in the general 
 ledger to which the totals of columns in sales book, cross-entry journal, and 
 -cash book are posted at the close of each month. If practicable, it will be 
 found more convenient to provide a separate ledger for the section covered 
 "by each traveler, and the loose leaf system is admirably adapted for this 
 purpose, as it can be made just the size^to suit the number of accounts to be 
 carried, and enlarged and diminished at will. 
 
 The form of ledger we recommend (where exceptional circumstances do 
 not alter cases) would contain the following columns : 
 
 Date, Items, Folio, Debits, Monthly Debits, Debit Balance. 
 Date, Items, Folio, Credits, Monthly Credits, Credit Balance. 
 
 The purpose of the "Monthly Debits" and "Debit Balance" columns will 
 l)e explained a little later on. 
 
 The representative, or adjustment, accounts in the general ledger will at 
 the close of each month show as follows : 
 
 J. F. ROBINS LEDGER. 
 Dr. 
 1900. Folio. Debits. Mo. Debits. Bal. igoo. Folio. Credits. Mo. Credits. 
 
 Mar. 31. 7.846 19 April 30 — 
 
 April 30 — Cash 160 5*967 80 
 
 Journal 28 6,75120 Journal 28 1,12795 7,o95 75 
 
 •Cash 160 12960 6,88080 
 
 7.631 24 
 
 This account, you will note, displays the total business of J. F. Robins, 
 salesman, and its results, and it can be made still more useful by a little more 
 itemizing. Sales can be kept separate from cross entries on the debit side, 
 and on the credit side returns and allowances may be particularized. The 
 increase of "Monthly Debits" shows an increase of business, and the increas- 
 ing or decreasing "Debit Balance" shows how the customers are paying their 
 accounts. So that this account becomes a valuable comparative statement of 
 J. F. Robins' business. 
 
 In taking the trial balance of the J. F. Robins ledger, draw off monthly 
 xiebits, monthly credits and the balances, and foot all three columns. Then, 
 if the total of the individual balances does not amount to $7,631.24, you can 
 ■see at a glance whether your total debits posted are $6,880.20, and your total 
 credits $7,095.75. That means that ninety-nine times out of a hundred 
 when there is an error it can be located to the side on which it occurred, which 
 is a tremendous advantage. 
 
 The principle above outlined can be successfully carried out in any 
 business with manifest benefit. In enterprises of considerable magnitude it 
 will frequently be found convenient to have separate cash books, sales books, 
 
 42 
 
etc., as the use of columnar books in such cases will necessitate books of an 
 unwieldly size. 
 
 The accounts may be sectionalized in many ways as may be found most 
 suitable to the requirements of the business. Some houses sectionalize 
 territorially, as : New York ledger, Pennsylvania ledger, Ohio ledger, etc., 
 etc. Some sectionalize alphabetically, A-F ledger, G-K ledger, L-R ledger, 
 S-Z ledger. 
 
 A very frequent sectionalization is by departments, as Wholesale 
 Ledger, City; Wholesale Ledger, Foreign; Retail Ledger, etc., etc. 
 
 Where sales tickets are used it will be found useful to have different 
 colored tickets for each section. 
 
 Where there are a number of sections it is also found useful to carry 
 the separate adjustment accounts in the general ledger, and group them in 
 the private ledger for the benefit of the principals, or officers of the 
 company, thus : 
 
 Folio. 
 
 Debits.Mo. 
 
 Debits. 
 
 Dr. Bal. 
 
 1900. 
 
 Folio. 
 
 Credits. 
 
 Mo. Credits. 
 
 Mar 31. Balances — 
 
 
 
 
 April 30. Cash — 
 
 
 
 
 N. Y. ledger... 
 
 
 
 9,562 75 
 
 N. Y. ledger.... 
 
 ... 234 
 
 8,765 14 
 
 
 Pa. ledger 
 
 
 
 2,758 92 
 
 Pa. ledger 
 
 ... 234 
 
 2,219 75 
 
 
 Ohio ledger 
 
 
 
 6,875 60 
 
 Ohio ledger 
 
 ... 234 
 
 7,550 20 
 
 
 April 30. Journal — 
 
 
 
 
 Journal— 
 
 
 
 
 N. Y. Ledger.. 178 
 
 10,785 90 
 
 
 
 N. Y. ledger.... 
 
 ... 178 
 
 1,118 75 
 
 
 Pa. ledger 178 
 
 4.S60 25 
 
 
 
 Pa. ledger 
 
 ... 178 
 
 652 80 
 
 
 Ohio ledger 180 
 
 8,972 60 
 
 
 
 Ohio ledger 
 
 ... 180 
 
 67825 
 
 20,98489 
 
 Cash— 
 
 
 
 
 
 
 
 
 N. Y. ledger... 235 
 
 •475 35 
 
 
 
 
 
 
 
 Pa. ledger 235 
 
 
 
 
 
 
 
 
 Ohio ledger 235 
 
 9650 24 
 
 ,890 60 
 
 
 
 
 
 
 Balances^ 
 
 
 ■\ 
 
 
 
 
 
 
 N. Y. ledger... 
 
 
 
 10,940 II 
 
 
 
 
 
 Pa. ledger 
 
 
 
 4,446 62 
 
 
 
 
 
 Ohio ledger 
 
 
 
 7,716 25 
 
 
 
 
 
 For further explanation of the uses of ledger adjustments, or balance 
 accounts, we quote from Dicksee's "Bookkeeping for Company Secretaries" 
 as follows : 
 
 "The details in connection with Adjustment Accounts vary under 
 different circumstances, but the general principle is that each separate ledger 
 should be so arranged as to possess within itself all the necessary materials 
 for a cornplete Trial Balance. That is to say, each Departmental Ledger 
 should contain a 'General Ledger Adjustment Account,' while the General 
 Ledger should contain an Adjustment Account for each of the Departmental 
 Ledgers. To the Adjustment Accounts in the various Departmental 
 Ledgers are posted contra entries for every single entry that occurs else- 
 where in that particular ledger ; but, of course, these contra postings are not 
 made in detail, but in totals, as otherwise an enormous amount of labor 
 would be involved. In the same manner the various Adjustment Accounts 
 which occur in the General Ledger each contain the contra entries of such 
 
 43 
 
other entries as are entered in the General Ledger, and which — but for these 
 Adjustment Accounts — would not have any contra entry at all in that 
 particular ledger. Thus the total of the sales is posted to the Sales Account 
 in the General Ledger; the corresponding debit of this entry would be the 
 •debit to the customers in the Sold Ledger. 
 
 "When 'self-balancing' ledgers are used> however, the practice is as 
 follows: The various items are still debited to the customer in the Sold 
 Ledger, and the total sales posted to the Sales Account in the General Ledger. 
 In addition, however, the double entry of the Sold Ledger is completed by the 
 monthly total of the sales being posted to the credit of the General Ledger 
 Adjustment Account in the Sold Ledger ; while the double entry of the General 
 Ledger is completed by the monthly total of the sales, in addition to being 
 posted, to the credit of the Sales Account, being also posted to the debit of the 
 Sold Ledger Adjustment Account in the General Ledger. All other tran- 
 sactions are treated in a similar manner. Where there is a considerable 
 number of Sold Ledgers, a separate Adjustment Account is usually kept for 
 each. 
 
 "From what has been said it will be seen that the entries which occur in 
 the General Ledger Adjustment Account in the Sold Ledger will be identical 
 with the entries which occur in the Sold Ledger Adjustment Account in the 
 General Ledger; and that therefore the balance of these two Adjustment 
 Accounts will always be the same if the books are correct. But the balance 
 will fall upon different sides, namely, upon the credit side of the account in 
 the Sold Ledger, and upon the debit side of the account in the General Ledger. 
 If these two balances agree, one may feel, reasonably satisfied that the postings 
 are correct, provided each ledger separately balances ; but in the event of their 
 not agreeing it ought to be comparatively a very simple matter to trace the 
 difiference, because not only should the balance of the two accounts agree, but 
 each separate item should be the same. 
 
 "To make this clear the following example of these Adjustment 
 Accounts is appended : 
 
 GENERAL LEDGER (ADJUSTMENT) ACCOUNT. 
 
 DR. CR. 
 
 1896. £ s. d. 1896. i. s. d. 
 
 Oct. 31 To Cash 70000 Oct. I By Balance 1,50000 
 
 " Discount 2000 Oct. 31 " Sales 1,20000 
 
 " Returns 40 o o Nov. 30 " Sales goo o o 
 
 Nov. 30 " Cash 80000 Dec. 31 " Sales 70000 
 
 " Discount 2500 
 
 " Returns 2000 
 
 Dec. 31 " Cash 60000 
 
 " Discount 1500 
 
 " Returns 30 o 
 
 44 
 
Bills Receivable 750 o 
 
 Bad Debts SO 
 
 Balance down 1,250 o o 
 
 4,300 o 4,300 o 
 
 1897. 
 Jan. I By Balance down 1,250 o o 
 
 SOLD LEDGER (adjustment) ACCOUNT. 
 
 DR. CR. 
 
 1896. I. s.d. 1896. £ s.d. 
 
 Oct. I To Balance 1,50000 Oct. 31 By Cash 70000 
 
 Oct. 31 " Sales 1,20000 " Discounts 2000 
 
 Nov. 30 " Sales 900 o " Return^ 40 o o 
 
 Dec. 31 " Sales 700 o Nov. 30 " Cash 800 
 
 " Discounts 25 
 
 " Returns 20 o o 
 
 Dec. 31 " Cash 600 o 
 
 " Discounts 1500 
 
 " Returns 30 o o 
 
 " Bills Receivable .... 750 o o 
 
 " Bad Debts 50 o o 
 
 " Balance down 1,250 o 
 
 4,300 o ^ 4,300 o o 
 
 1897. 
 Jan. 1 To Balance down 1,250 o o 
 
 General Principle oe Adjustment Accounts. — Before leaving this 
 question of Adjustment Accounts as a means of balancing ledgers separately, 
 it is well to call attention to the following points which, no doubt, will help to 
 clear up any difficulties which may be experienced in understanding the 
 application of the general principle. 
 
 The mere fact that one ledger is divided into two or more books does not 
 ipso facto alter its nature. The ledger, as a whole, still records the double 
 effect of each transaction. At any time the sum of its debits will, therefore, 
 always equal the sum of its credits. Consequently, a trial balance of a set of 
 ledgers can always be taken out by abstracting every balance, and the total 
 of the debit balances will always equal the total of the credit balances if the 
 postings are correct. There is thus no difficulty in testing the accuracy of a 
 set of ledgers, provided all the ledger balances are extracted. On the other 
 hand, when there is more than one ledger — or, at all events, when there are 
 more than two or three ledgers — it will very soon be found that the number 
 of balances is so large that, when the trial balance does not agree, it is a very 
 difficult matter to localize the error. Hence, it is very desirable that there 
 should be some means of verifying the accuracy of each ledger separately, and 
 it is for this purpose that the Adjustment Accounts are introduced. Inci- 
 
 45 
 
dentally it may be mentioned, however, that they are, in practice, particularly 
 valuable, because, by their means, trade ledgers (which usually contain the 
 heaviest amount of posting) may be separately balanced, not only when a 
 general balance is being struck, but also from time to time throughout the 
 year. In practice it is usual for them to be balanced at least once a month, 
 and without Adjustment Accounts this could not be done without balancing 
 all the books monthly. 
 
 Practicai. Working of Adjustment Accounts. — "With regard to 
 the practical working of the Adjustment Accounts, it is necessary that those 
 subsidiary books from which the various ledgers are posted should either be 
 in separate sets (one set for each ledger), or else they should be of the 
 columnar order, a separate column being devoted to the postings which have 
 to go into each ledger. In practice by far the most convenient way is to 
 have separate day books for each ledger ; but with regard to the cash book, 
 it is sometimes best to have one of the columnar type, while, in other cases, 
 separate subsidiary cash books are more convenient. With regard to trans- 
 fers from one ledger to another, these may be conveniently passed through a 
 transfer journal ; and for all practical purposes, it will be quite sufficient if the 
 contents of this transfer journal are analyzed at the end of each month, and 
 posted to the various Adjustment Accounts. 
 
 "The chief difference in the system of bookkeeping, where Adjustment 
 Accounts are used, will be with regard to the general ledger. Ordinarily 
 speaking, the general ledger is posted up from the totals of the various day 
 books and the general cash book, and in the case of most trading or manufac- 
 turing undertakings the number of journal entries will be very few. It is 
 not really necessary that the number should be increased because Adjustment 
 Accounts are used, as the necessary postings of day book totals can still just 
 as easily be made from the day books direct as through the journal ; but as, in 
 employing self-balancing ledgers, two entries have now to be made in the 
 general ledger itself, it is, perhaps, desirable that journal entries should be 
 made to enable this to be done." 
 
 Questions sometimes arise where there are branch businesses as to the 
 adjustment of differences between the main office and the branches on account 
 of goods and cash in transit which have been charged by the main office on a 
 certain date (the books being closed on that date), but have not been credited 
 by the branch office on account of their not having been received on that date. 
 In such a case, the financial statement of the business, which would be a 
 summary of the accounts of the main office, together with the branches, would 
 not be disturbed, and it would be only necessary to record the fact that certain 
 merchandise or cash had been shipped to such a branch and was at the date of 
 preparing the statement in course of transit. 
 
 46 
 
ADEQUATION.— The act of equalizing. 
 
 ADMINISTRATORS' ACCOUNTS.— See Executors' Accounts. 
 
 AD VALOREM. — A term used to denote a duty of charge upon goods- 
 at a certain rate per centum upon the cost or value as specified in the invoice,., 
 as opposed to a specific sum upon a given quantity or number. 
 
 The Dingley tariff of 1897 imposed the following ad valorem duties : 
 
 Per 
 cent. 
 
 Beads 35 
 
 Bindings, cotton 45 
 
 Bindings, flax 45 
 
 Bindings, wool 60 
 
 Blankets 30 
 
 Blankets, value 40c to see 3s 
 
 Bonnets, silk 60 
 
 Books, charts, maps 25 
 
 Bronze, manufactures of 45 
 
 Brushes 40 
 
 Buttons, sleeve and collar, gilt 50 
 
 Canvas for sails 45 
 
 Caps, fur and leather 35 
 
 Carpets, treble ingrain 40 
 
 Carpets, two-ply 40 
 
 Carpets, tapestry Brussels 40 
 
 Carpets, Wilton, Axminster, velvet... 40 
 
 Cattle (over one year old) T.T'/i 
 
 Cigars and cigarettes 25 
 
 Clocks, n. e. s 40 
 
 Clothing, ready-made, linen, silk and 
 
 woolen 60 
 
 Clothing, ready-made, cotton 50 
 
 Confectionery, all sugar 50 
 
 Copper, manufactures of 45 
 
 Cotton gloves So 
 
 Cotton handkerchiefs, hemmed..!.... 43 
 
 Cotton handkerchiefs, hemstitched... 55 
 
 Cotton shirts and drawers 50 
 
 Cotton plushes, unbleached 25 
 
 Cotton webbing 45 
 
 Cotton curtains 50 
 
 Cutlery, more than $3 per doz 40 
 
 Cutlery, razors, over $3 per doz .' . 20 
 
 Cutlery, table knives 15 
 
 Cutlery, tables knives, over $4 doz. ... 45 
 
 Diamonds (uncut free), cut and set. . . 60 
 
 Diamonds, cut, but not set 10 
 
 Drugs (crude, free), not crude 10 
 
 Earthenware, common 25 
 
 Earthenware, porcelain, plain 55 
 
 Earthenware, porcelain, etc., decor- 
 ated 60 
 
 Per 
 cent 
 
 Hair, human, unmanufactured 20' 
 
 Hides, raw dried, salted, pickled 15 
 
 Horn, manufactures of 30 ■ 
 
 India-rubber, manufacturers of 30 
 
 India-rubber, manufactures of 30 ■ 
 
 Instruments, metal 45 
 
 Iron, manufactures of 45.. 
 
 Ivory, manufactures of 35, 
 
 Jewelry ■ 60 
 
 Knit goods, wool, value not over 30c 
 
 per lb 50- 
 
 Knit goods, woolen apparel, 30c to 
 
 40c per lb 50; 
 
 Knit goods, woolen apparel, over 40c 
 
 per lb 44 
 
 Knit goods, silk 60 
 
 Leather, manufactures of 35 
 
 Linen, manufactures of 45 . 
 
 Linen, wearing apparel. 60 • 
 
 Meerschaum pipes... 60- 
 
 Muffs, fur 35 
 
 Musical instruments 45 . 
 
 Opium, liquid preparations 401- 
 
 Paintings and marble statuary 20 
 
 Paper manufactures 35.. 
 
 Perfumery, alcoholic 45 
 
 Photograph albums 35 
 
 Photograph slides : 25 
 
 Pickles 40" 
 
 Pins, metallic 35 
 
 Railroad ties, cedar 20 
 
 Rugs, Oriental 40 • 
 
 Sauces, n. e. s 40 ■ 
 
 Sausages (bologna free) all other.... 25 
 
 Sealskin sacques 35 . 
 
 Silk, spun in skeins 35 
 
 Silk laces, wearing apparel 60 ■ 
 
 Skins, tanned and dressed 20 
 
 Slates, manufactures of 20- 
 
 Smokers' articles, ex. clay pipes 60 
 
 Straw manufactures 20 • 
 
 Umbrellas, silk or alpaca 50 
 
 Vegetables, natural 25, 
 
 47 
 
J^ngravings 25 Vegetables, prepared or preserved. . . 40 
 
 Flannels, value 40c to 50c 35 Velvets, silk, 75 p. c. or more silk 15 
 
 Flax, manufactlires of 45 Watches and parts of 4° 
 
 Flowers, artificial 50 Willow for basket-makers 20 
 
 Fruits, preserved in their own juice. .. 35 Willow manufacturers 40 
 
 Fur, manufactures of 35 Wool or worsted yarns, value 30c to 
 
 -Furniture, wood 35 40c per lb 40 
 
 Glassware, plain and cut , 60 Wool or worsted yarns, value over 
 
 "Gold, manufactures of, not jewelry. ... 45 40c per lb 40 
 
 Hair of hogs, curled for mattresses ... 10 Woolen or worsted clothing 60 
 
 Hair, unmanufactured 35 
 
 ADVENTURE. — A commercial enterprise of hazard. A special 
 enterprise outside of the regular line of business, undertaken alone or in 
 •co-partnership with another party who shares the proceeds or losses. 
 
 Example of Adventure Account. — A corporatioh purchases jointly 
 with another a large invoice of goods, the first company agreeing to finance 
 ihe account, and the other to handle the selling end of it, the profit from the 
 sales to be divided equally between the two corporations. The first corpora- 
 tion pays for the merchandise invested in, being assisted in so doing by the 
 .sum of $3,000 received from the second corporation. The total paid for 
 the merchandise is $11,000, $3,000 of which is paid by the second corpora- 
 tion, and $7,890 of which is paid by the first corporation, who take advantage 
 ■of a cash discount of i^, the total making $1 1,000. How should this invest- 
 ment be recorded ? One very simple method would be as follows : 
 
 Carry a memorandum investment account. To this investment account 
 charge the amount paid for merchandise and the charges for interest, storage 
 and commission. Credit same with i^ discount and the gross sales. The 
 balance of this account will then show the profit jointly made on the 
 investment. 
 
 In the books of account proper open "Smith and Jones investment 
 account." Charge same with the amount of the total investment, $11,000, 
 when making payment for the goods, the credit being to cash. Charge 
 Jones with his share of the investment, $5,500, and credit investment account. 
 Credit Jones with the $3,000 received on account of investment, the charge 
 being to cash. Also credit the investment account with the i^ discount, the 
 charge being to cash- 
 
 When Jones renders his account of sales, which we will say amounts to 
 $14,000, less $750 paid out for interest, storage and commission, verify same 
 and obtain his check for the amount due, which on the above basis would be 
 $9,070, crediting $2,500 to balance Jones' account, and $6,570 to investment 
 cccount. Investment account will then show a profit of $1,180, which will 
 he cne-half of the total profit of $2,360. 
 
 48 
 
If the charges for interest, storage and commission are paid by Smith 
 instead of by Jones, it will, of course, increase the amount due by Jones. 
 
 ADVERTISING. 
 
 How TO Advertise. — You have something to sell and you wish to 
 make your sales or increase your sales by means of advertising. Just how 
 far is it wise for you to go in describing the article in your advertisement ? 
 
 This really lies at the bottom of the "trick of the trade" of advertise- 
 ment writing, and this is true equally of a mail-order proposition and of 
 selling to the customer after his personal inspection in the shop. 
 
 Here is where the art of deception comes in. 
 
 The first object of the advertisement is to cause the reader of it to 
 believe that he needs the article advertised, and the second to leave him in 
 such a frame of mind that he will take the trouble to learn more about it. 
 This latter should result either in a personal call or correspondence. If too 
 much is told in the advertisement the customer may be lost, because no 
 advertisement can tell as much as an illustrated booklet, a series • of 
 "follow-up" letters appealing to the individual replies, or, better than all, a 
 personal interview, or personal inspection of the thing itself. 
 
 Often it would be very unwise to mention the price of an article in an 
 advertisement without a very full description of it, of its uses and merits, 
 or without personal inspection and explanation. The price might seem so 
 high if given in an advertisement that the reader would conclude that he 
 could not afford its purchase. On the other hand, it is often that the 
 quoting of a price in an advertisement will have everything to do with 
 making a sale. There is no one general rule that can be followed in this 
 matter. 
 
 Comparatively few articles are sold directly from the advertisement. 
 Even with the patent medicines, which would seem to be an exception to this 
 rule, the man or women who reads the advertisement before buying usually 
 wishes to know more about the preparation. Friends are consulted, the 
 druggist is asked about it, the bottle is inspected, the directions read before 
 a purchase is made. 
 
 With local shop advertising the same is true, never mind what the 
 price may be which is quoted, and never mind what glowing description is 
 given of the goods, never mind how great a bargain the thing is made to 
 appear. Few sales are made except after personal inspection. Seeing 
 before buying is the general rule in all business transactions. 
 
 The man who has a horse to sell selects his prospective customers and 
 then tells them about the horse. This is advertising, and it is abotit as far 
 as advertising can go. What the man with the horse for sale tried to do is 
 to get some one enough interested to look at the horse, then salesmanship 
 
 49 
 
comes in to do the rest. Most of the failures in advertising come from the 
 belief on the part of the advertiser that the only thing necessary is to state 
 in the newspapers or other publications what he has to sell and then sit down 
 and wait for the orders to come in. Just as much salesmanship is required 
 in the mail-order business as in that of a retail shop. More, in fact, usually. 
 
 It is easy enough to attract a crowd. A man with a yellow coat on, 
 walking in the middle of any thoroughfare in any city, will get people 
 enough to look at him and talk about him. That is advertising, but it isn't 
 salesmanship. 
 
 While it is not good advertising or good business to directly and 
 purposely deceive the hoped-for purchaser, there is a great deal in sup- 
 pressing certain facts ; for instance, if an article sells for five dollars and the 
 cost of the article is fifty cents, it would be unwise to mention this cost price. 
 Even taking a very high business standard this could hardly be called 
 deception. 
 
 , Take proprietary preparations, while some have succeeded when the 
 formula has been given, it is extremely doubtful if ten per cent, of the best 
 sellers on the market would last a year if the public should be frankly told 
 all the details of their composition. Not that it should make and dififerenCe 
 in the effectiveness of the preparation, but people are not yet far enough 
 advanced so that they do not like a little mystery thrown in with most things 
 that they buy. You may suspect that your lady-love uses some lotion for 
 the purpose of improving the complexion — that she has some mysterious 
 inner garment which improves the contour of her form — but you, man of 
 the world as you are, would actually rather know nothing about it. 
 
 The best advertisement that can be written is that which puts you in 
 communication as directly as possible with those to whom you appeal and 
 at the same time does not put you on a false footing with them. If you are 
 advertising a retail business, about the only thing that you can expect your 
 advertisement to do is to bring the right kind of people to your shop. If 
 you are advertising an article that is on general sale you must, so far as 
 possible, convince the reader that it is the thing that he needs, proving it so 
 far as possible by the experience of others. If you conduct your sales by 
 mail, you must so prepare your advertisement that it will bring you into 
 communication with those people to whom you believe you can make sales 
 and to those only. Too much "mystery" surrounding an ad. of this kind 
 will bring a host of curiosity-seekers to whom you can never hope to make 
 sales and who will eat up a great part of your profits in the cost of postage, 
 stationery, printed matter, office help, etc. 
 
 After the ad.— "What?" 
 
 The only right way to look at advertising is as salesmanship. 
 
 50 
 
What would you think of a salesman who tried to sell goods without 
 having the goods — who gave a glowing description of an article to a 
 customer, which he does not have in stock and could not get ? 
 
 It seems ridiculous when put that way. 
 
 Yet many general advertisers rush into the magazines with ads. of their 
 goods which they expect to sell through the dealer, and through the dealer 
 only, before the dealer even knows that they exist. 
 
 They send customers to the stores to ask for goods which they know 
 are not on sale there. 
 
 They waste a whole lot of advertising effort, to say nothing of 
 advertising money, to obtain a result which is of no earthly value to them. 
 
 All advertising should provide not only arguments for selling goods, 
 but the goods themselves accessible to the people addressed. 
 
 This means that every advertising proposition should consist of at least 
 
 three things — the ad. itself in the right medium, the acquainting of the 
 
 ■ dealer with the fact that the article is being advertised, and with inducements 
 
 as to why he should carry it in stock, and the reaching of the customer who 
 
 replies to the magazine ad. direct. 
 
 In a mail-order proposition — that is, in something advertised to be 
 sold exclusively by mail — the dealer is eliminated. 
 
 Then what is required is a follow-up series for handling and landing the 
 customer who has made the inquiry. 
 
 Too much time is spent in making an ad- catchy, chic, unique, crisp and 
 striking. Too little thought and labor are spent in seeing that the goods 
 are where the customer can get them, and in handling a customer who has 
 made an inquiry. 
 
 The most that general advertising can do, or mail-order advertising, 
 or any advertising is to bring about an acquaintance between the advertiser 
 and the customer. 
 
 Of course, some things can be sold by the ad. alone, but in most cases 
 a letter or two is necessary. 
 
 The first step is to have an ad. which is calculated to bring replies. It 
 doesn't matter what this ad. is like, whether it is pretty or ugly, how it is 
 written or displayed, if it brings in the replies that are wanted. 
 
 These replies, then, are easily grouped in the several classes. First, 
 those who send actual money and give actual orders. They are' soon cared 
 for. Next, a larger class who make a definite inquiry, which can be 
 answered in a single letter. Third, a still larger class who merely ask for 
 the booklet, catalogue or any other information which has been promised 
 in the ad. 
 
 Class No. I is cared for by filling the order. 
 
 51 
 
Class No. 2 should have their inquiries fully and explicitly answered 
 by a personal letter. 
 
 Class No. 3 should receive the catalogue or booklet, accompanied by a 
 form letter. 
 
 These methods will either bring an order from inquiries of each class, 
 or they will not. If they do not, a second form letter should go out within 
 ten days. This letter should be diplomatically worded. At the same time, 
 it should get a reply, if possible — either a reply containing an order, or a 
 reply explaining why the inquirer doesn't order. 
 
 He would be persuaded to explain what there was about the printed 
 matter, or the letter of reply, which did not suit him. 
 
 In other words, the advertiser should feel around to find out what par- 
 ticular objection the customers had. If possible, he should answer that 
 objection. 
 
 If this letter fails, there should be a third letter and even a fourth o\ 
 fifth, according to the amount of business in prospect. That is, the more 
 there is to make upon a given sale, the longer can a follow-up series be 
 continued. 
 
 For a small article in which there is a bare margin of profit it is imprac- 
 ticable to follow up at all. 
 
 In advertising such things as furniture and household goods, carriages, 
 bicycles, pianos and other things in which a single sale means a good deal of 
 profit, the more thorough and elaborate the follow-up system is, the better 
 the results. 
 
 The one great fault with a large amount of magazine advertising is 
 that this very essential part of it is not considered. The work stops. with 
 the ad. itself. 
 
 Thousands of dollars' worth of sales are probably lost every month 
 simply for the lack of a few well-written, diplomatic, insinuating form letters 
 to send to inquirers. 
 
 These letters cost as little as four cents each, including postage, to 
 produce. The amount of tentative orders which they will transform into 
 real orders depends upon the nature of the goods, character of the letter and 
 other things, but in every case the nan who starts into business by adver- 
 tising must consider it as a part of the expense. He must figure out how 
 much he can afford to spend to get orders, and he must spend that. 
 
 Magazine advertising which doesn't have this adjunct stops short of 
 being useful. It never can be made to pay by itself alone — only when backed 
 up by a judicious, thorough and systematic follow-up system can it be made 
 profitable. 
 
 52 
 
When, however, the advertiser makes something to be sold by dealers, 
 this problem, while similar, becomes broader. He must then reach the 
 dealer, preferably by a series of mail matter, consisting of letters, cards and 
 folders and other things of that kind. This matter will inform the dealer 
 of all the facts about the goods advertised, and also of the fact that they 
 are being advertised, will tell him where he can buy them, what they are, 
 what the profit is, and how much his own customers now know about them. 
 
 Every direct inquiry from a customer will be referred to a dealer in his 
 district. By judicious form letters the dealer can be made to feel very 
 friendly toward the advertiser on this account. 
 
 The customer can be placed in touch with his nearest dealer, who can 
 supply him without trouble, and thus the magazine advertising can be made 
 to serve a double purpose. 
 
 Its first and primary object will be to interest the consumer. Its most 
 important object will be the moral effect upon the dealer. 
 
 This is only the outline of a very necessary part of advertising work. 
 
 It simply means that good advertising is salesmanship ; that it provides 
 not only the talk, but the goods somewhere where the customer can get at 
 them. 
 
 A plan could be made to fit every problem, no matter how complicated. 
 
 If proper attention is paid to such things as this, it will make the adver- 
 tising more profitable than any amount of artistic detail or finish in designing- 
 or wording. 
 
 Of course, an ad. is better for being attractive, artistic and well- 
 expressed, but the main thing is to give the facts so that there can be no 
 misunderstanding, to display the ad. so strongly that it cannot be overlooked, 
 to put it in magazines or dther mediums which will reach the people you want, 
 and then have a perfect system for following up every possible opening until 
 it results either in an order or conclusive proof that no order is there. 
 
 Advertising is to a postal business what steam is to a steam engine. It 
 may run or burst the concern. It is all a matter of application. The adver- 
 tising expert can tell off-hand whether general press advertising would be 
 more efficacious in this case or a circular in that, whether a poster would be 
 more telling or local press advertising there; but to the ordinary man of 
 business it is given to acquire this knowledge only after the expenditure of 
 much time, money and trouble, consequently any scheme which facilitates 
 the acquisition of this knowledge should be an acceptable addition to the 
 literature of commerce. 
 
 How TO Register Results (By G. H. Richardson.) — The problem in 
 advertising is to know the media which yield the best results. Papers are so 
 much on the increase and the pages given up to advertising have become so 
 
 53 
 
much more numerous, whilst advertisers themselves are so increasingly 
 enterprising that it has become a mooted point as to whether the business 
 yield of an advertisement has not decreased in exactly the same proportion as 
 the price of space occupied has increased. Of course, I refer more particu- 
 larly to the general press of the country — the technical press will always have 
 a value of its own. As new papers come along witjj new clairns and new 
 spheres of usefulness it is, perhaps, only right that the value of their space 
 should be tested. I will tell how I did it for a post order business. 
 
 Every paper in which we advertised had a distinctive letter or number 
 in the address of the advertisement, as Richardson & Co., Newcastle, Pa., and 
 customers writing for patterns were requested to use the full address. These 
 pattern requests were sorted up daily, and entered in a register, as shown in 
 form No. i. 
 
 Depot ABCDEFGM IJKLMNO 
 
 Total 
 
 January 1 
 2. 
 5 
 A 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Monthly Totals 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 These daily totals were totaled up monthly and carried to a monthly 
 analysis at the other end of the book arranged as shown in form No. 2. 
 
 
 Jan. 
 
 reb 
 
 Men- 
 
 Apl. 
 
 May 
 
 June 
 
 July 
 
 Amt 5pent|Averacje 
 
 Depot A 
 
 ■' B 
 " C 
 
 
 
 
 
 
 
 
 
 
 1 
 
 
 
 Total 
 Amount^pent 
 
 AveradeCoit 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 _ 
 
 
 
 
 ^^ 
 
 
 _ 
 
 LI 
 
 
 
 
 
 
 _ 
 
 
 
 
 
 u 
 
 
 
 ^^^^^ 
 
 .^^^^^ 
 
 = 
 
 A half yearly total was made, the amount spent per paper for the same 
 period was taken from the Advertising Charge Book, and the average spent 
 per application was struck. Up to this point, .doubtless, many advertisers 
 have carried their tests, and have been satisfied with the results obtained, 
 but to me it was not sufficient, for unless business resulted from these 
 inquiries it was so much wasted labor. But how to get at that? For the 
 whole of the business done could not be credited to current advertising, as 
 there was a large number of regular customers on the books, besides which a 
 considerable amount of circularising was got through. 
 
 With the patterns which were sent out in response to these inquiries were 
 order forms, and envelopes for return correspondence. On each of the order 
 
 54 
 
forms and envelopes was stamped the depot letter of the paper which produced 
 the inquiry, thus when the orders came to hand and after execution, they were 
 sorted out and dissected, and a monthly analysis of the results obtained was 
 made as in form No. 3. 
 
 Depot A 
 
 No. Amt. 
 
 B 
 
 No. Amt. 
 
 C 
 
 No. Amt 
 
 D 
 No. Amt 
 
 Jany 1 
 • 2 
 
 " 3 
 - 4- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Mon+h'yTotafc 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ' 
 
 
 
 The monthly totals of these, the same as with the inquiries, were carried 
 to a summary which, at the end of each half year or year, was extended out 
 and averaged as shown in form No. .4. 
 
 Number of Orders 
 
 Amounts of Orders 
 
 Jan. Feb Mch^Apl. May June Total Jan- feb Mch. Api 
 
 May June Total 
 
 Ave rage s 
 
 Avge.Ord 
 
 AvgePftper Ord. 
 
 Av6e.Co3t 
 
 rotal Pft 
 
 Total spent. 
 
 RirrKs 
 
 The average profit per order was taken, of course, on the basis of the 
 average profit of the business, and was shown here, as that is the only true 
 point of view from which to look at advertising expenditure ; you have first 
 of all to cover expenditure on account of merchandise, all expenses being 
 payable out of profits. The result of this analysis was to considerably 
 
 
 5 
 
 
 
 Name 
 
 Address 
 
 Depot 
 
 
 
 
 
 A 
 
 
 
 
 B 
 
 
 
 
 C 
 
 
 
 
 D 
 
 modify the opinion held respecting some of the papers, clearly showing that 
 the inquiries were to a certain extent cooked. But even this analysis was 
 not sufficient to me, for it left out of consideration the question of successive 
 orders. A customer obviously might only order a dollar's worth of,goods 
 
 55 
 
on the order form but, having obtained a price list, other orders might, and 
 would doubtless, follow not on stamped order forms ; clearly the paper which 
 produced the original inquiry should have the credit of all these orders ; the 
 plan had therefore to be carried a point further. I surmounted the difficulty 
 by indexing each stamped order form that was returned, and at the end of the 
 year taking the total amount of the customer's account and posting it to the 
 credit of the paper in a newspaper ledger. The index was arranged as shown 
 in form No. 5, and the newspaper ledger accounts were debited with the 
 amount spent and credited with the amounts of the several customers' 
 accounts, a separate page being set apart for each journal, thus the papers got 
 the credit of as much business as the year's expenditure could have been fairly 
 supposed to have brought; the majority of the trade of following years 
 belonging to the credit of circularising. From these several analysis a final 
 statement was made — the question was judged as to what papers should be 
 kept on the advertising list, as illustrated in form No. 6. 
 
 
 6 
 
 
 
 
 
 1696 
 
 1697 
 
 1696 
 
 1659 ■ 
 
 Amount spent 
 
 
 
 
 
 Number of papers subsc'bd 
 
 
 
 
 
 Amt spent per pfp'r , 
 No of Orders 
 
 
 
 
 
 
 
 
 
 No of enquiries 
 
 
 
 
 
 Proportion 
 
 
 
 
 
 Total value of Orders 
 
 
 
 
 
 Average value per order 
 
 
 
 
 
 Average per paper 
 
 
 
 > 
 
 
 Estimated profit on Orders 
 
 
 
 
 
 Estimated profit per ppr 
 
 
 
 
 
 Surplus per paper 
 
 
 
 
 
 Loss per paper 
 
 
 
 I 1 
 
 I do not pretend, of course, that the final word has been said on the 
 keying of advertising results, but I do claim that I have carried it as near 
 the maximum of usefulness as a given expenditure of time will permit. 
 
 In the commercial sense, advertising is the oral, written or illustrated 
 word by which he who has something to sell tells people of the fact. 
 
 The history of advertising is shrouded in the dust of dead centuries. 
 Much of the history that has been written is based on mere conjecture, — ■ 
 the reasonable supposition of philosophy. On the other hand, as we 
 approach the historical writings of the Romans and Greeks we find allusions 
 to confirm our belief that advertising is as old as commercial competition. 
 
 56 
 
The antiquarians delving into the long-buried mysteries of Pompeiii 
 and Herculaneum, have found supremely interesting remains of advertising 
 as their elder age understood and preached it. 
 
 Prom the advent of printing to the present, the progress of advertising: 
 is easy to trace. 
 
 The first ad was an oral one. 
 
 The first tradesman, no doubt, desiring to sell or trade his surplus pro- 
 duce, or his extra sheep or cattle, stood in the midst of his tribe, or at the 
 side of the caravan trail, and let his offer be known by calling it. As the 
 earth's population increased and permanent camps, then towns and cities- 
 grew, he who had something of value to offer hired others to cry his wares, 
 so that his efforts to sell might be duplicated in the efforts of others. 
 
 The Hebrew chronicles tell us of the criers, and the ancient tongue gives- 
 us our clue in the word Kara, to announce publicly. 
 
 The Greeks had a town crier who announced publicly official and state 
 edicts and gave notice of sales. 
 
 The Romans had their Praecones, who performed duties similar to- 
 their Greek prototypes and besides cried time, place and conditions of sales- 
 and things lost. We find little or no mention of tradesmen using these Town 
 Criers, as we called them in a later day. Tradesmen were yet content to- 
 cry their goods from their shop-fronts, while itinerant vendors hawked their 
 goods about the streets whenever the crowd promised a sale. Cicero speaks- 
 in his De Devin ii. 40, of one who cried figs for sale. 
 
 Early the Hebrews wrote on tablets the laws and edicts of the council, 
 and these parchments were displayed near the synagogues. The Greeks, 
 used tablets similarly displayed near the temples for the same purpose ; while 
 the Romans used tablets affixed to special columns for a similar purpose. 
 
 The Hebrews, Romans and Greeks were literary nations, hence the 
 written advertisement had an early use. 
 
 At the same time, however, the great mass of the population had to be 
 reached by other means. When people cannot read, we" see signs and sym- 
 bols in general use. Thus we see the rise of heraldry in the early ages — for 
 a coat-of-arms, crest or device was a simple method of affixing in the minds- 
 of the unlettered the individuality of the owner. 
 
 The easiest thing for a man to understand is a picture or sign. In the 
 History of Advertising, by Henry Sampson, to which the writer is indebted 
 for the greater portion of the historical data here, mention is made of the 
 signs found at Pompeii. As examples, a goat was the sign of a dairy ; a mule 
 driving a mill, of a baker ; a boy being birched, of a school ; a Bacchus press- 
 ing the wine out of grapes, of a tavern. The trades and professions, too, 
 had their signs. From the tomb of Diogenes, the grave-digger, we take a 
 
 57 
 
"pick-axe and a lamp ; Veneria, a tire-woman, has a mirror and comb carved 
 -on her tomb; a physician, a cupping glass; a surveyor, a measuring rule. 
 We even find punning indulged in by the fancy of the carver of mortuary 
 advertisements. Dracontius has a dragon ; Onager, a wild ass ; Leo, a lion, 
 -and Porcula, a pig. It does not require much imagination to picture how 
 these signs were used for the benefit of the living as well as to decorate the 
 "tomb of the dead. 
 
 After this, in the middle ages, coats of arms, devices, crests and the rest 
 of the heraldic nomenclature, were the chief methods by which the greater 
 and lesser men of the period preserved their identity in the eyes of the people. 
 As business grew, competition increased, and as from one tradesman in a 
 line there grew to be six or a dozen or more, it became apparent to each that 
 in order to preserve his identity some distinctive mark had to be given. So, 
 instead of a mere pair of scissors indicating a tailor, it became The Tailor of 
 the Golden Scissors, or of the Blue Scissors, or of the Red, Yellow or Green 
 Scissors, and so on. While others dropping the sign of their calling, adopted 
 the scissors with the coat-of-arms of their feudal lord, or of the court, if 
 "they should be fortunate enough to be purveyors to the royal household. 
 
 After this time came the period when printing commenced to make 
 headway against the opposition of the nobles and scribes ; the nobles oppos- 
 ing because of a fear of the consequences of the spread of knowledge, and the 
 iscribes because of a fear of losing a most remunerative employment. 
 
 As printing spread from Holland to Italy, England, France and Ger- 
 many — in its train, as a natural consequence, the capacity to read became a 
 less uncommon accomplishment, and in the beginning of the sixteenth cen- 
 tury we commence to notice premonitions of the era of the printed advertise- 
 ments. 
 
 Mr. Henry Sampson mentions as the first authentic example of adver- 
 tising as we moderns use the phrase, that a certain Jonathin Holden, haber- 
 dasher of London, in the year 1679, issued a printed bill or list of all the 
 articles he kept in stock, with the prices affixed. Now, mind you, he did 
 not give this to all his visitors, but only to those who bought to the extent of 
 a guinea, thus showing that it was to be considered as a convenience to the 
 •customer. Inasmuch as good Master Holden kept this up for some time, 
 we may conclude that his public appreciated the progressive spirit of the 
 haberdasher. It appears, however, that Master Holden's competitors di'd 
 not approve of such methods, however, for they met in solemn conclave and 
 -resolved that it was against business policy and morals to do as Master 
 Holden, for, save the mark! they said, it would be destructive to trade if 
 shopkeepers were permitted to expend their capital in printing useless bills 
 •of stock. 
 
 58 
 
But Master Holden had evidently sowed the seed, and it brought a 
 goodly harvest, albeit somewhat slow in ripening. 
 
 Soon handbills were distributed quite freely — posted on the deadwalls, 
 handed to foot passengers, much as they are today, but of course sparingly 
 indeed in comparison. 
 
 The advertisement, to appear in a regularly printed paper, was a later 
 innovation. 
 
 The only authentic record of early advertisements I have gives 1591 
 as the year in which the first real newspaper advertisement appeared. It 
 appeared in a German newsbook, now in the British Museum. The adver- 
 tisement was for a book written by a certain Dr. Laster. The book described 
 a plant that had made its appearance in the suburbs of the town of Soltwedel. 
 This plant, hitherto unknown, was taken a portent of Divine wrath — where- 
 upon Dr. Laster, constituting himself the Divine mouthpiece, proceeded to 
 •tell the people all about the plant and the portent. The advertisement says : 
 
 "This book, which as yet is not much known, shows and explains all 
 what the plant contains. Magister Cunan has published it, and Matthew 
 Welack has printed it, in Wittemberg. Let whoever does not yet know the 
 meaning of this (portend) buy the book at once, and read it with all possible 
 zeal." 
 
 One cannot help remarking at this time that book advertising has 
 not much changed since the time of Dr. Laster. 
 
 Most of the early advertisements were confined to books. This was 
 not strange when one stops to consider that in the vast majority of cases, 
 the printer who sent out the paper was the printer and publisher of the books 
 as well. 
 
 However, we discover in an old black letter newspaper, without name 
 or date, printed in Holland when James I. was King of England, the first 
 miscellaneous advertisement, in which is offered by auction articles taken 
 of prizes, Yit. : sugar, ivory, pepper, tobacco and logwood. These were 
 offered in terms at once sonorous and glowing — no doubt the good auc- 
 tioneer wrote the advertisement himself, and wrote as he would have talked; 
 therefore, he did well. 
 
 In 1622 Nathaniel Butler made the first attempt to make a newspaper 
 in England. The outbreak of the CivilWars made people want to hear 
 the latest news, and Butler thought to give it. Before this time, in the 
 year of the Armada, we hear that a paper was published, but historians say 
 that the copies of that paper are spurious. Butler wished to make a sheet 
 wherein he could chronicle the gossips of the halls and taverns. He did not 
 succeed over -well, for, strange to say, most all seemed against the idea. 
 No less a personage than Ben Jonson ridiculed the idea of a newspaper with 
 
 59 
 
the strangely illogical subtlety that "News ceased to be news as soon as it 
 was published!" The early English advertisements were mainly confined 
 to books. In 1658, however, we come across this simon-pure example of 
 advertising, in the Mercurius Politicus for September 30 : 
 
 "That Excellent, and by all Physicians, approved China drink, called 
 by the Chineans Tcha, by other nations Tay, alias Tee, is sold at the Sul- 
 baness Head Cophee-House, in Sweeting's Rents, by the Royal Exchange, 
 London." 
 
 The advertisement was the presage of a new era that witnessed the 
 spread and growth of the use of the printed advertisement. 
 
 Trade after trade, in spite of the oppositions of the guilds and com- 
 panies, entered the arena of the public prints. 
 
 Many of these old advertisements, surcharged with the personality of 
 their authors, loquacious, somewhat indifferent in grammar, yet having 
 point and pith, bear a lesson that may well be studied in an egotistical present 
 indifferent to the teachings of the past. 
 
 Turning abruptly from the latter part of the seventeenth century, let 
 us skip a century, interesting and evacative of profounder philosophers, but 
 space presses for an end, and consider the last twenty years of the nineteenth 
 century, just closed. 
 
 Erom 1880 to 1900 advertising commenced to take on its modern com- 
 plex form — to lay under tribute all the cunning of the literateur and the 
 skill of the artist, as moulded and formed by the acute intelligence of the 
 business man. 
 
 Advertising has become the chief concern of modern merchandising, 
 and the object of study of all branches of commercial life. The man who can 
 create a demand, i. e., make sales for an article, is sure of a commanding 
 position. 
 
 Fifty years ago advertising was looked upon as a catch-penny method 
 by which failure clung to existence. 
 
 Two decades ago Hypnotism was called Mesmerism and that was a 
 "fake." 
 
 Today hypnotism is a "branch of science." 
 
 Twenty-five years agp if a man would have come forward claiming to 
 be an "advertising expert," he would have been laughed out of court as a 
 fakir. 
 
 Today the advertising expert is a recognized power in the councils of 
 great enterprises. 
 
 Today there is more sp^nt in making the advertising pages of any of 
 our leading monthlies attractive than the publishers spend in catering to their 
 readers. 
 
 60 
 
Twenty-five years ago the concern that did not advertise was considered 
 the better grade of business ; today, it is a sign of "dry-rot" and the credit of 
 such a house is more seriously questioned and more easily assailed. In 
 twenty-five years the business world has changed front on the question of 
 advertising, because the experts and students of the subject have commenced 
 to specify its laws — of which the first is : 
 
 Thou shalt not lie. 
 
 Truth has come to be recognized as the hallmark of effective adver- 
 tising, where years ago, its lack was considered essential to success. Adver- 
 tising has raised the standard of commercial honesty because it has made 
 competition come out in the open sunlight of publicity and state its case. 
 
 Behind the mere announcement : 
 
 John Smith, 
 
 Grocer, ' 
 
 Brownville, Ohio. 
 
 of a decade ago, furked special favors, bargaining, misrepresentation, decep- 
 tion, but with the uncompromising — 
 
 John Smith 
 
 Ofeers to the Housewives of 
 
 BrownvieeE, Ohio, 
 
 BEST prunes eor iic a lb., 
 
 there could be no further parley. So, twenty-five years ago the first adver- 
 tisement of John Smith would have passed muster in the business world as 
 an evidence of the grocer's progressive spirit, today it would be to advertise 
 his lack of it. 
 
 It is computed by statisticians that $350,000,000 a year is spent in 
 advertising in the United States by means of regular publications and 
 printed matter, signs, etc. This vast sum is earned by itself, so to speak, so 
 some idea may be gathered of its tremendous and fascinating importance as 
 study to the student of modern commercial life. One sees a printed adver- 
 tisement in the magazine, — a picture, a few words — -which produces an 
 impression, possibly a sale results. It was !:ot chance that brought that pic- 
 ture, those certain few words selected out of a possible thousand combina- 
 tions, in that particular magazine. It was design. The vast interests linked 
 irrevocably to advertising, depends for success on the right or the wrong 
 methods of advertising, have gradually induced by large rewards, men of 
 keen business instinct, subtle insight into human nature, and command of 
 powerful English, to make a specialty of the planning, designing and writing 
 of advertising. 
 
 61 
 
.These men, few at first, now multiplying as the demand increases, have 
 brought to the subject a knowledge of business gained in the fierce com- 
 petition of the market-place, allied with that power to judge and measure 
 men in the mass that belongs to all great orators and writers. 
 
 Advertising in the hands of such masters has ceased to be the diverting 
 exhibit of a juggler playing at ball-and-toss with a few phrases, but a game 
 where all the skill, ingenuity and craft of intellect backed by infinite 
 resources of money, art and science was brought to, bear against the public 
 indifference or scepticism. 
 
 Advertising is practiced now not to catch the fool of the minute, but 
 the wisest of tomorrow, on the more logical theory that if you gain the 
 greater you will surely obtain the lesser. 
 
 Real advertising is founded on the same laws as the science of sugT 
 gestive therapeutics. 
 
 The power of suggestion — and all advertising is mere suggestion — is 
 coming to be properly understood now that psychological science has robbed 
 hypnotism of its pretence and sham. 
 
 Taking a primitive instance, familiar in every-day life — a little child 
 falls, bumps its head. The unthinking friend commences to sympathize, 
 and pet it — thereby suggesting to the child that it is hurt — and the child 
 cries. 
 
 The mother, on the other hand, may stand the youngster on its feet and 
 say : "Pooh, son, only a bump. Men don't cry over bumps," and the child 
 smiles, unmindful of the slight shock. 
 
 These two attitudes towards the same thing betrays varying 
 knowledge of child nature. The friend failed to understand that the 
 child's instinct turned to the older judgment — and a suggestion of hurt 
 produced a nervous concentration on the bump : while the suggestion of 
 the idea of endurance from the mother acted as a counter balance. 
 
 Advertising is based on the same laws. Take, for instance, the 
 examples of the two forms of advertisements shown in the foregoing : In 
 one, the simple announcement of 
 
 John Smith^ i 
 
 Grocer. 
 suggests only a bald fact, which grows less and less in its significance to 
 John Smith's neighbors or townspeople as there are other grocers who 
 advertise. What people want to know, as between two or more grocers, 
 is — Which is better or best? Which sells the cheaper or cheapest? And 
 so on, and as competition increases the finer become the points, hence the 
 more detailed must be the advertising. Hence the second advertisement 
 in which mention is made of a certain quality of prunes at a price that 
 
 62 
 
we shall say, for the sake of argument, is very low, suggests that other 
 things may be equally low-priced and the number of visitors such an. 
 advertisement brings is considerably more than that the first advertise- 
 ment could bring. 
 
 This primitive example is shown in many instances where the laws- 
 of advertising are but little understood and come as a consequence of a 
 knowledge of human nature. 
 
 We turn to more complex examples when we enter the field of adver- 
 tising as practiced in the great cities for the great enterprises. Here we- 
 see artists of national reputation putting forth their greatest efforts in 
 the production of striking designs; so that the eye, rendered blase by the 
 continual call upon its attention, may all be attracted and held; we see- 
 writers with all the cunning of a powerful pen putting into strong and 
 nervous English arguments that shall pass the logical attack of scepticism, 
 do no violence to the most aesthetic taste and create the faith that expresses- 
 itself in deeds. 
 
 Behind this advertisement is a brain that controls the artist, who- 
 designs, the writer, who shapes the argument, the printer, who arranges 
 the types, and selects the paper and the ink — and who aims to produce a 
 certain effect on the minds of a certain class among the hundreds or thou- 
 sands who shall see and read it. 
 
 That intelligence is the modern advertiser. 
 
 The time is past when a bald statement was sufficient. The subject is- 
 turned about in a hundred ways, always a new and entertaining way, 
 attractive, convincing, above all suggestive. This embodies a knowledge^ 
 of the people to whom a proposition is supposed to appeal. The aim is 
 first to gain that class' confidence. The attempt is carefully made so as- 
 not to betray the intent, while making no attempt to hide it. 
 
 I can compare this power of advertising to nothing but the talent for 
 oratory — for it calls for the same wide sweep of power over the prejudices,- 
 foibles, principles and acuteness of the people, to successfully advertise, 
 as it does to awaken sympathy and support among its listeners. 
 
 The audience is larger: the task is even more difficult, because the- 
 medium is insensate. Comprehending within its successful accomplish- 
 ment the same talents that in literature creates believers ; in art, followers ; 
 in politics, partisans; advertising is at once the new science and the new 
 profession of the twentieth century. 
 
 E. St. Elmo Lewis, Philadelphia. 
 
 ADVERTISING ACCOUNT.— An account which exhibits the 
 amount expended on advertising or received from sales of advertising. The 
 former account is carried on the books of those who advertise in newspapers, 
 magazines, and on bill boards, etc., while a memorandum account is kept,. 
 
 63 
 
•which, by the use of key numbers or similar devices, will record the sales 
 -effected, and the profitableness of the advertising medium employed. 
 
 With regard to the proper treatment of advertising expenditures as 
 revenue producers, there seems to be a considerable difference of opinion 
 amongst accountants as to the propriety of spreading such expenditures 
 (already incurred) over a number of years, instead of charging the whole 
 .amount to the current year's profit and loss account. There are undoubtedly 
 many cases in which considerable advertising expense is incurred in building 
 up a business, the benefits of which accrue in after years, and it consequently 
 seems reasonable under such circumstances to treat a certain portion of those 
 expenditures as an asset, gradually extinguishing same from year to year, 
 and thus preventing the cost of the investment from falling entirely on the 
 profits of the period during which the expenditures were made; such equal- 
 ization, however, is undoubtedly of a very speculative nature, and therefore 
 not to be encouraged, as it is evident that the results of such advertising 
 ■expenditures cannot be foreseen with any degree of certainty or confidence. 
 
 The "Advertising Account," in which are recorded sales oi advertising, 
 is carried by newspapers, magazines, advertising agents, etc., and fulfills the 
 same function as the ordinary Sales Account in mercantile business, charges 
 to customers or clients being credited to this account. 
 
 There are many methods in use for keeping track of advertising 
 ■charges — ^bound volumes, loose sheets, and cards being used. In bound 
 records- separate columns are provided for Name, Address, Agent from 
 Whom Business Received, Space Occupied, Times, Rate, Agents' Com- 
 mission, Net Amount, Position Desired. In a monthly record there will fol- , 
 low columns for each month in which to show, by entering page oh which the 
 advertisement can be found, that it was properly inserted. The expiration 
 of the contract may be shown by inserting the red letter D in the column 
 provided for month of expiration. 
 
 Itl^USTRATlON OF CHECKING RECORD. 
 
 R~te 
 
 
 AD\/CnTISMCtsrT_ 
 
 WCCJM.-V 
 
 Morjttj 
 
 Noffitep OI lOcr^eA op fine* corf 
 
 C-te, 4 
 
 30 
 
 31 
 
 of \n 
 
 df Lines 
 
 ■npaeffed to 
 
 NuirjPcr X ii7aei*f(i 
 
 
 For daily and weekly papers it is very necessary to keep track of 
 advertisements inserted because the various agencies keep what is called 
 
 64 
 
a "checking sheet," and if this checking sheet fails to record the insertion ot 
 the advertisement, the agency will claim this as evidence of failure to insert 
 the advertisement. In order to settle such claims promptly, therefore, it is a 
 good plan to keep a record something after the form hereto attached, which 
 provides for both daily and weekly issues, and seems particularly adapted 
 for keeping record of checking and billing variable space. 
 
 In each of the above mentioned forms it is supposed that the particulars 
 of the charge shall be obtained elsewhere for the purpose of posting to the 
 customers' ledger account. A considerable amount of time is necessarily 
 consumed in making the double record ; one for checking or memorandum 
 purposes, and the other for posting. Especially is this the case where the 
 advertising is at all voluminous, and we therefore call attention to an 
 illustration of another method which can be used either with loose sheets, in 
 binders, or with cards. In either case, the record should be self-indexing to 
 avoid the necessity of keeping an index. 
 
 IIvIvUSTRATlON OF CARD SYSTEM COMBINED CHECKING AND JOURNAUZING 
 
 FEATURES. 
 
 Pgf Nation^i Advtg. Agency. 
 
 Name 
 
 Rate.... 
 
 American Novelty Co, 
 
 City.. 
 
 Chicago, 
 
 . Com.. 
 
 . Led. Fol.. 
 
 Positioa 
 
 Nexi Reading Mafier, 
 
 
 
 
 
 
 
 
 
 From 
 
 Space 
 
 Amount 
 
 Times 
 
 Ck. 
 
 PosTG. Ck. 
 
 B.-K. Page 
 
 Jan., 1901 
 
 8 inches 
 
 $34 00 
 
 12 
 
 ^1 
 
 >l 
 
 153 
 
 The line "Per" at the head of the card index indicates the name of the 
 agent who secured the contract, and to whom the charges for advertising 
 are to be made. All cards referring to one agent should be kept together 
 in their proper alphabetical sequence, so that when billing it is not necessary 
 to search through the file to find the total of the agent's business. Where the 
 the business from agencies is heavy, it is advisable to keep an index of 
 advertisers' names, showing to which agency they belong. 
 
 The majority of the other headings on the cards do not need explanation, 
 but "Ck." is to show that the amount charged has been examined and found 
 correct. "B-K page" shows that the advertisement has been duly inserted 
 in "The Book-Keeper," and will be found on page 150. 
 
 As these cards are intended to combine the uses of record and journal, 
 there is a space provided for ledger folio. After the ledger folio has once 
 been inserted, it will not be necessary to again refer to the ledger index in 
 
 65 
 
posting. Postings are made direct from the cards, the book-keeper making 
 a check mark under the heading of "Posting Check to show that the amount 
 has been posted. The amounts charged are then taken off on a recapitulation 
 sheet and footed, and the total credited to "Advertising Account." 
 
 These cards can be made with 12 lines for monthly periodicals. For 
 weekly or daily publications it is not advisable to have more lines on the cards, 
 but substitute new cards for any which are filled. The old cards can then be 
 taken out and filed elsewhere, or retained in the same file as long as con- 
 venient. 
 
 AGENT. — A person employed to represent a business for the sale of 
 its goods, or to obtain contracts, or dispose of or acquire those commodities 
 or rights, etc., in which the business represented may trade or deal. 
 
 Such agents may be described as traveling agents ; agents who under- 
 take, as a side line, the sale of commodities belonging to the concern by whom 
 they are appointed, who may have the sole agency, or that for a city or 
 district, may be remunerated by commission only, or by salary and 
 commission ; or may be chffl-ged with the goods supplied at a certain agreed 
 rate, receiving as remuneration the difference between the price charged and 
 the amount at which the sale is effected; agents for Insurance Companies 
 who receive as a remuneration a certain proportion of premium receipts in 
 their territory and who may in turn appoint sub-agents. 
 
 AGENT (Com. Law). — One who undertakes to transact some busi- 
 ness, or to manage some affair for another, by the authority and on account 
 of the latter, and to render an account of it. 
 
 The term is of wide application and is used to include factors, brokers, 
 attorneys, cashiers of banks, auctioneers, clerks, and the like. The terms 
 agent and attorney are used synonymously. Thus, a letter or power of attor- 
 ney is usually spoken of as the formal instrument by which an agency is 
 created. 
 
 Who May be an Agent. — Many persons disqualified from acting for 
 themselves, such as infants, persons attainted or outlaws, aliens, slaves, and 
 others could act as agents in the execution of a naked authority. A feme 
 coert may be the agent of her Husband, and as such, with his consent, bind 
 him by her contract or other act, but she cannot contract for the sale of his 
 lands without express authority, and she may be the agent of another in a 
 contract with her husband. But although she is generally competent to 
 act as agent of a third person it is not clear that she can do so when her 
 husband expressly dissents, particularly when he may be rendered liable 
 for her acts. The husband may be agent for his wife, but by virtue of his 
 relations alone he has no implied power to act. A son may be agent of his 
 father. 
 
 66 
 
Extent of Authority. — The authority of an agent, unless the con- 
 trary clearly appears, is presumed to include all the necessary and usual, 
 means of executing it with effect. Where, however, the whole authority is- 
 conferred by a written instrument, its nature and extent must be ascertained 
 from the instrument itself, and can not be enlarged by parol evidence. 
 
 The words "jointly and severally" or "jointly or severally" have been 
 held to authorize all to act jointly or each to act separately, but not a part tO' 
 act jointly. 
 
 A mere agent can not generally appoint a sub-agent so as to render the 
 latter directly responsible to the principal. But it may be done when neces- 
 sity requires, and is sometimes warranted by usage. 
 
 Duties and Liabilities. — The particular obligations of an agent vary" 
 according to the nature, terms and end of his employment. When his- 
 authority is limited by instructions it is his duty to adhere faithfully to those 
 instructions, if the act is legal and moral, but cases of extreme necessity 
 and unforseen emergency constitute exceptions to this rule. He is bound 
 to execute the orders of his principal whenever, for a valuable consideration,, 
 he has undertaken to perform them. He is to exercise skill ; keep his prin- 
 cipal informed of his doings and give reasonable notice of whatever may 
 be important to his interests ; keep regi:lar accounts and render his accounts- 
 to his principal at reasonable times. 
 
 As to principals, the liabilities of an agent arise from a violation of 
 duties and obligations to them by exceeding his authority, by misconduct, 
 or by negligence, omission, or act by the natural result or just consequence 
 of which the principals sustam a loss. The degree of neglect which will 
 make the agent responsible for damages varies according to the nature of 
 the business and the relation in which he stands to his principal. 
 
 As to third parties, when an agent is known to act merely for another, 
 and with full authority, his acts and contracts will be deemed those of the 
 principal only, and the agent will incur no personal responsibility. But 
 when he does an act without authority or exceeds his authority, and the want 
 of authority is unknown to the other party the agent will be personally 
 responsible to the person with whom he deals. 
 
 The principal and agent are both liable where a tortious act is com- 
 mitted by the agent. , 
 
 Rights and Privileges. — An agent is ordinarily entitled to compen- 
 sation for his services, commonly called a commission, which is regulated 
 by special agreement, by usage of trade, or by the presumed intention of 
 the parties. 
 
 The agent has a right to reimburse his advances, expenses, and dis- 
 bursements reasonably and in good faith incurred abd paid, without any 
 
 67 
 
default on his part, in the course of his agency, and also to be paid interest 
 on such advances and disbursements whenever it may fairly be presumed 
 to have been stipulated for, or to be due to him. 
 
 In general a mere agenr who has no beneficial • interest in a contract 
 which he has made on behalf of his principal can not support an action 
 thereon. 
 
 AGENTS' ACCOUNTS.— The consideration of the accounts of 
 agents for Insurance Companies will be taken up under the head of insurance 
 
 The accounts of an agent for a general business, such as mentioned 
 above, frequently present a great many complications and require a consider- 
 able amount of book-keeping, especially where the accounts of the agents 
 with customers, for instance, are collected by the head office. In such 
 cases the agent is usually required to forward a daily report of sales in his 
 territory, which report is frequently transcribed into a journal before 
 posting the items to the ledger. A special form of report can, however, 
 easily be devised from which posting can be made direct without the 
 interposition of another book of entry, and these reports can be kept in a 
 binder which can be labeled "Clevelaifd Agent's Sales Journal." 
 
 
 
 
 Aa^NTiS 
 
 3ALC3 accoPD 
 
 
 
 
 
 
 
 
 DcacpipTTor^ 
 
 Quarjmy 
 
 FV-ice 
 
 A7\OuiJ 
 
 Ostedr 
 Report 
 
 DftScrip+ion 
 of 5aV 
 
 Quarjily 
 
 R-;« 
 
 A7\oun|T 
 
 Agn+^ 
 
 
 
 
 / 
 
 
 
 
 1 
 
 
 
 
 / 
 
 
 
 
 Where the agent receives a certain percentage on gross sales, it is a very 
 simple matter to keep track of his business, charging commission account 
 and crediting the agent with the percentage earned either daily, weekly or 
 monthly, as found convenient. 
 
 Where the goods are charged to the agent at, say, lo^ above cost, it will 
 be seen that this lo^ above cost enters into account both in the gross sales 
 charged to customers and the credit to merchandise when the goods are 
 charged to the agent. The plan used by many houses who make arrange- 
 ments of this kind with agents is as follows : 
 
 When goods are shipped to the agent for sale, a list of the shipments 
 is prepared, providing a column in which to enter the amounts at which the 
 goods are charged to the agent, and another column in which to enter the 
 amouiits at which the agent makes his sales. This list we will hereafter 
 refer to as "Agents Inventory." Open an account with the agent and charge 
 him with the goods at cost and lo^ added, crediting an account to be opened, 
 entitled "Agents Sales Account." As the agent's account sales come in, 
 
 68 
 
charge the customers in the usual way, and credit the regular Sales Account, 
 
 entering on the Agent's Inventory the amount realized by the agent from the 
 
 sales. The footing of the two columns on the Agent's Inventory will then 
 
 show the excess over profits at which the goods were billed to him. Having 
 
 ascertained this amount, charge Agent's Sales Account with the sales made 
 
 at the prices billed to the agent and credit the agent's account. Credit the 
 
 agent with the difference between the totals of the two columns on the 
 
 Agent's Inventory and charge Commission Account with the amount. 
 
 When the customer pays the bill, credit him, the charge being to cash. 
 
 When settlement is made with the agent, charge his account with the 
 
 amount paid him, the credit being to cash. 
 
 In order to make this quite clear, we append the following journal 
 
 entries : 
 
 Dr. Cr. 
 
 $770 00 Agent — bill of goods with 10% 
 added to cost. 
 
 Agent's Sales $770 00 
 
 I2S 00 John Smith & Co. 
 
 (Agent's report, 1-6-99) 
 
 Sales 12500 
 
 no 00 Agent's Sales. 
 
 Agent (Sales 1-6-99) no 00 
 
 15 00 Commission. 
 
 Agent's profits on Sales for 1-6-99, IS 00 
 
 125 00 *Cash. 
 
 John Smith Co 125 00 
 
 *In this and other illustrations in the American Business and Accountants' Ency- 
 clopaedia cash is included in journal entries simply to accomplish lucidity of explanation. 
 
 It will be found desirable to credit agent's profits to a separate account, 
 for the reason that if they are credited to the agent's account, they will 
 prevent that account from showing exactly the inventolry of goods he has on 
 on hand remaining unsold. Inasmuch, however, as the Agent's Sales 
 Account will exhibit precisely the same statistics it may be considereci that 
 this is all that is necessary, in which case the agent's account can be credited 
 with the profits, each credit being distinguished from other credits when 
 posted, so that at any time they can be extracted for the purpose of checking 
 up the agent's claim for the amounts due him. 
 
 According to the above journal entries, the accounts afifected would 
 
 stand thus after postings had been made : 
 
 Dr. Balances. Cr. Balances. 
 
 $660 00 Agent. 
 
 Agent's Sales $660 00 
 
 IS 00 Commission. 
 
 Agent's Profits IS 00 
 
 125 00 Cash. 
 
 Sales Account (regular) 125 00 
 
It will be seen that the agent's account shows that oi' the goods 
 furnished him he has disposed of $i lo worth and has $660 worth on hand. 
 The agent's profits on sales effected — ^$15 — have been credited to him and 
 charged to Commission Account as a selling expense ; the customer has paid 
 his account, while the Sales Account has been credited with the gross amount 
 of sales — $125. 
 
 Accounts with traveling salesmen are kept in a variety of ways, and 
 we think it would be of interest, as well as instructive, to reproduce here 
 the methods used in four large business houses for keeping track of debits 
 and credits to their travelin- salesmen. 
 
 No. I. 
 
 It is not always convenient to keep the cash accounts with the traveling 
 salesman in the general ledger. If there are many travelers they will occupy 
 a large amount of space in this book, besides, these accounts can be more 
 readily referred to and much easier kept track of, by means of a small cash 
 ledger used only for this purpose. 
 
 The book we use is about five and one-half inches wide and eight inches 
 long, and is ruled like form shown herewith: 
 
 William Simpson — Trip from Jonesville to Bloomington. 
 
 Date. Particulars. Dr. Cr. 
 1896. 
 
 Dec. I Cash $5000 
 
 (Wages paid to date.) 
 
 7 Expenses for week $23 75 
 
 7 J. B. Dalton 17 80 
 
 10 Cash to family 10 00 
 
 12 Expenses for the week ' 22 00 
 
 12 By two weeks' wages 34 00 
 
 12 Cash to balance i 95 
 
 Dr. or Cr 
 
 Bal. 
 
 Dr. 
 
 $50 00 
 
 Dr. 
 
 26 25 
 
 Dr. 
 
 44 OS 
 
 Dr. 
 
 54 OS 
 
 •Dr. 
 
 32 OS 
 
 Cr. 
 
 I 95 
 
 $79 75 $79 75 
 
 This book lies in the cash drawer, and when counting the cash every 
 night the amount charged in this book' to each traveler is counted as cash. 
 
 A book of this size, with about two hundred pages, will record the 
 transactions of five or six travelers for about two years, and when filled it 
 can be laid away and easily and readily referred to. A certain number of 
 pages are allowed to each man, so that when the book is completed, the 
 transactions of each account follow in regular order. 
 
 On account of its easy reference, we find it works vet-y satisfactory, as 
 the date of any previous trip can be quickly turned to. 
 
 When a man starts out on a trip he is given a certajn amount of money 
 which is entered only in this book. At the end of the week he sends to the 
 
 70 
 
house an itemized account of his expenses for that week, which is credited to 
 him in this book, and this amount is charged to general expenses in the cash 
 book. If he collects any money on the road, the fact is reported at once, and 
 he is charged with the amount, while the customer is credited with it in the 
 general cash book. 
 
 If his family get any money during his absence, this fact is recorded, 
 and the amount charged to him. When he comes home his account is 
 balanced by crediting him with his wages for time absent and paying the 
 balance due him. 
 
 No. 2. 
 
 The method hereunder outlined has been put to practical use, and 
 while simple in detail, has been found to be very comprehensive and 
 satisfactory. 
 
 Two accounts are opened for each salesman, — "Personal" and 
 "Sample." To the personal account are posted only such items as remit- 
 tances from the house and such collections as the salesman may make on his 
 trip, wherein the proceeds are retained by him for his use as previously 
 arranged, for the debtor side; and for the credit side salary and expenses 
 covering railroad fares, hotels and other legitimate items, as shown by 
 weekly reports. This account should be balanced at convenient times, but 
 particularly upon completion of each trip, when the account can be checked 
 with the salesman if necessary. 
 
 We now come to the sample account, which takes for its first entry a 
 charge from the sales journal, covering the aggregate selling value of all 
 goods taken by the salesman when starting on his trip. As each sale or 
 delivery of goods is made by the salesman, whether for cash or on time, 
 he should immediately report the transaction on the regular form of order 
 blank, when the charge in the home books would be in the event of a cash 
 
 sale. 
 
 John Hustle (salesman), Personal, 
 To John Hustle, Sample, 
 
 entering the description of goods in detail, or merely referring to reported 
 date of sale. When the goods are delivered, or sold on time, an invoice 
 must be made and mailed to the customer, and the proper entry for the home 
 books would be: 
 
 Marshall, Meadow &. Co. (Customer), 
 To John Hustle, Sample Account. 
 
 These entries involving transactions by the salesmen should be made in the 
 sundries journal, as the goods have already entered into the sales record 
 through the original charge to salesman. 
 
 71 
 
Immediately upon return of the salesman to the home plant his sample? 
 and stock of goods remaining on hand should be checked up and credited 
 through the sales journal, when, with all items posted, his sample account 
 should be in balance. 
 
 No. 3. 
 
 Oui attention having been called to the question of dealing with the 
 accounts ot traveling salesmen, particularly with the method outlined in No. 
 2, we have carefully examined same and note the claim that the system has 
 been put to practical use, is simple in detail, very comprehensive and 
 satisfactory. 
 
 As far as the knowledge and desire of those who use it are concerned, 
 this may all be true ; but as viewed from another standpoint, it appears to be 
 open to criticism. It recommends that two accounts be kept with each 
 salesman ; one a "Personal" and one a "Sample" account. It then explains 
 that to the "Personal" account should be posted, among other things "such 
 collections as the salesman may make on his trip, wherein the proceeds are 
 retained by him for his use," etc. 
 
 As long as the salesmen are strictly honest, the simplicity of the plan 
 proposed is sufficient to recommend it ; but simplicity is not the only feature 
 that should be considered, and while it would be wrong to cast an unjust 
 reflection on any man's honesty, it is, nevertheless, a fact that one object in 
 keeping accounts is to avoid, as far as may be, all possibility of loss, and it 
 would be well before inaugurating or continuing such a system to consider 
 the possible contingencies. 
 
 Let us suppose, that under such a system, one of the salesmen has 
 retained a number of his collections for personal use, and they have been 
 simply charged to such a "Personal" account kept with him as an individual, 
 together with other miscellaneous items. Let us further suppose that a 
 settlement is requested of him when the fact is brought to light that he has 
 appropriated funds far beyond the business needs and is "short" ; or that he 
 has taken what money he could collect and disappeared, after having 
 reported said collections and authorized a charge to his account of the 
 amount, in accordance with previous plans. 
 
 Under such conditions the only chance to secure a settlement would be 
 to rely on such laws as relate to the collection of ordinary debts. He has had 
 unlimited authority to collect what he could, with privilege of having it 
 charged to him personally as a principal and not as an agent. 
 
 A much better way to handle such matters is to require the salesmen to 
 remit promptly for each and every collection made, and when received, credit 
 
 72 
 
the accounts on which the payments are made. In other words, never 
 allow "a collection to pass through an employee's personal account. 
 
 If a salesman requires money for expenses or other purposes, remit or 
 pay it to him on receipt of proper vouchers showing that he has expended. 
 the amount. If it becomes necessary to advance money for similar purposes, 
 charge it to him as "Agent," "Custodian," or in a Fiduciary account, with 
 particulars plainly indicated by the entries made, and such vouchers as should 
 be required of him ; or the same transactions may be handled in various other 
 ways that will comply with existing conditions and, at the same time, like- 
 the plan herein explained; place a case of retention of funds subject to the 
 laws regarding embezzlements, when the salesman's person may be attached 
 for the unpaid balance. His "Personal" account should be a record of 
 settlements promptly made, and not one of unsettled balances. 
 
 Another feature of the advice given by Mr. Gus is worthy of attention.. 
 He proposes to charge the salesman's "Sample" accounts with such goods 
 as may be shipped to thern, subject to sale and regarding the entries for 
 subsequent sales made by them, he says they should be made in the "Sundries 
 Journal," "as the goods have already entered into the sales record through 
 the original charge to salesmen." While in such cases the manner of 
 handling sales totals may be so adjusted as to produce correct results, the- 
 plan proposed, without further proper treatment, would certainly produce- 
 an incorrect total of gross profits in a monthly statement, unless ail of such 
 goods have been sold and charged to final purchasers at that time. 
 
 If such goods are charged to the salesmen at cost, the profits, when, 
 actual sales are made, would be omitted from the original sales record, and. 
 if charged to salesmen at a profit, a monthly statement of totals shown 
 would represent an incorrect profit total, by having thus considered the 
 profits on such goods as had not been finally disposed of. 
 
 Again, when final sales were made from such stock, unless they were at 
 the same prices at which thej had been charged to salesmen, an adjusting- 
 entry would become necessary for the difference, which, under some systems, 
 would then be difificult to incorporate in the original sales record. 
 
 The conditions in question might be systematically and correctly 
 recorded in the following manner, viz. : 
 
 Open accounts with each salesman in the style of "John Johnson, 
 custodian" ; or "John Johnson, Sample Acct.," or any similar title that will' 
 briefly indicate the facts. Then open one othefr account as "Mdse. in- 
 Transit," or "Salesmen's Samples," or such title as may be decided on. Now, 
 presuming that a sjjecial book is kept for sales, and a journal for all other 
 entries that are not cash, the method of handling such matters would be as. 
 follows : 
 
 73 
 
For shipment to salesmen, if charged at cost, debit "John Johnson, 
 ■custodian," credit "Salesmen's Samples," and at the same time charge the 
 _goods to the purchaser in the regular manner through the sales book. 
 
 If goods are charged to salesmen at a profit, the entries would be the 
 same ; but in either case great care would have to be exercised in making the 
 second entries exactly the same prices at which the goods were originally 
 •charged to the salesmen's accounts. 
 
 By this plan the salesmen's sample accounts will represent at all times 
 the value of goods that remain in the charge of each, while the "Mdse. in 
 Transit" account will represent, by its credit balance, the total value of goods 
 lield by all the salesmen, unsold. 
 
 This latter account is in the nature of a memoranda only, and while 
 it shows g, credit balance, it simply requires the proper treatment in any 
 business statement that may be made, in order to show correct results. By 
 this plan the profits are in no case overestimated, and require no special 
 adjusting entries ; neither do the sales book totals contain any except actual 
 sales. 
 
 No. 4. 
 
 The keeping of a close line on the accounts with our salesmen has been 
 the cause of much trouble in our office. We have at last gotten on the right 
 track, and while there are some points in our system that may not be adapted 
 -to the uses of some other lines of business, this is just what we have needed : 
 
 First : The accounts with the various salesmen are on a purely com- 
 mission basis — one-half of the commission being paid when the order is ■ 
 accepted and the balance when the account is paid. It will be readily seen 
 that there will always be a balance large enough to protect the house against 
 the charge back commissions arising from goods being returned and other 
 ■causes. 
 
 Second : The goods are mostly sold on thirty days' trial, and this tends 
 to lengthen the term of credit considerably. 
 
 Third: The goods are special fittings, or machines, and if an agent 
 makes a wrong measurement for the fittings, there arises express charges 
 and other costs which must be kept track of in such a manner as to allow 
 ready reference when any question arises concerning an order when making 
 a settlement with the salesman. 
 
 Fourth : It is very desirable to have a complete record of each order in 
 ■such shape that the record can be used as a basis for future quotations and 
 ■correspondence. 
 
 Our plan is virtually as follows : When an order comes in from a 
 salesman, we first take a card and fill out the name, address, rating, etc. ; 
 
 , 74 
 
then the salesman order number and our order number ; the date of the order, 
 amount of the order, the symbols showing kind of goods ; then follows the 
 amount of the salesman's commissions, with one-half carried in short for 
 ready reference; the one-half commission is then credited to the salesman's 
 account in the ledger ready for settlement. Should the shipment be prepaid 
 at the expense of the agent, the express is charged on the card, but not in the 
 ledger at this time, this item appears on the card under date of shipment ; the 
 date of shipment also appears under the heading "Amount of Order." 
 
 When the account is paid by the customer, the card is taken from the 
 case, and the amounts to be charged back t6 the salesman are entered against 
 ., his account in the ledger and credit given for the one-half commission 
 unpaid. On the card the cash difference is shown. Each week the 
 salesman receives an itemized statement of the orders received with the 
 commissions thereon; the accounts paid, with a list of charge back items 
 and unpaid commissions due. This enables the salesman to have a check on 
 the house, and at the same time any differences in the accounts are at once 
 detected. After the card has become a "paid account card," it is transferred 
 to the transfer case, a record card first being made for the customer's record 
 case for use in correspondence, quotations, advertising matter, etc. This 
 is done for the reason that the salesmen do not work the same territory 
 continuously, and the orders that drift in afterward are not those on which 
 the salesman receives any commission. 
 
 The relation of Agents' Accounts to Balance Sheets, Trading Accounts 
 and Profit and Loss Accounts is easily understood where separate accounts 
 are kept with agencies. The best method of incorporating the transactions 
 of an agency is, by some accountants, considered to be by means of a Grand 
 Balance Sheet, including all the assets and liabilities of the main office and of 
 the agencies, and a detailed Balance Sheet provided with separate columns 
 for each agency, treating Trading Account and Profit and Loss Account in 
 the same manner. The latter form would be ruled as shown on page 267, 
 the same ruling being equally convenient for the Trading and Profit and 
 Loss Accounts. 
 
 In this way the gross and net profits, inventories and expenses, of each 
 agency will be exhibited contemporaneously with the statistics of the main 
 office and the combined statistics of the whole business. 
 
 The methods of keeping record of agency sales vary with the different 
 requirements of different lines of business. Thus, in breweries, where, as a 
 rule, a large number of agents are employed, it is desirable to formulate a 
 special record, which shall show at a glance each agent's sales and the total 
 quantity sold of each size of package, such as cases or barrels. 
 
 75 
 
AGENDA BOOK. — A title given to a memorandum book kept by the 
 secretary of a corporation for the purpose of entering therein notes of 
 meetings of stockholders or Board of Directors. 
 
 This agenda book may also be found useful for the purpose of entering 
 memoranda of such matters as it may be considered desirable from time to 
 time to bring to the attention of directors or stockholders at a subsequent 
 meeting. 
 
 AGREED (Com. Law). — A term, used to indicate the consent or 
 agreement of both parties; united in opinion or being in harmony; it is a 
 technical term and synonymous with contract. 
 
 AGREEMENT (Com. Law). — "The expression by two or more per- 
 sons of a common intention to afifect the legal relations of those persons." 
 It consists of two or more persons being of the same mind, intention or 
 meaning concerning the matter agreed upon. A coming together of parties 
 in opinion or determination, the union of two or more minds in a thing done 
 or to be done ; a mutual assent to do a thing. The consent of two or more 
 persons concurring, the one in parting with, the other in receiving, some 
 property, right or benefit. 
 
 Conditional Agreements are those which are to have full effect only 
 in case of the happening of certain events, or the existence of a given state 
 of things. 
 
 Executed Agreements are those where nothing further remains to be 
 done by the parties. 
 
 Executory Agreements are such as rest on articles, memorandums, 
 parol promises or undertakings, and the like, to be performed in the future, 
 or which are entered into preparatory to more solemn and formal alienations 
 of property. 
 
 Express Agreements are those in which the terms are openly uttered 
 and avowed by the parties at the time of making. 
 
 Implied Agreements are those which the law supposes the parties to 
 have made, although the terms were not openly expressed. 
 
 AGREEMENTS (SUBSCRIPTION).— An agreement embodying 
 the terms of subscription to the stock of a corporation. The following is a 
 form of subscription agreement suitable for the organization of a railroad 
 company : 
 
 This agreement made and entered into this day of , 
 
 A. D., by and between the parties whose names are hereunto subscribed, 
 witnessetn, that, 
 
 WHEREAS, it is the purpose of the undersigned to construct a 
 
 continuous line of railroad to extend from the City and 
 
 County of , or some convenient point on the , 
 
 » 
 
 76 
 
State of , by way of , by 
 
 c. convenient and practicable route hereafter to be deterrnined upon, to some 
 
 point in ; and, whereas, it is proposed and intended 
 
 for that purpose to organize under the laws of the State of 
 
 a Corporation to be called the with a capital 
 
 stock of dollars ( ), for the purpose of 
 
 constructing such railroad, so as to insure for the public benefit the existence 
 and operation of a continuous competing line of railroad from the City and 
 
 County of ;. through the , to such 
 
 a point in the County of ; and, whereas, the parties 
 
 hereto, as business men, as shippers and consumers of freight, and as 
 individuals, as citizens of the State of , and as property- 
 holders, will be directly and indirectly, jointly and severally, benefited by 
 the construction of said railroad, and by the maintenance and operation of 
 the same as a continuous and competing local line of railroad ; 
 
 Now, therefore, this agreement witnesseth: That for the purpose of 
 aiding, promoting, and forwarding the construction of said line of railroad, 
 and for maintaining the same as a bone-fide competing line, and for and in 
 consideration of the premises, and for the sum of $i.oo by each of the 
 undersigned to the other in hand paid, the receipt whereof is hereby by each 
 acknowledged, the undersigned parties hereto do hereby mutually covenant 
 and agree, and bind themselves unto the other, and each to and with the said 
 
 proposed Corporation, . . . ., , as follows, to wit : — 
 
 I. 
 
 Each of the undersigned hereby subscribes the sum set opposite his name 
 to the capital stock of the said proposed Corporation, the 
 
 The subscriptions of the undersigned, and each of them, are made, 
 
 however, upon the express condition precedent that, unless within 
 
 days from and after the date hereof, there shall be subscribed to the capital 
 
 stock of the said , sums of money aggregating in all 
 
 the amount of , the subscriptions of the undersigned and each 
 
 of them shall be null and void; provided, however, that the Executive 
 
 "Committee of the Traffic Association of shall 
 
 have the power, by vote duly passed and recorded in their minutes, to extend 
 the time within which said amount may be subscribed, but such extension 
 
 shall not exceed , and if the said sum of 
 
 shall be subscribed within days, or within the time so extended, 
 
 then these subscriptions shalj be in full force and efifect. 
 
 II. 
 
 The undersigned hereby further agree that said proposed Corporation 
 may, for the purpose of convenience, be organized by other persons than the 
 
 77 
 
undersigned, or any of them, or by any number less than all of them, and 
 that the Articles of Incorporation of said railroad company need not set 
 forth, in the list of subscribers to its capital stock, all, or any particular one, 
 of the names of, or the amounts subscribed by, the undersigned, and |this 
 covenant shall be deemed to have been made expressly for the benefit of said 
 proposed Corporation, and shall be irrevocable ; and the subscriptions of the 
 undersigned shall be valid and binding upon the undersigned, and the 
 subscriber shall be liable thereon to the said proposed Corporation, the 
 
 , whether the amount subscribed by the 
 
 undersigned, and by whom subscribed, be set forth by the Articles of 
 Incorporation of said proposed Corporation or not. 
 
 III. 
 
 Each of the parties hereto further covenants and agrees to and with 
 the others, and with said proposed Corporation, that the said shares of stock 
 of the said proposed Corporation, and each and all of them, subscribed for 
 
 by him may be issued in the names of Trustees (pledged to 
 
 maintain the road as a competitive line), who shall be selected as hereinafter 
 provided, and that said Trustees, their survivors or survivor, and successors, 
 
 shall for the term of ... . (....) years after the day of 
 
 have the exclusive right and power to vote such stock in such manner as the 
 majority of the Trustees shall determine at any and all me^etings of the 
 stockholders thereof, and for any and all purposes, and to sign, execute and 
 acknowledge as stockholders any and all documents, papers, written assents, 
 by-laws, or amendments to by-laws, contracts, acts or deeds which, in the 
 opinion of a majority of said Trustees it may be necessary, desirable or 
 expedient to so sign, execute or acknowledge ; and the power herein conferred 
 upon the said Trustees by the respective parties hereto is, and shall be 
 
 irrevocable, for the said term of ( ) years, and shall be 
 
 deemed to be coupled with an interest in the stock of the respective parties 
 hereto, so held in trust, which interest the said Trustees shall hold for the 
 benefit of all other parties hereto. 
 
 And it is further covenanted and agreed that the said 
 
 Trustees shall be elected by the subscribers to the capital stock whose 
 aggregate subscriptions, in order of time of subscription, shall first amount 
 
 to the sum of ; and the said election shall be conducted 
 
 upon the system of. 
 
 And it is further covenanted and agreed that in the event of a consoli- 
 dation of the said proposed Corporation with any other corporation, and as 
 often as any consolidation shall be made, it shall be in the discretion of the 
 said Trustees to surrender to such consolidated Corporation the certificates 
 of stock held by them as aforesaid, and receive in exchange therefor new 
 
 78 
 
certificates in such consolidated Corporation or corporations, to be held on. 
 the same trusts as those herein expressed. 
 
 And it is further understood and agreed that the said Trustees shalt 
 cause to be issued Trustees' certificates for stock, which certificates shall 
 respectively set forth the number of shares of stock in the said Corporation, 
 held in trust for each subscriber or his successor in interest, and^hall also- 
 specify that the said stock is held subject to the following irrevocable trusts,, 
 to wit : — 
 
 Said Trustees, their survivors, survivor, successors and successor, shal^ 
 hold said shares with full power to fill from time to time each and every 
 vacancy in their number upon the joint written nomination of a majority of 
 the surviving Trustees, approved in writing by the holders of a majority of 
 the Trustees' certificates issued hereunder. 
 
 Each new Trustee shall, from and after the filing of said nomination, so- 
 approved in the office of the said railroad company, be as fully vested with 
 said trust as if he was one of the original Trustees above named. 
 
 Second : Said Trustees above named, their survivors, survivor, suc- 
 cessors and successor, shall, as stockholders and owners, vote said shares for- 
 all purposes whatsoever, upon ever}- question raised at each and every 
 meeting of said Company, whether annual or special, and at any and all 
 stockholders' elections, as the majority of them shall in their discretion from, 
 time to time determine, and shall also sign, execute and acknowledge as. 
 stockholders any and all documents, consolidation papers, written assents, 
 by-laws, amendments to by-laws, contracts, acts or deeds which, in the- 
 opinion of a majority of said Trustees it may be necessary, desirable or 
 expedient to so sign, execute or acknowledge. 
 
 Such Trustees' certificates shall further set forth respectively that the- 
 shares represented thereby are transferable onlj upon surrender of such 
 certificates by a conveyance in writing signed by the person to whom the. 
 same is issued, or his attorney thereunto lawfully authorized and registered 
 in the Trustees' transfer book therefor kept by the parties designated by the 
 Trustees for that purpose, and that every person accepting any transfer- 
 thereof declares by so doing that he receives said shares subject to said trust,, 
 and that such certificate is not valid until signed by two of said Trustees and' 
 registered as aforesaid. 
 
 The said certificates shall be transferable by indorsement and registration-" 
 as above provided, in the same manner as shares of stock ordinarily are. 
 
 Shares of stock each may be transferred by the Trustees to, and allowed' 
 to stand in the names of the persons selected as Directors of the proposed, 
 railroad company to qualify them as such. 
 
 79 
 
And it is further covenanted and agreed that in the event of any 
 <onsoHdation of the said proposed Corporation with any other corporation, 
 after such certificates have been issued, and also in the event of any 
 -consolidation of such consolidated Corporation thereafter with any other 
 -corporation, then said Trustees shall have the power at any time, by a 
 majority vote, to call in such issued certificates and exchange the same for 
 ■other Trustees' certificates similar in form, but representing stock in such 
 new or consolidated corporation. 
 
 This agreement shall be binding upon the heirs, executors, adminis- 
 trators, successors and assigns of the respective parties hereto, and all 
 parties thereto, and all parties who shall subscribe their names to this 
 ■agreement, or to other agreerhents substantially identical herewith, shall be 
 deemed parties to this agreement, and each and every subscriber hereto 
 ■affixing his name thereby covenants and agrees to and with such parties as 
 subscribe their names to agreements identical or substantially identica' 
 herewith, with the same force and effect as if the names of such other parties 
 -were hereunto subscribed. 
 
 It is further understood that no call shall be made until the amount of 
 
 shall have been subscribed, and subscriptions shall be 
 
 then payable in installments, extending through , or more, 
 
 as the Board of Directors of said proposed Corporation may determine. 
 
 AGRICULTURAL IMPLEMENTS' BUSINESS ACCOUNT- 
 ING. — In the manufacture and sale of agricultural implements, a number of 
 accounting problems arise which call for a discriminating knowledge of the 
 :science of accounting. 
 
 In the manufacturing department material may consist of scrap iron, 
 ■pig iron, iron material (sundries), lumber, logs, wood material (sundries), 
 asphaltum, paint, oil, and a number of miscellaneous articles. There will 
 probably be a foundry, blacksmith shop, and pattern shop to take care of. 
 The plant may consist of building machinery, tools, horses and wagons, etc. 
 
 The question of record of manufacturing costs is of great importance, 
 -and the principles on which such records should be based will be explained 
 under the head of "Factory and Manufacturing Accounting." 
 
 The various material accounts should be debited when the same is 
 purchased, and it is generally found best to keep detailed stock records, 
 the stock being in charge of a responsible person. When material is 
 ■delivered to the manufacturing department, credit material account and 
 •debit foundry, or whatever account represents the department where the 
 material is to be used. The foundry cost records will show the amount of 
 material used and labor expended in the construction of the machines or 
 implements, and on their completion and delivery to the store, the 
 
 80 
 
manufacturing department should be credited and the finished product 
 account charged, which account will, therefore, exhibit the amount of 
 completed machines or implements on hand, thus constituting (if the per- 
 centage of profit can be averaged) a perpetual inventory in connection with 
 the sales account. The proper method of obtaining an approximately 
 correct inventory will be found under its proper heading an another page. 
 
 The repair department should be kept separate from general manu- 
 facturing, so as to ekhibit loss or gain on work done by same. 
 
 In connection with the accounts of the office, there is often found 
 considerable confusion in respect to repair accounts and those customers' 
 accounts which are settled by a series of installnients, notes being given for 
 the amount of each installment. The customers ledger should be so 
 arranged that the description of the machine and its number (if any) can be 
 entered opposite the debit. Customers .frequently write for repair parts, 
 but do not specify what kind of an implement they purchased, and in order 
 to secure this information, it frequently occupies much time for a clerk to 
 look up the old entry of charge. If, however, the kind of machine purchased 
 is entered in the ledger, it will not be necessary to refer to the old entry to 
 ascertain what kind of a repair part the customer requires. 
 
 With regard to notes received in settlements of accounts paid by 
 installments, a record of notes is absolutely indispensable in order to keep 
 proper track of same, and we therefore strongly recommend in such cases, 
 a combined Bills Receivable Register and Ledger, somewhat after the 
 pattern which will be illustrated under the heading of "Bills Receivable," 
 the notes themselves being kept in a Tickler, according to due dates, and 
 pushed ahead when payment is for any reason delayed. When the notes 
 are discounted, a printed or written slip should be substituted in the Tickler 
 for the note, the said slip to contain the necessary particulars. 
 
 The plant and machinery of this business are subject to the usual 
 charges for depreciation, and all replacements of tools and machinery should 
 go to profit and loss through the repair and replacement accounts opened for 
 machinery and tools. 
 
 Patterns available for use are assets to the extent of the cost of designing 
 and making same, but a certain sum should be written ofif annually for 
 depreciation, based on the principle that by the time the pattern is obsolete 
 or worthless, its value as ap asset on the books shall have been extinguished. 
 
 ALE OR BEER MEASURE.— 
 
 2 pints (pt.) equal i quart qt. 
 
 4 quarts equal i gallon gal. , 
 
 36 gallons equal i barrel bbl. 
 
 54 gallons equal i hogshead hhd. 
 
 81 
 
Ale or Beer Measure is used in measuring ale, beer, etc. The gallon 
 consists of 282 cubic inches. 
 
 ALLIGATION. — A term used to describe the mixing of various 
 ingredients, or combinations of different qualities or values, and the finding 
 of the average value of such a combination. 
 
 Thus, if a merchant desires to make a mixed quality of tea, composed of 
 a mixture of different grades, alligation signifies the process of finding how 
 much of each grade he can include in a given quantity of a mixture which is 
 to sell at a given price. 
 
 As an illustration of this method we give the following rule : 
 
 TO MAKE A MIXED TEA TO SELL AT 45 CENTS A POUND FROM QUALITIES SELLING RESPECTIVELY AT 
 75 CENTS, 60 CENTS, 40 CENTS AND 30 CENTS A POUND. 
 
 On one pound at 75 cents there is a loss of 30 cents. 
 
 On twenty pounds at 75 cents there is a loss of $6 00 
 
 On one pound at 60 cents there is a loss of 15 cents. 
 
 On twenty pounds at 60 cents there is a loss of 3 00 
 
 $9 00 
 
 On one pound at 40 cents there is a gain of 5 cents. 
 
 On one pound at 30 cents there is a gain of 15 cents. 
 
 Or a gain of 20 cents on each two pounds of the inferior qualities mixed. 
 
 We must, therefore, add 45 pounds each of these grades to cover the loss 
 
 on the better grades, making the mixture contain: 
 
 20 pounds at 75 cents $15 00 
 
 20 pounds at 60 cents 12 00 
 
 45 pounds at 40 cents 18 00 
 
 45 pounds at '30 cents 13 SO 
 
 130 pounds at 45 cents $58 50 
 
 ALIQUANT. — A part of a number or quantity which, when dividing 
 this number or quantity, leaves a remainder ; thus 7 is an aliquant part of 20. 
 
 ALIQUOT. — A part of a number or quantity which divides that 
 number or quantity without leaving a remainder ; thus 7 is an aliquot part 
 of 21. 
 
 Aliquot parts of numbers are largely used to shorten and simplify the 
 operation of multiplication, especially in computations involving fractional 
 prices or quantities. 
 
 The aliqtfot parts of 10, 100 and 1,000 are hereunder given : 
 
 ALIQUOT PARTS. 
 OF 10. 
 
 2 1-2=1-4 I 2-3=1-6 I 1-4=1-8 
 
 3 1-3=1-3 I 3-7=1-7 I 1-9=1-9 
 
 OF 100. 
 61-4=1-16 162-3=1-6 50 =1-2 
 
 81-3=1-12 25 =1-4 62 1-2=5-8 ori-i6 of 1000 
 
 121-2=1-8 331-3=1-3 75 =3-4 
 
 142-7=1-7 371-2=3-8 871-2=7-8 
 
 183-4=3-16 311-4=5-16 
 
 82 
 
OF 1000. 
 
 831-3=1-12 1662-3=1-6 333i-3='-3 
 
 I2S =1-8 250 =1-4 375 =3-8 
 
 62s =5-8 87s =7-8 
 833 1-3=5-6 
 
 Thus to compute 439 yards of muslin at 8 1-3 cents per yard multiply 
 by 100 and divide by 12. 
 
 The following Tables of Aliquot Parts of a lineal foot, or one dozen, 
 and tons, will be found useful : 
 
 TABLE OF ALIQUOT PARTS. 
 
 Aliquot Parts Of i foot or Aliquot Parts Of I Ton of 
 
 I dozen. 2000 lbs. 
 
 n. One thirty-second is 62 1-2 
 
 n. One-sixteenth is 125 
 
 n. One-eighth is 250 
 
 n. One-fourth is 500 
 
 n. Three-eighths is 750 
 
 n. One-half is 1000 
 
 n. Five-eighths is 1250 
 
 n. Three-fourths is 1500 
 
 n. Seven-eighths is 1750 
 
 n. One-twelfth is 166 2-3 
 
 n. One-fifth is : 400 
 
 n. One-sixth (2-12) is 333 1-3 
 
 n. One-third (4-12) is 666 2-3 
 
 n. Five-twelfths is 833 1-3 
 
 n. Seven-twelfths is 1166 2-3 
 
 n. Two-thirds (8-12) is I333 1-3 
 
 n. Five-sixths (10-12) is 16662-3 
 
 n. Eleven-twelfths is 1833 1-3 
 
 One-fortieth is SO 
 
 Soule, in his Philosophic Practical Mathematics, devotes 46 pages to 
 the general treatment of this subject in its various phases, and to those whose 
 business lies in the direction of computations and calculations of this kind, 
 his work is very highly recommended. 
 
 ALLONGE (Com. Law). — A piece of paper annexed to a bill of 
 exchange or promissory note, on which to write endorsements for which 
 there is no room on the instrument itself. 
 
 ALLOTMENT. — A share or portion ; that which is allotted. 
 
 ALLOTMENT OF SHARES.— In large corporations, especially those 
 whose stock is open to public subscription, it is necessary to keep a record of 
 shares applied for and shares allotted, as it frequently happens that appli- 
 cations have to be passed upon and the most desirable ones selected. This is 
 more especially true of very promising mining companies. 
 
 In such a case, one of the authorities on Corporation Accounting 
 recommends separate sheets being employed for each letter, and where 
 
 One thirty-second is J^ of i 
 
 One-sixteenth is %oi i 
 
 One-eighth is i J4 
 
 One-fourth is 3 
 
 Three-eighths is 45^2 
 
 One-half is 6 
 
 Five-eighths is 7J4 
 
 Three-fourths is 9 
 
 Seven-eighths is loH 
 
 One-twelfth is i 
 
 One-sixth (2-12) is 2 
 
 One-third (4-12) is 4 
 
 Five-twelfths is 5 
 
 Seven-twelfths is 7 
 
 Two-thirds (8-12) is 8 
 
 Five-sixths (^lo-is) is 10 
 
 Eleven-twelfths is 11 
 
 One-fortieth is 5-6 of i 
 
 83 
 
subscriptions are invited for more than one class of share, the employment 
 of separate application forms, printed on different colored paper, so that the 
 applications and allotment sheets for each class of shares may be easily 
 distinguished. When the allotment is complete the sheets can be bound 
 either in the form of a book or of a binder, in order to make a permanent 
 record. 
 
 Appended is an illustration of a record of applications and allotment. 
 
 I^Eai5T£P> or sSnAPIE. APPLJCATIO/W3 AA/O Al^L.OTMCN-7Z^ 
 
 
 NIa 
 
 AaAiics 
 
 Oc< 
 
 
 six 
 
 »! 
 
 wife 
 
 NoS Io)i( 
 
 ArTTourrf" 
 D<-ie 
 
 ALLOWANCE (Com. Law). — The share or portion given to a mar- 
 ried woman, child, trustee, etc. The term is ordinarily only another name 
 for a gift or gratuity to a child or other dependent. 
 
 ALLOWANCE. — The amount credited to a debtor, or claimed by a 
 purchaser, on account of overcharge, inferiority, damage, error, or discount. 
 
 A very good method of treating allowances is to provide consecutively 
 numbered credit tickets for all allowances other than cash deductions, each 
 credit to the ledger of this description to be vouched by the O. K.'d credit 
 ticket. 
 
 Some concerns use special credit books or journals for recording 
 allowances, while others record same in the regular cross-entry journal. 
 
 ALTERATION (Com. Law). — A change in the terms of a contract 
 or other written instrument by a party entitled under it, without the consent 
 of the other party, by which its meaning or language is changed ; a change 
 in the language of instruments but not in the contract itself. 
 
 Such a change by a stranger is called a spoliation. A change in the 
 written instrument by agreement of the parties is sometimes called an altera- 
 tion, but such an altered instrument becomes a new agreement. 
 
 An alteration avoids the instrument, if such alteration is material. 
 The question of materiality is one of law for the court and depends upon the 
 facts of each case. 
 
 A spoliation by a third party without the knowledge of or consent of 
 a party to the instrument will not avoid it even if material, if the original 
 words can be restored with certainty, but the material spoliation of an 
 instrument while it is in the custody of the promisee, avoids his rights under 
 
 84 
 
it, because having the custody of an instrument made for his benefit, he is- 
 bound to preserve it in its original state. 
 
 ALTERATION OF CHARTER.— See charter. As a rule the charter 
 of a private corporation cannot be altered unless at the desire of every member 
 of such corporation, and the sanction of the Secretary of State. It very 
 aften occurs that a corporation desires to enter into some business transaction 
 outside of the limits of the business, to do which the corporation is organized. 
 It should be understood that no corporation is legally entitled to enter intO' 
 any such business transaction without an amendment of the charter obtained. 
 in the proper manner. This is intended to be a protection to the stockholders.. 
 
 AMALGAMATION.— See consolidation. 
 
 AMBIGUITY. — Duplicity, indistinctness, or uncertainty of meaning- 
 of an expression used in a written instrument. 
 
 Latent ambiguity is that which arises from some collateral circumstance 
 or extrinsic matter in cases where the instrument itself is sufficiently certaini 
 and intelligible. 
 
 Patent ambiguity is that which appears on the face of the instrument ;. 
 that which occurs when the expression of an instrument is so defective that 
 a court of law which is obliged to put a construction upon it, placing itself 
 in the situation of the parties, cannot ascertain therefrom the parties' inten- 
 tion. 
 
 Latent ambiguities may be explained by parol evidence, and are sub- 
 jects for the consideration of a jury. Patent ambiguities render the instru- 
 ment, so far as they extend, inoperative. They can not be explained by parol 
 evidence. 
 
 Inaccuracies or such uncertainty as arises from the use of peculiar 
 words, or common words in a peculiar sense, are not ambiguities. 
 
 AMENDMENT TO ARTICLES OF INCORPORATION.— While 
 there are generally slight differences in the corporation laws of each State, 
 it may be generally understood that a corporation desiring to amend its- 
 Articles of Association, must first secure the assent of two-thirds of the 
 subscribed capital stock and a majority vote of its Board of Directors or 
 Trustees. The by-laws of a corporation usually include a provision that they 
 may only be repealed, or amended, or new by-laws adopted at a special 
 meeting (to be called as provided in the by-laws), or at the annual meeting, 
 such new by-laws to be adopted, or such old by-laws to be repealed or 
 amended only when voted for by a certain majority of stock. 
 
 In creating bonded indebtedness, or increasing or reducing capital stock, 
 it is also necessary in some States to file with the Secretary of State, a 
 certificate reciting the history of the proposed change, and a report of the 
 meeting at which the change was effected. In most States, changes in the 
 
 85 
 
Articles of Incorporation can be effected without reference to the State 
 authorities. 
 
 The following is an example of the procedure necessary to amend 
 Articles of Incorporation : 
 
 Whereas, At a meeting of the Board of Directors of the , 
 
 a Corporation, regularly and legally called and held at the office of said 
 
 Corporation, at the of and of , 
 
 at o'clock, , on the day of , A. D. 
 
 all of the members of said Board of Directors being present and 
 
 voting, it was determined by resolution passed and .adopted by unanimous 
 vote, duly recorded, to amend the Articles or Certificate of Incorporation of 
 
 said Corporation, which were heretofore, to-wit, on the day of 
 
 , A. D , filed in the office of the County Clerk of the 
 
 County of , State of and the said Amended 
 
 Articles, as hereinafter set forth, were read, duly considered and adopted 
 by said Board of Directors of said Corporation ; 
 
 Now, Therefore, These Amended Articles of Incorporation, Witness : 
 
 First. That the name of said Corporation is, and shall be 
 
 Second. That the purposes for which it is formed are : 
 
 (Here insert the original purposes of the corporation.) 
 
 Third. That the place where its principal business is, and is to be, 
 
 transacted is the Town of , in the County of , 
 
 State of 
 
 Fourth. That the terms for which it is to exist is fifty (50) years 
 from and after the date of its original incorporation. 
 
 Fifth. That the number of Directors under the original Articles of 
 
 Association and Certificate of Incorporation was ; that the 
 
 names and residences of the Directors who were duly elected as such at the 
 
 l^egular annual meeting of this Corporation, held on the day 
 
 of , A. D , serve until the election of their successors, 
 
 and are as follows, to-wit : 
 
 But that the number of Directors is now, and shall be, diminished from 
 
 (....) to (....), and that the following named persons, who 
 
 are members of the Corporation and duly qualified under the by-laws of 
 
 the Corporation, to-wit, , shall serve as the said 
 
 Directors from the time of the filing of the copy of these Amended Articles 
 of Incorporation, as provided by law, until their successors shall be elected. 
 
 Sixth. The amount of the capital stock of this Corporation is 
 
 dollars ( ), and the number of shares into which it is divided is 
 
 ( ) shares, of the par value of 
 
 dollars ( ) each. 
 
Seventh. That the whole amount of said capital stock, to-wit, 
 
 ( J .) shares, is actually subscribed, and the following are the names 
 
 of the persons by whom the said capital stock has been subscribed, and is 
 held, and the amounts subscribed and held respectively by each of them 
 at the date hereof, to-wi 
 
 In Witness Whereoe, The undersigned, , a 
 
 Corporation, organized and existing under the laws of the State of , 
 
 having its place of business at , in said State, and being a 
 
 present subscriber and holder of capital stock of said Corporation, has 
 
 hereunto this day of , A. D , caused its name 
 
 to be subscribed and its corporate seal to be affixed by its President and its 
 Secretary, being hereunto authorized by its Board of Directors by reso- 
 lution duly passed and adopted ; and we, the other undersigned, all of whom 
 
 are residents of the State of , and present subscribers and 
 
 holders of the capital stock of said Corporation, have hereunto, the said 
 
 day of , set our hands and seals ; and the said 
 
 Corporation and other undersigned, comprising more than two-thirds of 
 
 all of the holders of the capital stock of said , do hereby 
 
 respectively signify our assent to the Amended Articles of said Incorporation, 
 as hereinabove set forth. 
 
 The following is an example of form of Amendment to By-Laws : 
 
 Whereas, An assent in writing, bearing date , , 
 
 signed by the holders of more than two-thirds of the capital stock of this 
 Corporation, consenting to an amendment to the By-Laws, being an amend- 
 ment to Section of Article , relating to , 
 
 and is now on file in the office of this Corporation ; 
 
 Now, Therefore, Be it 
 
 Resolved, That the Board of Directors and Secretary of this Corpora- 
 tion certify to said amendment, and the Secretary is hereby directed to copy 
 said amendment, so certified, in the Book of By-Laws immediately following 
 the original By-Laws of this Corporation. 
 
 AMOUNT. — The- sum, total of two or more numbers or quantities ; 
 the aggregate, or value. Thus, the amount of 5 -j- 6, is ii. Gross amount 
 is a term used to represent the aggregate without deduction; net amount 
 represents the aggregate less reduction. 
 
 AMOUNT COVERED (Com. Law).— In insurance is the amount 
 that is insured, and for which underwriters are liable for loss under a policy 
 of insurance. 
 
 AMOUNT OF LOSS (Com. Law).— "The diminution, destruction, 
 or defeat of the value of, or of the charge upon the insured subject to the 
 assured, by the direct consequence of the operation of the risk insured 
 
 87 
 
against, according to its value in the policy, or in contribution for loss, so 
 far as its value is covered by the insurance." 
 
 AMORTIZATION.— The extinction of a debt ; usually by means of a 
 Sinking Fund. The periodical installment by which the purchase price 
 of a lease and interest thereon is extinguished, is termed the Amortization 
 Rate. 
 
 The following example will illustrate the amortization of a five years* 
 lease: 
 
 LEASE ACCOUNT. 
 
 1894. ^^- ^■■• 
 
 June I Purchase price $11,25000 
 
 1895. ^ 
 May 31 5% interest 562 50 
 
 Depreciation $2,598 45 
 
 Balance 9.214 oS 
 
 $11,812 50 $11,812 50 
 
 1896. 
 
 May 31 Balance forward $9,214 05 
 
 5% interest 460 70 
 
 Depreciation $2,598 45 
 
 Balance 7.076 30 
 
 $9,674 7S $9,674 75 
 
 1897. 
 
 May 31 Balance forward $7,076 30 
 
 S% interest 353 80 
 
 Depreciation $2,598 45 
 
 Balance 4.831 65 
 
 $7,430 10 $7,430 10 
 
 1898. 
 
 May 31 Balance forward $4,831 65 
 
 5% interest 241 58 
 
 Depreciation $2,598 45 
 
 Balance 2,474 78 
 
 ^ $5,073 23 $5,073 23 
 
 1899. 
 
 May 31 Balance forward $2,474 78 
 
 5% interest 123 67 
 
 Depreciation $2,598 45 
 
 $2,598 45 $2,598 45 
 
 ANALYSIS OF LEDGER.— An expedient frequently used by 
 accountants for the purpose of balancing ledgers where the books have been 
 kept in a very slipshod or careless manner, and where the entries are difficult 
 to decipher. Ruled sheets of paper are used for this purpose, separate' 
 columns being allotted to each account, the debits and credits to these accounts 
 being entered in the proper columns from the books from which the postings 
 
 88 
 
have been made to the ledgers. The analysis thus becomes practically a 
 transcript of the ledger, but obtained independently, and the accounts can 
 then be compared with the accounts in the ledgers and all differences 
 examined and corrected. , 
 
 Columns are also provided on the analysis sheets for each book from 
 which the postings are made, such as sales book, purchase record, cash book, 
 journal, etc., and each posting to a ledger account is counter-balanced by an 
 entry in the column allotted to the book from which the entry is posted. 
 
 At the completion of the analysis, the footings of the columns for. sales 
 book, cash book, etc., should agree with the totals of these books, while the 
 total of each account should agree with the total of the amounts posted to the 
 said account in the ledgers. A recapitulation sheet is also made of the totals 
 of the analysis sheets, and the balances thus obtained should agree with the 
 trial balance taken from the ledgers. 
 
 This is a very laborious and costly process, and is only resorted tO' 
 where it is evident that the books of account are in a very unsatisfactory 
 condition. In cases where arbitrary postings have been made to the ledger, 
 this method of checking will locate such postings by comparison of the 
 accounts. 
 
 ANNUAL STATEMENT.— A statement prepared at the close of the 
 fiscal, or business year, exhibiting the financial condition of the business and 
 the result of its transactions during the period reviewed. (See Balance 
 Sheets.) 
 
 ANNUALLY (Com. Law ) .—^Yearly ; returning every year. As 
 applied to interest it is not an undertaking to pay interest at the end of one 
 year only, but to pay interest at the end of each and every year during a 
 period of time, either fixed or contingent. 
 
 ANNUITIES. — By an annuity is meant a periodical payment, made 
 annually, or at more frequent intervals, either for a fixed term of years, or 
 during the continuance of a given life or a combination of lives, as will be 
 more fully explained further on. In technical language an annuity is said 
 to be payable for an assigned status, this being a general word chosen in 
 preference to such words as "time," "term," or "period," because it may- 
 include more readily either a term of years certain, or a life or a combination- 
 of lives. The magnitude of the annuity is the sum to be paid (and received) 
 in the course of each year. Thus if $ioo is to be received each year by a 
 person, he is said to have an annuity of $ioo. If the payments are made 
 half yearly, it is sometimes said that he has "a half-yearly annuity of $ioo" j 
 but to avoid ambiguity, it is more commonly said he has an annuity of $ioo, 
 payable by half-yearly installments. The former expression, if clearly 
 understood, is preferable on account of its brevity.' So we rriay have 
 
 89 
 
•quarterly, monthly, weekly, daily annuities, when the annuity is payable by 
 -quarterly, monthly, weekly, or daily installments. An annuity is considered 
 as accruing during each instant of the status for which it is enjoyed, although 
 it is only payable at fixed intervals. 
 
 If an annuity is payable for a term of years independent of any contin- 
 gency, it is called an annuity certain ; if it is to continue for ever, it is called 
 a perpetuity ; and if in the latter case it is not to commence until after a term 
 of years, it is called a deferred perpetuity. An annuity depending on the 
 continuance of an assigned life, or lives, is sometimes called a life annuity; 
 but more commonly the simple term "annuity" is understood to mean a life 
 annuity, unless the contrary is stated. A life annuity, to cease in any event 
 after a certain term of years, is called a temporary annuity. The holder of 
 an annuity is called an annuitant, and the person on whose life the annuity 
 -depends is called the nominee. 
 
 If not otherwise stated, it is always understood that an annuity is 
 payable yearly, and that the annual payment (or rent, as it is sometimes 
 •called) is £i. Of late years, however, it has become customary to consider 
 the annual payment to be, not £i, but simply i, the reader supplying what- 
 ever monetary unit he pleases, whether pound, dollar, franc, thaler, etc. It 
 is much to be desired that this course should be followed in any tables that 
 may be published in the future. The annuity, it will be observed, is the 
 "totality of the payments to be made (and received), and is so understood by 
 all writers on the subject; but some have also used the word to denote an 
 individual payment (for rent), speaking, for instance, if the first or second 
 year's annuity — a practice which is calculated to introduce confusion, and 
 -should, therefore, be carefully avoided. 
 
 The theory of annuities certain is a simple application of algebra to the 
 fiindamental idea of compound interest. According to this idea, any sum 
 •of money invested, or put out at interest, is increased at the end of a year by 
 the addition to it of interest at a certain rate ; and at the end of a second year, 
 the interest of the first year, as well as the original sum, is increased in the 
 same proportion, and so on to the end of the last year — the interest being, in 
 technical language, converted into principal yearly. Thus, if the rate of 
 interest is 5 per cent., $5 improved at interest will amount at the end of a year 
 to $5.25, or in conformity with a previous remark, i will at the end of a year 
 amount to 1.05. At the end of a second year this will be increased in the 
 same ratio, and then amount to (1.05)2. In the same way, at the end of a 
 third year, it will amount to (1.05)3, ^iid so on. 
 
 We pass on now to the consideration of the theory of life annuities. 
 'This is based upon a knowledge of the rate of mortality among mankind 
 •in general, or among the particular class of persons on whose lives the 
 
 90 
 
annuities depend. If a simple mathematical law could be discovered which 
 the mortality followed, then a mathematical formula could be given for 
 the value of a life annuity, in the same way as we give above the formula 
 for the value of an annuity certain. In the early stage of the science, 
 Demoivre propounded the very simple law of mortality which bears his 
 name, and which is to the effect, that out of 86 children born alive 1 will 
 die every year until the last dies between the ages of 85 and 86. The 
 mortality, as determined by this law, agreed sufficiently well at the middle 
 ages of life with the mortality deduced from the best observations of his 
 time; but, as observations became' more exact, the approximation was found 
 to be not sufficiently close. This was particularly the case when it was 
 desired to obtain value of joint life, contingent, or other complicated 
 benefits. No simple formula, however, has yet been discovered that will 
 represent the rate of mortality with sufficient accuracy; and those which 
 satisfy this condition are too complicated for' general use. 
 
 ANNUITY CALCULATIONS.— Tliese calculations depend upon 
 well defined methods of ascertaining the incremental value of a sum of 
 money under varying conditions, and also at any time during the "life" 
 of the annuity, that is the number of years or months or other periods in 
 which a certain prescribed amount is payable by will or otherwise, so as, 
 at the end of the payments, to amount to a given sum. 
 
 These sums are granted "in fee" (to a person and his heirs forever), 
 for life (made a charge on an estate which is to end with the life of the 
 donee) or for a series of years. As the interest on any one of the payments 
 in the series thus created does not fall due till the end of the period, this 
 incremental feature is not claimable nor payable until the second period 
 has begun in any case, so that we thus reach the general law that the claimant 
 is entitled to receive during any period that the annuity has been running 
 as many times the principal as periods plus as many times the interest as 
 there are periods less one, subject however to certain abatements founded 
 on the rules of compound interest alluded to further along, and some 
 "present worth" calculations which diminish this amount to a greater or 
 less degree. 
 
 But a yearly payment say of $500 at 6 per cent, simple interest amounts 
 in six years, npt to 6 times 500 plus 6 times 30, that is to $3,180, but to the 
 sum of $500, $530, $560, $590, $620, $650 or $3,450. 
 
 As annuitants have many forms of choice as to how and when they shall 
 take their payments from the estate, some twenty forms of calculation have 
 arisen in reaching varying values of such "holdings" under different con- 
 ditions, values of the "accrued terms," we might say. Let us take a case 
 where, for example, a man has worked eighteen months for a farmer at $20 
 
 91 
 
per month, the wages 'remaining unpaid till the end of the term of service, 
 CO find how much is due the workman, at 6 per cent, simple interest. In 
 this most simple form of annuity illustration, the figuring takes the form 
 of an attempt to strike an average for two successive periods in the payment, 
 and use that as a basis for working out the result of all the periods ; that is, 
 20 plus 20 plus .10 times 17 (the interest at 6 per cent, for one less than the 
 real number of periods) divided by 2, gives $21.70 for the value of an 
 "average" term, and multiplying this by the number of terms (18) we have 
 $375.30 as the amount due. 
 
 Or, we might put it in this way: 20 times the number of months 
 (18) plus one-half of sum of the interest increment for the time, that is 18 
 times $1.70 divided by 2, giving the same result. In the same way, to use 
 another illustration, if we have annuity of $150 running for 5J4 years, 
 payable quarterly at i J^ per cent., we would employ the formula : 
 
 (150 plus 150 plus $2.25 times 21) divided by 2 (to get the average 
 as above) and times 22 for the entire number of periods (that is four times 
 5J4), giving when worked out the sum of $3,819.75 as the result, as the 
 amount of the annuity. 
 
 Now, in this connection, there arises-an interesting feature of reckoning 
 where, instead of taking two periods, one of which is, the other not an 
 interest-bearing (accumulative) period, we are compelled to employ two 
 periods in the reckoning, both of which are incremental in character, as 
 in the preblem whercwe wish to find in what time an annual pension of $500 
 will amount to $3,450 at 6 per cent, simple interest; and the reason for 
 the choice of two interest-bearing periods which are easily found, is that 
 the number of periods in this case is not known ; whence arises the formula : 
 
 $3,450 divided by (530 plus $560 divided by 2) plus 30 equals 
 $3,450 divided by 575 or 6 (years) for the answer. We might derive a 
 general working rule then as follows : Divide the amount of the annuity 
 at the given rate by the increment for one period plus the average time for 
 two periods, to get the number of terms. 
 
 Again, since we have here the first term of an arithmetical progression 
 (500) the common difference (30) and the sum of the series $3,450 to obtain 
 both the number of terms and the last term; whence arises the working 
 formula, which is perhaps as good as any that can be devised, and it is of 
 universal application : 
 
 "C" representing the sum of the series, "a" the first term, "b" the 
 common difference to find "d" the number of terms and "e" the last term ; 
 then we have : 
 
 C divided by the formula (a plus b plus a plus 2 b) divided by 2 
 plus b, equals d (that is 6) ; represented in figures by the expression, $3,450 
 
 92 
 
divided by one-half of 530 plus 560, plus 30. The leading feature in this 
 method is that two increment bearing terms are used instead of the principal, 
 or the first term simply as in other solutions, and since in dividing by 2 to 
 get the average we lose the use of one of the elements, namely the 30 that 
 is the common diflference in working out the result, we have to add it again 
 after the reduction of the fraction 530 plus 560 divided by 2, to restore it to 
 its place in the solution. After obtaining "d," "e" is readily found. And 
 the formula is 6ne of universal application in this class of problems. Taking 
 another case to show its working, we have one where it is required to find 
 the rate per cent, at which an annuity of $6,000 will amount to $59,760 
 in eight years simple interest. Now comes first the formula 6,000 plus 
 6,000 plus 8 times a (the unknown term) divided by 2 and the result 
 multiplied by 8, the number of terms (which we have given), and in working 
 it out we reach finally the apparent value of a as being 840, but restoring 
 its real value by dividing by 2 (because the value was doubled when clearing 
 the first equation of fractional form to aid in the solution) we have the 
 real value of a as 420, whence 6,000 divided by 420 gives 7 per cent, as the 
 required answer. 
 
 In other cases the finding of the "valuation" of a series is of great 
 simplicity, as where it is required to ascertain the initial value of a perpetual 
 lease of $250 per year at 6 per cent., which is merely $250 divided by .06 
 or $4,166.66; but this is where the annuity is payable yearly; and if we go 
 a step further and take cases where the payments are made at lesser periods, 
 the solution becomes more difficult; as to find for illustration the value of 
 a perpetual leasehold of $2,500 a year payable first semi-annually, and 
 second quarterly, when it becomes necessary to take into consideration the 
 fact that interest accumulates upon the yearly payment and makes necessary 
 a larger sum to meet the required number of annuity payments than where 
 the annuity is payable yearly; in other words, the value of the "perpetual 
 lease" above referred to in case of quarterly payments is $2,575 divided by 
 .06, or $42,916.66 2-3, and where payable semi-annually it is $2,537.50 
 divided by .06, or $42,291.66 2-3, which are the required amounts to sustain 
 the yearly or rather the above periodical payments, and at the same time 
 maintain the interest rates demanded in settlement of the estate in this case. 
 
 It will be noted that the value when paid annually is really the 
 present worth of the amount paid semi-annually, as shown by dividing 
 $42,916.66 2-3 by 1.03. To extend this principle in a slightly different 
 direction to reach cases of a "deferred" annuity (perpetuity), and find for 
 instance the present worth of a deferred (forborne, as the old accounts used 
 to call it), annuity of $250 a year, deferred say 8 years at 6 per cent. 
 After obtaining as above the present value $4,166,662-3 by dividing by 
 
 93 
 
o6, and then taking the present value as a representative of the compound 
 interest of a certain su^n which invested will produce that amount, and 
 dividing the $4,166,662-3 by the compound interest of $1.00 for eight 
 years at 6 per cent, i. e., i. 5938481, we have $2,614.22 as the present value 
 of the perpetuity which has been deferred eight years. This means the 
 amount claimable by the beneficiary, who has been deprived for a series of 
 years of his annual income under the above circumstances. 
 
 And so to extend the illustration of principle a little further, if it is 
 asked to find the present value of a perpetuity of $160 a year to commence 
 in 3 years 4 months at 7 per cent. Solution: 160 divided by .07 gives 
 $2,285.71; then the 
 
 Compound interest at $1 for 4 years at 7 per cent, is 1.310796 
 
 Compound interest of $1 for 3 years at 7 per cent, is 1.225000 
 
 3) .085796 
 
 .028598 
 Adding this to the compound interest for 3 years 1.225043 we have 
 1.253641 as a divisor of the $2,285.71 above obtained, yielding a result of 
 $1,823.28 for the present value required. 
 
 It should be noted in this connection that in the drawing up of wills 
 neither the main part of the text nor the codicils provide for the maximum 
 amount which shall be payable in annuities with any degree of exactness, 
 that is to say, for illustration, if a man dying leaves a bequest of an annual 
 payment of $1,500 to some one, the interest accumulations are never cal- 
 culated upon, the term of years is not often exactly specified that the sum is 
 to be paid, nor any conditions attached to its deferment on account of the 
 absence, etc., of the beneficiary, or other reasons, nor what arrangements 
 shall be made if the donee elects to take what will be his due for a series of 
 years in advance, commencing at the end of such series of years to receive 
 the annual payment under ordinary conditions again, and so on. There 
 are some classes of cases, to be sure, where the codicil may defer the beginning 
 of the payment for a series of years as where, for instance, it is required 
 to ascertain the present value of an annuity of $680 to commence in 7 years 
 and to continue for 10 years at 5 per cent. ; we first find the present value of 
 $680 deferred 7 years at 5 per cent to be $9,665.27, i. e., $680 divided by 
 .05 equals 13600, divided by 1.407,100 equals $9,665.27; present value 
 $680 deferred 17 years at 5 per cent., $5,933.64; present value $680 deferred 
 7 years, and to run 10 years, $3,731.63. 
 
 But we must prepare ourselves for dealing too with a class of somewhat 
 related problems, but differing in the fact that there is no provision made 
 for the deferred "commencement" of the payment of the annuity, which is 
 
 94 
 
here immediate, and so necessitates a difference in the figuring; as for- 
 illustration, where it is required to find the deferred value of an "immediate" 
 annuity of $300 running 18 years at 5 per cent., we find as before the. 
 principal which produces the annual payment of $300 by dividing by .06;, 
 but instead of using the compound interest itself of $1.00 for the 18 years, 
 we employ the interest less the principal; that is 1.4066192 not 2.4066192, 
 and then on the calculation that this actual interest, deprived of its one 
 dollar of principal, and representing really the accumulative features of the 
 principal (one dollar), and using it as a means of determining what $6,000 • 
 would accumulate under the same conditions, we have for the required, 
 result the sum of $8,439.72 as the deferred value of the annuity named, 
 above. On the same principle in solving a class of problems to see what, 
 could have been saved in a given number of years under various conditions, 
 if the savings had been permitted to accumulate annually under the compound, 
 interest principles as where, for illustration, A pays $25 yearly for tobacco, 
 to see how much better off he would have been in 40 years had he invested, 
 the sum at 10 per cent, per annum, whence the formula 45.2592556 (less- 
 $1.00 principal as above) ; that is 44.2592556 times $25, giving $11,064.81 
 as the answer. 
 
 Annuity tables can be purchased which will save the accountant the- 
 greater part of the trouble of calculating same for himself, when required 
 to check up expenditures under this head, or to establish Sinking Funds, etc. 
 
 ANTICIPATING BILLS.— A term used in commerce to signify the 
 discounting of bills — that is, pay the amount of same prior to the due date: 
 in order to obtain cash discounts. 
 
 The following table will illustrate the apparent advantage of taking- 
 advantage of cash discounts, considering money as being worth 6 per cent^ 
 per annum : 
 
 Terms — 30 days, or 1% in 10 days, cash discount $ I 00 
 
 Interest on $100 for 20 days at 6% 33 1-3 
 
 Saving in 20 days i:--— $ 662-3 
 
 Saving in 30 days, or i month „ I 00 
 
 Saving in 12 months, or i year 12 00 
 
 Saving 12%. 
 
 Terms — 60 days, or 2% in 15 days, cash discount $ 2 00 
 
 Interest on $100 for i J4 months at 6% 75 
 
 Saving in 45 days $ i 25 
 
 Saving in 30 days or i month 83 1-3 
 
 Saving in 12 months, or i year 10 00 
 
 Saving 10%. 
 
 Terms — 4 months, or 5% in 30 days, cash discount $ 5 00 
 
 Interest on $100 for 3 months at 6% i 50 
 
Saving in 90 days $ 3 5° 
 
 Saving in i year 14 0° 
 
 Saving 14%. 
 
 Terms — 4 months, or 6% in 10 days, cash discount $ 6 00 
 
 Interest on $100 for 3 months, 20 days at 6% i 831-3 
 
 Saving in 3 months, 20 days $4 162-3 
 
 Saving in 30 days, or i month i 14 
 
 Saving in 12 months, or i year 13 68 
 
 Saving 1368-100%. 
 
 Terms — 6 months, or S% in 30 days, cash discount $ 5 00 
 
 Interest on $100 for S months at 6% 2 50 
 
 Saving in 5 months $ 2 50 
 
 Saving in 12 months, or i year 6 00 
 
 Saving 6%. 
 
 Terms — 6 months, or 6% in 10 days, cash- discount $ 6 00 
 
 Interest on $100 for S months, 20 days at 6% 2 83 1-3 
 
 Saving in 5 months, 20 days $3 162-3 
 
 Saving in 30 days, or i month S 59 
 
 Saving in 12 months, or i year 6 71 
 
 Saving 6 71-100%. 
 
 The advantage above mentioned, however, is more apparent than real, 
 and frequently is merely an exchange of capital and not of profit, as the 
 customers of the business take advantage of cash discounts just as readily 
 as the proprietor in regard to his own purchases. As a matter of fact, 
 a -wholesale house with a fair list of customers will lose more by offering 
 ■cash discounts than it will gain by taking advantage of them. 
 
 The six examples shown above may be considered misleading to a 
 •certain extent, as money is worth in a business whatever profit the business 
 makes on capital invested — that is to say, the legal rate of interest may be 
 •6 per cent, per annum, but the value of money used in a business may be 
 worth 50 per cent, per annum, so that its withdrawal for the purpose of 
 anticipating payments would not effect an actual saving. 
 
 A question that' frequently comes up in the direction of the prepayment 
 ■of bills may be illustrated as* follows : 
 
 Smith buys of Jones a bill of goods on January ist, at 60 days, April 
 1st, 2 per cent, off for cash, and i per cent, per month off for the prepayment. 
 Smith pays the bill January 1 5th, and deducts 2 per cent, for cash, and 4^^ 
 per cent, for four and one-half months' prepayment. Jones claims that 
 Smith is only entitled to 2^ per cent, for two and one-half months' prepay- 
 ment. Who is right ? 
 
 In this case, Jones is clearly right. 
 
 Smith having elected to take advantage of the 20 per cent, discount, 
 the bill becomes due for payment April ist, or as custom has decreed, April 
 
 96 
 
loth, and he is, therefore, entitled to interest for prepayment only to the date 
 on which he would be obliged to pay, viz., April loth. 
 
 Reduced to dollars and cents basis, we will assume a bill of $i,ooo, 
 terms as stated, April ist dating — 2 per cent, cash or net 60. 
 
 Amount of bill $1,000 00 
 
 2% discount 20 00 
 
 Amount due April loth : $980 00 
 
 If paid January isth, interest on this amount from January 
 
 iSth to April loth, or 85 days, at 12% per annum 27 77 
 
 Amount to pay January isth $852 23 
 
 It will thus be seen that the total deduction for discount is $20.00 and 
 
 $27.77==$47.77. 
 
 The only basis on which the four and one-half months for anticipation 
 
 could be used would be Smith's waiving the 2 per cent, for cash privilege, 
 
 in which case he might figure 4^ per cent, on $1,000, or i per cent, per 
 
 month from date of payment to the maturity of the bill, or $45.00. As this 
 
 would involve a clear loss of ^2.y'/, it is hardly compatible with good 
 
 financiering. 
 
 If Smith takes advantage of the 2 per cent, for cash, he can figure 
 
 interest only to the discount date. 
 
 * * * * 
 
 What is the net worth on April ist, 1899, of two notes of $500.00 
 
 each, dated January ist, 1899, one payable July ist, 1899, and the other 
 
 January ist, 1900, 6% per annum being allowed for anticipated payment? 
 
 FORMULA. 
 Calculate 6% on $1 for 3 months — 1.015. 
 Divide amount of first note by 1.015 (principal and discount) 500.00 (492.61 net worth 
 
 March i, 1899. 
 6% on 492.61 for 3 months is — ^7.39; 492.61 plus 7.39=1500.00. 
 Calculate 6% on $1 for 9 months — 1.045. 
 Divide amount of second note by 1.045)500.00 (478.47. 
 6% on 478.47 for g months is — 21.53; 478-47 plus 21.53=500.00. 
 
 The following will illustrate the way in which a great many commission 
 houses treat anticipated payments : 
 
 A bill sold on March 15th ($650.00), with terms of 6 per cent., 10 
 days, or 5 per cent., 30 days, with 60 days extra. If this bill is paid on April 
 1st the calculation of discount would be as follows : 
 
 March 15 as May 15 $650 00 
 
 Less 6% discount 39 00 
 
 Due May 25th $611 00 
 
 Interest from April 1st to May 25th, 55 days 5 60 
 
 At 6% p. a $605 40 
 
 The $39.00 should be credited to discount account, and $5.60 should 
 be credited to interest account, thus showing at the end of the month, or year, 
 
 97 
 
the net credit secured by anticipating bills. This matter will be further 
 
 considered under the heading of "Discounts." 
 
 ANY — (Com. Law). — Is synonymous with "either" and is given the 
 
 full force of "every" or "all." 
 
 APOTHECARIES' WEIGHT.— 
 
 20 grains (gr.) equal i scruple 
 
 3 scruples equal I dram 
 
 8 drams equal I ounce 
 
 12 ounces equal I pound 
 
 This weight is used in mixing and retailing medicines. The pound is 
 the same as the pound Troy. 
 
 APPLICATION by Payments, see Appropriation. 
 
 APPLICATIONS FOR SHARES.— In corporations where the stock 
 is offered for public subscription, it is necessary to keep a careful record of 
 all applications for shares and of shares allotted. 
 
 Such a record should be provided with columns for Date of Applica- 
 tion; Number; Name; Address; Occupation; No. Shares Applied For; 
 Folio ; Amount of Deposit ; Proposed Allotment ; No. of Letter of Regret ; 
 No. of Allotment; Nos. of Shares Allotted; Amount Payable on Allot- 
 ment ; Date ; Cash Receipts ; Balance Due ; Certificate No. 
 
 Where the stock is divided into issues of common and preferred, 
 separate sheets should be used for each class. It will be noticed that in 
 the form a column is provided for the description of the occupation of 
 the applicant. This is frequently a very important matter, as preference 
 should be given to applicants interested in the kind of business which the 
 Corporation has been organized to carry on in order to secure their favorable 
 influence. 
 
 APPORTIONMENT— (Com. Law).— The division or distribution 
 of a subject-matter in proportionate shares. The allowance, in case of the 
 partial performance of a contract, of a proportionate part of what the party 
 would have received as a recompense for the entire performance of the 
 contact. 
 
 A contract for the sale of goods is entire, but where there has been a. 
 part delivery of the goods the buyer is liable on a quantum valebant if he 
 retain the part dehvered, but he may return the part delivered and escape 
 liabilities. Yet a contract consisting of several distinct items, and founded 
 on a consideration apportioned to each item, is several. The question of 
 entirety is one of intention to be gathered from the contract. 
 
 Wages are not apportionable where the hiring takes place for a definite 
 period. 
 
 APPRAISE.— To value; to estimate the worth of. 
 
 APPRAISEMENT— (Com. Law).— A just valuation of property. 
 Appraisements are required by law to be made of the property of persons 
 dying intestate, of insolvents, and others, when an inventory of the goods, 
 ought to be made, and a just valuation put upon them. 
 
APPRAISER. — One who sets a value upon goods ; a person appointed 
 and sworn to estimate a fixed value on goods or estates. 
 
 APPRECIATION. — A term used to describe the accretion of value to 
 certain classes of assets which are affected by changes in the markets or other 
 causes, accidental and otherwise. Such accretions of value are a gain to 
 capital. Appreciation, therefore, should be credited to Profit and Loss onljr 
 when there is a reasonable prospect of the increase in value being permanent.. 
 This does not, however, refer to speculative securities, the fluctuations of 
 which are mostly artificial and form a distinct class of commercial 
 transactions. 
 
 Like the law of gravitation by its moving center, so is the law of supply 
 and demand governed by leading principles. Whenever the supply of some- 
 thing for which a want exists equals the demand for it, values remain at a. 
 stable equilibrium on first quotations the market is said to be active and' 
 merit defies demand in selection. Whenever the supply exceeds the 
 demand, the equilibrium becomes unstable or is lost, the market is said 
 to be dull and bearish, values range downward and merit critically dictates^ 
 selection. Whenever the demand exceeds the supply, the equilibrium gains- 
 stability, because values are firm or farther appreciate and, like a rising body, 
 seek their highest level. The market is said to be bullish. As decrease of 
 the visible supply stimulates the desire to possess and control the supply 
 available, merit ceases to be the leading factor in final selection. At this- 
 time real appreciation ends and speculation, the inflator of values and twin- 
 brother of gambling, steps in. 
 
 APPROBATION SALES.— Gkjods delivered to customers on approval 
 — that is, on the understanding that they may be returned without charge 
 if found unsatisfactory. 
 
 Such sales should be kept in a separate memorandum sales book until 
 disposed of. If the goods are retained by the customer, they should be 
 entered in the regular sales book ; if returned, a memorandum to that effect 
 should be made in the approbation sales book. 
 
 In all large businesses where there is danger of approbation sales being; 
 overlooked, it is advisable to open an account called "Approbation Sales." 
 To this account charge all goods sent out and credit all goods returned, and 
 goods charged in the regular sales book. The balance of this account will 
 thus always show the value of goods out on approbation. A special form 
 of bill can be used in duplicate, the original being handed to the customer 
 with the goods, and the duplicate /being retained as a record. The bills 
 can be so devised as to perform the functions of an approbation sales book 
 as above mentioned; thus saving the labor of making entries in a bound 
 volume. 
 
One of our contemporaries relates in his text book chat on account 
 of the difficulty of finding suitable names for the various auxiliary books 
 of record used in a certain large establishment, the approbation sales book 
 is there denominated as the "cold pig," from which he inculcates the lesson 
 that if an accountant reads about a certain book and looks around the office 
 for a book bearing the same name, he should not be discouraged if he cannot 
 immediately find it. 
 
 APPROPRIATION OF PAYMENTS— (Com. Law).— The appli- 
 cation to one or more of several debts, of a payment made by a debtor to his 
 creditor. 
 
 The debtor has the first right of appropriation. No precise declaration 
 is required of him, but his intention, when made known, is sufficient; still 
 such facts must be made to appear and be proved as will satisfy a jury that 
 the debtor did purpose the specific appropriation claimed. The appro- 
 priation must be made by the debtor at or before the time of payment. 
 
 The creditor may apply the payment, as a general rule, if the debtor 
 does not. In the absence of directions the creditor may apply credits to the 
 least secure items of his claim, but there are some restrictions on this right. 
 The debtor must have known and waived his right of appropriation. The 
 creditor must prefer a prior legal debt to a posterior equitable debt. Where 
 only one of several debts is valid and lawful, all payments must be applied 
 to this, irrespective of its order in the account. A creditor cannot apply 
 unappropriated funds to such of his claims as are illegal and not recoverable 
 at law. But in the case of some debts illegal by statute, — namely those 
 contracted by sales of spirituous liquors, — an appropriation to them has 
 been held good. And the debtor may always elect to have his payments 
 applied to an illegal debt. 
 
 If some of the debts are barred by the statute of limitations the creditor 
 cannot first apply the unappropriated funds to them, and thus revive and 
 take them out of the statute. Still a debtor may waive the bar of statute 
 of limitation, just as he may apply his funds to an illegal debt; and the 
 creditor may insist, in the silence of the debtor, unless other facts controvert 
 it, that the money was paid on the barred debts. It has been held that a 
 creditor may first apply a general payment to discharging any one of several 
 accounts all barred, and by so doing he will revive the balance of that 
 particular account, but he is not 'allowed to distribute the funds upon all of 
 the barred accounts so as to revive all. 
 
 The law will apply part payments in accordance with the justice and 
 equity of the case, and most beneficial to the debtor at the time of payment. 
 
 Unappropriated funds are always to be applied to a debt at the time 
 of payment, rather than one not then due. But an express agreement will 
 make good an appropriation to debts not due. 
 
 100 
 
Payments made on account are first to be applied to the interest which 
 has accrued thereon. And, if the payment exceed the amount of interest, 
 the remainder goes towards extinguishing the principal. But a payment 
 cannot be applied by the creditor to usurious interest. 
 
 When no other rules of appropriation intervene, the law applies part- 
 payments to debts in the order of time, discharging the oldest first. So 
 strong is this rule of priority that it has been said that equity will apply 
 payments to the earliest items, even where the creditor has security for these 
 items and none for later ones. 
 
 The general rule is that neither debtor nor creditor can so apply a 
 payment as to affect the liabilities of sureties, without their consent. 
 Where a principal makes general payments, the law presumes them, prima 
 facie, to be made upon debts guaranteed by surety, rather than upon others. 
 
 APPROVED ENDORSED NOTES — (Com. Law). — Notes 
 endorsed by another person than the maker, for additional security, the 
 endorser being satisfactory to the payee. i 
 
 When credit is given at public sales, the sales are generally made on 
 approved endorsed notes. The meaning of the term is that the purchaser 
 shall give his promissory note for the amount of the credit endorsed by 
 another, which, if approved by the seller, shall be received in payment. 
 
 APPROXIMATE INVENTORY.— A method of calculating inven- 
 tory on hand by averaging percentages of profits on sales. ( Se^ Inventory. ) 
 APPURTENANCES.— Things belonging to another thing as prin- 
 cipal, and which pass as incident to the principal thing. 
 
 ARCHITECTS' ACCOUNTING.— The accounting necessary for the 
 business of an architect should be very simple. One of the main features 
 is a record of certificates issued on work performed on buildings. These are 
 usually recorded in a contract register wherein columns are provided for 
 
 Date of Contract. 
 
 Contractor's Name and Address. 
 
 Amount of Contract. 
 
 Specifications Covered by the Contract. 
 
 Certificates Issued on Contract, 
 
 Number and Amount. 
 A ledger account will also be kept with each contract, or client, to which 
 fees, dues and payments made should be charged, and to which payments 
 received on account of same should be credited, separate representative 
 accounts being opened for architects' fees and expenditures on account of 
 clients. As payments on behalf of clients are frequently made, it is best to 
 provide special columns for the same on the cash paid side of the cash book, 
 
 101 
 
and a postage record will also be found necessary in which to record cost of 
 postage incurred on account of clients. 
 
 The certificates are made with counterfoils, or stubs, on which the 
 particulars of each certificate issued are copied for reference. 
 
 ARITHMETIC. — The science of numbers ; the art of computation by 
 figures. 
 
 ARITHMETIC (AMUSING).— A term employed to signify devices 
 in the combination of figures by which surprising results are apparently 
 obtained without effort. These devices are, however, of no practical value 
 in commerce or mathematics. We append some illustrations. 
 
 Addition. — In this case the operator asks for a line of figures and 
 sets them down as per line of the example. Underneath this line the operator 
 writes another, adding sufficient to the figures in the first line to make 9's 
 of each pair of figures. (See second line). The operator now asks for 
 another line, which is set down under the first two lines, adding a fourth 
 line to make pairs of 9's as before. The operator then obtains the fifth 
 line of figures, which is called the key line. By subtracting 2 from the last 
 figure on the right and placing a 2 in front of the first figure on the left, the 
 total is obtained. 
 
 For three pairs of lines deduct 3 from the last figure on the right-hand 
 and prefix 3 to the first on the left, and so on, with four pairs of 9's, etc. 
 
 FIRST EXAMPLE. 
 
 4 
 
 8 
 
 5 
 
 3 
 
 6 
 
 2 
 
 8 
 
 I 
 
 2 
 
 7 
 
 5 
 
 I 
 
 4 
 
 6 
 
 3 
 
 7 
 
 I 
 
 8 
 
 7 
 
 2 
 
 7 
 
 2 
 
 I 
 
 2 
 
 8 
 
 6 
 
 S 
 
 8 
 
 3 
 
 4 
 
 2 
 
 7 
 
 8 
 
 7 
 
 I 
 
 3 
 
 4 
 
 I 
 
 6 
 
 S 
 
 8 
 
 '2 
 
 4 
 
 3 
 
 I 
 
 I 
 
 
 
 7 
 
 S 
 
 6 
 
 2 8 
 
 2 
 
 4 
 
 3 
 
 I 
 
 I 
 
 
 
 7 
 
 5 
 
 4 
 
 
 
 
 SECOND EXAMPLE. 
 
 
 
 
 4 
 
 8 
 
 5 
 
 3 
 
 6 
 
 2 
 
 8 
 
 I 
 
 2 
 
 7 
 
 5 
 
 I 
 
 4 
 
 6 
 
 3 
 
 7 
 
 I 
 
 8 
 
 7 
 
 2 
 
 7 
 
 2 
 
 I 
 
 2 
 
 8 
 
 6 
 
 S 
 
 8 
 
 3 
 
 4 
 
 2 
 
 7 
 
 8 
 
 7 
 
 I 
 
 3 
 
 4 
 
 I 
 
 6 
 
 5 
 
 8 
 
 2 
 
 4 
 
 3 
 
 I 
 
 I 
 
 
 
 7 
 
 S 
 
 6 
 
 I 
 
 7 
 
 S 
 
 6 
 
 8 
 
 8 
 
 9 
 
 2 
 
 4 
 
 3 
 
 7 
 
 2 
 
 I 
 
 8 
 
 2 
 
 6 
 
 3 
 
 S 
 
 8 
 
 4 
 
 3 7 
 
 2 
 
 I 
 
 8 
 
 2 
 
 6 
 
 3 
 
 S 
 
 8 
 
 I 
 
 
 
 
 THIRD EXAMPLE. 
 
 
 
 
 4 
 
 8 
 
 5 
 
 3 
 
 6 
 
 2 
 
 8 
 
 I 
 
 2 
 
 7 
 
 5 
 
 I 
 
 4 
 
 6 
 
 3 
 
 7 
 
 I 
 
 8 
 
 7 
 
 2 
 
 7 
 
 2 
 
 I 
 
 2 
 
 8 
 
 6 
 
 S 
 
 8 
 
 3 
 
 4 
 
 2 
 
 7 
 
 8 
 
 7 
 
 I 
 
 3 
 
 4 
 
 I 
 
 6 
 
 5 
 
 8 
 
 2 
 
 4 
 
 3 
 
 I 
 
 I 
 
 
 
 7 
 
 5 
 
 6 
 
 I 
 
 7 
 
 5 
 
 6 
 
 8 
 
 8 
 
 9 
 
 2 
 
 
 3 
 
 7 
 
 2 
 
 I 
 
 8 
 
 2 
 
 6 
 
 3 
 
 S 
 
 8 
 
 4 
 
 2 
 
 7 
 
 8 
 
 I 
 
 7 
 
 3 
 
 6 
 
 4 
 
 I 
 
 S 
 
 I 
 
 2 
 
 2 
 
 4 
 
 5 
 
 S 
 
 6 
 
 S 
 
 I 
 
 8 
 
 102 
 
Or, the first line may be made the key line, pairing the lines of 9's 
 underneath. 
 
 MutTiPUdATiON. — Multiply the following example as directed : 
 
 72 
 
 78 
 
 5616 
 
 Multiply the upper right hand figure by the lower right hand figure, 
 2X8, and place the product, 16, in the answer. Then add i to the lower 
 left hand figure, and multiply the upper left hand figure, 7X8, and place the 
 product, 56, in the answer, to the left of the other two figures, making a 
 total product of 5616. 1 
 
 Apply this rule to the following examples : 
 
 88 92 8s 44 8; 46 74 11 5S 99 65 58 
 64 98 8s 82 83 44 76 46 73 64 6s 52 
 
 Multiply the following example as directed: 
 
 76 
 
 2736 
 
 Multiply the upper right hand figure by the lower right hand figure, 
 6X6, and place the product, 36, in the answer. Then multiply the upper 
 left hand figure by the lower left hand figure, 3X7, and add to this product 
 the lower right hand figure, which equals 21 +6^27; place this product 
 in the answer to the left of the other two figures, making a total product of 
 -'736. 
 
 Apply this rule to the following examples : 
 
 37 1i S6 49 37 64 87 65 64 82 75 37 
 44 66 s6 69 88 99 27 45 44 22 35 88 
 
 Multiply the following as directed : 
 
 27 s6 63 46 
 
 92 84 44 24 
 
 1814 4024 2412 824 
 
 ()j 68 36 28 
 
 2484 4704 2772 I I 04 
 
 Multiply the right hand figures together, and place the product In the 
 answer. Next, multiply the left hand figures together, and place the product 
 to the left of the preceding. Then multiply the diagonal figures together, 
 the upper left by the lower right, and the upper right by the lower left, and 
 add these products together, and place them under the first line, with the 
 right hand figure in the place of lo's. The sum thus obtained will be the 
 correct answer. 
 
 103 
 
Apply thus rule to the following examples : 
 
 27 S6 74 47 63 29 26 46 41 71 95 
 92 84 98 63 44 47 43 24 28 97 27 
 
 In the first example the short cut is due to the fact that the diagonal 
 figures multiplied together and added as above give, in the example worked 
 out, 72 X 78 ^ 5616, a sum of 700 (8 X 70 + 70 X 2), which is equal to 
 I X 700, and this added to 70 X 70 = 4,900, is the equivalent of 7 X 700 
 + I X 700, or 80 X 70. The same explanation applies to the second class 
 of examples under this head, 88 X 64, where the upper figures are the same 
 and the lower are compliments of each other. 
 
 In the second example of the above, the first case, 36 X 7^ = 2736, is 
 of two numbers, having the right hand figures alike and the left hand figures 
 complements of each other. In this case the multiplication and addition of 
 the diagonal figures gives 6 X 30 + 70 X 6^ 100 X 6 or 600, which is 
 exactly what is done in following the process prescribed. In the class of 
 examples shown by the second case, the upper figures being complements 
 of each other and the lower figures alike, the result is the same, but, if the 
 multiplier and multiplicand change, places the example will be brought under 
 the first head. 
 
 Neither first nor second examples can be applied to the examples under 
 the third example. 
 
 Another illustration of multiplication, where there are two figures in 
 both multiplicand and multiplier, or three figures in multiplicand and two 
 
 in multiplier, is as follows : 
 
 72 
 78 
 
 S6i6 
 
 8X2 = 16, then 8 X second figure of the multiplicand, 7 ^ 56 ; then 
 second figure of multiplier 7 y^2, first figure of multiplicand ^ 14 X 56 +1 
 carried from 16^71. We then take the two second figures of multiplier 
 and multiplicand and multiply 7 X 7 =^ 49 + 7 carried from 71 = 56. 
 Answer, 5616. 
 
 Take 36 x 76 and apply the same rule as in the first example and we have 
 2736. So with 27 X 92, 56 X 84, 63 X 44. When there are three figures in 
 multiplicand and two in multiplier, the following rule should apply. 
 Example : 732 x 68 ^ 49776. Rule — Multiply first figure of multiplicand 
 by first figure of multiplier and we have 16 ; put down 6 and carry i. Then 
 multiply first figure of multiplier by second figure of multiplicand=24 added 
 to product of second figure of multiplier times first figure of multiplicand 
 (12) we have 36 + i = 37. Then multiply second figure of multiplier by 
 second figure of multiplicand (18) plus the product of first figure of multi- 
 
 104 
 
plier times third figure of multiplicand (56) equals 74 + 3 carried from. 
 37 = 7T- Then multiply the second figure of multiplier by third figure of 
 multiplicand (42) and add 7 carried from "j"] equals 49. Thus we have- 
 ^977^ ^^ the answer. This rule can never fail if correctly applied. 
 
 If there are three figures in both multiplicand and multiplier the follow- 
 ing rule applies : 
 
 236 
 417 
 
 98412 
 
 Multiply the first figures of multiplier and multiplicand and we have- 
 42. First figure (7) of multiplier times second figure of multiplicand. 
 (21) added to product of second figure of multiplicand times first figure 
 of multiplicand (6) equals 27 + 4 = 31. Then add products of second 
 figures of multiplier and multiplicand and (3) first figure of multiplier- 
 times third figure of multiplicand ( 14) ; third figure of multiplier times 
 first figure of multiplicand (24) equals 3 + 14 + 24^41+3 carried 
 from 31=44. Then add products of second figure of multiplier times 
 third figure of multiplicand (2) third figure of multiplier times second, 
 figure of multiplicand (12) equals 14x4 carried from 44^18. Then 
 multiply third figure of multiplier and multiplicand (8) plus i carried from 
 18 we have 9. Answer 98412. 
 
 To multiply by aliquot parts of 100, add two ciphers and divide- 
 whatever fraction of 100 the multiplier is. Thus 28 x 25 is J4 of 100. 
 
 4)2800 
 
 700 Ans. 
 
 These rules are easy, and when once fixed in the mind are never lost. 
 
 Attention has been called to the number 142857, which is odd in more 
 senses than one. 
 
 If we multiply it by any number, from i up to 6, we arrive at products- 
 expressed by exactly the same figures as the original. Not only so, but 
 with the exception that a different figure leads off each time, the order of; 
 the figures is the same. 
 
 142,857 multiplied by I is the same 
 142,857 multiplied by z is 285,714 
 142,857 multiplied by 3 is 428,571 
 142,857 multiplied by 4 is 571,428 
 142,857 multiplied by 5 is 714,285 
 142,857 multiplied by 6 is 857,142 
 
 With this multiplying by 6, the strangeness stops, though the result: 
 
 of multiplying the number by 7 gives the rather odd number, 999, 999. 
 
 ARRANGEMENT OF ACCOUNTS.— (See Classification.) 
 
ARBITRATION— (Com. Law). — The investigation and determina- 
 -tion of a matter or matters of difiference between contending parties, by one 
 or more unofficial persons, chosen by the parties, and called arbitrators or 
 referees. 
 
 Voluntary arbitration is that which takes place by mutual and free 
 •consent of the parties. It usually takes place in pursuance of an agreement, 
 usually in writing, between the parties, termed a "submission." The 
 -determination of the arbitrators or referees is called an "award." A parol 
 submission is good at common law. 
 
 A submission to arbitration made pending an action relative to the 
 matter, operates as a discontinuance of the suit. 
 
 Compulsory arbitration is that which takes place when the consent of 
 -one of the parties is enforced by statutory provisions. 
 
 Any matter which the parties may adjust by agreement, or which may 
 Tje the subject of a suit at law (except crimes) may be determined by 
 arbitration. 
 
 Any person who is capable of making a valid and binding contract 
 with regard to the subject, may, in general, be a party to a reference or 
 .arbitration. 
 
 At common law arbitration is entirely voluntary, and depends upon 
 the agreement of the parties, to waive the right of trial in court by a jury. 
 
 A submission to arbitration is subject to revocation at any time before 
 an award, and it is revoked by the death of one of the parties. 
 
 ARREARS — (Com. Law). — The remainder of an account or sum of 
 -money in the hands of an accountant. Any money due and unpaid at a 
 given time. "In arrear" means overdue and unpaid. 
 
 ARREARS. — An amount overdue but unpaid, as, arrears of rent; 
 -arrears of salary, etc. 
 
 ARTICLES OF AGREEMENT— (Com. Law).— A written memo- 
 randum of the terms of an agreement. 
 
 The instrument should contain a clear and explicit statement of the 
 names of the parties, with their additions for purposes of distinction; the 
 subject matter of the contract, including the time, place, and all the 
 important details of the manner of performance; the promises to be per- 
 formed by each party ; the date, which should be truly stated, and should 
 he signed by the parties or their agents.. 
 
 ARTICLES OF INCORPORATION.— While any citizens of the 
 United States may enter into a partnership agreement without first con- 
 -culting the State or Federal laws (excepting, for their own protection, 
 those which cover the proper construction of partnership agreements), a 
 
 106 
 
corporation has certain defined legal privileges in regard to limited liability, 
 on account of which th\e conferring or obtaining of a charter of incorporation 
 has been made a favor to be secured only by complying with certain legal 
 forms and obligations. 
 
 Unfortunately the laws governing corporations are not uniform in 
 all the States, this being a reform much to be desired, and some day to be 
 achieved. In order, therefore, to obtain a suitable form of Articles of 
 Incorporation, it is advisable and necessary to consult the local statutes in 
 order to ascertain the State and other requirements, but, as examples, the 
 following may be found useful : 
 
 ARTICLES OF ASSOCIATION 
 
 OP 
 
 We, the undersigned, desiring to become incorporated under the 
 provision of Act No. 232 of the Public Acts of 1885, entitled "An act to 
 revise the laws providing for the incorporation of all manufacturing 
 companies (except such as are contemplated by Act No. 42 of the Session 
 Laws of 1867, which provides for the incorporation of persons, or corpor- 
 ations, engaged in the manufacture of salt), and mercantile companies, 
 or any union of the two, and to fix the duties and liabilities of such 
 corporations," and the acts amendatory thereof and supplementary thereto, 
 do hereby make, execute, and adopt the following articles of association, 
 to-wit : 
 
 ARTICLE I. 
 
 The name assumed by this association, and by which it shall be known 
 in law, is 
 
 ARTICLE II. 
 
 The purpose, or purposes, of this corporation are as follows : 
 
 ARTICLE III. 
 
 The operations of this corporation are to be carried on in the County 
 of , State of 
 
 ARTICLE IV. 
 
 The capital stock of the corporation hereby organized is the sum of 
 dollars. 
 
 ARTICLE V. 
 
 The number of shares into which the capital stock is divided is 
 
 of the par value of ten dollars each. 
 
 ARTICLE VI. 
 The amount of said stock actually paid in at the date hereof is the sum 
 
 107 
 
of dollars, being .- pei 
 
 cent, of said capital stock. 
 
 ARTICLE VII. 
 
 The office in the State of , for the transaction of 
 
 business, shall be kept at 
 
 ARTICIvE VIII. 
 
 The term of existence of this corporation is fixed at 
 
 years from the date hereof. 
 
 ARTICLE IX. 
 
 The names of the stockholders, their respective residences, and the 
 number of shares of stock subscribed for by each, are as follows : 
 
 NAMES. RESIDENCE. NO. OE SHARES. 
 
 In Witness Whereof, We, the parties hereby associating, for the pur- 
 pose of giving legal effect to these articles, hereunto sign our names, this 
 day of , A. D. 19. . 
 
 NAMES. NAMES. 
 
 FORM OF ACKNOWLEDGMENT OF SIGNATURE. 
 
 State of , County of , ss. 
 
 On this day of , 19 .... , before me, 
 
 a in and for said County, personally appeared 
 
 known to me to be the persons named in, and who executed the foregoing 
 instrument, and severally acknowledged that they executed the same freely 
 and for the intents and purposes therein mentioned. 
 
 Articles of Incorporation of the 
 
 Registered Office with the 
 
 NAME. 
 
 First. The name of the corporation shall be 
 
 PRINCIPAL OFFICE. 
 
 Second. The location of its principal office in the State of , 
 
 shall be at , at , in the 
 
 108 
 
County of , and said Corporation shall be registered with 
 
 the Trust Company. The said Trust Company is the 
 
 agent therein, and in charge thereof, and upon whom process against this 
 Corporation may be served. 
 
 OBJECTS. 
 
 Third. That the objects for which, and for each of which, this 
 Corporation is formed, are: 
 
 To manufacture, buy, sell, deal in and deal with steel or iron, or both, 
 and all like or kindred products ; to mine, manufacture, prepare for market, 
 market and sell the same, and any articles or product in the manufacture 
 or composition of which metal is a factor, including the acquisition by 
 purchase, mining, manufacture, or otherwise of all material, supplies, and 
 other articles necessary or convenient for use in connection with and in 
 carrying on the business herein mentioned, or any part thereof. 
 
 To build, construct, repair, maintain, and operate water, gas, or electri- 
 cal works, tunnels, bridges, viaducts, canals, wharves, piers and 
 
 railroads, and any like works of internal impi-ovement, or public use, or 
 utility. 
 
 In furtherance, and not in limitation, of the general powers conferred 
 
 by the laws of the State of , and of the objects and 
 
 purposes as herein above stated, it is hereby expressly provided that the 
 Company shall have also the following powers, that is to say: 
 
 POWERS. 
 
 (a) To do any or all of the things herein set forth as objects, purposes, 
 powers or otherwise, to the same extent, and as fully, as natural persons 
 might or could do, and in any part of the world, as principals, agents, 
 contractors, trustees or otherwise. 
 
 (b) To conduct its business in all its branches, and have one or more 
 offices, and unlimitedly- to hold, purchase, and convey, real and personal 
 
 property, both within and without the State of , and 
 
 in all other States, Territories, and Colonies of the United States, and in 
 all foreign countries and places. 
 
 (c) To manufacture, purchase, or otherwise acquire, hold, own, 
 sell, assign and transfer, invest, trade, deal in and deal with goods, wares, 
 and merchandise and property of every class and description, and to do both 
 mining and manufacturing of any kind. 
 
 (d) To purchase, or otherwise acquire, to hold, own, maintain, work, 
 mine, develop, to sell, convey, or otherwise dispose of, without limit as to 
 
 amount, within or without the State of , and in any 
 
 part of the world, real estate and real property, and any interest and rights 
 therein. 
 
 109 
 
(e) To acquire the good will, rights and property of all kinds, and to 
 undertake the whole or any part of the assets and liabilities of any person, 
 firm, association or corporation, and to pay for the same in cash, stock of 
 this Company, bonds or otherwise. 
 
 (f) To apply for, obtain, register, purchase, lease or otherwise 
 acquire, and to hold, own, use, operate, introduce and sell, assign, or other- 
 wise dispose of, any and all trade-marks, trade names, and distinctive 
 marks, and all inventions, improvements and processes used in connection 
 with, or secured under Letters Patent of the United States or elsewhere, 
 or otherwise, and to use, exercise, develop, grant licenses in respect of, or 
 otherwise turn to account, any such trade-marks, patents, licenses, con- 
 cessions, processes and the like, or any such property, rights, and information 
 so acquired, and with a view to the working and development of the same, 
 to carry on any business, whether mining, manufacturing, or otherwise, 
 which the Corporation may think calculated, directly or indirectly, to 
 effectuate these objects. 
 
 (g) To hold, purchase, or otherwise acquire, to sell, assign, transfer, 
 mortgage, pledge or otherwise dispose of shares of the capital stock, bonds, 
 or other evidences of indebtedness created by other corporation, or corpor- 
 ations, and while the holder of such stock, to exercise all the rights and 
 privileges of ownership, including the right to vote thereon, to the same 
 extent as a natural person might or could do. 
 
 (h) To purchase, lease, exchange, hire, or, otherwise acquire, any 
 and all rights, privileges, permits or franchises suitable or convenient for 
 any of the purposes of its business ; to erect and construct, make, improve, 
 or aid or subscribe towards the construction, making and improvement of 
 mills, factories, store-houses, buildings, roads, docks, piers, wharves, houses, 
 for employees and others, and works of all kinds ; and in conjunction with, 
 and in furtherance of the general business and purposes of the Corporation, 
 as above described, to construct, lease, own, operate, or sell a railroad, or 
 
 railroads, or both, in any State or icountry other than the State of , 
 
 subject to the laws of such other State or country, either directly or through 
 the ownership of stock of a corporation formed, or to be formed, for the 
 purpose under the laws of such other State or country. 
 
 (i) To guarantee the payment of dividends, or interest on any shares, 
 stocks, debentures, or other securities issued by, or any other contract, or 
 obligation of, any corporation, whenever proper or necessary, for the 
 business of this Corporation in the judgment of its Directors, or the 
 Executive Committee. 
 
 (j) To make and enter into contracts of every sort and kind with any 
 individual, firm, association, corporation, private, public, or municipal, body 
 
 110 
 
politic, and with the Government of the United States, or any State, Terri- 
 tory or Colony thereof. 
 
 (k) To do all and everything necessary, suitable or proper for the 
 accomplishment of any of the purposes or attainment of any one or more of 
 the' objects herein enumerated, or which shall at any time appear conducive 
 or expedient for the protection or benefit of the Corporation, either as holders 
 of or interested in any property, and in general to carry on any business, 
 whether manufacturing, mining or otherwise. 
 
 It is the intention that the objects, purposes and powers specified and 
 clauses contained in this third paragraph shall, except where otherwise^ 
 expressed in said paragraph, be nowise limited or restricted by reference- 
 to, or inference from the terms of any other clauses of this or any other 
 paragraph in this charter, but that the objects, purposes and powers specified, 
 in each of the clauses of this paragraph shall be regarded as independent 
 objects, purposes and powers. 
 
 CAPITAL STOCK. 
 
 Fourth. The total amount of the capital stock of this Corporation is. 
 
 to be , divided .into shares 
 
 of dollars each. Of the said stock 
 
 shares, amounting at par to , are to be- 
 
 preferred stock, and shares, amounting at 
 
 part to dollars, are to be common stock. 
 
 The rights, privileges and conditions following shall attach to the- 
 shares aforesaid, that is to say : 
 
 (i) The common stock shall be subordinate to the rights of the- 
 preferred stock, except that both preferred and common stock shall have- 
 equal voting powers. 
 
 (2) The Corporation shall not be at liberty without the consent in 
 writing first obtained of the holders of two-thirds in amount of the preferred, 
 stock issued and outstanding : 
 
 (a) To create or issue any other or further shares ranking in any 
 
 respect, paripassue with, or in priority, to the aforesaid issue of 
 
 of preference shares. 
 
 (b) Nor to create any charge, excepted as herein provided, upon the- 
 net profits of the Corporation which shall not be subordinate to the rights, 
 of the preference shares. 
 
 (c) Not to reserve a surplus fund which shall not be chargeable with 
 the pajmient of the accrued dividends on the preference shares. 
 
 (3) The said preference shares shall carry a fixed cumulative- 
 preferential dividend at the rate of, but never exceeding, per- 
 
 annum on the par value thereof, and such dividends shall be declared. 
 
 Ill 
 
-quarterly on the days of in each year, or at such other times 
 
 as the Board of Directors or the Executive Committee shall see fit and 
 ■determine. 
 
 If in any year dividends amounting to per 
 
 ..annum shall not be paid on such preferred stock, the deficiency shall be a 
 charge on the net profits, and be payable, without interest, before any 
 "dividends shall be paid upon or set apart for the common stock. 
 
 (4) The balance of the net profits of the Corporation, after the 
 
 ■payment of said accumulative dividend at the rate of per 
 
 annum to the holders of the preferred stock, may be distributed as dividends 
 .among the holders of the general, or common stock, as and when the Board 
 -of Directors or the Executive Committee shall in their discretion determine. 
 
 (5) In the event of the liquidation or dissolution of the Corporation, 
 the surplus assets and funds thereof shall be applied in the first place in 
 repaying to the holders of the aforesaid cumulative preference shares the 
 full amount of the principal thereof and the accrued dividends, if any, 
 
 ■charged, before any amount shall be paid upon the common stock, and 
 after such payment in full to the holders of said cumulative preference 
 -shares, the surplus assets and funds shall belong to and be divided among 
 the holders of the other shares. 
 
 From time to time the preferred and common stock may be issued in 
 .such amount and proportion as shall be determined by the Board of 
 Directors, in accordance with the laws of the State of 
 
 DIRECTORS. — CLASSIFICATION. 
 
 Fifth. The Directors of the Corporation shall be divided in' respect 
 
 to the time for which they shall severally hold office, into classes, 
 
 •equal in number. The first class shall be elected for a period of 
 
 years, the second class for a period of years, the third class for 
 
 a period of years, the fourth class for a period of 
 
 years, and the fifth class for a period of years, etc., and at each 
 
 annual election after the successors to the class of Directors whose terms 
 
 »expire in such years, shall be elected to hold office for years, 
 
 ■so that the term of office of at least one class shall expire in each yej r. 
 
 In case of an increase in the Board of Directors between the annual 
 ■election by the stockholders, the newly created Directorship shall be, and be 
 construed as, vacancies until the next annual election to be filled forthwith 
 <'by the Board. 
 
 INCORPORATORS, NAMES AND POST-OEPICE ADDRESS. 
 
 Sixth.. The names and post-office address of the incorporators, and 
 ithe number of shares of common stock subscribed for by each, the aggregate 
 
 112 
 
of which is the amount of capital stock with which this 
 
 Corporation will commence business, are as follows : 
 
 NO. OF SHARES OF 
 NAME. P. O. ADDRESS. COMMON STOCK. 
 
 DURATION. 
 
 Seventh. The duration of the Corporation is to be perpetual. 
 
 REGULATIONS AND LIMITATIONS. 
 
 Eighth, (i) The Corporation shall have no power to mortgage its 
 real property, except upon the assent in writing first obtained of the holders 
 
 of of the issued preferred stock hereinbefore described, 
 
 or upon the affirmative vote of the holders of a majority of the said preferred 
 stock at a meeting of the preferred stockholders duly called for that purpose ; 
 and upon such assent so obtained, or upon such affirmative vote so had, 
 and not otherwise, the Corporation shall have power to mortgage its real 
 property to secure an issue of bonds or otherwise. 
 
 (2) The Board of Directors shall have power without the assent or 
 vote of the stockholders, to make, alter, amend and rescind the by-laws of 
 this Corporation, and, subject always to the payment of the dividends on the 
 preferred stodk, to fix the amount to be reserved as working capital. 
 
 (3) With the assent in writing, or pursuant to the vote of the holders 
 of two-thirds of all the stock, irrespective of class, issued and outstanding, 
 the Directors shall have power and authority to sell, assign, transfer, convey, 
 or otherwise dispose of the property and assets of this Corporation as an 
 entirety on such terms and conditions, and for such consideration, as the 
 Directors shall deem fit, right and just. 
 
 (4) The Board of Directors, and when the Board is not in session, 
 the Executive Committee, in addition to the powers and authorities by 
 statute and by the by-laws expressly conferred upon them, are hereby 
 empowered to exercise all such powers, and to do all such acts and things 
 as may be exercised or done by the Corporation, but subject, nevertheless, 
 to the provisions of the statute, of the charter, and to any regulations that 
 may from time to time be made by the stockholders ; provided that no regu- 
 lations so made shall invalidate any provisions of this charter, or any prior 
 acts of the Directors or Executive Committee which would have been valid 
 if such regulations had not been made. 
 
 ( 5 ) There shall be an Executive Committee of members, 
 
 who shall be elected by the stockholders from the Directors, and hold office 
 as hereiriafter provided. The said committee shall have and exercise all 
 the powers expressly conferred upon it by this Article of Incorporation, and 
 also all the powers of the Board of Directors whenever a quorum shall fail 
 
 113 
 
to be present at any stated or other meeting of the Board, and as well at all 
 times whenever the Board shall not be in session, and shall have power to 
 affix the seal of the Corporation to all papers which they may deem to 
 require it. 
 
 The officers of the committee shall be a , a 
 
 , and a , who shall hold office during the 
 
 term of their office as members of the committee, and shall be elected by the 
 stockholders. 
 
 At all meetings of the committee all questions shall be decided by a 
 majority of votes, and in case of an equality of votes, the Chairman, and in 
 his absence, the Vice-Chairman, and in the absence of both, the Secretary 
 shall have a second and deciding vote. 
 
 The stockholders shall, at their first meeting, elect by ballot the said 
 
 committee of members from the Directors elected at such 
 
 meeting, and shall also elect the said officers thereof. 
 
 The stockholders shall determine and fix the compensation to be paid 
 to the members of the committee, and to any of the officers thereof, as such, 
 and the compensation of any member, or officer of the committee, so fixed, 
 shall not be diminished during his tenure. 
 
 At every annual meeting, after the first meeting, whenever the term 
 of office of any member or officer of the committee shall -expire, the stock- 
 holders shall elect a successor. Any member of the committee may be 
 elected to succeed himself. 
 
 Any director, irrespective of class, is eligible to election as a member 
 of the Executive Committee. 
 
 The term of office of each member of the committee shall be co-extensive 
 with the term of his office as Director, unless the stockholders at the time 
 of his election shall fix a shorter period or term of office, which they shall 
 have power to do. Any member of the committee who shall cease to be a 
 Director of the Company shall ipso facto cease to be a member of the 
 committee. 
 
 Neither the Directors nor the members of the Executive Committee 
 nor the President nor Vice-President shall be subject to removal during 
 their respective terms of office, nor shall their terms of office be diminished 
 during their tenure. 
 
 All vacancies in the Executive Committee shall be filled for the unex- 
 pired term from the Directors by the remaining members of the committee. 
 
 (6) The Directors shall, from time to time, determine whether, and 
 to what extent, and at what times and places, and under what conditions 
 and regulations, the accounts and books of the corporation, or any of them, 
 shall be open to the inspection of the stockholders, and no stockholder shall 
 
 114 
 
have any right to inspect any account, or book, or document of the Corpora- 
 tion except as conferred by statute of or authorized by the Directors. 
 
 (7) The Directors shall have power to hold their meetings, to have 
 one or more offices, and to keep the books, of the Corporation (except the 
 stock and transfer books) outside of this State, at such places as may from 
 time to time be designated by them. 
 
 It should be understood that in the framing of Articles of Incorporation, 
 they should include the name by which the corporation shall be known, the 
 locality where its main offices will be situated, the kind of business which 
 it is organized to transact (being careful under this heading to include 
 everything which may be found necessary as directly concerning or auxiliary 
 to the business to be transacted) ; the period for which the corporation has 
 been organized (not necessary in all the States) ; amount of capital stock; 
 how divided and par value of shares; amount of capital stock subscribed 
 and names of subscribers; signatures of subscribers and statutory acknowl- 
 edgement of signatures. 
 
 Care must also be taken in the selection of the name of the corporation, 
 as an imitation of the name of another corporation, especially if in the 
 same line of business, will not be allowed. The names selected should, 
 therefore, be first submitted to the Secretary of State, who will advise 
 whether there will be any objection to their ado£tion. The variations 
 in State laws are considerable ; for instancte, in some States the amount for 
 which a corpora,tion can be capitalized is limited, and the amount of capital 
 stock paid at date of articles must be specified; stockholders must hold 
 shares in a corporation in order to qualify as Directors ; the word "limited" 
 must be made a part of the corporation name ; a corporation is not permitted 
 to own stock or bonds in any other corporation. A number of these 
 variations will be described under the heading of, "Corporation Law." 
 
 ARTICLES OF CO-PARTNERSHIP.— A co-partnership is an asso- 
 ciation of two or more persons for the transaction of business with joint 
 capital. Such an association of persons is not subject to the restrictions 
 or limitations attached to a corporation, and each partner is individually 
 responsible for the obligations contracted by the firm, or co-partnership, 
 in case the capital invested by the partners in the partnership business is 
 insufficient to satisfy all trade liabilities. 
 
 The following form of Articles of Co-partnership may be found useful : 
 
 FORM OF ARTICLES OF CO-PARTNERSHIP. 
 
 Articles of Co-partnership made this '. . day of , 
 
 , by and between John Jones and William Smith, both of the city of 
 
 115 
 
The said parties hereby agree to form, and do forrii, a co-partnership 
 for the purpose of carrying on the general produce and commission business, 
 on the following terms and articles of agreement, to the faithful performance 
 of which they mutually agree to bind themselves. The style and name of 
 
 the firm shall be Jones & Smitk, and shall commence on the day 
 
 of 
 
 Each of the said parties agree to contribute to the funds of the partner- 
 ship the sum of in cash, which shall be paid in on or before 
 
 the first day of , to the business, and to the care 
 
 and superintendence of the same. 
 
 All profits which may accrue to the said partnership shall be divided, 
 and all losses happening to the said firm, whether from bad debts, depreci- 
 ation of goods, or any other cause or accident, and all expenses of the business 
 shall be borne by the said parties equally. 
 
 All the purchases, sales, transactions and accounts of the said firm 
 shall be kept in regular books, which shall always be open to the inspection 
 of both parties, and their legal representatives, respectively. An account 
 of stock shall be taken, and an account between the parties shall be settled 
 as often as once a year, and as much oftener as either party may desire, and 
 in writing request. 
 
 Neither of the said parties shall subscribe any bond, sign or indorse 
 any note of hand, accept, sign or indorse any draft or bill of exchange, or 
 assume any other liability, verbal or written, either in his own name or in 
 the name of the firm, for the accommodation of any other person or persons 
 whatsoever, without the consent in writing of the other party; nor shall 
 either party lend any of the funds of the co-partnership without such consent 
 of the other party. 
 
 Neither party shall engage in any other business, nor shall either party 
 
 withdraw from the joint stock any more than per 
 
 quarter, or per year. 
 
 On the dissolution of this co-partnership, if the said parties or their 
 legal representatives cannot agree in the division of the stock then on hand, 
 the whole co-partnership effects, except the debts due the firm, shall be sold 
 at public auction, at which both parties shall be at liberty to bid and purchase 
 like other individuals, and the proceeds be divided after paying the debts 
 of the firm. 
 
 For the purpose of securing the performance of the foregoing agree- 
 ments, it is agreed that either party, in case of any vioaltion of them, or 
 either of them, by the other, shall have the right to dissolve this co-partner- 
 ship forthwith on his becoming informed of such violation. 
 
 116 
 
In Witness Whereof, The said parties have hereunto set their hands 
 and seals, the day and year first above written. 
 
 John Jones. (Seal) 
 
 WiEEiAM Smith. (Seal) 
 
 ASSESSMENT. — A specific sum levied or assessed ; a levy on stock- 
 holders based on their holdings of stock, for the purpose of raising additional 
 capital with which to carry on the business, make up deficiencies, cover losses,, 
 make improvements, etc. 
 
 A valuation of property by which the amount of taxation is determined ;, 
 called an assessment roll. 
 
 The levying of assessments on stockholders is usually subject to certain 
 conditions embodied in the corporation laws of the dififerent States, and the 
 State law must therefore be consulted when ati assessment is under considera- 
 tion by the directors^ of a corporation. These legal provisions limit the 
 amount of assessment which may be levied in dififerent cases, but as a rule, 
 whenever the fuir amount of capital stock has not been paid up it is permis- 
 sible to levy the full amount unpaid in case the corporation finds itself unable 
 to discharge its liabilities. It sometimes occurs that corporations are 
 organized with the understariding that the stock subscribed need not be paid 
 Until required by the necessities of the business. 
 
 A notice of assessment should contain full particulars as to authority by 
 which levied, amount, when and where payable, and to whom, with a penalty 
 for failure to comply therewith. 
 
 The following is an example of a form of assessment notice which may 
 be used : 
 
 NOTICE OE ASSESSMENT. 
 
 The Company, a corporation — principal place of 
 
 business County, 
 
 Notice is hereby given that at a meeting of the Board of Directors of said 
 Company, held on the day of , i . . . , an assess- 
 ment, No , of dollars and cents ( ) per 
 
 share was levied upon the capital stock of the said corporation, payable 
 to at 
 
 Any stock upon which this assessment shall remain unpaid on 
 
 I . . . , will be delinquent and advertised for sale at public auction, and unless 
 
 payment is made before, will be sold on , i . . . , at .... o'clock 
 
 M., to pay the delinquent assessment, together with costs of advertising and 
 
 expenses of sale. 
 
 Secretary. 
 
 Office 
 
 Dated ipo. . . 
 
 117 
 
ASSESSMENT RECORD.— Where assessments are levied by a cor- 
 poration, a special record of same should be kept after the following form : 
 
 ASSESSMElS-r RCCORD 
 
 
 No. cff-M 
 
 Dstc 
 
 doe 
 
 Name& of* 
 sSfeoKholderA 
 
 No lS>)ar«= 
 
 per.5h^T^ 
 
 -Tsy 
 
 Da+c of 
 
 liry(^tjerjt 
 
 So far as the accounting necessary on the general books in regard to an 
 assessment is concerned, the best plan is to open an assessment account, to 
 which the total amount of the assessment as shown by the assessment record 
 will be charged, "Capital Stock" being credited with an assessment for 
 unpaid stock, and "Working Capital" credited with an assessment levied to 
 make good losses or to meet emergencies. As the assessments are paid, cash 
 will be charged, and assessment account credited. 
 
 ASSETS. — Property, possessions, resources. A real account repre- 
 senting intrinsic value. All property — realizable or unrealizable, real or 
 contingent, upon which a value can be placed. "An expenditure upon a 
 remunerative object." 
 
 Assets are credits of the concern owning them, and form the basis of the 
 credit such concern receives from the commercial community. 
 
 Assets are considered as debits on ledger and trial balance, but in making 
 up balance sheets, it is best to ignore the debit and credit element, and to 
 consider only assets in contradistinction to liabilities. Thus the make up of 
 the balance sheet may be arranged to suit the convenience of the maker as 
 follows : 
 
 Assets. Liabilities. 
 
 or 
 
 Liabilities. 
 
 Assets. 
 
 or 
 Assets. 
 Liabilities. 
 
 or 
 Liabilities. 
 Assets. 
 Assets and Expenses. — ^Assets may be represented by cash on hand, 
 inventories, accounts receivable ; expenses by advertising, stationery, postage. 
 The difference between asset accounts and expense accounts is really 
 one of degree. In purchasing merchandise, for instance, cash is exchanged 
 for something of equal value which can, in turn, be exchanged for cash by the 
 purchaser. In purchasing advertising, or circulars for distribution, cash is 
 
 118 
 
exchanged for something the results of which are generally indirect and 
 uncertain. 
 
 Stationery, stamps, etc., actually on hand at date of taking inventory, 
 are assets; the amounts expended and used represent an expense which 
 reduces the profits of the business. 
 
 One writer, therefore, differentiates assets and expense as follows : 
 
 An asset account is charged with something received, and represents 
 property on hand, maintaining or increasing capital invested. 
 
 An expense account is charged with something disbursed, and represents 
 expenditures which decrease or impair capital invested. 
 
 Assets may be differentiated into : 
 
 1. Fixed Assets. — Fixed assets are those which form a permanent 
 and essential part of the business carried on, such as real estate, machinery, 
 land and plant of a mine, road-bed and rolling stock of a railroad, etc. 
 
 2. FivOATiNG Assets. — Floating assets are those which vary from day 
 to day from sale, realization, or exchange, etc., such as stock-in-trade, cash, 
 accounts and notes receivable, land of a real estate company, etc. 
 
 3. Speculative Assets. — Speculative assets are those which fluctuate 
 in value from day to day — such as stocks, bonds, and "futures" in different 
 kinds of products dealt in by the exchanges. 
 
 Such assets as patent rights, good will and advertising devices are more 
 or less speculative, the latter often losing their entire value the moment a 
 business is suspended or closed out. 
 
 We will not under this heading take into consideration what are called 
 wasting assets, as they will receive special attention under the headings of 
 depreciation, good will, patent rights, etc., but it is convenient here to men- 
 tion some of the ordinary items of a balance sheet. It should be borne in 
 mind that any inaccuracies in estimating the proper value of assets on a 
 balance sheet, directly affects the profits of a business, and while it is quite 
 unusual to find the assets of a business underestimated, it is unfortunately 
 common to find them inflated above their actual value in order to make a 
 better showing of the results of a year's transactions. 
 
 Accounts receivable, or book debts, <&s assets, may be of much or little 
 value. One thing is certain, that in the majority of instances sufficient 
 allowance is not made for bad and doubtful debts in the nature of a reserve, 
 or by eliminating from the list of book debts, and the transference thereof to 
 a suspense account, all debts of a doubtful character, either from a knowl- 
 edge of the circumstances of the debtor, or because of being so far overdue 
 as to merit some special attention being paid to their collection. It is not 
 wise to write off into profit and loss any book debt until it is known that it is 
 irretrievably bad. It must also be admitted that accounts of a doubtful 
 
 119 
 
nature, once transferred to the suspense account, are very apt to be over- 
 looked, and some well devised plan should be in existence whereby the 
 collection of such debts as these is kept constantly before the person charged 
 with the duty. 
 
 Preliminary expenses as an asset will not be found in any but companies 
 or corporations. At first glance it does not seem reasonable that these 
 should be regarded as an asset under any circumstances, but it is not only 
 the rule but the almost universal practice to include the extraordinary 
 expenses of promotion and organization, or at least a portion of them, in the 
 assets of the concern as shown in the balance sheet. It is a question 
 whether a company is bound to write off this item out of profits. It has been 
 held in certain cases, before the courts, that it is not obligatory. And in the 
 case of railway and other corporations of a like nature, preliminary expenses 
 are treated as an expenditure on capital account, and are as such never 
 written off. Without considering critically, the legal phases of the question, 
 it is not only advisable but desirable that these expenses should be eliminated 
 from the balance sheet as an asset by writing off into profit and loss account 
 a sufficient portion to clear up the charge in three to five years, depending 
 upon the amount of the account and the profits of the business. It is 
 readily admitted that it would be manifestly unfair to charge up the whole 
 cost of organization of a company against the first year's profits. 
 
 Improvements as an asset should be most carefully watched, as they 
 have a close affinity to repairs, and are also liable to depreciation. 
 
 Inventories of stationery and office supplies of all kinds are frequently 
 taken at cost for the purpose of inflating the asset side of the balance sheet, 
 when, as a matter of fact, such inventories may contain unusable circulars, 
 ancTent letter heads, old correspondence files which are absolutely useless, 
 etc. On the other hand, unexpired insurance, a proportion of rents, and 
 similar revenues earned, but not accrued due, are often omitted from the 
 schedule of assets. 
 
 Questions will frequently come up for the determination of the 
 accountant which cannot be covered by any book, whether it be encyclopedic 
 or otherwise. A company dealing.in sewing machines, sold a number to its 
 employes on the instalment principle; they wished to keep these sales 
 separate from the ordinary sales to customers, and at inventory time included 
 the machines at cost, less amount of the instalments paid by the employees. 
 They should, of course, have been treated the same as any other sales, 
 which would not have interfered with their being recorded separately. 
 
 Where goods are imported and duty and revenue, or war tax, paid on 
 the same, duty and tax should be added to the value of the article as an 
 asset, as should permanent appreciation of the market value of a staple 
 
 120 
 
article of trade, or a fixed asset. . Where, however, the market value of a. 
 fixed asset has depreciated, proper allowance for such depreciation should be 
 made. Thus, if a corporation invests a portion of its surplus in securities, 
 the market value of which has declined, or which have completely lost their 
 market value, such securities should not be included in the balance sheet at. 
 cost. 
 
 Stock on hand should be taken at cost for inventory purposes, unless- 
 subject to extraordinary appreciation or depreciation of market value. 
 
 Thus, manufactured goods should be valued at cost of raw material, 
 with freight, duty, and labor added, together with the percentage usually- 
 added to represent the cost of management of factory. Goods only par- 
 tially manufactured should be valued on the same basis. 
 
 Goods on hand, whether manufactured or purchased complete, should, 
 never be valued for inventory purposes at selling price. 
 
 ASSETS — (Com., Law). — All the stock in trade, cash, and all avail- 
 able property belonging to a merchant or company or corporation. The- 
 property in the hands of an heir, executor, administrator, or trustee, which. 
 is legally or equitably chargeable with the obligations which such heir, 
 executor administrator or other trustee is, as such, required to discharge.. 
 
 Legal Assets are such as constitute the. fund for the payment of debts- 
 according to their legal priority. 
 
 Personal Assets. — Goods and personal chattels to which the execu- 
 tor or administrator is entitled. 
 
 Real Assets are such as descend to the heir, as an estate in fee simple.. 
 
 In the United States, generally, by statute, all the property of thci 
 deceased, real and personal, is liable for his debts, and, in equity, is to be- 
 applied as follows, when no statute prescribes a different order of applica- 
 tion, exhausting all the assets of each class before proceeding to the next r 
 
 Pirst — The personal estate not specifically bequeathed. 
 
 Second — Real estate devised or ordered to be sold for the payment of 
 debts. 
 
 Third — Real estate descended but not charged with debts. 
 
 Pourth — -Real estate devised, charged geilerally with the payment o£ 
 debts. 
 
 Pifth — General pecuniary legacies, pro rata. 
 
 Sixth — Real estate devised, not charged with debts. 
 
 See Marsjaalling of Assets. 
 
 ASSIGN — (Com. Law). — To make or set over to another. 
 To appoint, to select, to allot. To set forth, to point out. 
 
 ASSIGNEE — (Com. Law). — One to whom an assignment is made„ 
 
 121 
 
Assignee in Fact is one to whom an assignment has been made in 
 -fact by the party having the right. 
 
 Assignee in Law is one in whom the law vests the right. 
 
 ASSIGNEES' ACCOUNTS.— The accounts of Assignees, Receivers 
 -and Trustees are similar in nature and arranged on the same general prin- 
 ciples. An account has to be kept of the assignor's property, showing how 
 realized, and an account must also be kept of receipts and expenditures of 
 the assignee, who charges himself with all receipts and takes credit for 
 -all authorized expenditures and remuneration for his services. A record 
 must also be kept of all claims against the assignor's estate, such claims 
 -being properly proved before being allowed to rank for dividend. This 
 record is ruled so as to show — amount of claim; amount at which claim 
 is admitted; amount disallowed; amount of dividends; when paid; cred- 
 itors' receipts. 
 
 ASSIGNED ACCOUNTS.— Accounts assigned to a bank or other 
 party for the purpose of realizing on same before they become due. 
 
 As this method of discounting Accounts Receivable is not very common, 
 we will illustrate it as follows : 
 
 We will assume that W. H. Hunt & Co. have $12,000 out in accounts 
 receivable, distributed as follows : Smith & Co., $2,000 ; Jones & Co., 
 :$4,ooo ; Brown & Co., $6,000. Wishing to raise immediately, say $8,000, 
 "they communicate with their bankers, and having obtained their consent to 
 the loan, copies of each bill (representing the $12,000) are made in duplicate, 
 and on the back of each is endorsed the usual "For value received we do 
 hereby transfer, set over, etc." A statement is attached to each firm's bills, 
 making each account complete. All the firms whose accounts are being 
 assigned are then notified by Hunt & Co. of the fact, and the bills assigned 
 are specifically mentioned. The bills are then sent to the bank accompanied 
 "by addressed and stamped envelopes, in order that they may have as little 
 trouble as possible in the matter. This completes the preliminaries. 
 
 The bank then makes a demand note for the amount of the loan 
 ($8,000), which embodies the collateral on which the loan is made, i. e., 
 Smith, Jones & Brown's accounts, it being understood that the bank does 
 not loan on the accounts but on the note, which is signed by Hunt & Co., and 
 their account is then credited by the bank and loan account charged. 
 
 Hunt & Co. first make a journal entry crediting Smith, Jones and 
 Brown and charging Assigned Accounts, which is really an account against 
 the bank. The reason for this entry is very plain. The moment the assign- 
 ment is made to the bank, that moment the accounts of the three customers 
 are settled as fully as though they had mailed checks for the proper amounts, 
 •so far as they are concerned ; but as a matter of fact the amounts are still 
 
 122 
 
"accounts receivable," the only change being the source from which the 
 payment is to be received. 
 
 Cash is then charged with $8,000 and the item is credited to loan 
 account. Some might prefer calling this account Bills Payable, which is 
 perfectly proper ; but it has been found more desirable to separate it from the 
 trade notes. The accounts effected by the above entries then stand as fol- 
 lows : 
 
 SMITH & CO. 
 
 Nov. 20. Mdse $2,000 Nov. 26. Asgmt $2,000 
 
 JONES & CO. 
 
 Nov. 15. Mdse 4,000 Nov. 26. Asgmt 4,000 
 
 BROWN & CO. 
 
 Nov. IS. Mdse 6,000 Nov. 26. Asgmt 6,000 
 
 ASSIGNED ACCOUNTS. 
 
 Nov. 26. Smith & Co $2,000 
 
 Nov. 26. Jones & Co 4,000 
 
 Kov. 26. Brown & Co 6,000 
 
 LOAN ACCOUNT (FIRST NAT'L BANK.) 
 
 Nov. 26 $8,000 
 
 CASH. 
 Nov. 26. Loan $8,000 
 
 The bank receives Smith & Co.'s check for $2,000. They pass it to 
 the credit of Hunt & Co. exactly the same as a deposit made in the regular 
 way. Then a subsequent entry is made, charging H. & Co. and crediting 
 loan. 
 
 Hunt & Co. do exactly the same thing, , i. e., charge cash and credit the 
 bank ( assigned accounts ) and then credit cash and charge loan account. 
 
 These are the methods applied by the borrower and lender. When the 
 $8,000 has been received by the bank, they close out the loan and make up 
 interest charge, which is deducted from the regular deposit account of 
 Hunt & Co., the papers relating to the assignment and the note are all 
 returned, and subsequent payments from Smith, etc., are received by the 
 bank and credited up as straight deposits, while Hunt & Co. credit such pay- 
 ments to assigned accounts until it is closed. 
 
 ASSIGNMENT— (Com. Law).— A transfer or making over to 
 another of the whole of any property, real or personal, in possession or in 
 action, or of any estate or right therein. A transfer by writing, as distin- 
 guished from one by delivery. 
 
 The deed by which the transfer is made is also called an assignment. 
 
 As to what may be assigned, there has been a large number of deci- 
 sions in the several courts of this country to enumerate which would not, we 
 believe, be profitable. To make an assignment valid at law, the suDJect of it 
 
 123 
 
must have an existence, actual or potential, at the time of the assignment. 
 But courts of equity will support an assignment not only of interests in 
 action and contingency, but of things which have no present, actual or 
 potential existence, but rest in mere possibility only. 
 
 The right of an insolvent debtor to make an assignment for the benefit 
 of his creditors exists at common law, independent of statute, and when 
 good in the state where made is good everywhere. The statutes of the 
 several states should be exaniined regarding this subject. 
 
 Any words which show the intent of the parties to make a complete 
 transfer, will work an assignment. The proper and technical words are 
 "assign, transfer, and set over." 
 
 ASSIGNOR — (Com. Law). — One who makes an assignment. 
 
 ASSURANCE.— ( See Insurance. ) 
 
 ASSURED — (Com. Law). — A person who has been insured by souie 
 insurance company, or underwriter, against losses or perils mentioned in the 
 policy of insurance. He is sometimes designated in maritime insurance by 
 description, and not by name, as "for whom it may concern. 
 
 ATTORN — (Com. Law). — To turn over; to transfer to another 
 money or goods ; to assign to some particular use or service. 
 
 ATTORNEY — (Com'. Law). — One put in the place, turn or stead of 
 another, to manage his affairs ; one who manages the affairs of another by 
 direction of his principal. 
 
 ATTORNEYS' ACCOUNTS.— The accounts necessary to be kept 
 by an attorney are similar in character to those kept by a public account- 
 ant, the principal income consisting of fees received in payment for pro- 
 fessional services. These fees are usually based on time occupied. There 
 being different scales of fees for principal's time, principal clerk's time, 
 and assistant clerk's time, a careful record of time occupied and expen- 
 ditures made on behalf of clients has, therefore, to be kept, and in a large 
 office where many persons may be employed on the same case, it is useful 
 to have an intermediate book in which to assemble the time of each man on 
 each case, posting only the daily or weekly totals to the ledger account. 
 
 Attorneys are frequently appointed agents for the management of 
 estates, collections of rents, interest on investments, etc., and it will be 
 found best to keep the professional and real estate or other departments 
 separate, having separate columns for each in cash book and journal and 
 separate ledgers. 
 
 Several treatises on accounting methods for attorneys are published 
 in Great Britain, but they all embody the suggestions above made. 
 
 124 
 
ATTORNEY IN FACT— (Com. Law).— A person to whom the 
 authority of another, who is called the constituent, is by him lawfully dele- 
 gated. The term is employed to designate persons who act under a special 
 agency, or a special letter of attorney, so that they are appointed in factum, 
 for the special act to be performed. But in a more extended sense it 
 includes all other agents employed in any business or to do any aCt or acts 
 in pais for another. 
 
 AUDIT. — The examination of books of account to determine their 
 accuracy, and the honesty of those interested. 
 
 The objects of an audit have been defined as follows : 
 
 1. The detection of technical errors. 
 
 2. The detection of errors of principle which do not affect the 
 
 accuracy of the figures. 
 
 3. The detection of fraud. • 
 Another authority states that the principles which should govern an 
 
 audit are : 
 
 1st. The obvious principle, that the books, should be thoroughly 
 examined and found to be in- balance and all payments correctly vouched. 
 In my humble opinion, no partial audit of a company's affairs is satisfactory. 
 
 2nd. An exhaustive survey of the results from past standpoints (where 
 there are any), and any serious discrepancy noted with a view to careful 
 inquiry. 
 
 3rd. An intelligent and conscientious review of the assets (and upon 
 these an auditor of any experience and ability to gather information ought 
 to form some definite opinion), in order to ascertain to the best of his judg- 
 ment the true financial position. It is clearly laid down that where the 
 services of an outside and independent valuer are employed, the auditor 
 cannot go behind his certificate, but I suggest that in his report he should set 
 out the fact of an outside valuation. But it appears to me that the auditor is 
 not wise to accept the certificate of anyone inside the company, without 
 making such examination as is possible, within the bounds of his experience. 
 
 F. N. Yarwood, Fellow^ Sydney Institute of Accounts, N. S. W., says : 
 
 "The auditor is appointed to see that : ( i ) The balance sheet is correct. 
 (2) That it states the position as clearly as possible. (3) That the direc- 
 tors, etc., have carried out their duties in a bona Ude manner to the share- 
 holders, and with due regard to the objects and intentions of the company. 
 
 AUDITING. — The method employed or work performed in accom- 
 plishing an audit. 
 
 The Scope oE an Audit. — In considering this subject we have to take 
 into account the fact that it has by no means been authoritively defined as to 
 exactly what an efficient audit should cover. There has been considerable 
 
 125 
 
diversity of opinion as to the extent of probing which the term "auditing" 
 should embrace, some maintaining that an audit should trace every entry 
 to its original source, while others consider the verification of the trial 
 balance from the books to be sufficient. It is often very difficult to convince 
 a merchant of the value of the work for which he will be called upon to 
 pay, and in such cases what may be termed "a condensed method of auditing" 
 may be used, which will of course be subject to modifications made to suit 
 the special conditions encountered. Such a condensed method of auditing 
 will be hereafter described in detail. 
 
 Checking Postings to Ledger. — A great many auditors consider it 
 necessary to check in detail the postings to the individual accounts receivable 
 and payable, but it is usual in this country to take the ground that if the 
 general or representative accounts are found correct, no manipulation of 
 the individual or personal accounts could remain undetected. The auditor 
 does not devote any time to satisfying himself that a bill of goods bought 
 by John Jones has been charged in error to John Smith. When John Smith 
 gets the bill he will promptly attend to the rectification of the error. The 
 postings to customers and purchase accounts, however, are checked in bulk. 
 The auditor satisfies himself that the total amount of charges called for by 
 the sales book has gone into the ledger, as also the total amount of credits 
 called for by the cash book, etc. As the trading statement will show the 
 gross and net sales and purchases, there is very little chance of falsifying 
 the merchandise account so that the falsification will not be detected. 
 
 Books to be Audited. — These will comprise customers' ledgers, pur- 
 chase ledger, general or private ledger, cash book, petty cash book, cross-en- 
 try journal, purchase journal, sales journal, credit journal, pay roll, bills re- 
 ceivable book, bills payable book, trial balance book, and any other extra- 
 ordinary book, or books of original entry, from which postings may be made 
 to the ledger, or the totals of which may be transferred from the auxiliary 
 books to a book from which postings are made to the ledger. The import- 
 ance of paying attention to the last mentioned detail can be illustrated by an 
 accountant's experience in an audit where it was only accidentally discovered 
 that the book-keeper used an auxiliary or "blotter" cash book, from which 
 he transferred each day the items to the regular cash book, from which they 
 were posted to the ledger. This "blotter" being examined, a comparison 
 with the regular cash book disclosed the fact that the book-keeper had 
 changed the entries so that for years he had been putting in his pocket not 
 less than $io every day, making fictitious credits to conceal the defalcation 
 in the ledger, said credits being duly entered in the journal. 
 
 Statistical Reports and Exhibits. — From the books above men- 
 tioned, the auditor compiles the following statements and exhibits, which, 
 
 126 
 
as a rule, will cover all the desired information. Where investigations are- 
 made for a special purpose the whole trend of the audit will naturally be 
 directed along- the special line and special statements will, in all prob- 
 ability, be required : 
 
 1. Trial balance at commencement of period covered by audit. 
 
 2. Trial balance at close of period covered by audit. 
 
 3. Trial balance after closing the books. 
 
 4. Balance sheet, or statement of assets and liabilities. 
 
 5. Trading statements. Departmentalize as much as possible. 
 
 6. Profit and loss account. 
 
 7. Analysis of expense account and comparative statement when-, 
 possible. 
 
 8. Statement showing analysis of Merchandise account as appearing 
 on the ledger (where a Merchandise account is carried). 
 
 9. List of bad or suspense accounts. 
 
 10. Schedule of Bills Receivable. 
 
 11. Schedule of Bills Payable. 
 
 12. Schedule of missing Vouchers. 
 
 Check MARKS.-^It is usual for the auditor to use a distinctive check 
 mark by which he can readily distinguish his completed work. Some 
 accountants, however, state that they make a point of accomplishing their- 
 work without placing a mark of an}'^ kind upon the books audited. This- 
 seems, however, to be a very risky method and would not be advisable unless 
 the books audited were in the sole charge of the auditor during the exam- 
 ination. Particularly is this true where books of account are subject to a 
 partial audit which is supposed to keep the work as much as possible up 
 to date until the accounts receive their final checking. In order to prevent. 
 alterations being made after the books have been checked in this way, some 
 accountants adopt a special form of check-mark upon all figures upon which 
 a correction may appear. They afterwards look back over their work for 
 corrections, erasures or alterations in order to see that nothing of the kind 
 appears without the special check-mark. This special check-mark should 
 be as much like the regular check-mark as possible, so that the book-keeper 
 may not recognize the distinction. 
 
 Cash and Bank. — The first task of an auditor upon undertaking an 
 audit is usually to check the cash account both on hand and at bank according 
 to the balance shown in the cash book. If some time has elapsed since the 
 books were closed, add to the cash balance on hand the footings of all dis- 
 bursements since that date, deduct the footing of the receipts, and the balance- 
 should agree with the cash on hand at date of closing as shown by the cash 
 book. It should be particularly noted that no check for currency has beem 
 
 127 
 
■drawn but not entered on the cash book for the purpose of making up the 
 amount which should be on hand. 
 
 An audit is much facilitated when all receipts are deposited in the bank, 
 and in any case it is useful to compare deposits made in bank with the 
 receipts as shown by the cash book for the purpose of locating any large 
 •differences which need investigation. It has often happened that dishonest 
 cashiers have deposited amounts in the bank, omitting to enter same on the 
 the books, thus enabling them to appropriate a similar amount from the 
 receipts which are entered on the books. 
 
 Purchase Accounts. — It has been indicated above that accounts with 
 ■creditors are frequently checked in bulk and not in detail. It will, however, 
 be necessary for the auditor to take particular notice that there has been 
 no opportunity to charge purchases "for employes to merchandise or expense 
 accounts. 
 
 Vouchers. — The auditor should call for vouchers, not only for every 
 -expenditure, entered on the cash book, but also for credits and allowances 
 entered on the journal, the latter being fruitful ground for entries made to 
 •cover defalcations. There should also be vouchers for deductions from the 
 amounts of customers' bills for freight, discount, etc. In a well ordered 
 •office such deductions are always O. K.'d by a responsible person who guar- 
 antees their accuracy to the auditor. The vouchers should be turned over 
 to the auditor in order of date, and it is best also that they should be in 
 numerical order. This, however, comes under the head of improvements 
 which an auditor can generally suggest in his report. 
 
 Discount. — Where the information can be readily ascertained the 
 auditor will allow for the usual cash discounts on both sales and purchases 
 in making up his statements. Trade discounts must always be deducted, 
 but this class of accounts is usually posted to the ledger "net." 
 
 Fraudulent Errors. — The detection of irregularities forms a large 
 part of an auditor's duty, and he must always be on the watch for "clues" 
 which may lead to discoveries. 
 
 Customers' Accounts. — In cases of suspected embezzlement of col- 
 lections, statements should be mailed to all customers with a request that 
 they verify the balance shown as owing. 
 
 Arbitrary Entries. — One of the most trying conditions encountered 
 by the auditor is when transfers are made from one account to another with- 
 •outoriginating from any book of original entry or when simple postings are 
 made in the same manner. Such entries must necessarily cause a large 
 amount of trouble and the auditor will know how to deal with them in his 
 report. The proprietor of a business should promptly deal with such mat- 
 ters, as it is he who pays the bill. 
 
 128 
 
Location of Errors. — The detection of irregularities in books of 
 account forms a large part of the duties of the auditor and accountant, the 
 auditor exclusively employed by a large corporation, or the independent 
 public accountant. 
 
 One of the peculiarities of accounting in the United States commercial 
 houses is that they prefer to have their books made of a paper on which 
 erasures can easily be made without detection. Any sign of erasures, there- 
 fore, should be considered with suspicion, and the entries carefully followed 
 up checked b^ck. 
 
 The transfer of footings from page to page should also be carefully 
 watched, as this is a frequent hiding place for peculations. It is a very 
 common trick with fraudulent book-keepers or cashiers to bring footings 
 forward accurately in the first place until the cash book has been scrutinized 
 by the proprietor. After he has found everything all right, he is not likely 
 to look at those particular entries or that particular page again, and the 
 footings brought forward can, therefore, be safely reduced on the receipt 
 side or increased on the payment side. 
 
 Vouchers should be demanded for all payments entered in cash book or 
 petty cash book, and also for all journal credits to customers, etc., such 
 vouchers to be properly O. K.'d by some responsible official who at the time 
 was cognizant of the transaction. Six months hence no person in the 
 business will be able to recollect why certain payments were made if no 
 receipts can be found for same, or no authorized vouchers. A system of 
 vouchers for journal credits should always be instituted for the reason that 
 receipts may be diverted into the book-keeper's pocket and entered in the 
 journal as a credit for goods returned, or for all_ allowances, or something of 
 that kind. An embezzlement is more frequently connected with a clever 
 manipulation of merchandise account than with anything else. 
 
 Deductions from remittances on account of freight, expressage or dis- 
 count are frequently taken advantage of, the amounts of said deductions 
 being increased and the amount of the remittance decreased. These petty 
 frauds are extremely difficult to locate, and can only be checked up by filing 
 remittance letters as vouchers in order of date, so that even if all such 
 letters are not compared with the entries a judicious selection can be made 
 which will probably determine the fact as to whether the entries are correct. 
 
 Another favorable location for embezzlement is in the pay roll of a 
 large manufacturing concern, unless proper precautions and safeguards are 
 adopted. It will be found quite possible to overcharge the wages earned 
 by workmen who are in collusion with the superintendent, to insert "dummy" 
 names, or for the cashier himself to foot up the pay roll sufficiently incorrectly 
 to give him a "rake-off" when he enters the wages paid in the cash book. 
 
 129 
 
The proper method of preventing defalcations of this kind is to have a 
 complete system of record from the time the workman enters the factory 
 until he leaves ; an automatic machine to register his arrival ; a job record 
 book in which a clerk will register the work he is engaged on ; a cost ticket , 
 on which the workman will enter time occupied and material used on each 
 job ; cost summary from which another clerk will make up the total labor 
 from the cost cards and the amount due each worjcman; a pay roll book 
 to be kept by another clerk which shall bring the labor of the different jobs 
 together for each man, and will show the amount due him, the amount 
 which may have been advanced him, and the balance due on pay day. A 
 -form of receipt should then be issued to each workman showing the amount 
 he is to receive, and on his presenting this form, duly signed, at the cashier's 
 desk he will be paid. 
 
 There may .>'so be irregularities in making deposits in the bank, outside 
 of such irregularities as taking a few hundred dollars in currency to deposit 
 and taking the train for Canada instead. Cases have been known in which 
 deposits have been short for quite a lengthy period of time, the amount in 
 the bank pass-book being made to agree with the amount shown on the books 
 of account by omitting one or two entries towards the close of the month 
 when the balance is taken. The only way to detect such intentional mistakes 
 is, of course, to carefully compare the payments as per cash book, or check 
 stub, with the payments entered in the cash book and to check the balance 
 of cash on hand and at bank as shown by the cash book with the actual cash 
 on hand at unexpected intervals, afterwards depositing the whole amount 
 on hand in the bank so that there will be an accurate basis for further inves- 
 tigation if found desirable. 
 
 Another method of embezzlement often employed is by paying invoices 
 of goods purchased twice. This can easily be prevented by a good voucher 
 system by which the bills to be paid are all attached to the voucher, and each 
 bill is stamped by the officer who O. K.'d them as he reviews them. These 
 bills cannot then be brought before him again because of the endorsement 
 upon them, and in case a duplicate bill should be presented it would be the 
 officers' duty to carefully investigate the matter before sanctioning its pay- 
 ment. 
 
 Every invoice, also, before being presented for O. K. to the treasurer, 
 should bear the O. K. of the shipping clerk, as being received in good order ; 
 of the superintendent (if it is a factory) ; or of the department manager 
 (if it is a business divided into departments) ; of the purchasing agent in 
 regard to price ; and of the book-keeper so far as accuracy of computation 
 is concerned. 
 
 130 
 
The misappropriation of cash sales occurs very frequently in business 
 houses where strict and proper methods of precaution are not used. The 
 salesman may pocket the cash sale when receiving the money from the 
 customer, or the cashier may pocket it on receiving the money from the 
 salesman. The best method of protecting the merchant from this class of 
 fraud is to use triplicate cash sales tickets, and to advertise to every customer 
 that a receipt is given for every sale. This practically compels the salesman 
 to make out a ticket for the customer. The salesman retains one of the 
 carbons and hands the other to the cashier with the money. In case of an 
 investigation the salesman's tickets and the cashier's tickets are compared. 
 Both sets of tickets should be numbered and filed away consecutively. 
 
 The best method to prevent defalcations in the keeping of petty cash 
 is to have that duty performed by an assistant cashier, providing him with 
 a separate book with which to enter his transactions. A check should be 
 drawn to his order, which he will enter in the petty cash book as a receipt. 
 At certain intervals he will account for all moneys expended to someone 
 appointed to receive his report, and on this account being O. K.'d he will 
 receive a check for the amount of his expenditures which, will make the 
 amount of cash in his hand equal to the amount originally given him. In the 
 general ledger an account will be opened with the petty cashier, charging him 
 v/ith all checks for which he is resppnsible, and crediting him with the 
 amount of his expenditures, the difference showing each month the balance 
 he has on hand. 
 
 There are, of course, a number of other methods of making intentional 
 errors for the purpose of concealing fraud, but it is impossible to attempt to 
 describe them all, and the foregoing may be considered interesting examples 
 which may be useful reading to anyone whose duty it is to supervise or check 
 up the work of others. 
 
 The responsibility of the auditor for errors or defalcations unlocated 
 has been a matter of considerable discussion, but the general conclusion 
 appears to be that he is not bound to do more than exercise reasonable care 
 and skill. He does not guarantee that the books correctly show the position 
 of a company's affairs, but he does guarantee that his investigation has been 
 perfect to the best of his ability and that his findings have been arrived at 
 in the most careful and bona fide manner possible. 
 
 The Vai^uation of Assets on the BaIvAnce Sheet. — The respon- 
 sibility of the auditor for the values set down in a statement of assets and 
 liabilities has not yet been defined in this country, and the auditor will, 
 as a rule, take the values as he finds them, incorporating in his report such 
 criticism and recommendations in regard to same as he may think best. 
 This refers exclusively to an audit performed for the purpose of verifying 
 
 131 
 
the accuracy of books of account. Where an examination is made for 
 intending purchasers of a business all values must be analysed in detail, 
 and only what are considered to be actual current values accepted of assets 
 known to exist as represented. 
 
 Market Vai<uES. — The fluctuation of values aflfected by the market 
 is a very difficult matter to handle in most cases, but where it appears reason- 
 ably permanent the difference between present and original values should 
 be charged or credited to profit and loss. 
 
 Depreciation. — It is the auditor's duty to see that proper provision 
 is made for the depreciation of fixed assets, and that bad debts are eliminated 
 from the statement of assets. Whether he will establish a reserve for bad 
 and doubtful debts will depend upon th^general conditions of the case. 
 
 Charges for repairs should be carefully watched, as it is quite usual 
 for merchants to treat them as capital expenditures instead of as a charge 
 to revenue for maintaining present values. ' 
 
 This subject will be considered at length under its proper heading. 
 
 Verification oe PROFiTS.^There has been considerable discussion 
 as to the scope of an accountant's work when engaged to verify the profits 
 of a business, some maintaining that it does not include an examination as 
 to the accuracy of the books of account from which the profits are deter- 
 mined. 
 
 The only way, however, to verify a statement of profits made is to deter- 
 mine the truth of the figures from which such a statement is compiled, i. e., 
 those figures which affect the trading, and profit and loss accounts. 
 
 With regard to this important subject, which hinges so much upon 
 the value of certain supposed assets which go to make up the alleged 
 surplus shown by the books, such as accounts receivable (either trade or 
 loans), etc., it may be well to quote the following: 
 
 "It is no part of an auditor's duty to give advice, either to directors 
 or to shareholders, as to what they ought to do. An auditor has nothing 
 to do with the prudence or imprudence of making loans with or without 
 security. It is nothing to him whether the business of a company is being 
 conducted prudently or imprudently, profitably or unprofitably. It is 
 nothing to him whether dividends are properly or improperly declared, pro- 
 vided he discharges his own duty to the shareholders. His business is to 
 ascertain and state the true financial position of the company at the time 
 of the audit, and his duty is confined to that. But then comes the question : 
 How is he to ascertain that position? The answer is, by examining the 
 books of the company. But he does not discharge his duty by doing this 
 without inquiry and without taking any trouble to see that the books them- 
 selves show the company's true position. He must take reasonable care 
 
 132 
 
to ascertain that they do so. Unless he does this, his audit is worse than 
 an idle farce. Assuming the books to be so kept as to show the true 
 position of the company, the auditor has to frame a balance sheet showing 
 that position according to the books, and to certify that the balance sheet 
 presented is correct in that sense. But his first duty is to examine the 
 books, not merely for the purpose ot ascertaining what they do show, but 
 also for the purpose of satisfying himself that they show the true financial 
 positior of the company." 
 
 UfTEARNED Profits. — It is a part of the auditor's duty to see that 
 no unearned profits on uncompleted work, or on sales booked for future 
 delivery art included in the period covered by the audit. One method of 
 treating uncompleted work is to include the credit for a completed contract — 
 for instance — and to open an account entitled "reserve for unfinished con- 
 tracts," and charge to this account the estimated cost to complete. This 
 applies only to contracts in an advanced stage. 
 
 Condensed Auditing System. — ^Verify the cash balance at date of 
 commencement of audit with balances found in ledgers. On suitably 
 ruled paper open accounts with all general ledger accounts, and adjustment 
 accounts with customers and purchase ledgers. Post up these accounts 
 from cash book and cross entry journal, and post totals from Purchase, 
 Sales and Credit journals to their respective representative accounts. Where 
 the books are well kept and separate columns used for the different ledgers 
 and for heavy posting accounts (such as cash sales, cash purchases, expenses, 
 etc.) this work is extremely simple, and easy to perform with speed and 
 accuracy. 
 
 In a case of very old-fashioned book-keeping, where everything is 
 jumbled up in one column on the books of original entry, it is a more difficult 
 process, and necessitates great care. 
 
 After completing this auditor's ledger, or abstract, draw oflf the balances 
 from same and compare with the balances shown on the book-keeper's trial 
 balance. Locate the source of every difference and note all errors found, 
 such as personal accounts charged to non-posting columns, etc., accompany- 
 ing same with entries necessary to correct. The customers ledger balance 
 accounts will agree total sales and other ledger debits with sales and cross 
 entry journal, total cash and other ledger credits with cash book and credit 
 journal, and the resulting balances will agree with the total of the ledger bal- 
 ances as per trial balance. The purchase ledger balances will be checked in 
 the same manner. 
 
 To obtain this comparison, on a sheet of suitably ruled paper write out 
 the following data : 
 
 133 
 
From the trial balance at commencement of audit the debit and credit 
 balances, taking sales and purchase accounts in totals. From the auditor's 
 abstract ledger in adjoining columns, the total debit and credit postings for 
 the period audited. In columns next adjoining draw off new trial balance 
 and agree with that of the book-keeper. 
 
 To the total credits add cash on hand at close of books. To the debits 
 add cash on hand at commencement of audit. The debits and credits will 
 
 lWarfW« cS 
 
 
 
 
 Debits OPcdfe 
 
 DoUrfe 
 
 Crcdfe 
 
 
 OreJrte 
 
 Ctsal^ 017 rlani & a"} Bam 
 
 Bill* R=cciv.»bl-, 
 Ciooclw'.ll 
 
 P.»y Qoll 
 lr;tar-ea-t- 
 Oi*<i.otjrr't" 
 
 i£l& 
 
 £!l£l 
 
 7m\os 
 
 Cs.^'n bal. Juily I'i" 
 
 4 r 
 
 S3 
 
 24 II Ti-)al C^. 
 
 h Cr 
 
 .-.jit^ 
 
 ■S^f^.acs^ 
 
 then agree. Compare with total debits and credits from cash andjournals. 
 This will catch errors of footings, simple or counterbalancing. 
 
 Close out accounts to profit and loss, and draw up statement of assets 
 and liabilities. Check footings of all columns of cash book and journals 
 the totals of which were taken into the abstract. Check footings of pay 
 roll and compare with cash book. Check footings of petty cash book. Check 
 bills receivable book with Bills Receivable account, and verify inventory of 
 bills on hand. Check bills payable book with Bills Payable account. Have 
 bank book balanced at bank, and verify balance on hand at close of books 
 after listing all unpaid checks. Check vouchers for all payments by cash or 
 check, and make a list of vouchers not produced. Some auditors consider 
 the checks themselves as sufficient vouchers for payments through bank. 
 Call for vouchers for journal credits and allowances. Prepare report and 
 necessary financial statements. 
 
 Whenever possible the auditor should endeavor to satisfy himself that 
 all receipts have been entered in the cash book, but it is rare to find a 
 business house possessing a record which can be satisfactorily checked or 
 that will take the trouble to keep such a record. Should it fall within the 
 duty of the auditor to balance the books, this is best accomplished by making 
 each ledger self-proving by means of adjustment accounts. 
 
 134 
 
Corporation Auditing. — The audit of the books of a corporation 
 involve the examination and verification of Capital, Debenture, and Dividend 
 accounts. To accomplish this, the company's minutes must be perused and 
 their effect noted, and a report made of any variations therefrom. 
 
 The corporation laws of the United States do not, however, prescribe 
 the method of dealing with these accounts, and the auditor will therefore 
 use his judgment in regard to what he finds. 
 
 AUDITOR. — An auditor may be described as a person whose duty it 
 is to examine the accounts of a company, firm or person, so as to ascertain 
 the exact state of afifairs financially at a given moment. This involves not 
 only a scrutiny of the figures, but also an examination of the form and 
 substance of the accounts, in order to see that they truly represent the state 
 of affairs purporting to be represented by them. The position of an 
 auditor, his rights, and liabilities, depend very much upon the circumstances 
 under which, and for the purpose of which, he is appointed. 
 
 Qualifications. — Dicksee says : "First, it is very' generally con- 
 ceded that an exhaustive knov/ledge of every department of book-keeping is 
 the very 'A B C of the Auditor's art. 
 
 "Second in importance, probably, is a thorough acquaintance with 
 various statutes regulating the different undertakings in which the Auditor 
 may be concerned. 
 
 "Thirdly, although this point has been bitterly contested by some, a 
 sufficient knowledge, not only of business generally, but of the especial 
 way in which various particular businesses are conducted. In his presi- 
 dential address at the first provincial meeting of the Institute of Chartered 
 Accountants, Mr. Frederick Whinney, F. C. A., clearly advocated the doc- 
 trine when he said: 'No accountant can successfully carry on his practice 
 in all the above mentioned branches unless he is a person of considerable 
 knowledge, skill, and experience, for he must be not only acquainted with 
 book-keeping, which is to him as the alphabet only; but, to put it briefly, 
 he miist have some general knowledge of various trades and their customs.' 
 
 "Lastly, but not least, may be placed those desirable qualifications of 
 the Auditor which are not acquired by careful study, but, rather, by living. 
 Tact, caution, firmness, fairness, good temper, courage, integrity, discre- 
 tion, industry, judgment, patience, clear-headedness, and reliability. In 
 short, all those qualities that go to make a good business man contribute to 
 the making of a good accountant; while that judicious and liberal education 
 which is involved in the single word 'culture' is most essential for all who 
 would excel'. Accountancy is a profession calling for a width and variety 
 of knowledge to which no man has yet set the limit ; the foremost account- 
 ants are not ashamed to say that, like Epaminondas, they 'learn something 
 
 135 
 
in addition every day' ; let us, therefore, see no shame in following their 
 example." 
 
 Duties. — i. To detect error, mismanagement and fraud. 
 
 2. To verify the accuracy of books of account examined and to certify 
 the correctness of the balance sheet submitted. 
 
 3. To determine the intent and insure a proper compliance with the 
 terms of partnership agreements, etc. 
 
 4. To prevent illegal declarations of dividends, inflation of assets, or 
 overissue of capital stock, etc. 
 
 5. To satisfy himself as to the existence of securities included in the 
 assets scheduled in the balance sheet. 
 
 6. To obtain and inspect vouchers for all payments made. 
 
 7. To call attention to all loose, irregular and incompetent methods 
 employed, and to devise forms and methods which will prevent or hinder 
 inaccuracies and facilitate the prompt detection of all errors which may 
 nevertheless occur. 
 
 8. To provide the proprietors of a business, as far as possible, with a 
 PERSONAL CHECK upon the accuracy and honesty of their employes. 
 
 9. To simplify everything that is complicated and difficult; to keep 
 in order and to straighten out everything that has become confused and 
 tangled. 
 
 ID. To serve always the interests of his client (and thereby his own) 
 to the best of his ability. 
 
 The relation of an auditor to those who employ him is invariably a 
 confidential one. Just as the physician is admitted to the home, and shown 
 the physical weaknesses which are concealed from other eyes, so is the 
 auditor admitted to the inner sanctum of the business, where concealment of 
 its weaknesses is impossible. The physician by a breach of the trust reposed 
 in him could bring untold distress upon the family, and so might the 
 auditor by a similar violation of confidence bring ruin and disaster to his 
 clients. There are in the profession a number of men of strong abilities 
 and splendid knowledge of the technical work of auditing, who are denied 
 success, however, by the fact that they have at some time in their careers 
 been disloyal to the interests of those who employed them. A case has 
 never fallen within the observation of the writer, where an auditor has 
 become recreant to the trust reposed in him, without bringing upon himself 
 professional ruin. It is, therefore, best that the auditor at the beginning 
 of his career should recognize the fgct that nothing but the most uncom- 
 promising honesty should distinguish his conduct as an auditor. It is a 
 common impression that the auditor is a developed book-keeper and that an 
 anorenticeship at the book-keeper's desk is a necessary preparation for an 
 
 136 
 
auditor's work. It is hardly possible to agree with those who share this opin- 
 ion. It is true, the auditor must have a thorough knowledge of accounts, and 
 be so familiar with the art of book-keeping as to be able to understand 
 and criticise any books which may be presented for inspection, but the 
 duties of the two positions are very dissimilar and it is quite possible that a 
 man may be a good book-keeper who would not succeed as an auditor, while 
 on the contrary a successful auditor might make a very poor book-keeper. 
 The book-keeper should be a methodical man, whose every effort should be. 
 put forth to systematize his work and confine it within certain well-defined 
 lines. The auditor, on the other hand, must guard himself against becom- 
 ing too methodical or he will find himself trying to perform all his work in 
 the same way, which will certainly defeat his success. As stated in the 
 beginning, each piece of work undertaken is surrounded by its own peculiar 
 circumstances, and this fact makes it impossible to prescribe set rules, to be 
 followed in each and every piece of work. The object or purpose for which 
 the audit is undertaken wields a directing influence in determining the 
 manner in which the work shall be done. If the object of the audit be ta 
 ascertain the accuracy with which a book-keeper is discharging his duties, 
 a very different procedure will be necessary from that to be taken in the 
 case of a confirmation of a statement of resources and liabilities, where the 
 honesty of the book-keeper is not in question. So also would a different 
 course of procedure be necessary in legal investigations, where but one 
 feature of the business may be of importance. It is the duty of the auditor, 
 where employed to audit the accounts of a going concern, to report to those 
 who employ him every material fact in connection with their business which 
 he has reason to believe that they do not already know. It is his further duty 
 to suggest improvements in the forms or system of books in use, when he 
 can advance a good reason for the adoption of such suggestions. The 
 auditor should never be afraid of giving more than he is paid for. He will 
 find that those who employ him believe that they are paying for all his 
 talents, and that they have a right to all of the knowledge of their affairs 
 which becomes apparent to him from his investigation. The auditor will 
 find it profitable to have his clients feel that they have received a little more 
 than they expected from his employment, and as a general policy in every 
 line of business it is best to give full measure. The auditor who shall fail 
 to do this may be compared to a physician who is called to lance a boil and 
 does so without mentioning the presence of an incipient cancer which is 
 apparent to his professional eye. It is difficult to attempt to set forth his- 
 duties in the actual work, for the reason that each auditor determines this 
 for himself, and may in perfect good faith entirely disagree with the policy 
 that might be mapped out by another auditor. As before stated, the cir- 
 
 137 
 
cumstances of each case will determine the auditor's duty in relation thereto, 
 so that no set rules can be prescribed. 
 
 Attitude of the Auditor. — The auditor to a firm is usually ap- 
 pointed by the mutual agi-eement of the partners, but, occasionally, by the 
 -articles of partnership themselves, or by one particular partner. If appointed 
 auditor to the firm, he must, however, in either case, consider each partner 
 as his client, and protect the interests of each accordingly. The same con- 
 ditions as to terms of agreement, responsibility, fees, and resignation, 
 -obtain as to the auditorship of firms as mentioned in the previous paragraph ; 
 but it would seem that a:ny one partner would have power to bind the firm 
 ..as to the amount of the fees — except, perhaps, where the appointment lay 
 in the hands of one partner, when the consent of such partner would prob- 
 ably be required. Probably no one partner could discharge an auditor 
 without the consent of all his co-partners. 
 
 The auditor of the company is subject to the rules and regulations of 
 that company, and to such further statutory provisions as may apply to the 
 particular class of undertaking. The usual practice is for him to be 
 -appointed, in the case of a new company, by the directors ; but he is subject 
 to re-election at each successive annual general meeting, and at any such 
 meeting the shareholders may (theoretically), if they so please, appoint 
 another auditor. Unless the remuneration of the auditor be fixed at the 
 time of his appointment, or by the articles of association, he is entitled to 
 a reasonable remuneration; but if appointed "at such remuneration as the 
 shareholders may think fit," he is entitled to such sum as the general meet- 
 ing may award him — and no more. Directors have no power to dismiss 
 an auditor, once appointed ; but, apparently, an auditor may resign at any 
 time, although probably at the loss of his fees for the uncompleted work. 
 A casual vacancy has usually to be filled by an appointment at an extra- 
 •ordinary general meeting, but many articles of association give the directors 
 power to fill casual vacancy. To a great extent it rests with the directors 
 to decide how much information shall be supplied in the published accounts ; 
 but the auditor must not lose sight of his individual responsibility, and he 
 should never certify a balance sheet to be "full" merely because he considers 
 it to be as "full" as he may think it expedient for it to be. Rather let him, 
 in such a case, certify the balance sheet, "in his opinion to be a fair balance 
 ■sheet, and to sufficiently disclose the financial position of the company." On 
 the other hand, he should be particularly careful to guard against juggling 
 with words, and so appearing to give a full certificate, when in reality he 
 is "making himself safe," or "hedging" behind a certificate which, when 
 ■carefully analyzed (and only then) is found to be most qualified. He must, 
 in every case, be satisfied in his own mind that the accounts are correct, and 
 -fairly stated. 
 
 138 
 
Attitude o? Proprietors oe Business. — An accountant says : "Com- 
 panies' audits are curious things. Some secretaries and managers think 
 the audit ought to be as they think fit — that is, they and not you sliould 
 say what ought to be gone through. In this case I strongly recommend 
 the auditor to go through first what is offered, and afterwards to whatever 
 he wants. Never be put off by anything material. If seriously blocked 
 at any stage or thwarted in any way, look out and pay more particular 
 attention to this part of the audit than any other." The proprietors of a 
 business where the books are being audited are, however, pleasant as a 
 rule, especially if the work is being done "on contract" — that is, at a speci- 
 fied sum for the job. If, however, the work is being done at so much per 
 diem, some proprietors have an unpleasant habit of sneaking around the 
 auditor every ten minutes and surveying his work with manifest impatience 
 and displeasure, after a while asking him how much longer he thinks the 
 audit is going to take, and otherwise generally upsetting his equanimity. 
 
 Some proprietors are quick to take advantage of any hints thrown out 
 by the accountant in regard to shorter and better methods which might be 
 improved, and promptly give such suggestions a trial. Others, strange to 
 say, resent these suggestions, although they actually pay the accountants 
 to make them. Instances have been known when very trying abuses, 
 which greatly hindered the accountant in his work, and thereby made the 
 audit more expensive for the merchant, were left uninterfered with year 
 after year, in spite of recommendations for their removal made in each 
 semi-annual report. 
 
 Attitude oe the Book-keeper. — In the performance of his duties 
 the public accountant must of necessity come into contact with all kinds and 
 varieties of persons, and it naturally follows that some of his experiences 
 are amusing, and some exasperating. The demeanor of the book-keeper 
 to the public accountant is of itself an entertaining study. Some book- 
 keepers maintain an impressive and haughty dignity with a view to im- 
 pressing upon the accountant the fact that he, the book-keeper, considers 
 himself not only as good as the accountant, but a great deal better, and that 
 if he, the book-keeper, must suffer the outrage of the/ accountant's contig- 
 uity, he does it under protest. Some book-keepers, on the other hand, 
 are extremely agreeable, and even endeavor to be as "chummy" as possible 
 with the accountant, as by this method they expect to touch the soft spot 
 which can always be found in the heart of a human being, and thus obtain 
 a favorable report in regard to their abilities and the way in which the work 
 has been performed. 
 
 Some book-keepers are morose, savage, and act as though the exam- 
 ination conducted by the accountant was an insufferable insult which 
 
 139 
 
could never be for^ven. The accountant generally manages in some 
 way to help improve the prospects of such a book-keeper as a return for 
 his amiability. 
 
 Auditors' Assistants.— Reliability is the first requisite in an auditor's 
 assistant, and those who wish to do well in this profession must, above all 
 things, obtain a reputation for being tenacious of the secrets of their 
 business. The accountant's assistant should be careful not to accept the 
 friendly advances of the employers' book-keeper or other clerks with 
 whom he may have to do, as in case condernnatory reports have to ibe 
 made, he may otherwise find himself in an uncomfortable position. Owing 
 to the difficulty in obtaining experienced assistants in this country, the 
 publid accountant is frequently compelled to suffer many annoying experi- 
 ences. One difficulty which appears to be almost omnipresent is getting 
 the detail work of an audit done in such a neat and orderly manner that, 
 should the assistant die in the midst of an audit, or suffer any other calamity 
 whereby he may be prevented from completing the work, someone else 
 may take it up at the point of breakage and intelligently complete it, with- 
 out having to do all the work over again. The average assistant, when 
 he comes to any difficulty, will generally make a note on some small slip 
 of paper, with an intention of referring to it at some time hereafter. He 
 also generally carries these small slips around with him in his pockets. 
 When he quits the work it never occurs to him that the contents of these 
 slips will be unknown to his successor, and if that successor takes up the 
 work \vhere "number one" left off, and carries it out until its completion, 
 he will consequently find himself involved in an almost inextricable tangle, 
 the straightening out of which will be extremely annoying and expensive. 
 
 Another curious trait of accountants' assistants is that a great many 
 of them canfiot on any account be persuaded, induced or cajoled into 
 obeying instructions, and this is frequently true of really good men. You 
 may order them to follow certain lines in their work and to adopt certain 
 methods, but in the end it is usually found that they have done the work 
 in some other way (their own way), which they describe to you as having 
 iaeen found by them to be much simpler and speedier in this particular 
 case. 
 
 AUDITORS' CERTIFICATES.— Many forms of certificates have 
 been used by auditors, and we attach some of the best known. It should 
 be borne in mind that the auditor is not required to make himself respon- 
 sible for errors or defalcations which have escaped his notice after a 
 faithful and conscientious examination. 
 
 Forms of Certificates. — "I hereby certify that I have carefully ex- 
 amined the books of account of James Reid & Co- with the vouchers pro- 
 
 140 
 
duced, and that the above balance sheet (or statement of assets and Uabili- 
 ties) is a true and correct statement of the present condition of the business 
 as on the 31st day of December, 1899, as disclosed by said books of 
 account. 
 
 Dated this 8th day of January, 1901. 
 
 (Signature.) 
 
 Certified Public Accountant." 
 
 "I have audited the above Balance-Sheet.(or the Company's Balance- 
 
 Sheet dated the day of ), and in my opinion 
 
 such Balance-Sheet is properly drawn up, so as to exhibit a true and 
 correct view of the state of the Company's affairs as shown by the Books 
 of the Company." 
 
 "We hereby certify that we have thoroughly audited these accounts 
 for the (year) ended (25th March) last, and that the same appear to be 
 correct. We further certify that the above Balance-Sheet is in accordance 
 with the books, and appears to us to be a correct statement of the financial 
 position of the firm, as it appeared on the above date." 
 
 Auditor (Permanent, of Corporations). — The chief accountant, 
 whose duty consists in verifying all the accounting work of a corporation, 
 and preparing the necessary verified statistical statements of the condition 
 of the business. These officers proceed from one branch to another check- 
 ing the work in detail. They are also responsible for the suitability of 
 the various forms used. 
 
 The duties of the permanently employed auditor of a corporation 
 necessarily dififer from those of an auditor employed from the ranks of 
 public accountants. The former is the company's paid servant, and has not 
 the independence or opportunity to use his best judgment that the public 
 accountant claims as his greatest privilege and right. The paid permanent 
 auditor of a corporation always has to consider whether his recommenda- 
 tions will give offense or not, as, if they are objectionable to the high 
 officers of the corporation, he may lose his employment as a consequence. 
 This consideration must at all times relegate the permanent auditor 
 to a secondary place in accounting, ranking him barely above the level 
 of the ordinary book-keeper, and a description of the methods he may 
 use in his work in devising systems and checking the accounts of work of 
 his office and that of the various branches connected therewith, does not 
 possess any greater value than the description of the accounting methods 
 
 141 
 
of a business where no permanent auditor is employed. However, for 
 the purpose of including everything of interest, we quote the following 
 description of the duties of a permanent auditor as compiled by one in the 
 profession : 
 
 To open a set of books for a business corporation of to-day as com- 
 pared with the method that would have been employed some twenty-five 
 years ago, the auditor of a corporation finds himself confronted with 
 many difficulties, occasioned by the legislatures of the dififerent states enact- 
 ing laws permitting the organization of corporations with certain limited 
 liability conditions. As a result of these varying conditions we find that 
 stock companies do, not all open their books alike but conform entirely to 
 their charter, which contains the fundamental agreement with the incor- 
 porators themselves, terms of agreement of association with the share- 
 holders indicating the character and extent of business in which the com- 
 pany shall engage, taken in connection with the laws of the state under 
 which .the incorporation takes place. Consequently, the auditor finds the 
 situation of some of the larger corporations of today something like this : 
 
 To engage in new enterprise with capital stock paid in full ; or part of 
 the subscription paid in cash and balance in installments under various con- 
 ditions ; or patentee may take stock for patent, balance of stockholders pay 
 in cash, etc., or consolidation of many companies into individual corpora- 
 tions. 
 
 The new company purchases all of the real estate, plants and inventory 
 of materials at an appraised value, paying cash to the sellers, or instead of 
 paying cash issue paid up stock. This necessitates the old companies collect- 
 ing their accounts and paying ofif their obligations, they settling with their 
 stockholders direct, or the new company may purchase the outstanding 
 stock of the old companies, in which case the old companies turn over their 
 entire property, including book accounts, real estate, plants and materials ; or 
 the stock of the old companies may be purchased at a price based upon their 
 trial balance at a certain losing period, receiving a guarantee from the old 
 companies that at the expiration of a certain period they will make good all 
 unsettled balances ; or to purchase part of the entire capital stock of other 
 concerns, the latter to retain their corporate existence, in which case the new 
 company would control the officers and business affairs of the old com- 
 panies, taking their profits after regular dividends have been declared, which 
 profits or dividends from subsidiary companies would constitute the princi- 
 pal earning power of the new company. 
 
 The method of keeping the accounts of a corporation ten years ago 
 was simple compared with modern practice, for the reason that certain legal 
 
 142 
 
aspects were not considered at that time while now a majority of the states- 
 have enacted laws limiting the powers of both local and foreign corpora- 
 tions. 
 
 The books of an individual corporation of to-day are opened up under 
 legal counsel so as not to conflict with the various state laws, and which. 
 Aegal advice governs the auditor in outlining his system of accounting. 
 This arises from the fact that most of the large corporations of to-day have- 
 plants located in various states, are transacting business in every state in 
 the Union and with foreign countries. These facts decide whether the- 
 minor companies transact business as individual corporations or whether 
 their accounts shall be a part of a central system. 
 
 The Auditor should determine what results it will be necessary for him 
 to obtain; whether the officials desire a monthly estimate of profits and 
 losses being satisfied to wait for actual inventories upon which correct, 
 showing can be ascertained, which may be either semi-annually or annually, 
 or to make a monthly closing for ascertaining profit and loss, taking book 
 values for inventories, which inventories can be adjusted from time to time- 
 as fast as actual count can be had. If the Auditor inaugurates the monthly- 
 closing system, the officials will never permit hira +0 change; but once- 
 started on a semi-annual or annual closing with estimate of monthly profits, . 
 he will find it hard to convince the officials of the benefits of more frequent 
 showings, if he desires to change. 
 
 Assuming that the method of arriving at monthly profits by an actual, 
 closing of the books is preferable, a system which will obtain these results 
 should be arranged upon a plan likened unto a wheel — the hub being the: 
 central office, the spokes the departments or district offices, and the rim the- 
 organization. The first thing necessary will be so to arrange the general, 
 ledger in the central office as to receive only the results of the various 
 departments or district offices, but so mapped out that these results will. 
 arrive as early after the first of each month as is possible, and that all 
 reports giving these results be so classified that every detail necessary for 
 sake of comparison be given. The general ledger should only contain the 
 representative accounts of the company, in addition to which may be carried, 
 individual accounts of such nature as will not permit of their being carried 
 in the sales ledgers; also an account with each accounts receivable or sales, 
 ledger as is used in the accounts receivable department. It should be 
 arranged that all reports showing results be so complete that after they- 
 have been entered on the general ledger at the end of the month, the trial' 
 balance of the ledger will show the true condition of the company's affairs- 
 
 In large corporations having many factories or branch offices, and 
 especially where these are widely separated from the central office, it is. 
 
 143 
 
very difficult to get all closing entries in at a very early date after the first 
 •of the month, and as it is usually the fifteenth of the succeeding month, the 
 .general books must remain open longer than the records in the other depart- 
 ments ; therefore, it is very essential -that some method be employed in the 
 -construction of the general books that will admit, in order to gain time, 
 •of the posting of the current business without interfering with the work of 
 the preceding month. After the general books have been carefully classified 
 and laid out to receive the various reports from the departments and district 
 ■offices, special attention should be given to the method and manner of 
 making up the forms of reports from the departments or district offices to 
 -dovetail with the classification of the general books. 
 
 JDepartments can be divided into the following general classifications, 
 and subdivided into as many departments of each as the nature of the business 
 ■of the corporation demands, having a sub-division of each maintained in 
 the district offices, if desirable, in which event they should be so arranged 
 that their reports will be combined in the original department, which should 
 Jbe maintained in the central office, consequently reference to such depart- 
 ments at the central office will give all of the information of the company 
 ■desired : 
 
 General Ledger Division. 
 
 Sales Ledger Division. 
 
 Journal Division. 
 
 Invoice Division. 
 
 Claim Division. 
 
 Vouchers Division. 
 
 Cost Division. 
 
 Statistical Division. 
 
 The accounts receivable or sales ledgers should contain only those 
 accounts which represent charges covering the sales of the company's 
 products. As the book-keepers on these ledgers should do nothing but 
 post the entries to these accounts, the Auditor will find it to his advantage 
 to so arrange the division that each book-keeper may receive his work 
 ■entirely independent of the others, so that he will not be compelled to post 
 from a record that is passed along from one book-keeper to another, causing 
 ■an industrious book-keeper to wait on his neighbor who is behind in his 
 work. In planning this division it will be found that bound forms cannot 
 'be as successfully used as loose ones. After the book-keepers have posted 
 the entries from these reports, such reports should be turned over to the 
 'division keeping bound records of the results to be summarized. In fact, 
 the adoption of such a system will result in the reduction of labor to a great 
 extent over the methods generally employed at the present day. It is 
 
 144 
 
greatly to be desired that a trial balance of the accounts receivable or sales 
 ledgers show as nearly as possible the true condition of the accounts receiv- 
 able at all times, and this can be had by the inauguration of a Claim division, 
 which will receive all of the unadjusted balances in the customers' accounts, 
 thereby leaving the sales ledger accounts in a clean condition. 
 
 The Journal division can contain all of the journal work of various 
 natures that is essential to the business, including sales records of all kinds, 
 debit and credit memoranda, and such other entries as affect the sales ledgers. 
 
 The Invoice division should issue all invoices of the company. This 
 division should be so planned that quick reference can be had to all of its 
 records. 
 
 In large corporations the settlements of accounts receivable carry with 
 them a great many deductions of various natures, and in addition to these 
 deductions claims are made in advance of the remittances. In order to 
 facilitate the handling of all such deductions it is necessary to establish a 
 Claim division, which will handle everything of a claim nature. As this 
 division is a part of the Accounting Department they will keep certain 
 records that will contain all the business that is left in their hands for adjust- 
 ment and which must balance each month in order to ascertain that all claims 
 are accounted for. If this department is properly equipped, claims should 
 be adjusted promptly, thereby keeping the customers' accounts in a healthy 
 condition at all times. 
 
 Accounts payable of every nature should be handled by the voucher 
 system, which obviates the necessity of carrying a purchase ledger in which 
 are kept the accounts of those from whom purchases are made. The distri- 
 bution of vouchers audited account at the end of the month should be made 
 direct to the different factories getting the materials and re-distributed to 
 the various commodity accounts. There is one important account which is 
 carried in the vouchers record which the Auditor is compelled to scrutinize 
 very closely, and that is General Expense. In order to conveniently examine 
 it and at the same time keep the classification of the accounts from the others, 
 it is suggested that the General expense of the company be charged to this 
 one account and classified according to the various classes of expense by 
 prefixing a number to the account, and in case a sub-division of the account 
 is required, it can carry a number and a letter. 
 
 As the object of a cost department is to obtain accurate costs of every 
 article manufactured, a correct distribution of the various items in connection 
 therewith is essential. It becomes, therefore, necessary to provide a system 
 that will account for every item of expenditure, such as materials, pay rolls, 
 supplies, etc., which cannot be successfully accomplished unless it is a part 
 of the general accounting system, having all accounts pertaining thereto 
 
 145 
 
dosed monthly into the general books. The inauguration of such a system 
 commends itself over one where all charges entering into the cost of 
 production are charged into one general account, generally termed "Manu- 
 facturing Account," with an "estimated" system used for getting at costs 
 unattached to the books ; the latter costs never balance with the "Manufac- 
 turing Account" at any period, while the former actually accounts for every 
 cent of receipts and expenditures, proven by the books being in balance each 
 month with all factories and branches. The correct distribution of same 
 over the various cost accounts at the different factories and warehouses 
 depends largely upon the efficiency of the help and their correct interpretation 
 of the instructions. The general ledger at the central office will contain 
 an account with each factory or warehouse, the same as with any customer 
 to wjiom goods are sold, being charged with all materials on hand, purchases, 
 pay rolls, etc., and credited with sales, transfers of materials to other works, 
 etc., corresponding entries being made on the ledgers at the factory with 
 the General Office Account. Distributions of the various items passing 
 through the Central Office Account are made to the numerous cost and 
 inventory accounts. Having an inventory account with each class of goods 
 produced enables a company to keep an accurate book account of its stock 
 by charging same with production and returned goods, and crediting same 
 with sales and transfers to other departments to be used in producing other 
 commodities. Having a cost account containing every item of expense 
 pertaining thereto enables it to furnish a cost of production for use in 
 charging materials produced to the inventory accounts. With the adjust- 
 ment of the sales accounts. Profit and Loss account is opened, receiving the 
 difference, in addition to which there will be such other accounts of a 
 profit and loss nature as appear on the books. This will give the profit and 
 loss for the factory, the inventory of materials on hand, accounts receivable 
 and accounts payable, all of which must be ascertained and closed into the 
 Central Office Account before the general books can close. Cost sheets 
 showing every item entering into the cost of production can be made up 
 from the ledger account. The closing of all these factory accounts into 
 the general books makes it possible to show the profits and losses 
 for every plant as well as the profits and losses on each article 
 sold; in fact, there is not much that would be asked for that could 
 not be given promptly. Not all of the expense that accrues at any particular 
 factory and territory adjacent thereto enters into the cost of production, but 
 on the other hand only expenditures that directly enter into the cost of 
 producing any particular commodity. On account of the various processes 
 that goods sometimes go through, certain items of expense cannot be applied 
 directly against any one article manufactured in a certain department, and in 
 
 146 
 
such cases certain distribution of sucii expense will be made over the various 
 articles that it affects on the basis of percentage generally according to 
 production. Outside of this comes the local office expenses, insurance, 
 taxes, etc.; also expenditures for improvements, maintenance, etc.; such 
 expenditures, although pertaining to any particular factory, do not enter 
 into the direct or first cost of goods, but as in any well organized institution 
 will be closed into Profit and Loss against the earnings of the commodities 
 sold from that particular factory. For the guidance of the salesmen, it is 
 essential that these expenditures be distributed on some particular basis 
 over the various articles manufactured, and treated as an additional cost to 
 be taken care of in formulating the selling price for goods. In addition to 
 the local expense the general expense of the company should not be lost 
 sight of, but treated in like manner, so that if the salesman finds he can gee 
 the additional price to cover the expenses of the company, both local and 
 general, he can do so,and if it becomes necessary to meet competition he 
 can distinguish between the first cost and the total, including selling expense 
 of the company. While in many instances the application of this system to 
 obtain accurate costs may result in the appearance of high costs for some 
 particular article, those not informed would immediately condemn the system 
 as inaccurate and unreliable, but the real facts are the system is correct if 
 the books are in balance and, furthermore, an explanation of each item can 
 be readily given. As this division is one of the most important in the 
 company which is under the Auditor, too much attention cannot be given 
 to it. 
 
 When arranging the accounting system one should have in mind the 
 numerous statistics which the management will call for at any time, and 
 endeavor, therefore, to have every form of report emanating froni the several 
 departments as complete in detail as possible, so that information of whatever 
 nature desired can be quickly jiroduced by the Statistical Division. 
 
 After all the reports are in, the Statistical Division enters upon its work 
 of recapitulating and verifying them. The auditing done in this division 
 should be correct in every detail, as all statements pass direct to the executive 
 officers, necessitating that the work should be done so thorough that criticism 
 be unnecessary. To accomplish this it requires that the division be lined 
 up so completely that all manner of checks be had on the various reports to 
 prove their correctness without reference to the auxiliary books. This 
 means a great deal of study at the time the general forms are drafted for 
 the accounting system, as the omission of a certain form or the wrong 
 drafting of another may prove expensive to rectify. The Statistical Division 
 is in a sense a thermometer, indicating the rise and fall of business tempera- 
 ture or pulse, showing the condition normal, active or unhealthy. As the 
 
 147 
 
management does not request any particular statements for its guidance, 
 it is left with the Auditor to provide in such forms as will determine the 
 condition of the company. The following are a few of the most essential 
 reports : 
 
 Financial Statement, 
 
 Profit and Loss, 
 
 Inventory, 
 
 Sales, 
 
 cJeneral Expense, 
 
 Additions to Plant, 
 
 Improvements, 
 
 Maintenance, 
 
 Production, 
 
 Number of Employees and Pay Rolls, 
 and other important items according to the nature of the business. These 
 reports should be comparative and classified according to the commodities, 
 showing quantity, average price, percentage, profit and loss, by territorial 
 division. General expenses should be classified according to the various 
 kinds of expense as well as by territorial division. Not only does 
 the Statistical Division pay particular attention to the reports concern- 
 ing the business done by the company, but has other work, such as 
 ascertaining the expense incurred by each department of the com- 
 pany, and seeing that the proper distribution of every item of expense 
 in the shape of pay rolls, stationery, etc., is made. The keeping of expense 
 statistics by departments permits the management to force measures of 
 economy unknown to heads of departments. As all large companies have 
 investments in other concerns of which they own all or a controlling interest, 
 the statistics of these companies are as carefully looked after as those of 
 the controlling company, for the reason that in some cases it becomes neces- 
 sary to combine results of subsidiary companies with those of the controlling 
 company to arrive at certain issues. It is, therefore, necessary that the 
 reports of the subsidary companies reach the central office as early as the 
 reports from the factories. This plan, therefore, becomes self-proving and 
 self-balancing, resulting in economy of labor and promptness in arriving at 
 details. 
 
 One of the most important features in the successful operation of an 
 accounting system is the arrangement of forms, records and ledgers. It is 
 necessary that the Auditor be "up to date" in the very latest methods and 
 short cuts used in the construction of records, as the adoption of some forms 
 and records, which may appear necessary, will result in being cumbersome 
 and jeopardize the whole system. One should always Jiave before him the 
 
 148 
 
motto, "NO RED TAPE, NO DUPLICATION," and strive in every way- 
 possible not to deviate from it. Posting should be done as far as possible 
 from original entries, refraining from transferring these entries in any 
 manner ; for instance, the book-keeper, in order to expedite the work given 
 him, should receive his cash entries on sheets from the Treasury Department 
 at a certain time, and should not be compelled to wait until his neighbor 
 has attended to such items as belong to him, and the same rule should apply 
 as regards the Invoice, Journal and other divisions. Experience has taught 
 that this can only be successfully accomplished by the use of loose forms, 
 emanating from the different departments as original entries. 
 
 A great saving of time can be had in the book-keeping division if the 
 proper ledger is installed. Some companies have demonstrated that the 
 loose-leaf ledger meets all requirements. This is undoubtedly a fact in 
 small concerns. They are also valuable for large companies starting an 
 accounting system where no definite plan has been determined, but after 
 a plan has been agreed upon, the loose-leaf system will prove expensive, 
 both as regards the number of books used and the labor necessary. 
 
 Ledgers should be so constructed that the book-keepers will not be 
 compelled to stop their current work at the first of the month, and this can 
 be done by the construction of a book containing two columns each, debit 
 and credit, respectively, having each month's entries alternate. With such 
 a book, the book-keeper should always be up with his work. The ledgers 
 should also be arranged with proper division of accounts to permit of a large 
 number being kept within a small number of pages; this will result in 
 economy. As every business is peculiar to itself, the application of one 
 good ledger may fail while another with less of a reputation would meet 
 the conditions, consequently, suggestions only c.an be given. This is also 
 true of other forms of reports. 
 
 It is often the case that the office boy, who receives a very small com- 
 pensation, has his worth appraised according to his salary in his capacity 
 of "director" of envelopes and general utility boy. A large company cannot 
 afford to look lightly upon the qualifications of a boy for such work. He 
 handles all of the important letters, invoices, memoranda, etc., and should he 
 misdirect an invoice, for instance, of one large customer and another equally 
 large, and it should happen that they were competitors in the same line of 
 business, and upon receipt by one of the wrong invoice should discover the 
 company giving his competitor any advantage, the result of such an error 
 ■would cost the company making the mistake considerable money; yet this 
 happens frequently, not only with invoices, but with important letters. It is, 
 therefore, economy to put good help in such positions. 
 
 149 
 
One of the greatest problems for a large corporation to solve is the filing 
 of old records as well as of current records; the very best place to file them 
 where they are easy of access, the method of filing or storing them for con- 
 venience of ready reference, the length of time certain records should remain 
 in the office before being permanently filed, and, last of all, how long records 
 should be kept before being destroyed. There are so many conditions to con- 
 sider, depending largely upon the nature of the business the company is en- 
 gaged in, the system of conducting the business, whether through a central 
 office or independent branches, that no particular plan can be suggested ; how- 
 ever, as these records (most of them being from the Accounting Department) 
 are frequently consulted, and there being many branches, a central .storage 
 should be built of fire-proof material, properly located so that -it can be 
 reached promptly from any office of the company and so constructed that it 
 shall be partitioned to contain each class of records, separated according to 
 offices and departments, boxes unpacked and contents carefully filed in 
 accordance therewith. A good man should be in charge, with a record 
 of everything that goes in and out. Records filed in different places devoid 
 of system is entirely unsatisfactory, causing annoyance and delay in getting 
 desired information and probably loss of money in failure to produce certain 
 documents, which have been lost. 
 
 Prominent amongst the characteristics of persons in authority should be 
 a reputation for strict integrity and truthfulness, as the exercise of these 
 virtues has a powerful influence over employes. When deciding questions 
 in dispute, which is frequently necessary, strict impartiality and firmness are 
 absolutely essential, so that the natural confidence existing between employer 
 and employe be not disturbed. Fair play is the essence of discipline, and the 
 latter, coupled with common sense, is the basis of business of whatever 
 nature. 
 
 Persons selected for various important positions should be individually 
 adapted for the duties required of them. Unless skill be exercised in the 
 allotment of work to those who must perform it, it often happens, unfor- 
 tunately, that men who are capable and willing in many directions are placed 
 in positions where their energies are thrown away, so that in appearance, 
 though not in reality, they work unwillingly and incapably. Unfortunately, 
 many heads have had little or no experience in clerical work or the duties 
 devolving upon the various clerks in their departments, are unable to correctly 
 discriminate, and their inexperience is frequently the cause of misunder- 
 standing, because they do not know the exact time it will take to perform 
 any particular work, or how it should be done. Such conditions simply 
 irritate and annoy the employe and unfit him in the performance of his 
 duties. The head of a department should show uniform coolness and self- 
 
 150 
 
possession, otherwise the employes will become nervous and confusion will 
 likely end all the good that might be derived from close supervision. 
 
 The question of priority is one that deserves more attention than it 
 usually receives. Under no circumstances should one employe be given 
 a position interfering with another, so that the duties of one will in no 
 way overlap the other. This means that it becomes essential to distinctly 
 outline every position and specify to whom reports should be made. Those 
 in charge of departments should be given full swing to exercise the duties 
 imposed upon them, with the knowledge that their superior has full con- 
 fidence in their ability to satisfactorily run the department and that results 
 are wanted. A chief cannot perform his work when continually hampered 
 by the thought that every moment he is being watched by his superior. He 
 thus quickly recognizes the responsibility upon him and that criticism will 
 result detrimentally. 
 
 The recommendation of a central system of accounting with secret 
 methods of checking and verifying reports in the absence of auxiliary books, 
 where there are many branches, is good in so far as its moral effect is con- 
 cerned. Every man knows that his work must be gotten out correctly and 
 promptly, or he will be notified from headquarters that it is not satisfactory; 
 it is unnecessary to say that he will not court many such notifications. It 
 seems to be human nature to work better when one knows he is being held for 
 results. 
 
 As accounting is simply common sense with the application of a few 
 well-settled principles and mathematical formulas, the auditor of any corpor- 
 ation must be able to meet and overcome unforseen difficulties at times, 
 besides putting into successful operation a system applicable to a certain 
 business. His ability, therefore, cannot always be strengthened by experi- 
 ence in any particular line of business. On the contrary, he must keep up-to- 
 date by reading technical literature on the subject of "Accounting" and 
 seeking association with accountants of all classes. 
 
 The professional accountant is brought into contact with various kinds 
 of trade, permitting him to get actual experience while the less fortunate 
 must employ other means, such as accountants' organizations. Considering, 
 therefore, there is no authority on these matters, it remains for the pro- 
 gressive man to carve out his own success at the head of a large corporation 
 by the application of his past experience and his ability and nerve to introduce 
 methods to meet the requirements. 
 
 AUCTIONEERS' ACCOUNTS.— Books of account for auctioneers 
 present a few unusual features, for the reason that an auction sale has to 
 be considered independently, and separate returns made of each sale, 
 
 y 
 
 although some customers may buy regularly at almost every sale con- 
 
 151 
 
ducted. To overcome this difficulty, it is customary to have sales books 
 and ledgers so arranged that separate portions may be allotted to each sale, 
 while cash book and journal entries will be posted by items and drawn off 
 by what is termed the "reverse system" for the purpose of proving the 
 accuracy of the work by sectionalization. This is probably the most sat- 
 isfactory and reliable system to use. 
 
 Accounts with clients will be carried on a similar principle to those 
 of architects, or accountants, expenses of selling, advertising, commission, 
 etc., being charged to the client's account, proceeds of sale being credited, 
 and the balance showing what is due the client or by the client. 
 
 With regard to keeping track of sales at auction, a clerk is generally 
 entrusted with making the necessary memoranda at the sale, viz., names 
 of customers, lots sold, prices obtained, and cash paid, either in purchase 
 or on account, after which the entries are transferreid and extended in 
 a regular sales book or sales register and bills made out where cash was 
 not paid or only deposits made. The auctioneer will also usually make his 
 own memoranda, particularly noting cash sales and deposits, and his record 
 is afterwards compared with that of his clerk. 
 
 Copies of advertisements cut out of the papers in which they were 
 published should be treated as vouchers and accompany the account sfiles 
 rendered to clients. 
 
 AUTHENTIC ACT— (Com. Law).— An act which has been executed 
 before a notary public or other officer authorized to execute such functions, 
 or which is testified by a seal, or has been rendered public by the authority 
 of a competent magistrate, or which is certified as being a copy of a public 
 record. 
 
 An authentic act has been held to be full proof of the agreement con- 
 tained in it, against the contracting parties and their heirs and assigns, 
 unless it be declared and proved to be a forgery. 
 
 AUTHENTICATION— (Com. Law).— Acts done with a view of 
 causing an instrument to be known and identified. 
 
 AUTHORITY— (Com. Law).— The lawful delegation of power by 
 one person to another. 
 
 Authority coupled with an interest is an authority given to an agent 
 for a valuable consideration, or which forms part of a security. Here the 
 agent has an interest in the subject matter of the agency, and a limitation isi 
 thus placed upon the principals power to terminate the agency. 
 
 Express authority is that given explicitly either in writing or verbally. 
 
 152 
 
General Authority is that which authorizes the agent to do everything- 
 connected with a particular business, and it empowers him to bind his prin- 
 cipal by all acts done within the scope of his employment. General authority 
 cannot be limited by any private order or direction not known to the party 
 dealing with him. 
 
 Limited Authority is where the agent is bound by precise instruction. 
 
 Special Authority is that which is confined to an individual transac- 
 tion. 
 
 Naked Authority is where the principal delegates the power to the 
 agent wholly for the benefit of the former. 
 
 A naked authority may be revoked; an authority coupled with an 
 interest is irrevocable. 
 
 Unlimited Authority is where the agent is left to pursue his own 
 discretion. 
 
 Authority by law is such cases as where the law creates an agency, as- 
 where the law authorizes a wife to pledge her husband's credit, even against 
 his will, it creates a compulsory agency, and her request is his request. 
 
 The delegation of authority may be by deed for any purpose whatever^ 
 When the act to be done must be done by or through the medium of a deed 
 the authority to do such act must be delegated by a deed, and executed with 
 all the forms necessary to render the instrument, by which the act is done, 
 perfect. , 
 
 But a written authority is not necessary to authorize an agent to sign 
 an unsealed paper. For most purposes the authority may be- either in 
 writing not under seal or verbally, or by the mere emplojmient of the agent, 
 or from the conduct of the employer in sanctioning the acts of the agent. 
 
 Destruction of Authority. — In general, an authority is revocable from 
 its nature, unless it is coupled with an interest. 
 
 ■ AUXILIARY BOOKS. — Auxiliary books of account may be defined' 
 as records other than those of original entry. Statistical records of all 
 kinds, manufacturing expense and cost distribution books would be clas- 
 sified under this heading. 
 
 In businesses affected day by day by market variations, these auxiliary 
 records are of the utmost importance and are constantly consulted. As 
 examples of such books may be mentioned records of options bought and 
 sold by brokers on the Board of Trade. 
 
 AVERAGE. — A varying quantity on which a fixed rate is to be 
 charged. To find the amount of such charge, proceed as per the com- 
 pound average rule given under the head of "Averaging Accounts." The 
 date at which the bill is to be rendered is taken as the focal date from which 
 
 153 
 
the average storage of goods received and delivered is calculated. The 
 following will illustrate the problem to which the above definition refers : 
 
 RECEIPTS. DELIVERIES. 
 
 May ig i,ooo cases May 26 200 cases 
 
 May 30 2,000 cases May 28 100 cases 
 
 .June 10 2,000 cases June 1 1,400 cases 
 
 June IS SCO cases June 7 1,000 cases 
 
 June 20 300 cases 
 
 Total S.Soo 
 
 Total 3,000 cases 
 
 Average of cases on which to 
 On hand 2,500 cases charge storage i,579 cases 
 
 PROCESS OF OPERATION. 
 
 May 19 1000 X 33= 33000 
 
 May 30 2000x22= 44000 
 
 June 10 ■ » 2000 X 11= 22000 
 
 June IS Soox 6= 3000 
 
 S500 102000 
 
 May 26 200 X 26= 7200 
 
 May 28 100 X 24= 2400 
 
 June 1 1400 X 20= 28000 
 
 June 7 1000 X 14= 14000 
 
 June 20 300 X 1= 300 
 
 3000 49900 
 
 102,000 — 49900^:52100-^33=1570 cases on which to charge. 
 
 The above method assumes that each case was in storage from the 
 date received until June 20th, and by this average process we find first, that 
 the number of day's storage on one case was 102000. On the deliveries 
 we take the length of time that each delivery was made prior to June 20th, 
 by which we obtain the total of 49900 days' storage on one case as shown.- 
 Deduct deliveries from receipts and the difference, 52100 cases divided by 
 33 is the number of cases on which to charge the storage at whatever rate 
 is fixed. 
 
 AVERAGING ACCOUNTS.— There are many methods of "aver- 
 
 - aging accounts," which is one title of that arithmetic.\l formula known as 
 
 "equation of payments" — the determining or finding of the balance of 
 
 interest due on an account, or finding the common time of maturity oi 
 
 bills due at different times. 
 
 The general principle involved is simple. Charge interest from due 
 date on amount owing; credit interest on accounts received in payment; 
 or part payment ; the balance will be the interest due. On -large ac- 
 counts with numerous charges and credits it is a laborious task to obtain 
 -..this balance, and hence, mathematicians have devised many meth- 
 
 I 
 
 154 
 
ods which were more or less shortcuts. In fact, so many methods have 
 been devised that it is quite confusing, and a thankless task, to study them 
 all and follow up the different reasons for the different rules. 
 
 The rules appended for Single and Double Average are simple, good, 
 and easily borne in mind, and will answer every purpose. 
 
 SiNGivE Average. — Set down the items in their order of due date. 
 
 Calculate the number of days between the first and second items, and 
 multiply the amount of the second item by the number of days. This is 
 called the product of average. Proceed in like manner with each succeed- 
 ing item. 
 
 Foot the items and products for average. 
 
 Divide the latter amount by the first. The result will give the number 
 of days forward from the date of the first item, which added to that date 
 will give the average due date of the account. 
 
 Calculate interest at the required rate on the sum of the account from 
 the average due date to the date of rendering statement. 
 
 
 f«by 
 
 Apl 
 M 
 
 y- 
 
 I oo 
 
 lOO 
 
 lOO 
 
 loo 
 
 eo 
 
 AOGO 
 6000 
 9000 
 
 
 ^ iQooor- 
 
 e% IrttSAtot or,».doO ^ fi=orr^ Apl 2 /» "to JuneP^'3^ 
 
 Proof: 
 
 Interest on $ioo at 6 per cent from Feb. 15 to June i . . $1 75 
 
 Interest on $100 at 6 per cent from March 25 to June i. i 08 
 
 Interest on $100 at 6 per cent from April 15 to June i. . 75 
 
 Interest on $100 at 6 per cent from May 15 to June i . . 25 
 
 $3 83 
 
 Double Average. — Assume as the basis for finding the average the 
 1st of the month in which the first charge is made. This is called the 
 "Focal Date." 
 
 Debits. — Calculate the number of days from the Focal Date to the date 
 of each charge, or to the due date if it is a time charge. 
 
 Multiply the amount of each charge by the number of days obtained. 
 This gives the "Product for averaging." 
 
 Add the debit items of the statement and the "Product for averaging" 
 ■»olumn. 
 
 Credits. — Calculate the number of days from the Focal Date to the 
 date of each credit. 
 
 155 
 
Multiply the amount of each credit by the number of days obtained, 
 which gives the "Product for averaging." 
 
 Add the credit items of the statement and the "Product for averaging" 
 column. 
 
 Deduct the total of the credits from the total of the debits, and the 
 total of the credit "products" from the total of the debit "Products." 
 
 Divide the balance of the "Product" columns by the balance of the 
 "Items" or "Amount" columns. This will give the number of days for- 
 ward from the Focal Date when the balance of the account was, or will 
 be due. This is the average Due Date of the account. 
 
 Calculate interest on the balance of the account for the period of time 
 elapsed between the Average Due Date and date of rendering statement. 
 
 DgSfe of ^eiHcmcnt" 
 
 ^ImIv i-f 
 
 focal Dgte r?Kv !<_ 
 
 C-Otoi-rs 
 
 Malui^d 
 
 Amour\+" 
 
 Dav^a (^wwaiod 
 
 C'ooduc.t Tot! 
 
 Da+c, 
 
 AmourVt* 
 
 Oiyy^ {c>p»uvdi»d 
 
 Dooduct fera 
 
 Date. 
 
 oro.ii 
 
 fi^tV-olCWTc 
 
 ^vC^i^^ 
 
 fi«j.nl&ci,l Date 
 
 Avt-ttAQCS 1 
 
 Icliy 
 
 1.3 
 
 lOO 
 
 
 15 
 
 t.300 
 
 
 ^pni) 
 
 (O 
 
 loo 
 
 - 
 
 VO 
 
 VOOO 
 
 
 McK 
 
 23 
 
 lOO 
 
 - 
 
 S>S 
 
 .5500 
 
 • 
 
 May 
 
 ro 
 
 IOC 
 
 • 
 
 too 
 
 \oooo 
 
 
 Apf> 
 
 U 
 
 lOo 
 
 
 7.3 
 
 ysoo 
 
 - 
 
 cj*jr\e 
 
 lO 
 
 *o 
 
 - 
 
 I30 
 
 6SOO 
 
 
 N/lrty 
 
 1.^ 
 
 too 
 
 -. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 /loo 
 
 
 
 25000 
 
 
 
 
 350 
 
 - 
 
 
 2350O 
 
 
 ago 
 
 ISO 
 
 I I ijoe r a ioday.& (opvwaiad fpoin Ichy l^ 
 
 ANKxaoe Doe Date fcby lO'R ^ ji ^„ 
 
 e%li\iir>eat or,*l50-fi«<in\ feby lO^ "to dylv l"? - ♦S'^-f' 
 
 Proof. — ^Total time — Feb. i (Focal date) to July i (date of settle- 
 ment) — 5 months^iso days. 
 
 Divide total "product" of debts by amount of charges. 
 
 Deduct result from total days and calculate interest on total charges 
 for balance of days obtained. 
 
 Divide total "product" of credits by amount of credits. 
 
 Deduct result from total days and calculate interest on total credits 
 for balance of days obtained. 
 
 The difference between debit interest and credit interest will be the 
 amount of interest due. 
 
 OCS/7 
 
 laal C>f.odijc.t 
 1 2300O0O 
 62 .5 
 
 L.e^o 
 
 "To-fel Time 
 I.50 d&y^r 
 
 S7 '/a dayA 
 
 s^ooo 
 
 "lestel ;P>_i«odi.»c.+" TotSii Time 
 
 > ■zzscio oo i^Q cJay^ 
 
 Q7/aDa^«3 |iSter»c«sl'®6*^ oa dc&it^ -./Ioo*2P « ^ .5.&3 
 
 06 
 
 
 "y 
 
 As a matter of fact the formula of the proof is as good, if not better, 
 than the formula of the original, because it seems more complete. A 
 
 156 
 
further illustration is, therefore, given, showing the double average thus 
 obtained. 
 
 rocal CiA-te 
 
 Total days from Jan. i (Focal date) to May i (date of settlement) 120 
 days. 
 
 Debits — Total days 120 — ^e,}4=64}4. Interest at 6 
 
 per cent on $230 .$2 47 
 
 Credits — Total days 120 — 85^ 35. Interest at 6 per 
 
 cent on $100 58 
 
 Interest due May i $1 89 
 
 What is called the "Interest Process of Averaging Accounts" is so 
 generally used that an illustration is hereto appended in order to complete 
 the subject. By this method the interest is separately extracted in each 
 calculation, the credits are subtracted from the debits, and the result is the 
 same with a little more labor. 
 
 
 
 
 . Da-fe of &«■ 
 
 ttjerrvc 
 
 r>+ 
 
 
 ^Ji£iY- 
 
 ±5 
 
 - 
 
 
 
 DEBITS 
 
 CQE-OIT-^ 1 
 
 Da.t£ 
 
 Amour\t 
 
 Oa+i 
 
 
 lnt>P«.3+ 
 
 Da-te 
 
 Amouni' 
 
 Dov--.-to 
 
 !nfer»c&t' 
 
 Fib 15 
 McK 15 
 Apl 15 
 
 eo 
 80 
 
 JO 
 
 
 6'/o 
 
 L 
 Int r 
 
 105 
 4.5 
 
 ! 
 1 
 
 05 
 
 30 
 12 
 
 McK 10 
 Apl 10 
 
 50 
 .30 
 
 
 
 
 42 
 re 
 
 2 
 
 
 
 ■se 
 
 =* 1 
 
 ^M 
 
 There are numerous other methods of obtaining average due dates, 
 and amount of interest due at a given date, but the methods above 
 described will answer every ordinary business requirement. 
 
 In cases of "freak" averages, where the average due date will be found 
 prior to date of first charge, it will be well to bear in mind that where the 
 preponderance of weight is all on one side no average can be struck. 
 
 157 
 
The average due date of an account is the theoretical time the NET 
 Bai^ance must have run to produce at a given date the correct amount of 
 interest on that balance. 
 
 ILLUSTRATION. 
 
 Date of settlement assumed as Focal Date. 
 
 Nov. 1st date of settlement. 
 
 Dr. Cr. 
 
 1894. 1894. 
 
 May 14, $500X166 $83,000 July 9, $400X111 • $44,400 
 
 June 16, 800X134 107,200 Sept. II, 600X 49 29,400 
 
 July 21, 300X98 29,700 Oct. 29, 200X I ••• 200 
 
 1,600 $219,900 1,200 $74,000 
 
 1,200 74,000 
 
 — — ■ 364 days back of Nov. ist. 
 
 $ 400 $145,900 Average date, Oct. 26, 1893. 
 
 ILLUSTRATION. 
 
 Credit amounts in excess of Debit amounts. 
 May 1st, Focal Date. 
 
 Dr. Cr. 
 
 1894. 1894. 
 
 May 14, $500X14 $7,000 June 9, $40oX 69 $27,600 
 
 June 16, 800X46 36,800 Sept. II, 600X131 78,600 
 
 July 21, 300X81 24,300 Oct. 29, 200X179 3S,8oo 
 
 1,600 ' $68,100 1,200 $142,000 
 
 1,200 68,100 
 
 400 4/739/184 days back of May 1st. . $73,900 
 
 Average date Oct. 26, 1893. 
 
 363 days' interest at 6% on $400,000 $24.20 
 
 Proof. May ist to Nov. ist date of settlement — 180 days. 
 
 1600/68100/43 days. i20o/i420o/ii8days. 
 
 6400 
 
 4100 
 
 180 — 43r=i37 dap interest on $1,600.00 at 6 per cent $36 54 
 
 180 — 118= 62 days interest on $1,200.00 at 6 per cent 12 40 
 
 Interest due $24 14 
 
 Another Method op Averaging Accounts and Computing 
 
 Interest, 
 simple average. 
 Arrange the items in order of date. Use due date, if any. 
 Carry out balance of account on each date after items on that date 
 have been entered. With every new entry there is, therefore, a new 
 balance. 
 
 158 
 
Multiply each balance by the time intervening between its date and 
 the next succeeding entry. 
 
 Add amounts so obtained and divide by balance of account. The 
 quotient will be the number of days to count backward from latest date, 
 which will give average due date. 
 
 Compute one day's interest on total of "Amounts" column (if time has- 
 been computed in days) which will be the balance of interest due at latest- 
 date. 
 
 ILLUSTRATION. 
 Int. rate 5%. 
 
 Daily 
 
 1895. Dr. Balances. Days. Amounts. 
 Dec. 23 $1,000 $1,000 IS $15,000 
 
 (Dec. 23 to 
 
 1896. Jan. 7.) 
 
 Jan. 7 500 1,500 20 30,000 
 
 Jan. 27 2,000 3,500 14 49,000 
 
 Feb. 10 200 3,700 ' 15 55,500 
 
 Feb. 25 300 4>opo 10 40,000 
 
 March 7 1,000 S.ooo 
 
 $5,000 74 $189,500 
 
 $189,500 divided by 5000=37.9 days back from March 7=January 28"' 
 
 equated due date. 
 
 $189,500 @ 5 per cent for one dayi=$25.96, interest due, March 7.. 
 
 Total due March 7, $5,025.96. 
 
 COMPOUND AVERAGE. 
 
 Proceed as before, but deducting credit "Amounts" from debit: 
 "Amounts" and dealing with the balance. 
 
 ILLUSTRATION. 
 
 Required amount due Feb. 19, '96. Int. rate 7%. 
 
 Dr. Cr. Dr. Cr. 
 
 1895. Dr. Cr. Bals. Bals. Days. Am'ts. Am'ts. 
 
 Dec. I $1,000 $1,000 7 $7,000 
 
 Dec. 8 $800 200 12 2,400 
 
 Dec. 20 500 $300 20 $6,000 
 
 1896. 
 
 Jan. 9 600 300 9 2,700 
 
 Jan. 18 700 1,000 32 32,000 
 
 Feb. 19 $44,100 $6,000 
 
 Feb. 19 $44,100 $6,000 
 
 44,100 — 6000=38,100 divided by 1000 (net Dr. balance)=38. i-io- 
 
 days back from Feb. 19 — -average due date, Jan. 12. 
 
 38,100 @ 7 per cent for one day=$7.3i, interest due Feb. 19. TotaL 
 
 due Feb. 19 — $1007.31. 
 
 159 
 
The Conto Currento Method of Computing Interest on 
 
 Accounts Current. 
 The method illustrated below is still largely used by European bank- 
 iing and commission houses in figuring the interest of accounts current 
 
 rendered at certain intervals. 
 
 illustration. 
 
 1896. 
 
 Jan. 17 
 
 Feb. 
 
 Mar. 
 
 Mar. 
 
 Mar. 
 
 April 
 
 Date of statement April 
 
 Time. 
 60 d. 
 
 4- 
 I. 
 
 IS- 
 31- 
 2. 
 
 60 d. 
 
 15, '96. 
 Due. 
 Mar. 17 
 Feb. 
 May 
 Mar. 
 Mar. 
 June 
 
 60 d. 
 
 Debit numbers from Cr. side 
 Balance of numbers 
 
 4 
 I 
 
 IS 
 31 
 2 
 
 Int. rate 
 
 Days. 
 
 29 
 
 71 
 
 16 
 
 31 
 IS 
 48 
 
 6%. 
 Numbers. 
 800 
 
 3SS 
 292 
 244 
 
 48 
 
 89 
 
 4SS 
 
 1,402 
 
 Jan. 
 
 I 
 
 Jan. 
 
 15 
 
 Feb. 
 
 IS 
 
 Mar. 
 
 14 
 
 Mar. 
 
 14. 
 
 Mar. 
 
 14 
 
 Dec. 
 
 Jan. 
 
 Mar. 
 
 April IS 
 
 May IS 
 
 June IS 
 
 Credit numbers from Dr. side. . . . 
 
 6% on balance of numbers (1402). 
 Balance carried forward 
 
 31 
 31 
 
 I 
 
 106 
 
 4S 
 
 30 
 01 
 
 3,304 
 
 598 
 
 1,875 
 
 4S0 
 
 ISO 
 30s 
 381 
 
 3,304 
 
 Debits. 
 
 $2,758.63 
 500.00 
 1,823.59 
 786.26 
 319.80 
 186.39 
 
 $6,374.67 
 Credits. 
 
 $563.75 
 2,500.00 
 1,000.00 
 1,000.00 
 500.00 
 500.00 
 
 23-37 
 287. 55 
 
 $6,347-67 
 
 EXPLANATION. 
 
 Multiply the principal (debit or credit) by number of days, point ofif 
 iast four figures at right and enter number left in "Number" column. 
 Thus 2758.63X29=800.0027. Number to be entered — 800. 
 
 On coming to items 3 and 6 on the debit side we find the date of 
 maturity to be May i, sixteen days after date of equation. The numbers 
 for these items should therefore be written in red ink, not included in the 
 footing of the column, but transferred to the credit side, as shown in 
 illustration. 
 
 Similarly on the credit side we enter the 5th and 6th items in red ink 
 and transfer them to the debit side. 
 
 Enter the balance of the "Numbers" column on the side to which it 
 may belong, and compute interest due by dividing it (the balance) by 60, 
 pointing ofif the second and third figures of the quotient to the right to gd: 
 dollars and cents, as follows : 
 
 Balance of numbers (Cr.) 1402 divided by 60 equals $23.37. 
 
 160 
 
BACKING — (Com. Law). — Indorsement, as of a note or bill. 
 
 BACK ORDERS.— See unfilled orders. 
 
 BAD DEBTS. — Debts uncoUectable and on which there appears to 
 be no prospect of collection. 
 
 In preparing financial statements a provision should always be made, 
 not only for debts which are known to be bad, but to offset a probable loss 
 which at the time of calculating profits cannot be anticipated. The sys- 
 tematic treatment of this subject will be fully referred to under the head 
 of "Suspense," this term being better understood and more used in the 
 United States. 
 
 BAILMENT — (Com. Law). — Bailment is the delivery of goods for 
 some purpose, upon a contract, express or implied, that after the purpose 
 has been fulfilled they shall be re-delivered to the bailor, or otherwise dealt 
 with according to his directions, or kept till he reclaims them. 
 
 The distinction between bailment and sale, fundamentally, is that in 
 bailment the identical thing delivered, in the same or altered form, is to be 
 restored, and the title to the property is not changed ; while in a sale there 
 is no obligation to return the specific article, but the party receiving it is at 
 liberty to return another thing of equal value, either in the form of money 
 or otherwise, and becomes a debtor to make the return, and the title to the 
 property is changed. 
 
 The decision of the question as to whether a certain transaction is a 
 bailment or sale is not always easily made, and frequently depends upon 
 the understanding of the parties, the wording of the particular contract or 
 the usages of trade, as where grain is deposited in a warehouse or elevator to 
 be commingled with other grain, and it is not contemplated that the identical 
 grain stored shall be returned, but only an equal amount of grain of the same 
 kind and grade, in which cases the better doctrine seems to be that the 
 transaction as between the parties, viz., the owner of the grain and the 
 depository, is a mere bailment, and does not pass title to the grain. But 
 where the depository has the option of paying the market price in lieu of 
 the return of a like quantity and quality of grain, the transaction is a sale. 
 
 Where goods or raw materials are sent to a manufacturer to be made 
 into other articles or goods which are to be returned to the owner, the 
 transaction is a bailment. But where such goods or materials are to be 
 returned as altered or manufactured or the money value of the same, or to be 
 paid for in commodities, the transaction is a sale and not a bailment. 
 
 There are three general classes of bailments : 
 
 First — Those for the sole benefit of the bailor, or of a third person 
 represented by him. 
 
 161 
 
Second — Those for the sole benefit of the bailee, or of some one whom 
 he represents, and 
 
 Third — Those for the benefit of both parties. 
 
 The first class is of two kinds : (a) Deposit, where personal property 
 is to be kept for the depositor without reward, and to be returned when he 
 requires it, and (b) Mandate, a bailment of personal property in regard to 
 which the bailee engages to do some act without reward. 
 
 The second class is (a) Gratuitous Loan, a bailment of an article for 
 a certain time, to be used by the bailee without paying for the use. 
 
 The third class is (a) Pledge or Pawn, a bailment of personal property 
 as security for some debt or engagement; (b) Bailments for hire. 
 
 In the first class the law requires of the bailee only slight diligence, and 
 holds him responsible only for losses attributable to his gross neglect. 
 
 In the second class the bailee is required to exercise extraordinary care 
 over the thing bailed, and is responsible for slight neglect. 
 
 In the third class the bailee is required to exercise only ordinary dili- 
 gence, and is answerable for onlv ordinary neglect. 
 
 The bailee is not an insurer. 
 
 BAKERY ACCOUNTING.— The general characteristics of ac- 
 counting for retail bakeries are similar to all other 'accounting for retail 
 stores, the exception being that bread being delivered to customers daily, 
 it is a very troublesome matter to carry regular accounts with them, debit- 
 ing each delivery. A tabular record is therefore preferable, combining 
 the features of sales book and sales ledger and arranged by days, with a 
 balance column to carry forward unpaid balances to the next week. 
 
 A form of tabular sales record is shown hereunder. 
 
 Mom&s 
 
 Dal. Due. 
 
 Da»;^,s. or VVe.e.?\ 
 
 -TE>-fe.f- 
 
 F^;J 
 
 T5rr.I"lk 
 
 .50 Jt 
 
 I 
 
 2. 
 
 3" 
 
 ■4. 
 
 5 
 
 6 
 
 V 
 
 #l.©5 
 
 *I.S^ 
 
 25 
 
 20 
 
 15 
 
 25 
 
 20 
 
 2.0 
 
 a-o 
 
 There is also the questions of keeping track of the delivery wagons> 
 so that the amount of bread delivered can be checked with the amount 
 charged according to the driver's reports and the amount returned by the 
 driver. One method very much used in this connection is to furnish each 
 driver with a ticket on which will be entered the amount of supplies taken 
 out by him, with space provided so that he can record on this ticket the sup- 
 plies delivered, where delivered, cash received, amount to be charged, etc. 
 On his return to the store, these tickets are checked over and the balance 
 of supplies not accounted for compared with the driver's returns. 
 
 162 
 
Another method is to keep a record of these suppHes in a book, charg- 
 ing the driver with the value of the supplies he takes out on each round, and 
 crediting him with the value of the goods he returns and the amount of 
 charges which he reports (on separate memoranda). Experience, how- 
 ever, shows that this method is more laborious than the first. 
 
 BALANCE. — The difference between the debit and credit side of 
 an account. 
 
 "The surplus, or deficiency, shown on a balance sheet, or profit and 
 loss account." 
 
 The inherent quality in the system of double-entry book-keeping, 
 whereby every debit entry must have its offsetting credit entry, and every 
 credit entry must have its offsetting debit entry. 
 
 BALANCE ACCOUNT. — A summary account into which at a given 
 date the balances of other accounts are transferred. See "Adjustment 
 Account." 
 
 BALANCE LEDGER. — A ledger containing separate columns for 
 the exhibition of daily, weekly or monthly balances. 
 
 It has at all times been found useful to show the balance of a ledger 
 account at frequent intervals, so that it has now become quite customary 
 to provide a special column for the purpose. The prominent display of 
 the balances in customers' ledgers is a great aid to the credit man, especially 
 if a due date column is provided in front of the balance column in which 
 the due dates are brought forward. 
 
 The provision of balance columns also does away with the old- 
 fashioned method of ruling off accounts each month and bringing down 
 the balances, which absorbs, or wastes, a great deal of entirely unnecessary 
 time, interferes with the convenient checking off of bills paid, and increases 
 the possibilities of error. The monthly ruling off of nominal, or repre- 
 sentative, accounts is especially to be discouraged, as it is absolutely essen- 
 tial for the convenient preparation of comparative statistics that the totals 
 of debits and credits of these accounts be obtainable at any time without 
 labor of "digging." 
 
 The separate balance column is also a great improvement on that 
 other old-fashioned plan of disfiguring the ledger pages with balances 
 written in pencil. 
 
 As instances of well-known balance ledgers, we may cite the Boston 
 Bank Ledger, the "Safeguard" Commercial Ledger; the Havill Bank 
 Ledger, in which a silicate margin is attached to the right hand side of the 
 ledger, on which the daily balances of changing accounts are entered by 
 erasing the old balances with a soft rubber and writing the new balances 
 
 163 
 
from the accounts. This is a very useful levice for bank ledgers where a 
 daUy balance is a necessity; but would not be practicable in any ordinary 
 commercial business where there are a large number of accounts receivable. 
 The Havill Balance Ledger carries accounts in the old-style way, but with 
 the improved Boston Bank Ledger columnar ruling. The lines on the 
 silicate strip on the margin are numbered to correspond with a similar num- 
 ber of pages containing accounts. Thus, if the number of lines on the ledger 
 page is 80, the silicate strip will show the balances of 80 accounts, thus giving 
 an opportunity to sectionalize in proving when desired. 
 
 Other examples of balance ledgers will be found in the popular loose- 
 leaf forms, such as the following : 
 
 
 DA-rez 
 
 
 
 rai.10 
 
 acaiT^ 
 
 GAL^ANCC 1 
 
 p-F^CDi-ro 
 
 ^OUIO 
 
 • 
 
 DATC 
 
 
 
 f 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 BALANCE SHEET— (Com. Law).— A balance sheet is a summa- 
 tion of, or general balance of all accounts, but not the particular items going 
 to make up the several accounts. 
 
 Where a statute required the directors of mining corporations to post in 
 the ofifice of the company each month a "balance sheet or an itemized 
 account," it was held that the publication of a balance sheet was a sufficient 
 compliance with the statute. The court said : "Each of these words has a 
 well-known and definite meaning, entirely different from each other, and 
 they cannot be construed to mean the same thing." 
 
 BALANCE SHEET.— A statement of actual assets and liabilities at 
 a given date designed to exhibit the financial condition of a business. It 
 consists of the balances of assets and liabilities accounts extracted from the 
 ledger after inventory has been taken and the nominal accounts have been 
 closed into profit and loss, and of outstanding resources or liabilities not 
 included in the books of account. 
 
 The excess of assets over liabilities represents the profit made by the 
 operations of the business during the period covered by the statement ; the' 
 excess of liabilities over assets represents a loss. This surplus, or defi- 
 ciency, is the balance of the balance sheet, and must agree with the balance 
 of the current profit and loss account 
 
 Items such as "surplus," "reserve," "undivided profit," etc., having 
 separate accounts in the ledger, are in reality sections of the balance of the 
 balance sheet, and should be classified accordingly. 
 
 "A balance sheet is a statement showing upon one side the assets of 
 the person or firm in question, and on the other side the liabilities. If the 
 
 164 
 
assets exceed the liabilities the surplus is the capital of the person or firm, 
 and is entered on the liabilities' side so that the totals of both sides may 
 agree. On the other hand, should the liabilities exceed the assets, the 
 difference is called a deficiency, or capital overdrawn, and is entered on the 
 assets' side." 
 
 "A balance sheet is a list of the ledger balances of a system of books 
 kept by double entry, which has been extracted after the nominal accounts 
 have been closed. It is therefore a list of assets and liabilities, and shows 
 the financial position of the undertaking as at the date thereof." 
 
 How TO Prepare a Bai^ance Sheet. — After the trial balance has 
 been properly taken, together with complete inventories of merchandise, 
 etc., and all the current liabilities entered up, the next step is to close the 
 Profit and Loss accounts in the ledger, transferring the balances through, 
 the regular journal, or through a private journal, which frequently accom- 
 panies the special ledger in which are carried the nominal accounts. The 
 balance of these accounts will then show the net profit or loss made during 
 the period included. 
 
 Before closing the merchandise or other accounts, in relation to which 
 inventories have been taken, it is necessary to credit the amount of the 
 inventory at date of closing, carrying the amount of the inventory forward 
 as a debit balance for the new year, or fiscal period. If the total credits 
 of such account are then in excess of the total debits, the difference shows 
 the gross profit and is transferred to the Profit and Loss account. 
 
 The accounts remaining open on the ledger after the elimination of the 
 Profit and Loss accounts as above described, and the addition of the inven- 
 tories, will constitute a Balance Sheet. 
 
 Ci,ASSiEiCATioN OF ACCOUNTS. — c!onsiderable differences have always 
 arisen among accountants in regard to both the classification of accounts 
 on balance sheets, and the proper form which can be used with the best 
 results. With regard to classification, Dicksee prefers the following: 
 
 Liabilities.^ — "Upon the liability of a Balance Sheet the most prom- 
 inent item — in case of a limited company, at least — is the shareholders' 
 capital, which, of course, can only be increased beyond its original limit, 
 or reduced, after due compliance with important legal technicalities. In 
 stating the Capital Account, it is desirable to show, first, the nominal capital, 
 i. e., the limit sanctioned by the memorandum of association; secondly, 
 the nurrlber and value of each clas of shares issued and the amount called 
 up thereon, from which should be deducted the amount of calls in arrear, 
 stating the number of shares upon which such calls are due. In France, 
 and also in South America, it is usual to state the full amount of the 
 
 165 
 
capital issue as a liability, and the amount uncalled as an assets; but this 
 is not at all a desirable form toadopt, as it can hardly be said that uncalled 
 capital is more than a contingent asset. 
 
 "The next item to be stated is the amount paid up upon shares for- 
 feited, when such shares have not been re-issued by the company; when 
 they are re-issued this item may appropriately be absorbed in the Reserve 
 Fund. 
 
 "Next comes the amount due upon debentures, the amount extended 
 being the nominal amount ; or, in the case of debentures issued at a discount, 
 the amount actually received. In the latter case, however, the nominal 
 amount should also be stated, and in both cases the rate of interest should 
 be mentioned. The appropriate place for premiums received upon issues 
 of either shares or debentures is in the Reserve Fund. 
 
 "The next item upon the Balance Sheet will be the amount due upon 
 mortgage, which, like most debentures, constitutes a preferential liability, 
 and ordinarily speaking is practically permanent. The rate of interest 
 should be stated here also. 
 
 "Next comes the ordinary liabilities of the company, which may be 
 separated under the following sub-headings 
 
 (a) Debts for which acceptances has been given. 
 
 (b) Debts to tradesman for supplies of stock-in-trade and other 
 
 articles. 
 
 (c) Debts for law expenses. 
 
 (d) Debts for interest upon debentures and other loans. 
 
 (e) Unclaimed dividends. 
 
 (f) Debts not enumerated above. 
 
 "The next item upon the liability side is for 'Reserve Fund, showing the 
 amount set aside from profits to meet contingencies.' 
 
 "The last item upon this side of the Balance Sheet is the balance of 
 undivided profit. It is preferable to show this balance without elaboration 
 upon the Balance Sheet and in a 'Profit and Loss Apportionment Account' 
 (or the last section of the Profit and Loss Account) to show the connection 
 between the balance shown upon the Balance Sheet and the balance of the 
 Profit and Loss Account for the current period. There is, however, no 
 more serious objection to showing the details upon the Balance Sheet 
 except that it does not appear to present the facts of the case so clearly. 
 
 "With the question of Contingent Liabilities it is not necessary to deal 
 at length, beyond stating that all such liabilities must be noted upon the 
 Balance Sheet, even if it is anticipated that they, will not ultimately result 
 in a claim against the company." 
 
 166 
 
Assets. — Fixed assets, such as freehold land, leasehold land and lease- 
 hold buildings stated separately. 
 
 Floating assets, such as stock-in-trade and plant; debts considered 
 good, for which the company holds security; debts considered good, for 
 which the company holds no security; debts considered doubtful and bad. 
 
 Investments which should be stated in some detail, and if on account of 
 Reserve Fund, or Sinking Fund, the circumstances should be clearly stated. 
 
 Cash on hand and cash at bankers on deposit. 
 
 At the first examination of the C. P. A.'s of New York, the following 
 classification was given official approval: — 
 
 Assets. — "Commencing with the most available asset, namely. Cash, 
 the amounts lodged in the several banks, and the amount in hand are sep- 
 arately stated and the figures placed in the indent or first column adjoining 
 the text and the total extended into the next or final column. 
 
 The properties actually in the possession of the estate, such as land, 
 buildings, plant, equipment and stock-in-trade, should be stated next, 
 placing the separate values of each in the first column and extending the 
 total of all into the outer column, giving full particulars of deductions for 
 depreciation and basis of valuation to the extent that responsibility therefor 
 is to be assumed. 
 
 Bills Receivable being more enforceable or generally more readily 
 realized upon would take precedence over Open Book Accounts in the order 
 of arrangement, and the latter should be classified into good and doubtful, 
 and necessary provision for losses on bad accounts should be shown as well 
 as reserve for customary discounts by deducting from the aggregate sum 
 the amounts respectively charged against the profits to provide for such 
 contingencies. 
 
 All actual assets thus available for the satisfaction of the liabilities 
 in the event of liquidation should be first stated and totaled before any 
 quasi or speculative assets, such as claims against the private estates of 
 partners when any question as to their realization may exist (as where 
 tl>e sfime are unsecured or constitute capital deficits), patent rights, good 
 will, or similar conditional values. 
 
 Liabilities. — Mortgages against the realty, with reference to the prop- 
 erties stated contra, upon which they are encumbrances, loans secured by 
 collateral pledged therefor, and similar items would rank first against the 
 assets. 
 
 Bills Payable or other written pledges would precede unsecured Trade 
 Creditors on open account. 
 
 tfVI 
 
After stating and totaling all the liabilities and obligations to outside 
 creditors it would then be proper to state the various Reserve Accounts and 
 the Capital Accounts. 
 
 A Balance Sheet thus framed will show first in classified form the 
 actual assets as opposed and in juxtaposition to the actual liabilities, and the 
 total of each, and thereafter the capital or surplus, or both, as qualified 
 by reserves and opposed to speculative or conditional values. 
 
 If the capital precedes the liabilities in the same column the total 
 labilities, exclusive of the capital, is not shown, and if conditional values 
 aie first among the assets, or alternate with them in the order of arrange- 
 ment the actual assets are not shown, and the degree in which the capital 
 as stated on the balance sheet may be qualified by reserves or surplus as 
 augmenting features, or by fictitious or uncertain assets as diminishing 
 features cannot be expressed without a rearrangement of the statement. 
 
 The ledger folio from which the balance is taken should be prefixed 
 to each account stated on a balance sheet. 
 
 It will be noticed that in the first form of classification above men- 
 tioned, the capital of the business is the first item on the liability side of 
 the Balance Sheet, while in the second capital reserve, undivided profits, 
 etc., come last. We append a sample of the American Balance Sheet and 
 of the English Balance Sheet, showing the differences. It will also be 
 noticed that in the former the real assets are scheduled together and totaled, 
 after which speculative or doubtful assets are added. In the same way 
 the outside liabilities are scheduled together and totaled and capital, etc., 
 added. Inasmuch, however, as capital is as much a liability of a business 
 as an outside liability, the advantage of this particular classification is 
 somewhat obscure unless it is intended as a comparison of trade assets 
 with trade liabilities. 
 
 CONTINENTAL AND AMERICAN FORM OF BALANCE SHEET. 
 
 ASSETS. LIABILITIES. 
 
 Cash on hand. Mortgages. 
 
 Cash at bank. Bonds. 
 
 Investments, as per Schedule A. Interest due and accrued. 
 
 Real estate. Accounts payable. 
 
 Plant, machinery, etc., Bills payable. 
 
 Less depreciation. Unpaid taxes, wages, etc. 
 
 Inventories. Capital stock. 
 
 Accounts receivable. Reserve account. 
 
 Bills receivable. r refit anu loss account. 
 
 Less reserve for discounts. 
 Expense account. 
 Good will. 
 Patents, copyrights, etc. 
 
 168 
 
ENGLISH REGISTERED COMPANY FORM OF BALANCE SHEET. 
 
 LIABILITIES. ASSETS. 
 
 Nominal capital ( ). .Leasehold buildings at ( ).. 
 
 Capital subscribed ( ). Less depreciation. 
 
 Less calls in arrear. Stock-in-trade (at cost) .viz : 
 
 Debenture stock ( ) . Materials, 
 
 Bills payable. Goods unfinished, 
 
 Sundry creditors. , Manufactured goods. 
 
 Interest on debentures. Plant and machinery : — 
 
 Unpaid dividends. Value 1st January, 1892, 
 
 Reserve fund. Additions during the year, 
 
 Profit and loss account (balance available Less depreciation, 
 
 for dividends, etc.) Warehouse and office fittings : — 
 
 Value 1st January, 1892, 
 Less depreciation. 
 Bills receivable. 
 Sundry debtors. 
 Investment of reserve fund. 
 
 Debenture stock at .... 
 Cash :— 
 At bank. 
 In hand. 
 
 There is still another method of classification which is used in the 
 bankruptcy courts, but an illustration of this method will appear under 
 bankruptcy practice. 
 
 There is also a double account form of Balance Sheet, used more par- 
 ticularly by English railroads, in which a Balance Sheet is divided intO' 
 two portions, "one showing expenditure, and the other the capital raised 
 to meet such expenditure, while the second section, or general Balatice- 
 Slieet, contains what may be conveniently called 'Floating Assets and 
 Iviabilities' arising incidentally in the course of carrying on the under- 
 taking." An illustration of this form of classification is also appended. 
 
 FORM OF DOUBLE ACCOUNT BALANCE SHEET. 
 
 CAPITAL ACCOUNT. 
 
 Dr. Cr. 
 
 each per 
 
 I. 
 
 To Land and freehold buildings. 
 
 By Ordinary shares of 
 
 2. 
 
 " Leasehold buildings. 
 
 share paid. 
 
 2. 
 
 " Generating machinery and tools. 
 
 " Debentures paid up. 
 
 4- 
 
 " Accumulators, motor transformers 
 and apparatus in sub-stations. 
 
 
 s. 
 
 " Mains. 
 
 
 6. 
 
 " Meters. 
 
 
 7- 
 
 " Electrical instruments. 
 
 
 8. 
 
 " Furniture for office. 
 Less renewals and depreciation 
 Fund account No. VI. 
 
 
 169 
 
Dr. GENERAI, BALANCE SHEET. Cf. 
 
 ^. To Capital account— l. By Capital account- 
 
 Amount received as per Amount expended as per 
 
 account No. III. account No. III. 
 
 3. " Sundry creditors. Less renewals and ^ieprecia- 
 
 -4. " Net revenue account— tion fund account. 
 
 Balance at credit thereof. 2. " Stores on hand- 
 
 Coal oil, waste, etc. 
 General stores, including work in 
 progress. 
 
 5. " Sundry debtors for current sup- 
 
 plied, etc. 
 
 Less bad debts deducted. 
 
 6. " Sundry debtors for interest on calls 
 
 in arrear. 
 
 7. " Cash at bankers and in hand. 
 
 Position op Assets and Liabilities on the Balance Sheet. — 
 While the American and Continental Accountants generally place assets on 
 the left-hand side and liabilities on the right-hand side, English Chartered 
 Accountants have, for a long time, followed the opposite course; so long, 
 in fact, that it seems to be quite difficult for them to understand the reasons 
 for the use of other methods. In Dicksee's Auditing, it is stated that "some 
 ■years ago it was not unusual to find Balance Sheets stated with the assets 
 upon the left-hand side and the liabilities upon the right-hand side. The 
 -circumstance is, doubtless, at first sight curious." From this quotation 
 the reader would necessarily imagine that the custom referred to was 
 absolutely obsolete, and it entirely ignores the fact that the large majority 
 •of accountants still use the methods referred to as being not unusual some 
 years ago. 
 
 In the American Accountants' Manual, which contains the views of 
 the Certified Accountants of New York, this question is gone into at great 
 length, but, as a matter of fact, it is simply and entirely a matter of form 
 which is of no importance, and a great deal too much fuss has been made 
 -about it. If the English accountants prefer to place their liabilities on the 
 "left-hand side, they may do so, we hope, without preventing other account- 
 ants from placing them on the right-hand side, nor can the former assert 
 any legal or other authority for making their method a standard even in 
 "Great Britain. The arguments in favor of the English Chartered Account- 
 ants' method appear largely to be based upon the idea that the Balance Sheet 
 is made out by the business to the proprietor. The proprietor is therefore 
 "debited with the liabilities incurred and credited with the assets on hand. 
 
 For further arguments on this subject, we refer to Dicksee's Auditing 
 and the American Accountants' Manual, published by Broaker & Chapman, 
 where the subject is, in our opinion, given considerably more importance 
 than it legitimately possesses. 
 
 170 
 
Special Items. — There are a number of components of a Balance 
 Sheet which are, to a certain extent, unusual, and which, therefore, invari- 
 ably cause a considerable amount of trouble to the inexperienced book- 
 keeper who desires some authority by which he can ascertain their proper 
 disposition. Some of these we will now proceed to illustrate. 
 
 (a) Wages Accrued but Not Payable. — These should be included 
 as a liability. 
 
 (b) Unexpired Insurance. — A proper proportion should be in- 
 cluded as an asset. Unexpired licenses should be treated in the same 
 manner. 
 
 (c) Accounts Receivable. — ^An accurate Balance Sheet should 
 include a reserve for probable bad debts. We believe it to be a fact that a 
 certain percentage of Accounts Receivable are never realized, and this per- 
 centage should not be included in the divisible profits. 
 
 (d) Plant, Machinery, Etc. — A certain percentage should be 
 written ofif annually from any asset which is liable to depreciation, other- 
 wise a portion of dividend will be paid out of capital as well as from profits. 
 
 (e) Excess oe Capital. — In a partnership business, if one partner 
 draws less than his share of the profits and allows it to remain in the business 
 as working capital, he is entitled to interest unless otherwise specifically 
 provided in the partnership agreement. 
 
 (^f) Reserve is a portion of undivided profits, and is, to a large 
 extent, synonymous with surplus. 
 
 (g) Discounts From Accounts Receivable. — ^As a rule, sales are 
 charged to customers, less trade discount. Where they are charged gross, 
 of course, it would be necessary always to deduct the trade discount in 
 making up the Balance Sheet. 
 
 With regard to cash discounts, it may be safer to take off, say 2 per 
 cent as a reserve against possible discounts of this kind, but as the amount 
 of cash discount taken advantage of is extremely irregular and uncertain, 
 it is quite legitimate to ignore it. 
 
 (h) Present Value. — Articles, the value of which is subject to 
 market fluctuations, should always be -included in the Balance Sheet at 
 present market price. This is a generally recognized principle, but is very 
 rarely carried out. If, for instance, goods are purchased at a price, the 
 market value of which subsequently declines and which may shortly again 
 appreciate, the proprietors of the business naturally object to reducing 
 profits which they consider to be only fictitiously and temporarily affected. 
 
 (i) iNTEREST.^Interest charged upon uncollectable loans or bad 
 investments should be written of to Profit and Loss. 
 
 171 
 
(j) Preliminary Expenses oe Promotion. — These may be with 
 propriety spread over the first few years after a company's incorporation, 
 so that the total expense of promotion does not come out of the first year's 
 profits. 
 
 With regard to liabilities accrued, but not payable, and similiar items, it 
 is usual to include them in the Balance Sheet without incorporating them in 
 the ledger. If, however, the Balance Sheet is desired to be an exact record 
 of balances shown on the ledger, accounts can be opened in this way : Charge 
 Wages Account and credit Unpaid Wages Account. When the wages are 
 paid Cash is credited and Unpaid Wages Account debited with the amount, 
 thus closing the account. 
 
 The Balance Sheet and the Statement oe Assets and Liabiw- 
 tiES. — A text-book defines the difference between these two accounting 
 forms as follows : 
 
 " 'Staterrient of affairs' is a term generally used to describe the state^ 
 ments of assets and liabilities prepared in bankruptcy and insolvency cases. 
 It is also frequently used in connection with the accounts of retail traders, 
 who keep their books by single entry, or who have kept no proper books 
 enabling a Balance Sheet to be prepared. 
 
 "Balance Sheet is the term almost universally applied to the statements 
 of assets and liabilities of ordinary going concerns, or of concerns, the 
 books of which have been correctly kept by double entry. The tendency 
 rather is to restrict the application of the term 'Balance Sheet' to these latter 
 cases, and to use the term 'Statement of Assets and Liabilities,' in the fre- 
 quent instances where we are called in to ascertain a trader's position, and 
 have to make up the statement from imperfect books, and where we have 
 practically no such means ot testing the completeness and the arithmetical 
 accuracy of the statement, as a set of books kept by double entry affords." 
 
 As a matter of fact, however, what used to be called the Balance Sheet 
 is now preferably know as the "Statement of Assets and Liabilities" or the 
 "Statement of Affairs of a Business." The reason of this preference is 
 obvious. In making up a correct statement of the assets and liabilities of 
 a business, the accountant must include unschedeuled liabilities which may 
 have been partly or wholly incurred and discard unearned assets. For 
 instance, an insurance company must not schedule unearned premiums as 
 assets, but only that proportion of the premium actually earned to date. 
 It is evident, therefore, that the Statement of Assets and Liabilities will not 
 agree with the regular books or show the balances shown by the books. It 
 will, however, be a more correct representation of the condition of the 
 business than any Balance She^t drawn from the books, and this statement 
 is, therefore, appropriately named "Statement of Assets and Liabilities." 
 
 172 
 
Working Form. — This form of Balance Sheet consists of a ruled sheet 
 of paper with columns provided for (i) Trial Balance, (2) Trading Ac- 
 count, (3) Profit and Loss Account, (4) Balance Sheet. The balances of 
 Trading and Profit and Loss Accounts are inserted in red ink at the foot of 
 the respective columns. The surplus of the Balance Sheet is inserted in red 
 ink to call attention to the agreement with the balance of Profift and Loss 
 Account. 
 
 This form of statement is also much recommended by business col- 
 leges. We cannot do better than quote from the American Accountants' 
 Manual, an excellent criticism of this form : 
 
 "While this form affords an excellent illustration of the process of 
 roughly analysing a trial balance preparatory to framing a balance sheet 
 and a revenue account, it is but a working-paper and incapable of giving the 
 adequate expression to the contemplated articulation and relation of values 
 called for in a Balance Sheet suitable for presentation as a financial state- 
 ment. It is only because of the fact that the works in which it appears hold 
 out to the student as the form of balance sheet, and it consequently (although 
 seldom) appears under such title as a finished statement, that any notice 
 whatsoever is given to it in this work, as from an accountancy standpoint it 
 is valueless, its manifest limitations not admitting of its use even as a work- 
 ing paper. It therefore can be only regarded as a somewhat neat, school- 
 room exercise, and that, no doubt, is all its originator intended it should be." 
 
 The following example of a peculiar form of Balance Sheet may not 
 be without interest to our readers : 
 
 BALANCE SHEET— December 31, 1893. 
 
 LIABILITIES. ASSETS. 
 
 To sundry creditors $2,000 By Cash — ^ 
 
 To interest on mortgage l,ooo Bankers $ 500 
 
 To bank loans 7.50° I" hand 250 
 
 N. B. — An amount of $30,000 is due r. c j t~> i, ^ ^^° 
 
 to Mortsjages, secured upon the 
 
 By Sundry Debtors S,ooo 
 
 freehold property. \ V*""^'^ ^"'^ ^""'^'^ 
 
 Stock 3,750 
 
 By Revenue and Expenditure 
 Account — 
 Debit Balance 2,500 
 
 Less excess of Capital Ac- 
 count credit over Freehold 
 Property Account debit... 1,500 
 
 $1,000 
 By Balance (deficiency) 
 
 $10,500 $10,500 
 
 This Balance Sheet is remarkable for being as entirely wrong in form 
 and principle as can well be imagined. 
 
 173 
 
BALANCE SHEET (AUDITING).— In certifying to the Balance 
 Sheet or the accounts which have been audited, it is necessary for the auditor 
 to be very particular to see that (i) the liabilities are all included; (2) the 
 assets are not inflated; (3) that fictitious assets are so defined; (4) that 
 the profit and loss account includes all chargeable expenses for the period 
 covered by the audit, whether paid or unpaid; (5) that all profits earned are 
 included. 
 
 A number of accountants in good practice have hit upon the expedient 
 of presenting to their clients two Balance Sheets in cases where the value 
 of the fixed assets have been very much inflated in order to offset the capital- 
 ization. One balance is based on book values, and the other balance sheet is 
 based on such values as the accountant considers fair and reliable. 
 
 With regard to the verification of liabilities, it is very often found 
 advisable and desirable to send a request to all persons with whom the con- 
 cern is known to be doing business for a statement of amounts due. 
 
 BALANCE, TRIAL.— See Trial Balance. 
 
 BALANCING ACCOUNTS.— See Balance Account and Adjustment 
 Accounts. 
 
 BANK ACCOUNT. — An account of moneys deposited with and with- 
 drawn from a bank. One of the most common methods of keeping this 
 account is to make the record of deposits and withdrawals on the stub of the 
 check book, which should be specially ruled so as to conveniently provide 
 for the record of deposits on the reverse of the stub, and permit footings 
 of checks to be made with facility. 
 
 The check stubs thus form a check register, showing at the close of 
 each day the balance at bank by the simple process of deducting the totals 
 of checks from the totals of deposits. The footings should be carried for- 
 ward to the end of the month before striking a new balance on the stub, 
 for the reason that, if any error is made, the bringing forward of a new 
 balance every day obstructs its discovery. 
 
 The separate check register is an amplification of the stub record, and 
 is often developed into a bank cash book where all receipts are deposited, 
 the general cash book in this case becoming only a record of minor 
 expenditures. 
 
 The bank account is frequently kept in either cash book, or journal, 
 separate columns being provided, both debit and credit, headed "Bank." 
 The total of deposits is entered daily in the proper column from the deposit 
 slips (which are filed for reference) and the total of checks issued is also 
 entered daily. The entering of checks in detail in the bank column is 
 unnecessary and profitless labor, and the grand totals only of the bank 
 
 174 
 
columns should be posted to the ledger at the end of each month for triak 
 balance purposes. 
 
 The ideal method of treating bank account is to utilize it as a preventa- 
 tive of defalcation by depositing all receipts, and making all payments by- 
 check except petty expenditures, and this method is now quite extensively 
 used. Exchange and discount will be charged through the cash book, so 
 that the balance of the cash book must always agree witji that of the bank- 
 pass-book. 
 
 A petty cashier has charge of necessary incidental cash payments, whichi 
 are recorded in a petty cash book. He is supplied with money by checks- 
 drawn to his order, the amounts of which are charged to his account, while 
 he is credited with approved expenditures. 
 
 Checks drawn to his order should cover the e&act amount disbursed 
 from date of last check, as by this method any unusually large expenditures- 
 would at once attract attention. 
 
 BANK ACCOUNT— (Com. Law).— A fund which merchants, trad- 
 ers and others have deposited into the common cash of some bank, to be- 
 drawn out by checks from time to time as the owner or depositor may- 
 require. The statement of the amount deposited and drawn, which is kept 
 in duplicate, one in the depositor's bank book and the other in the book<^ of 
 the bank. 
 
 BANK ACCOUNTING.— Organization.— The organization of a 
 bank is so intimately connected with the plan ultimately decided upon for 
 the transaction of the bank's business that it is considered better to treat- 
 it under this heading than to treat first of Bank Accountingg and afterwards 
 Bank Organization. 
 
 Under the National Bank Act of 1900 the applicants for a charter must 
 number five "natural persons," who must possess the legal right under the 
 laws of the State in which the bank is to be organized to hold property in: 
 their own names. 
 
 The application for a charter, duly signed, must be forwarded to the 
 Comptroller of the Currency and must give the following particulars: 
 Name of bank, location, capital stock. The applicants must also have a 
 responsible endorsement as to their qualifications and reputation, and such- 
 endorsement is generally sought from the United States Senator, or member 
 of the House of Representatives. 
 
 By the National Banking Act of 1900, the minimum capital required to 
 establish a bank in towns containing 3,000 inhabitants, or less, was fixed 
 at $25,000. 
 
 Articles of Association. — For the purpose of organizing an associa- 
 tion to carry on the business of banking, under the laws of the United States,. 
 
 175 
 
the undersigned, subscribers for the stock of the association hereinafter 
 named, do enter into the following articles of association : 
 
 First. The name and title of this association shall be "The " 
 
 Second. The place where its banking house or office shall be located, 
 -and its operations of discount and deposit carried on, and its general business 
 conducted, shall be 
 
 Third. The board of directors shall consist of shareholders. 
 
 The first meeting of the shareholders for the election of directors shall be 
 
 held at , on the , or at such other place 
 
 and time as a majority of the undersigned shareholders may direct. 
 
 (Or, the board of directors shall consist of . . ." shareholders, and 
 
 the following persons [insert names] are hereby appointed directors of the 
 association, to hold their offices as such until the regular annual election 
 takes place pursuant to the fourth article of these Articles of Association, 
 and until their successors are chosen and qualified.) 
 
 Fourth. The regular annual meeting of the shareholders for the 
 ■election of directors shall be held at the banking house of this association 
 -on the second Tuesday of January of each year; but if no election shall be 
 "held on that day it may be held on any other day, according to the provisions 
 -of Section 5149 of the Revised Statutes; and all elections shall be held 
 according to such regulations as may be phescribed by the board 
 ■of directors, not inconsistent with the aforesaid provisions of the said Sec- 
 tion 5149 of the Revised Statutes. 
 
 Fifth. The capital stock of this association shall be thousand 
 
 dollars, to be divided into shares of one hundred dollars each; but the 
 capital may, with the approval of the Comptroller of the Currency, be 
 incVeased at any time hy shareholders owning two-thirds of the stock, 
 according to the provision of an act of Congress approved May i, 1886; 
 and in case of the increase of the capital of the association, each shareholder 
 shall have the privilege of subscribing for such numbers of shares of the 
 proposed increase of the capital stock as he may be entitled to according to the 
 ■number of shares owned by him before the stock is increased. 
 
 Sixth. The board of directors, a majority of whom shall be a guorum 
 to do business, shall elect one of its members president of the association, 
 who shall hold his office (unless he shall be disqualified, or be sooner removed 
 by a two-thirds vote of all the members of the board) for the term for 
 -which he was elected a director. The directors shall have the power to 
 ■elect a vice-president, who shall also be a member of the board of directors, 
 and who shall be authorized, in the absence or inability of the president 
 fron. any cause, to perform all acts and duties pertaining to the office of 
 ihe president, except such as the president only is authorized by law to 
 
 176 
 
perform, and to elect or appoint a cashier, and such other officers and clerks 
 as may be required to transact the business of the association; to fix the 
 salaries to be paid to them, and continue them in office, or to dismiss them, 
 as, in the opinion of a majority of the board, the interests of the association 
 may demand. 
 
 The directors shall have the power to define the duties of the officers 
 and clerks of the association, to require bonds from them and to fix the 
 penalty thereof; to regulate the manner in which elections of directors 
 shall be held, and to appoint judges of the elections; to make all by-laws 
 that it may be proper for them to make, hot inconsistent with law, for the 
 general regulation of the business of the association and the management 
 of its affairs, and generally to do and perform all acts that it may be legal 
 for a board of directors to do and perform under the Revised Statutes 
 aforesaid. 
 
 Seventh. This association shall continue for the period of twenty 
 years from the date of the execution of its organization certificate, unless 
 sooner placed in volunteer liquidation by the act of its shareholders owning 
 at least two-thirds of its stock, or otherwise dissolved by authority of law. 
 
 Bighth. These articles of association may be changed or amended 
 at any time, by shareholders owning a majority of the stock of association, 
 in any manner not inconsistent with law ; and the board of directors, or any 
 three shareholders, may call a meeting of the shareholders for this or any 
 other purpose, not inconsistent with law, by publishing notice thereof for 
 thirty days in a newspaper published in the town, city or county where the 
 bank is situated, or by notifying the shareholders in writing. 
 
 In witness whereof, we have hereunto set our hands this day 
 
 of , nineteen hundred 
 
 I certify that the articles of association of the are 
 
 executed in duplicate, and that one of the instruments so executed is the 
 foregoing; and that, the other, in all respects like the foregoing, is on file 
 with said bank. 
 
 Cashier or President. 
 , 190- ■ 
 
 It is necessary to pay in at once one-half of the proposed capital stock. 
 The value of the shares is fixed by ballot at $100 each. 
 
 For the purpose of application the following forms will be required: 
 (i) Articles of Association; (2) Certificate of Organization; (3) Certifi- 
 cate of Officers and Directors. These forms can be obtained from the 
 Comptroller of the Currency in duplicate; after being filled out one copy 
 must be filed with the Comptroller of the Currency. The organization 
 
 177 
 
certificate must be sworn to before a Notary Public or other official author- 
 ized to administer such oaths. 
 
 Should it be desired to convert a State bank into a National bank, the 
 following provisions of the National Banking Act, Section 5154, must be 
 followed : 
 
 Any bank incorporated by special law, or any banking institution 
 organized undpr a general law of any State, may become a National associa- 
 tion under this title by the name prescribed in its organization certificate; 
 arid in such case the articles of association and the organization certificate 
 may be executed by a majority of the directors of the bank or banking 
 institution ; and the certificate shall declare that the owners of two-thirds 
 of the capital stock have authorized the directors to make such certificate, 
 and to change or convert the bank or banking institution into a National 
 Association. A majority of the directors after executing the articles of 
 association and organization certificate, shall have power to execute all 
 other papers, and to do whatever may be required to make its organization 
 perfect and complete as a National association. 
 
 The shareholders of the bank to be converted must give evidence of 
 their assent in the execution of a paper similar to the following : 
 
 Authority of Shareholders to Directors for the Conversion 
 OF A State Bank Into a National Bank. — We, the undersigned, share- 
 holders of the [here insert the name of the State bank], located in the 
 
 of , County of , and State of , 
 
 having a capital of dollars, do hereby authorize and empower 
 
 the directors thereof to change and convert said bank into a National bank 
 association, under the general banking laws of the United States, and 
 according to the provision of Section 5154, Revised Statutes of the United 
 States, and we do also authorize the said directors, or a majority thereof, 
 to make and execute the articles of association and organization certificate 
 required to be made or contemplated by said laws, and also to make and 
 execute all other papers and certificates, and to do all acts necessary to be 
 
 done to convert said into a National banking association, and 
 
 also to do and perform all such acts as may be necessary to transfer the 
 
 assets of every description and character of said to the National 
 
 banking association into which it is to be converted, so that the said con^ 
 version may be absolute and complete. 
 
 And we do hereby assume and authorize the said directors to assume, 
 
 as the name of the National banking association into which the said • 
 
 is to be converted, "The [here insert the name of the association] ;" and 
 we do here appoint [here insert the names of the directors], who are now 
 directors of the said [here insert the name of the State bank, about to be 
 
 178 
 
converted], to be directors of the said [here insert the name of the associa- 
 tion] , to hold their offices as such directors until the regular annual election 
 of directors is held, pursuant to the provisions of said laws, and until their 
 successors are chosen and qualified. 
 
 And we do hereby authorize the said directors to continue in office the 
 officers of the said [here insert the name of the State bank about to be con- 
 verted], or to appoint or select others as to them may seem best. 
 
 In witness whereof, we have hereunto set our hands, and written 
 against our names the number of shares owned by us, respectively, this 
 day of , A. D. 19 . . 
 
 The Articles of Association under these circumstances will differ from 
 the above as per the following example: 
 
 We, the undersigned, directors of the , having 
 
 been authorized by the owners of two-thirds of the capital stock of said 
 bank to change and convert the said bank into a National banking associa- 
 tion, under Section 5 1 54 of the Revised Statutes of the United States, and 
 of subsequent acts in addition to or amendatory thereof, and to execute 
 articles of association, do hereby, in our own behalf, and in behalf of the 
 shareholders whom we represent, make and execute the following articles 
 of association : 
 
 First. The name and title of the association into which the said 
 is to be changed and converted shall be 
 
 Second. The place where its banking house or office shall be located, 
 and its operations of discount and deposit carried on, and its general business 
 
 conducted, shall be the , in the County of , and State 
 
 of 
 
 Third. The board of directors shall consist of shareholders. 
 
 Fourth. The regular annual election of directors shall be held on the 
 second Tuesday of January of each year ; but if no election shall be held on 
 that date, it may be held on any other day, according to the provisions of 
 the tenth section of this act; and all elections shall be held according to 
 such regulations as may be prescribed by the board of directors of the 
 association, not inconsistent with the provisions of the aforesaid act. 
 
 Fifth. The capital stock of this association shall be thousand 
 
 dollars, to be divided into shares of dollars each ; but the capital 
 
 may be increased, with the approval of the Comptroller of the Currency, 
 according to law, any sum deemed expedient ; and in case of the increase 
 of the capital of the association, each shareholder shall have the privilege 
 of subscribing for such number of shares of the proposed increase of the 
 capital stock as he may be entitled to according to the number of shares 
 owned by him before the stock is increased. 
 
 179 
 
Sixth. The board of directors, a majority of whom shall be a quoritm 
 to do business, shall elect one of its members president of this association, 
 who shall hold his office (unless he shall be disqualified, or be sooner 
 removed by a two-thirds vote of all the members of the board) for the 
 term for which he was elected a director. The directors shall have power 
 to elect a vice-president, who shall also be a member of the board of directors, 
 and who shall be authorized, in the absence or inability of the president from 
 any cause, to perform all acts and duties pertaining to the office of president, 
 except such as the president only is authorized by law to perform ; and to 
 elect or appoint a cashier, and such other officers and clerks as may be 
 required to transact the business of. the association; to fix the salaries to 
 be paid to them, and continue them in office, or to dismiss them, as in the 
 opinion of a majority of the board the interests of the association may 
 demand. 
 
 The directors shall have power to define the duties of the officers and 
 clerks of the association, to require bonds from them, and to fix the penalty 
 thereof; to regulate the manner in which election of directors shall be held, 
 and to appoint judges of the election ; to make all by-laws that it may be 
 proper for them to make not inconsistent with law, for the general regula- 
 tion of the^ business of the association and the management of its affairs, 
 and generally to do and perform all acts that it may be legal for a board 
 of directors to do and perform under the Revised Statutes aforesaid. 
 
 Seventh. This association shall continue for the period of twenty 
 years from the date of the execution of the organization certificate, unless 
 sooner dissolved by the act of its shareholders owning at least two-thirds 
 of its stock, who may dissolve and close up the association in such manner 
 as they may deem to be for the interest of the shareholders and creditors 
 of the association, but subject to the restrictions, requirements and pro- 
 visions of the act. 
 
 Eighth. These articles of association may be changed or amended at 
 any time by shareholders owning a majority of the stock of the association, 
 in any manner not inconsistent with the provisions of the Revised Statutes ; 
 and the board of directors, or any three shareholders, may call a meeting 
 of shareholders for this purpose. 
 
 In witness whereof, we, the directors aforesaid, for ourselves as such 
 
 directors, and in behalf of the shareholders of the have 
 
 hereunto set our hands this day of , nineteen hundred 
 
 and 
 
 Not?. — ^This paper is to be excuted in duplicate. 
 
 180 
 
I certify that the articles of association of the were 
 
 executed in duplicate, and that one of the instruments so executed is the 
 foregoing, and that the other, in all respects like the foregoing, is on file 
 with said bank. 
 
 Cashier or President, 
 , 190- • 
 
 The organization certificate may be as follows : 
 
 We, the undersigned, director of the , having been 
 
 duly authorized by the owners of two-thirds of the capital stock of said bank 
 to change and convert the said bank into a National banking association, and 
 to make the necessary organization certificate, under the sections of the 
 United States Revised Statutes that authorize the conversion of State 
 banks into National associations, and of subsequent act in addition to or 
 amendatory thereof, do sign and execute the following organization cer- 
 tificate, which we hereby declare we are authorized to make by the owners 
 of two-thirds of the capital stock of said 
 
 First. The name and title of this association shall be "The " 
 
 Second. The said association shall be located and continued in the 
 
 of , County of , and State of , 
 
 where its operations of discount and deposit are to be carried on. 
 
 Third. The capital stock of the association shall be 
 
 dollars ($ ), and the same shall be divided into shares of 
 
 dollars each, as it is now divided into the said "The " 
 
 Fourth. The name and residence of each of the shareholders of the 
 said , which is to become a National bank under the pro- 
 visions of the United States Revised Statutes aforesaid, and the number 
 of shares of dollars each, held by each shareholder, are as follows : 
 
 Fifth. This certificate is made in order that the said 
 
 and the shareholders thereof may avail themselves of the advantages of 
 
 the aforesaid United States Revised Statutes, and that the said 
 
 may be changed and converted into a National banking association under 
 the name and title of "The " 
 
 In witness whereof, we have hereunto set our hands this day 
 
 of nineteen hundred and 
 
 State of 
 
 County of , ss. : 
 
 On this the day of , A. D. 19. ., personally came before 
 
 me, a of said county, , , 
 
 181 
 
directors of the , to me well known, who severally 
 
 acknowledge that they executed the foregoing certificate for the purposes 
 therein mentioned. 
 
 Witness my hand and seal of office the day and year aforesaid. 
 
 The directors of National banks must be citizens of the United States, 
 and not less than three-fourths of the directors must have resided in the 
 state or territory where the bank is located for at least one year preceding 
 their election to the board. The directors must also remain residents of 
 said state or territory while holding office. No person is eligible for election 
 as director unless owning at least ten shares of stock. 
 
 Directors, when not designated in the articles of association, are elected 
 by the shareholders. A condition of his election is, that he must swear 
 that "he will not knowingly violate or permit to be violated any of the pro- 
 visions of the law under which the bank operates, and that he is the owner 
 of the required amount of shares and that they are not hypothecated or 
 pledged as security for any loan or debt." 
 
 The board of directors being completed, they may then proceed to elect 
 the officers of the bank. After fifty per cent of the capital stock has been 
 paid up the fact must be sworn to by the president or cashier and a majority 
 of the directors. 
 
 Under the law, a bank having $150,006 capital, or less, must deposit 
 United States registered bonds to the amount of at least one-fourth of the 
 capital stock. This must be done whether circulation is taken out or not. 
 Circulating notes may be had up to the par value of the bonds deposited 
 for their security, providing the market prices of the bonds remain at or 
 above par. If it falls below par, the Comptroller may call upon the bank 
 to make good the deficiency, either by depositing coin or legal tender notes, 
 or additional bonds. The notes will be issued in denominations of five 
 dollars and upwards, but no bank can have more than one-third of its total 
 circulation in five-dollar notes, the remaining two-thirds must be made up 
 of bills of the higher denominations. 
 
 The Comptroller furnishes blank orders for circulation which indicates 
 the denomination of plates desired. The expense of engraving the plates 
 must be borne by the bank. The cost is $75 apiece for each of the plates 
 technically known as "5, 5, 5, 5," "10, 10, 10, 20," and $50 for the "50 and 
 100' plate. It requires about forty-five days after the organization of a 
 bank and the bonds deposited, to complete the engraving of the plates and 
 have the currency ready for delivery. The order for circulation cannot be 
 acted upon until the bank has been authorized to begin business, because, 
 
 182 
 
until that time, the bank's charter number, which must appear on the plates, 
 has not been ascertained. 
 
 The Comptroller of the Currency being satisfied that the law has been 
 complied with, that the shareholders have organized the bank in good faith, 
 issues a certificate authorizing it to commence business. On receipt of 
 this certificate the bank must publish it and proof of publication be sent to 
 the Comptroller. 
 
 The following is a general form of by-laws of a National bank : 
 
 General Form of By-Laws of National Banks. — By-laws of the 
 [here insert the title of the bank] organized under the National banking 
 laws of the United States. 
 
 Elections. — Section i. The regular annual meetings of the share- 
 holders of this bank for the election of directors shall be held at its banking 
 house on the second Tuesday of January of each year, between the hours 
 of lo and 4 of said day. It shall be the duty of the board of directors, 
 within one month prior to the time of said election, to appoint three share- 
 holders to be judges of said election, who shall hold and conduct the same, 
 and who shall, after the election has been held, notify under their hands the 
 cashier of this bank of the result thereof, and the names of the directors- 
 elect. 
 
 Sec. 2. The cashier, upon receiving the returns of the judges of 
 election as aforesaid, shall cause the same to be recorded upon the minute 
 book of the bank, and shall notify the directors-elect of their election, and 
 of the time at which they are required to meet at the banking house of the 
 bank for the purpose of organizing the new board. If at the time fixed 
 for the meeting of the directors-elect there is not a quorum in attendance, 
 the members present may adjourn from time to time until a quorum is 
 secured ; and no business shall be transacted prior to qualifying by taking 
 the oath of office as prescribed by law. 
 
 Sec. 3. It, for any cause, the annual election of directors is not held on 
 the date fixed in the articles of association, the directors in office shall order 
 an election to be held on some other day, of which special election notice shall 
 be given in accordance with the requirements of Section 5149, United 
 States Revised Statutes, judges appointed, returns made and recorded, and 
 the directors-elect notified according to the provisions of sections one and 
 two of these by-laws. 
 
 Officers. — Sec. 4. The officers of this bank shall be president, vice- 
 president, cashier, teller, book-keeper, and such other officers as may be 
 from time to time required for the prompt and orderly transaction of its 
 business, to be elected or appointed by the board of directors by whom their 
 several duties shall, be prescribed. 
 
 183 
 
Sec. 5. The president shall hold his office for the current year for 
 which the board of which he shall be a member was elected, unless he shall 
 resign, become disqualified, or be removed ; and any vacancy occurring in 
 the office of president or in the board of directors, shall be filled by the 
 remaining members. 
 
 Sec. 6. The cashier and the subordinate officers and clerks shall be 
 appointed to hold their offices respectively during the pleasure of the board 
 of directors. 
 
 Sec. 7. The cashier of the bank shall be responsible for all the moneys, 
 funds and valuables of the bank, and shall give bond, with security to be 
 
 approved by the board, in the penal sum of dollars, conditioned for 
 
 the faithful and honest discharge of his duties as such cashier, and that he 
 will faithfully apply and account for all such moneys, funds and valuables, 
 and deliver the same to the order of the board of directors of this bank, or 
 to the person or persons authorized to receive them. 
 
 Sec. 8. The president of this bank shall be responsible for all such 
 sums of money and property of every kind as may be intrusted to his care 
 or placed in his hands Ijy the board of directors or by the cashier, or other- 
 wise come into his hands as president, and shall give bond, with security 
 to be approved by the board, in the penal sum of ...'..... dollars, con- 
 ditioned for the faithful discharge of his duties as such president, and that 
 he will faiihfully and honestly apply and account for all sums of money 
 and other property of this bank that may come. into his hands as such 
 president, and pay over and deliver the same to the order of the board of 
 directors, or to any other person or persons authorized by the board to 
 receive the same. 
 
 Sec. 9. The teller shall be responsible for all such sums of money, 
 property, and funds of every description as may, from time to time, be 
 placed in his hands by the cashier, or otherwise come into his possession 
 as teller, and shall give bond with security, to be approved by the board, 
 
 in the penalty of dollars, conditioned for the honest and faithful 
 
 discharge of his duty as teller, and that he will faithfully apply, account for, 
 and pay over all moneys, property, and funds of every description that may 
 come into his hands by virtue of his office as teller, to the order of the board 
 of directors aforesaid, or to such persons or persons as may be authorized 
 to demand and receive the same. 
 
 Seal. — Sec. 10. The following is an impression of the seal adopted by 
 the board of directors of this bank : 
 
 Impression of 
 Seal. 
 
 184 
 
Conveyance op Reai, Estate. — Sec. ii. All transfers and convey- 
 ances of real estate shall be made by the association, under seal, in accord- 
 ance with the order of the board of directors, and shall be signed by the 
 president or cashier. 
 
 Increase oe Stock. — Sec. 12. Whenever an increase of stock shall' 
 be determined upon, in accordance with law, it shall be the duty of the 
 board to notify all the shareholders of the same, and to cause a subscription 
 to be opened for such increase of capital. In the increase of capital each- 
 shareholder shall have the privilege of subscribing for such number of 
 shares of the new stock as he may be entitled to subscribe for, according- 
 to his existing stock in the bank. If any shareholder fails to subscribe for 
 the amount of stock to which he may be entitled, the board of directors may 
 determine what disposition shall be made of the privilege of subscribing- 
 for the unsubscribed stock. 
 
 Business of the Bank. — Sec. 13. This bank shall be open for busi- 
 ness from . : . . o'clock a. m. to .... o'clock p. m. of each day of the year, 
 excepting Sundays and recognized by the laws, of this State as holidays. 
 When any regular weekly meeting of the board of directors falls upon a 
 holiday, the meeting shall be held upon such other day as the board may- 
 previously designate. 
 
 Sec. 14. The regular meeting of the board of directors shall be held 
 on [here insert time of meetings] . Special meetings may be called by the 
 president, cashier, or at the request of three or more directors, and should 
 there be no quorum at any regular or special meeting,, the members present 
 may adjourn from day to day until a quorum is in attendance. In the 
 absence of a quorum, no business shall be transacted. 
 
 Sec. 15. There shall be a coijimittee, to be known as the discount 
 committee, consisting of the president, cashier and directors, appointed by- 
 
 the board every months, to continue to act until succeeded, who shall 
 
 have power to discou'nt and purchase bills, notes, and other evidences of 
 debt, and to buy and sell bills of exchange; and who shall, at each regular 
 meeting of the board of directors, make a report of all bills, notes, and. 
 other evidences of debt discounted and purchased by them for the bank 
 since their last and previous report. 
 
 Minute Book. — Sec. 16. The organization papers of this bank, the 
 returns of the judges of the elections, the proceedings of all regular and! 
 special meetings of the directors and of the shareholders, the by-laws and 
 any amendments thereto, and reports of the committees of directors shall 
 be recorded in the minute book ; and the minutes of each meeting shall be 
 signed by the president and attested by the cashier. 
 
 185 
 
Transfers of Stock. — Sec. 17. The stock of this bank shall be 
 -assignable and transferable only on the books of this bank, subject to the 
 restrictions and provisions of the banking laws ; and a transfer book shall 
 be provided in which all assignments and transfers of stock shall be made. 
 
 Sec. 18. Transfers of stock shall not be suspended preparatory to 
 the declaration of dividends ; and, unless an agreemnet to the contrary shall 
 be expressed in the assignments, dividends shall be paid to the shareholders 
 in whose name the stock shall stand at the date of the declaration of divi- 
 •dends. 
 
 Sec. 19. Certificates of stock, signed by the president and cashier, 
 
 may be issued to shareholders, and the certificate shall state upon the face 
 
 thereof that the stock is transferable only upon the books of the bank ; and 
 
 when stock is transferred, the certificates thereof shall be returned to the 
 
 bank and cancelled, and preserved, and new certificates issued. 
 
 Expenses. — Sec. 20. All the current expenses of the bank shall be 
 paid by the cashier, who shall, every six months, or oftener, if required to 
 -do so, make to the board a detailed statement thereof. 
 
 Contracts. — Sec. 21. All contracts, checks, drafts, etc., and all 
 receipts for circulating notes received from the Comptroller of the Cur- 
 Tency, shall be signed by the president or cashier. 
 
 Examinations. — Sec. 22. There shall be appointed by the board of 
 ■directors a committee of .... members, whc.3e duty it shall be to exercise 
 a supervision of the business of the bank, and to examine every three 
 months the affairs of this bank, count its cash, and compare its assets and 
 liabilities with the accounts of the general ledger, ascertain whether the 
 accounts are correctly kept, and the condition of the bank corresponds 
 therewith, and whether the bank is in a sound and solvent condition ; and to 
 recommend to the board such changes in the manner of doing business, etc., 
 as shall seem to be desirable; the result of which examination shall be 
 ■reported in writing to the board at the next regular meeting thereafter. 
 
 Sec. 23. The board of directors shall have power to change the 
 form of the books and accounts when deemed expedient, and define the 
 manner in which the affairs of the bank shall be conducted. 
 
 Quorums. — Sec. 24. A majority of all the directors is required to 
 -constitute a quorum to do business. 
 
 Sec. 25. These by-laws may be changed or amended by the vote of 
 two-thirds of the directors. 
 
 As banks are the custodians of the funds of other people, in no other 
 line of business is it more necessary that a careful and complete record of all 
 their transactions be kept. 
 
 186 
 
These records should be kept in such a manner and so clearly and con- 
 cisely, together with simplicity of method, that an investigation can be 
 easily made at any time, and any query made by an officer, stockholder, 
 or depositor, can be readily answered. 
 
 Minute Book. — The minute book is the first to be considered. In that 
 should be clearly and explicitly recorded the full proceedings of the meetings 
 of both stockholders and directors. If these minutes are written up from 
 notes taken at the meeting, they become copies, and it is then necessary to 
 retain the original notes. These should be carefully filed in long envelopes, 
 the date of the meeting being placed upon the back. The minutes should 
 be signed by the proper officer. 
 
 Stock Certificate Book. — Next in order is the stock certificate book. 
 When issuing a certificate a careful record should be made upon the stub 
 of the name and address of the stockholder, the number of shares issued, 
 and the number of the certificate, unless this is printed upon the stub, as is 
 generally done. A receipt should be taken from the stockholder at the 
 time the certificate is delivered to him, and this should appear at the bottom 
 of the stub. 
 
 Stock Register and Transfer Book. — In large banks where there 
 are many stockholders, a stock register and transfer book will be found 
 useful. In this book is recorded all the certificates of stock issued, giving 
 date of issue, number of certificate, name of stockholder, number of shares 
 and one column for "succeeding number" and one for "preceding number," 
 these last to be used in case of transfer. By this book the location of every 
 certificate of stock, and in fact its histofy, can be seen at a glance. 
 
 As all transfers should be recorded clearly, giving number and name, 
 upon the stub of the stock certificate book, it is from this book that the items 
 are posted to the stock register and transfer book, and to the stock ledger. 
 
 Stock Ledger. — The stock ledger should be ruled so as to show on 
 the credit side th^ date of issue, number of certificate, from what num- 
 
 no s. 
 
 3TOCn LnDGEid 
 
 cJas.L. Drown 
 
 
 El 
 
 Dhfelranelep 
 
 To yvhqiriTP'Siief <J- 
 
 No 
 
 Arpf. 
 
 Da"fe Issue 
 
 ipofT) wr]om ReocJ . 
 
 Shanes 
 
 Am'-): 
 
 
 
 
 
 
 
 
 
 bar of shares, and each stockholder's account should be credited with 
 these items in the order mentioned. If he sells any of his stock, his stock 
 account should be charged and show date of transfer, number of the cer- 
 tificate from which the transfer is made, name of party to whom transferred, 
 
 187 
 
number of the transferee's certificate, and number of shares transferred. A 
 stock account should then be opened for the party to whom the stock is 
 transferred, and this account credited with the stock issued, ' showing the 
 number from which it came. In the case of original stockholders, when 
 crediting their accounts on the stock ledger, it is well to write the word 
 "cash" in the column marked "from what number." These should show 
 the number of shares issued at the organization of the bank, and the total 
 when multiplied by the value per share actually paid in should agree with 
 the capital stock account on the general ledger. 
 
 Cash Book. — The general cash book is in some banks called a journal 
 and run as a journal. As the transactions of a bank in reality relate to cash, 
 I deem it proper to run this book as a cash book. In this book is recorded 
 each day the whole business of the bank, each department furnishing a 
 report in aggregate. The balance, as shown by this book at the close of the 
 
 ^'O. I 
 
 cJOUQNAL. (oi"C<soAi SooK ) Monday, cJune a, \&3Z 
 
 day, must agree with the balance of cash on hand as shown by the paying 
 teller. The items on this book are posted to their respective accounts in the 
 general ledger. 
 
 Bank Ledger. — The balance ledger (three columns or four columns 
 as best suits the taste of the officer, for one is as good as the other) is fre- 
 quently used; the condition of each account is continually shown, and a 
 statement can be readily made at any time for any previous date. This 
 ledger should show the whole business of the bank, and from it can be learned 
 the condition of the bank. 
 
 Some banks in our large cities keep their general accounts on sheets 
 ruled similar to the Boston Ledger system, with the names of Ihe accounts 
 
 IIKJO 
 
 
 ^ 
 
 
 MONCWSfV 
 
 hA£i>f. 7 
 
 
 _j 
 
 
 
 TUCSDAV, hA£^ ft. 
 
 1 
 
 weotMe3c>.«*^,N/iAV'o, 1 
 
 MAMC 
 
 Doionce 
 
 ?OF>d 
 
 ChecNs 
 indcl&il C 
 
 ^^''^ 
 
 Dolonce 
 
 ChecKs 
 
 Tofel 
 Checks 
 
 Depoails 
 
 E«"«Hfn 
 
 dela.l 
 
 Tafel n. 
 
 ix»ifc&: 
 
 iliince 
 
 
 
 
 Kn 
 
 OfKI 
 
 
 ±i 
 
 0P<^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 m.1 
 
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 noflz 
 
 1 Q 
 
 Q£ . 
 
 
 1.1 fi 
 
 no 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 AWMiit»iv\y ' 
 
 
 
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 rJor 
 
 
 fin 
 
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 rai 
 
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 ffOf ? 
 
 in 
 
 DQ . 
 
 
 y 1 
 
 ffi 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 * AAOOSiS -t- OIO.OO - SO\0,ZS - .035.00 'AS7S.ZS 
 
 on the left-hand border, and six columns each containing a debit, credit 
 and balance column, representing the six days of the week. 
 
 188 
 
At the close of each month the general ledger book-keeper makes up 
 the accounts current of the various banks keeping accounts with his bank. 
 If interest is allowed on the daily balances this must be figured upon the 
 average of these balances. In many banks the accounts current are made 
 out during the month, adding to them daily the items as they appear in the 
 transactions. Most banks make arrangements with many of their cor- 
 respondent banks to settle weekly or semi-monthly for all their collection 
 items. 
 
 The genera] ledger book-keeper should keep a watch of these accounts 
 and report at once to the cashier as delinquency. 
 
 Daily Statement Book. — The daily statement book is made every 
 day from the accounts on the general ledger with the addition of the "over- 
 drafts," which are obtained from the individual ledger, and in this case the 
 amount of 'individual deposits subject to check," which should appear on 
 the credit side of the statement book, must be the total standing to the credit 
 of individual depositors, and not the balance of the "individual deposit 
 account," as shown by the general ledger. It will be found of advantage 
 to have the daily statement book made to correspond nearly as practicable 
 ,to the form used for the reports to the Comptroller of the Currency, which 
 will very much simplify the making of these reports when called for. As 
 many of the State Departments have adopted a system of reports similar 
 to those in use by the United States Treasury Department, those banks 
 operating under State law only will find a statement book of this kind equally 
 applicable. 
 
 Some small banks make their statements weekly, but the daily state- 
 ment will be found much more satisfactory. 
 
 Certificate of Deposit Register. — The certificate of deposit account 
 should be kept on the general ledger, although some banks keep it on the 
 individual ledger. If the account is kept on the general ledger in aggre- 
 gate only a register must be kept, which will show the date, name, number 
 and amount of each certificate issued, and the date of its payment. If the 
 account is kept in detail in this manner upon the ledger the register will of 
 course be necessary. 
 
 Draft Register. — Many banks have their drafts made loose, in which 
 case a draft register will be necessary in which to keep a complete record 
 of each draft drawn under the name of the bank upon which it is drawn. 
 Some banks, however, have their drafts drawn in a book with a wide stub 
 upon which the record can be kept, thus doing away with the draft register. 
 
 Individual Ledger. — The individual ledger is one of the most impor- 
 tant books in a bank, for in it is kept the accounts with the various depos- 
 itors. As the detail attached to this desk is necessarily great, much care 
 
 189 
 
must be shown. The chief quahfications for a first-class individual ledger 
 book-keeper are rapidity, accuracy and care. 
 
 There are several styles of individual ledgers — the old-fashioned debit 
 and credit ledger, the three-column (or four-column) balance ledger, the 
 Boston ledger. Rand's patent ledger (which seems to combine in some 
 measure the balance ledger and Boston ledger), and a New York ledger, 
 similar to the Boston. The advantage of the balance ledger is that many 
 months of a customer's account can be seen at a glance, and in discounting 
 paper it is quite necessary to be able, to tell quickly what kind of an account 
 the party desiring the discount keeps. It is also a simple matter to average 
 the balances. 
 
 The Boston or New York systems have the advantage of each day's 
 work being a trial balance of the ledger. 
 
 In posting the checks and deposits in the individual ledger it is best to 
 post from the vouchers, and in case these are entered upon a scratcher or day 
 book, the items should be checked back with the ledger to insure proper 
 posting and to the proper accounts. The credits of discounts are posted 
 from the discount register. 
 
 It is a good plan to have the pass-books written up and balanced by 
 someone other than the book-keeper, as an extra check upon the accounts. 
 
 Many banks using the Boston or New York systems of ledgers do not 
 enter their checks or deposits in a scratcher, relying entirely upon the 
 entries in the ledger. This is not a wise plan; the best banks make a 
 record of these vouchers independent of the ledgers, and one is then a check 
 upon the other. 
 
 D/SCOUNT f^E.GIS'TEFl 
 
 u£^T r-iANO ^Ace 
 
 ftc. s. Ce") 
 
 Date of 
 
 ISlanrxe. 
 
 As 
 MaKap 
 
 
 Date of 
 Rayrner>T 
 
 /ArnouoH" 
 
 
 Geo, &apnee> 
 
 
 
 )SO 
 
 
 
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 DlSCeuf^T a^aisTCCt 
 
 
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 NoTfe. 
 
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 Wb=n 
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 Amouutr 
 
 Discount 
 
 Iri-feresf 
 
 Cxcf^an^e 
 
 Net 
 F?»occecle 
 
 R<=«iar>K& 
 
 
 
 
 1 
 
 
 
 
 
 
 / 
 
 
 
 
 Discount Register. — The discount desk is an exceedingly important: 
 one, keeping as it does the record of all the loans. All the time paper is 
 
 190 
 
entered upon the discount register, a book ruled so as to give the number 
 (in sequence), date of discount, name of the drawer, name of the endorser, 
 to whom credited, date of note, time to run, when due, amount of note, 
 amount of discount, net amount credited to the party's account, and a final 
 column for remarks. This is the usual form, but an improvement has- 
 been made and copyrighted, by which the complete history of the paper is- 
 recorded, and from which a proof of the notes is easily made at any time. 
 By this improved form it is also very easy to trace renewals at any time, 
 and it often happens that the cashier or board of directors are desirous of 
 knowing quickly how often a borrower has renewed. 
 
 Offering Book. — When paper is first presented at a bank it should- 
 be placed upon the "offering book," a book which simply gives date when 
 presented, date of note, name of drawer, name of endorser, and amount. 
 
 PI a 1 r») 
 
 orr£i=>iMc: 
 
 300*^ 
 
 TFioro^dai 
 
 y, £>ep,7lKl89ff 
 
 MaKer» 
 
 Er->clor» se-P" 
 or Collate Rol 
 
 Ti'm.e 
 
 wHer% Due 
 
 Arnoual" 
 
 ReiT\<sr»HN.& 
 
 
 
 
 
 
 
 This book, together with the paper, is presented to the discount com- 
 mittee or board when they meet, the paper not passed by them being marked, 
 off, the balance is approved by them and that approval noted by the sig- 
 natures of the various members of the committee present. 
 
 The notes approved are then entered upon the discount register, and 
 the number appearing opposite each entry should be written in red ink 
 upon the upper left-hand corner of the back of the corresponding note. The 
 notes should then be entered in the tickler, the corresponding note. The- 
 notes under their due date, the entry consisting of the number as seen on 
 the discount register, the name of the drawer, the name of the endorser, and. 
 the amount of the note. The "tickler" is made like a diary, each day's- 
 transactions being separate under their respective date. 
 
 The notes should then be filed away according to their due date. De- 
 mand paper should be entered upon a register by themselves, showing num- 
 ber, date of discount, drawer, endorser, date of note, and amount of note. 
 This book should also have a column for interest, one for date of payment, 
 and one for amount paid, which last should show the total of the face of 
 the note and interest. 
 
 191 
 
Note Ticjs.IvER. — These should be entered upon the note tickler at the 
 time they are paid, and the amounts entered in a different column from that 
 -of the time paper. 
 
 r'la %3 (IS) 
 
 yvo ri= 
 
 -riChM-ErCi Tticsday, cJui-.<=.,to-1K, laso 
 
 |Nl<jmber> 
 
 Make JO 
 
 EfTcaoPSeR 
 
 Rayable 
 
 
 Pdl'd. 
 
 Rem<3r~Ks 
 
 
 
 
 
 
 
 
 Liability Ledger. — All the discounts should be posted in a ledger 
 ■called the "credit ledger," or "liability ledger," in which accounts are kept 
 with both the maker and the endorser of each piece of paper discounted. 
 These accounts should show the date of the discount, a column for name of 
 endorser and two columns for amount, one "as endorser" and one "as 
 
 fOOf^ & 
 
 uot-tN ^ ^aoi/v/s/ 
 
 
 
 ( 
 
 =1 
 
 Dais of 
 Discouni" 
 
 h-4<atT-\e.- 
 
 
 As. 
 
 Da-te or 
 
 Amounf 
 Rai'ci 
 
 
 Gco, C><a<oaeB 
 
 
 I.SO 
 
 
 Mov.© 
 
 lao 
 
 oo 
 
 idrar.ver," all on the debit side, and on the credit side the date of payment 
 and the amount, which should always be posted opposite its corresponding 
 •charge. Many banks when a note is paid simply rule a red line through 
 the amount on the credit ledger. This makes an unsightly account and is 
 not as satisfactory in the long run as posting regularly the nayments oppo- 
 site the charges, giving date of payment. The total of the balances of the 
 accounts "as drawers" on the credit ledger should agree with the balance 
 of the "bills discounted" account on the general ledger, also with the total 
 •of the discounted notes on hand. 
 
 - The collection desk is the one through which all notes, drafts and bills 
 of exchange left with the bank for collection are collected and placed to the 
 credit of the proper party. 
 
 Collection Register.— The collection register is the chief book of 
 ■this department. In it is kept a complete record of each piece of paper by 
 ■date, consecutive number, drawer, endorser, on whom drawn, time when 
 -due, amount, where sent, when paid, exchange, net amount, remarks. All 
 paper sent out of town for collection must be endorsed "for collection" by 
 
 192 
 
the bank sending it. A letter-press copy should always be kept of all letters 
 sending the collections in fact, a letter press copy should always be kept of all 
 of a bank's correspondence. 
 
 4.m^T MAND f^A.OS 
 
 CpLLECTION DCOISTCfi 
 
 / o«M / (B) 
 
 Da+& 
 
 Numbep 
 
 Depoai"tor= 
 
 Dl^dweia 
 
 n.P)doio«e.io 
 
 Rayer* 
 
 
 
 
 
 
 
 
 roRM 1 f=) 
 
 
 
 COI-L.£CTION arCISTEPt 
 
 mOHT l-tAND OAOe , 
 
 Whese livable 
 
 Wh=pe 
 Sent- 
 
 Dafe 
 
 T\rne, 
 
 When 
 
 Due. 
 
 Am-h. 
 
 Cxok, 
 
 R<occed& 
 
 Remai=>K.a> 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Dividend Book. — The, dividend book is made to shov: the name of 
 each stockholder, his number of shares and the amount cf the dividend he 
 is entitled to at each dividend period, with a wide column at the extreme 
 right hand for signature or receipt of the stockholder. 
 
 The total number of shares shown must agree with tjie number shown 
 by the capital stock account, and the total of the dividend must agree with 
 th3 sum declared at the meeting of the board of directors at which the divi- 
 dend is declared. 
 
 When a dividend is declared the profit and loss account on the general 
 ledger must show the actual profit, and the amount so declared should be 
 charged to the profit and loss account, and credited to dividend account. 
 As the dividends are paid, the date of each payment should be noted on the 
 dividend book, and the dividend account should be charged with the total 
 at the close of each day. 
 
 Outstanding and unpaid dividends sometimes occur. The dividend 
 book should show who the parties are to whom the dividends are due and 
 the total of them should agree with the total balance standing to the credit 
 of the dividend account. 
 
 In the keeping of the accounts of banks, each clerk should feel that he 
 has a certain responsibility resting upon him, and that he is not there simply 
 as a mere dumb machine. In this position he should recognize that his 
 first duty is to the bank — that is, to the stockholders and depositors. 
 
 Let any request from whatever source to falsify an account of a report 
 be met with most firm refusal; and any knowledge of any such or other 
 
 193 
 
illegal transactions, if reported to the Comptroller of the Currency at 
 Washington, may be the means of preventing serious loss to the bank and 
 consequent great injury to all concerned. 
 
 Let every employe of a bank familiarize himself with the provisions 
 of Section 5209 of the U. S. Revised Statutes as given below, and live up 
 to them : 
 
 "137. (Sec. 5209.) Every president, director, cashier, teller, clerk, 
 or agent of any association, who embezzles, abstracts, or wilfully misapplies 
 any of the moneys, funds, or credits of the association; or who, without 
 authority from the directors, issues or puts in circulation any of the notes 
 of the association; or who, without such authority, issues or puts forth 
 any certificate of deposit, draws any order or bill of exchange, makes any 
 acceptance, assigns any note, bond, draft,' bill of exchange, mortgage, judg- 
 ment, or decree ; or who makes any false entry in any book report, or state- 
 ment of the association, with intent, in either case, to injure or defraud 
 the association or other company, body politic or corporate, or any indi- 
 vidual person, or to deceive any officer of the association, or any agent 
 appointed to examine the affairs of any such association ; and every person 
 who with like intent aids or abets any officer, clerk, or agent in any violation 
 of this section, shall be deemed guilty of a misdemeanor, and shall be 
 imprisoned not less than five years nor more than ten." 
 
 General Recommendations. — Handling Money. — No officei- or 
 employe handling the money should be permitted to make entries in the 
 ledgers, general cash book, or sheets, or discount or collection registers, and 
 ihose keeping these books should not be allowed to handle the cash. 
 
 Access to Securities. — Some banks carry heavy investments in 
 stocks, bonds, mortgages, etc., also large amounts as collateral for loans. 
 These should be kept securely, and a proper record made in a register pre- 
 pared for that purpose, which should be kept by a clerk, and the entries 
 made from vouchers accompanying the securities. The voucher for the 
 withdrawal of securities should be in the form of a receipt. The officer 
 withdrawing the securities should be permitted to do so only in the presence 
 of a second party designated by the board. 
 
 The Mail. — The mail should always be opened by an officer of the 
 bank, he distributing to the proper departments such as belong to them, 
 and it will be found a wise plan for the officer to make pencil memoranda, 
 in a scratcher kept for that purpose, of all remittances contained in the maik 
 
 Posting Work Daily.- — The work of a bank, however few the items, 
 should be closed up and posted daily. Some country banks have a practice 
 of posting their ledger items once or twice a week, and entering up the 
 
 194 
 
discounted paper once a week. It is impossible, with such methods, to keep 
 an adequately close track of the business. 
 
 Obligations to Customers. — Some banks oblige their employes tO' 
 obtain certain lines of deposits. This is a bad policy, for no employe should 
 evpr be placed in a position of obligation to a customer. Collusion haS' 
 resulted from such relations. 
 
 Drafts, Certificates op Deposit and Due BiIvLS. — A complete 
 record by number should be kept pf all drafts, certificates of deposit and due: 
 bills, when issued, and if these vouchers be signed by two officers, each keep- 
 ing a separate record of the number and amount, it will be found a great 
 safeguard. Watch these accounts closely, as many defalcations and irreg- 
 ularities have been covered for a time through these channels. 
 
 RE-discounTs. — Many country banks fail to keep a re-discount ac- 
 count. This is an unsatisfactory and unsafe practice, as the books of such. 
 a bank do not show the true condition, and, under such circumstances, there 
 is an opportunity for manipulation of paper which should not exist. 
 
 Correspondents' Accounts. — Accounts with correspondents should, 
 be checked off and proved monthly, and a reconcilement book kept in which. 
 should be noted all the items of difference. It is advisable that the recon- 
 ciling of these accounts should be done by some other clerk than the book- 
 keeper, wherever possible, 
 
 Teli^Ers. — The tellers should not be alowed to make loans to others,, 
 and especially to officers or tellers of other banks, who have sometimes used 
 this means to procure currency to cover a shortage while undergoing or 
 expecting an examination. Loans should be made solely through the reg- 
 ular channel, and no payment of currency should be made except upon a 
 regular voucher. When tellers receive deposits it is advisable that they 
 put their initials thus, "A. B.," in the pass-book, opposite the amount, and 
 the same on the deposit ticket. This plan has prevented loss in more than, 
 one instance. Tellers should not be allowed to carry anything in the "Cash 
 items" but small expense items, which should be fully described on their 
 balance book, and should be charged off every month at least. The "Cash 
 items" is often used as a "hole" in which to conceal fraudulent transactions, 
 and should be watched closely. 
 
 Individual Ledgers. — These ledgers should be kept very carefully 
 and balanced monthly at least ; some are made to be balanced daily. When 
 balance ledgers are used (there are several systems) the figures in the 
 balance column should always be entered in ink ; never in pencil. In fact, 
 no entries should be made in the books of a bank in pencil. It is a wise 
 policy to change individual ledger book-keepers at iregular periods, and to 
 have a balance taken of the ledgers by others, independently of the book- 
 
 195 
 
keepers. Pass-books should be balanced monthly, and whenever possible 
 this should be done by some clerk other than the book-keeper. In cases 
 where it is impossible to obtain the pass-book, a statement of the account 
 should be made from the ledger and verified from the vouchers. This 
 should be sent to the customer, enclosing a postal card for return as to the 
 correctness of the account. Overdrafts are an abnormal condition, and 
 wherever they occur should be watched closely. It is a bad policy to allow 
 them at any time, but especially so to firms and or corporations in which 
 anyone connected with the bank may be interested. 
 
 Discounts. — Keep a close watch on the discounted paper. Every 
 bank should use an "Offering book," in which all paper offered for discount, 
 whether between Boards or not, should be entered, and this duly presented 
 to the Board with the paper. After the paper has been passed upon, the 
 record should be signed by the Board. All discounts should be regularly 
 entered upon the register. Some banks have a custom of entering discounts 
 upon the General Cash or Journal by tickets, they not appearing on the 
 Discount RegisterSuch {regularity opens the door to fraudulent transac- 
 tions. The Discount Register should be a more complete history of each 
 transaction than is usually found. In stead of ending on the register with 
 the net amount of the discount, as is customary, there should be two more 
 columns which should describe further disposition of the paper, whether 
 paid or renewed. A book so kept will show what notes are actually on 
 hand at any time and the balance between the two sides should agree with 
 the amount as shown by the "Bills Discounted" account on the general 
 ledger. Any committee of directors can easily prove the notes when a 
 register is kept and arranged like this. 
 
 The discount register should always have an extra column fo/ num- 
 bers, thereby enabling one, in case of renewals, to record the preceding 
 numbers and render the renewals easily traceable. Each renewal note 
 should show not only its regular consecutive number, but also its former 
 number. 
 
 The "Liability Ledger," or "Credit Ledger," as sometimes called, is 
 often kept very carelessly, frequently no dates being used whatever, and 
 in some instances only the due date of the paper. To make the record 
 complete, the date of discount, and when a note is paid, should always 
 appear. 
 
 Sai^ariES. — In the payment of salaries consider not only the work but 
 the amount of responsibility. Excessive economy in this respect has fre- 
 quently proved an exceedingly costly policy. The custom of allowing 
 employes to overdraw their salaries is exceedingly pernicious. Some- 
 times the amounts appear as ovedrafts on the Individual Ledger, and some- 
 
 19(5 
 
times as tickets carried in the teller's cash. The practice is wrong, and 
 when allowed, the ease w;th which the transaction can be accomplished 
 pften becomes an incentive to speculation and dissipation. In many banks 
 the co-operative plan, inducing the employes to become stockholders, has 
 proved very satisfactory. 
 
 Vacations. — The officers and employes of a bank should be required 
 to take a vacation every year. The employment of a substitute to fill the 
 vacancy will be found advantageous and may be the means of discovering 
 irregularities, if any should exist. 
 
 OuTsid:^ Business Engagements. — Bank directors should exercise 
 every caution in permitting employes to be connected with mercantile 
 firms or corporations, either as partners or officers ; the division of interest, 
 with the natural accommodations required in trade, present temptations 
 too serious to be ignored. Bank officials are generally in request for 
 trusted officers in their communities, such relations being calculated to 
 inure to the advantage of their banks, but the wisdom of permitting such 
 combinations to exist should receive the serious consideration of bank 
 directors. Should circumstances appear to warrant them, however, it is 
 recommended that periodical audits be made with the particular view of 
 preventing the application of the funds of one office to conceal any possible 
 defalcation in another. 
 
 Special Examinations. — Of the various methods employed by banks 
 to circumvent fraudulent actions, none have given better results than 
 special examinations. Sometimes these are carried on by a part of the 
 force of the bank, but, all things considered, it will generally be found wiser 
 to employ an outside party as being more apt to be free from the element 
 of partiality or influence. Frauds can hardly continue long where a careful 
 special examination is made annually or semi-annually, or by departments 
 monthly. It is also a satisfacton to stockholders to have complete reports 
 from the examinations of an outside and independent auditor. 
 
 Daily Statement. — The first principle of approved, advanced meth- 
 ods in bank book-keeping is the daily statement. Many banks are content 
 with a weekly statement, or with a statement twice in the week. In arrang- 
 ing the books for a daily statement, it is necessary to separate the strictly 
 general ledger accotmts from the accounts with corresponding banks. This 
 is done by placing such accounts on a "foreign ledger," and treating the 
 foreign ledger with its accompanying cash book in the same manner as 
 the individual ledger »are treated. Cross entries for accounts on different 
 ledgers are made in the general journal. The most generally approved 
 ' form for ledger ruling is the three-column balance ledger, the columns 
 beiiig ruled alongside of each other with the balance column on the right, 
 
 197 
 
aacti posting, whether debit or credit, is made on its owrv line with the 
 resulting balance struck with th pen at the time the posting is made. Each 
 ledger carries its own balance account, which is charged and credited witli 
 the total debits and credits at the close of each day. By running, this 
 account, a trial balance can be taken off from any ledger for any desired 
 back date. Accounts in the general ledger, that show losses and gains, 
 should be itemized in the posting ; that is, each posting should be accom- 
 panied by a note showing what the posting is for. The expense account, 
 for example, will show not only the items of expense, but also what each 
 item is for. The fact of the expense account being constantly in review 
 before the executive officers is a salutary check on unnecessary expen- 
 ditures. So in the account for discount and interest; each item posted 
 should carry the explanation of the source from which the item comes. 
 It is a mistake to post only figures to the, general ledger. Explanations 
 should be posted as well. It is really better to separate the revenue 
 accounts on the ledger, placing each under its appropriate head, as, for 
 instance, "discount on time paper," "interest on call loans," "office rents," 
 and so on. All these items should show separately on the daily statement. 
 
 A word as to the reserve. In a national bank, the per cent of legal 
 reserve should be shown in order to comply with provisions of the national 
 bank act. But it should not be forgotten that the legal reserve has nothing 
 whatever to do with the actual cash reserve. For example, the actual cash 
 reserve may remain practically unchanged for a week, or for a month, while, 
 during the same period, the legal reserve may vary greatly from day to day. 
 The reason for this is that the legal reserve is based on the holdings of gold, 
 greenbacks and silver to the exclusion of national bank notes, while the 
 actual cash reserve includes all the cash money in the vault and also the 
 exchanges for the clearing house. 
 
 Again, the legal reserve may remain steady and the actual cash reserve 
 vary from day to day. It is proper, therefore, to show in the daily state- 
 ment the per cent of actual cash reserve as well as the per cent of legal 
 reserve. 
 
 It must be remembered that the daily statement of a bank is made for 
 the inspection of busy men, who want results in the clearest and simplest 
 form possible. Accordingly, it is a good point to rule up the daily state- 
 ment so that the gross expenses may be deducted from the gross gains 
 and the net gain show as one item. 
 
 A very large proportion of the business of banks is the receiving of 
 deposits from various individuals, and these moneys, being held subject 
 to the demand of the depositors, are withdrawn by means of orders upon 
 the bank called checks. All banks endeavor to secure as large a line of 
 
 198 
 
deposits as possible, for these deposits are, with certain restrictions, in 
 reality the working capital of the bank. 
 
 Some of the best and most successful banks have started with a com- 
 paratively small capital stock and used every means to build up a large 
 deposit line. An instance of this is seen in the banks that stand No. i, 2, 
 and 3, respectively, in point of high condition, in the United States, the 
 Chemical National Bank of New York, capital stock $300,000, deposits 
 $20,000,000; the First National Bank of New York, capital $500,000, 
 deposits $25,000,000; the First National Bank, Scranton, Pa., capital stock 
 $200,000, deposits $6,000,000. 
 
 To keep correctly all the records relating to the deposits and checks, 
 and to the depositors' accounts, is a work requiring great care and accuracy 
 together with rapidity, as the volume of the work is often considerable. 
 
 It is extremely necessary that all the posting to the various accounts 
 of the deposits, or credits from other sources, and checks, be made daily, 
 so that at the close of each day's business the exact condition of each 
 depositor's account may be known. 
 
 The necessary books in which to keep the proper record of the indi- 
 vidual depositors are the individual ledger, deposit scratcher and check 
 scratcher. The individual ledgers should be kept in such a way as to show 
 the balance of each depositor's account at all times. 
 
 Among ledgers that have so far been shown to be adapted for this 
 purpose are the "Balance Ivedger," or "Three Column Ledger," as it is 
 sometimes called, which is shown in figure No. i, and the "Boston Ledger," 
 as shown in figure No. 2. z 
 
 .^la. 
 
 
 
 \ 
 
 
 
 
 
 
 M 
 
 w. c>3 i^i~r-i~t 
 
 /-*. /^ . *^0/^^vS, 
 
 £>.s-fe 
 
 
 Dr». 
 
 Cro. 
 
 &dlanO'<^ 
 
 D^4-^ 
 
 
 Dr=. 
 
 C r. 
 
 £>Sil^r\c^ 
 
 'V3 
 
 
 
 J20000 
 
 laoo 00 
 
 Mayl 
 
 
 
 250 00 
 
 2So 00 
 
 ■- A 
 
 z 
 
 7S 00 
 
 
 1 1 zs 00 
 
 5 
 
 
 
 2SOO 
 
 275 
 
 a 
 
 
 2SOO 
 
 
 1 100 00 
 
 6 
 
 
 2S 50 
 
 
 ass SO 
 
 s 
 ( 
 
 > 2 
 
 1 
 
 May4 
 
 D 
 3- 
 
 Dalanco 
 
 Z50 00 
 1390 00 
 
 40 00 
 2,5 00 
 
 1 140 00 
 1 & IS 00 
 ises 00 
 
 i<3&o 00 
 
 a 
 1 
 
 cJoneS 
 
 a 
 
 2 
 
 1 00 
 
 >4oo 00 
 
 200 00 
 
 2^2 so 
 
 4^42 SO 
 
 -4 2 SO 
 
 1-7.40 00 
 
 \7AO 00 
 
 
 139000 
 
 In the ledger as represented by figure No. i the deposits are posted 
 from the deposit tickets which are taken at frequent intervals, generally at 
 noon and every hour or half hour till the close of the bank. These deposit 
 tickets are first entered in a scratcher by the "receiving teller and are then 
 entered, before being posted, in a deposit scratcher by the individual book- 
 keeper or an assistant, and are then posted into the ledger to their respec' 
 tive accounts. 
 
 199 
 
The book-keeper on receiving the tickets first arranges them alpha- 
 betically and vo welly, in the order in which the accounts are opened in 
 the ledger ; they are then entered in the deposit scratcher in this order, 
 thus greatly facilitating the posting, also the checking back the following 
 morning between the deposit scratcher and the ledger, a thing which it is 
 advisable to do carefully as a safeguard against errors which are liable to 
 occur to anyone. When posting discounts or collections to the credit of 
 depositors it is advisable to use the letter "D" opposite the discounts and 
 the abbreviation "Coll." opposite collections in the ledger to distinguish 
 them from ordinary deposits. 
 
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 Thic is shown in both illustrations. In figure No. i it will be seen 
 opposite some debit items a small figure; this indicates the number of 
 checks contained in the item posted, and is a good plan to adopt to guide 
 the book-keeper in proving a pass-book and in many ways. 
 
 The items of discount and collections mentioned are obtained by the 
 book-keeper from the discount clerk and the collection clerk. The dis- 
 counts are sometimes posted directly from the discount register and some- 
 times from tickets made out by the discount clerk. The collections are 
 generally posted from tickets made out by the collection clerk. These 
 two forms of credit are also entered upon the deposit scratcher, so that 
 at the close of the day's business that book will show the total of the credits 
 to individual depositors. No credit should ever be posted in a ledger 
 without a ticket or voucher and without having gone through the regular 
 business channel. 
 
 200 
 
The debit items as shown in figure No. i represent the checks and- 
 various items of charges against the depositor. These are obtained from 
 the tellers during the day and are arranged in the same manner as the- 
 deposit tickets. They are then entered in a check scratcher and are posted 
 from the checks to the ledger. It is advisable also here, as with the 
 deposits, to check back all the postings of the checks between the ledger 
 and check scratcher, generally the following morning. 
 
 When posting either checks or deposits the balances should always be 
 extended at the time of posting in ink, never in pencil, as is sometimes^ 
 done. 
 
 Over-drafts are an irregularity in any bank, but as they will sometimes, 
 occur it is well to know how to treat them with this form of ledger (No. i). 
 If a check or charge is posted which is greater than the amount of balance 
 shown on hand, the balance must be deducted from the amount of the 
 charge and the difference placed in the balance column in red ink; this 
 indicates an over-draft. When an over-draft occurs, unless is has been 
 arranged for by the cashier or president of the bank, a notice should be- 
 at once sent to the depositor calling his attention to it and requesting a 
 deposit to cover it. The book-keeper should be very sure, however,, 
 that the over-draft has not arisen from some error of his own. 
 
 Each depositor keeping a running account has (or should have) a. 
 small book called a "pass-book," which he presents at the teller's desk, 
 when he makes his deposits, and these deppsits are entered in the pass- 
 book by the teller. This is the depositor's record or receipt for his deposits. 
 Once a month these pass-books should be called in and all the checks of 
 each depositor entered upon his respective pass-book, and the total of 
 these checks deducted from the total of the deposits shown by the pass- 
 book, the difference should agree with the balance as shown by the depos- 
 itor's account on the ledger. The account in the ledger should then-.be 
 ruled off, as shown by the account of W. C. Smith in figure No. i, and the- 
 pass-book should also be ruled off and the balance brought down cor- 
 respondingly. 
 
 Once a month a proof balance of the individual ledger should be 
 taken off in a book called a balance book, entering in it the ledger pag", 
 name, and last balance as shown by each balance column, putting the- 
 over-drafts in a column by themselves. The total of the credit balances, 
 from which should be deducted the total of the over-drafts, should leave 
 a sum that should correspond with the balance standing to the credit of 
 the "individual deposit account" on the general ledger. 
 
 The balance book mentioned is ruled the same as the trial balance 
 book used in mercantile business. 
 
 The scratchers mentioned are simply ordinary journal ruled books. 
 
 201 
 
The "Boston Ledger" mentioned has some advantages and some disad- 
 
 "vantages over the "three-column balance ledger." As will be seen, the 
 
 -checks are itemized in each account, and tjie arrangement of the columns for 
 
 checks. and deposits are such that the total footing of these columns at the 
 
 close of the day gives the totals of charges and credits to individual deposits 
 
 and should agree with the total of the scratchers. 
 
 There should always be two listings of the checks and deposits by 
 separate clerks and their totals compared at the close of the day. The 
 method of entering them in the "Boston Ledger" in reality makes one 
 listing. Then the arrangement of the balances of the individual accounts 
 4s such that by extending the balances of the unchanged accounts the daily 
 balance column becomes a daily trial balance, and any error in extension 
 ■or figuring the balance can easily be detected. The postings should, how- 
 -ever, always be checked back to avoid errors, and especially those of 
 posting to the wrong account. 
 
 The disadvantages of this system are: the difficulty in making a 
 transcript of an account, as compared with the other systems mentioned; 
 ''the difficulty in learning the great condition of an account, as is fre- 
 quently necessary when a discount or loan is asked for; the inability to 
 rule off an account when balancing a pass-book, it being necessary in this 
 instance, to make a check mark in the ledger against the balance as shown 
 by the pass-book. 
 
 The same rules regarding the handling of the checks and deposits, 
 ■discounts and collections, apply to this ledger as to the former. 
 
 In both systems the ledgers should be divided alphabetically and 
 vowelly, and the accounts entered correspondingly. By this means an 
 index is unnecessary, in fact could hardly be used with success in a bank 
 •doing any considerable business. 
 
 An important part of the records of a bank is the keeping a careful 
 record of all the transfers of the bank's stock. While the care of the stock 
 books and the issuing and transferring of stock is generally one of the 
 duties of the cashier, yet it sometimes happens that the general ledger 
 book-keeper or some clerk is delegated to make the proper records. 
 Whether this is so or not, a familiarity with the methods adopted will be 
 advantageous, as no doubt every bank clerk has an ambition to be a bank 
 • cashier some day. 
 
 A full description was given of the methods of issuing stock and 
 the proper records to be kept. As the stock certificates frequently change 
 hands from various causes — sale, death, changing of name (in case of 
 -women), etc. — it becomes necesary to keep a careful and concise record 
 •of these changes. The proper book in which to keep these records is 
 
 202 
 
called a "Stock Transfer Book," a diagram of which, showing the method 
 of keeping it we here give. The left-hand columns show the history of 
 the issuing of the stock, and the right-hand columns the transfers. The 
 items are posted into the Transfer Book from the stubs of the certificate 
 book. The diagram shows the original stock, issued January 2, 1895, 
 to be 200 shares. The transfer shows that Geo. I. Brown transferred 25 
 shares of his stock to E. J. Brooks, retaining 25 for himself, and that 
 Samuel Jones transferred 20 shares to S. B. Brewer, keeping 30 shares 
 for himself, and that Robt. Smith disposed of all his stock to James Peebles. 
 Also that later on S. B. Brewer disponed of . ^ shares of stock to Joseph 
 Samson and retained 10 for himself To learn the amount of stock on 
 hand, foot the columns of transfers and deduct their combined sum from 
 the total of all the issues, the difiference will give the stock on hand, an-i 
 
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 this should agree with the capital stock account on the general ledger. To 
 obtain a list of the existing stockholders, it is only necessary to take from 
 the Transfer Book those names against which there appear no transfers. 
 This can be proved by the outstanding certificates, as shown by the cer- 
 tificate book. 
 
 Whenever it becomes necessary to transfer a portion of a stockholder's 
 stock, the old certificate should always be taken up and cancelled and two 
 new certificates issued, one representing the stock transferred and the other 
 the balance of the stock still retained by the stockholder. 
 
 We mention this particularly, as we have seen transfers made by 
 simply noting the same upon the back of the old certificate, issuing simply 
 a new certificate for the stock transferred. Such a proceeding is exceed- 
 ingly irregular, and is liable to give trouble. 
 
 ^03 
 
There are many conditions regarding the transfers of stock that it may 
 be well to consider. 
 
 No transfers are considered legal except they be made upon the books 
 of the bank, and such transfers should not be made except upon presen- 
 tation of the old certificate. In case the old certificate is lost, a duplicate 
 may be issued, but the certificate-holder should furnish a bond of indemnity 
 to the bank for double the amount of the certificate lost. 
 
 If a certificate is presented for cancellation and transfer, the party 
 presenting should be well known to the bank officer; otherwise, should 
 always be identified. The mere fact of being the holder of a certificate 
 should not be sufficient evidence to entitle to transfer. 
 
 Where transfers are made through a power of attorney, great care 
 should be exercised against the possibility of forgery. 
 
 If transfers are made by a trustee or executor, they should be obliged 
 to present their authority for acting in that capacity. Certificates made 
 to trustees or executors should always state for whom or whose estate the 
 party acts, and no signature of a trustee or executor should be considered 
 valid unless stating for whom. 
 
 A transfer made by a married woman of stock issued to her before 
 her marriage should always be signed by her in her married name, with 
 the addition of her maiden name, as appearing in the body of the certificate, 
 thus : "Mrs. Jane Smith Jones, formerly Miss Jane Smith." 
 
 Executors or administrators of estates sometimes hold in their hands 
 shares of stock of the deceased person, and feeling that the bank is safe, 
 and having no difficulty in collecting the dividends, they carelessly neglect 
 to have the stock properly transferred to themselves as executors^ or 
 administrators. The most troublesome complications have sometimes 
 arisen by this course, in consequence of the death of the administrator, 
 for instance, or any serious change in the organization of the bank, and the 
 bank officers should use every means to have the proper transfer made as 
 early as possible. 
 
 In case a transfer is requested by the officer of another corporation, 
 not personally known to the bank, and especially if it comes through 
 another party holding a power of attorney, the safest plan is to obtain 
 from the corporation a copy of the vote or resolution of the board of 
 directors of such corporation, showing the authority of the officer to 
 make the transfer, with the seal of the corporation attached. 
 
 In cases of transfers, the old certificates should always be marked or 
 stamped across the face, "Cancelled and Transferred," giving the date and 
 the number or numbers to which transferred. 
 
 In all the records let them be so clear and complete as to be self- 
 explanatory ; this is the safest position to take at all times. 
 
 204 
 
Through the channel of its "loans and discounts" a bank is expected 
 tp make the money by which to pay running expenses and dividends on 
 stock, and lay by a surplus. 
 
 Hard times in general business makes a slim demand for money, and 
 good activity in general business brings just the opposite, consequently 
 this department in a bank necessarily is sensitive to these conditions. 
 
 As is to be supposed, this is one of the most important departments in 
 a bank, and to manage its detail the clerk in charge of it must be a man 
 accustomed to the systematic handling and arrangement of detail, and 
 exceedingly careful and correct. The ability to calculate interest rapidly 
 and correctly should also be one of his qualifications, for, while many banks 
 use the interest tables in figuring the interest on loans, still the discount 
 clerk should be able, if called upon, to act independenly of such book. 
 
 ' The principal books used at the discount desk are the Offering Book, 
 the Discount Register, the Note Tickler, and the Discount Ledger, or, as 
 sometimes called. Credit Ledger, or Liability Ledger. 
 
 When a loan or discount is desired by a^ customer, he must make 
 application and present his security. The application is generally made 
 by presenting a note, either time or demand, and if collateral is tendered 
 with it, a form of note called a collateral note is used, in which the collateral 
 is specified, and the bank is authorized to dispose of the collateral if the 
 borrower fails to pay the loan. The note is generally either given to the 
 cashier or placed in a sealed envelope and left at the discount desk. The 
 cashier or discount clerk enters it upon the Offering Book. 
 
 The offering book, together with the notes and their collateral, if any, 
 are presented to the discount committee, or finance committee, as some- 
 times called, for their consideration. 
 
 The loans which they decline should be marked off of the offering 
 book by having a line in red or black ink ruled through them. Those left 
 are considered as passed, and the record of the day should be signed by 
 the members of the committee present. 
 
 In many banks the discount committee meets only twice a week, the 
 cashier and president being generally empowered to pass upon all paper 
 presented between the board meetings; but this paper should be entered 
 upon the offering book and be presented to the board for their approval, 
 at the next meeting. 
 
 After being passed by the board the paper and the offering book are 
 turned over to the discount clerk. He first checks off the paper with the 
 offering book, and then proceeds to enter it in the discount register, a 
 form which is commonly used as seen in Figure 2. The discount register 
 should give a complete record and description of each note discounted 
 
 205 
 
For convenience it is customary to record them by number, the numbers 
 running consecutively from i to 10,000, generally beginning then at i 
 again. As a note is entered under its consecutive number, the number 
 should be written upon the upper left-hand corner of the back of the note. 
 
 After recording in the discount register the note is then entered in a 
 book called the "Tickler." (See Figure 3.) The entry in this book should 
 be made under date upon which the note will become due, entering the 
 amount in the left-hand amo.unt column. The right-hand amount column 
 is bnly used when the note is paid, at which time the amount is carried out 
 in that column. If a note should be paid before it becomes due, it should 
 be entered as paid under the date when this takes place and a memorandum 
 made on the due date in the column of "remarks," stating the date when 
 it has been paid. 
 
 About a week before a note becomes due a notice should be sent to 
 the drawer, and to each indorser, informing them of the fact. A good 
 form of notice that is often used may be seen in Figures 4 and 5. It is 
 exceedingly important to send notice to the indorsers. Cases of forgery 
 have been detected by so doing. In fact some banks adopt the plan of 
 
 Figure No. 4 
 MR. GEORGE DODWELL 
 
 Your note for $1,750.75 will be due at the First National Bank, 
 Boston, Mass. 
 
 December l8th, 1899. 
 Figure 5 
 
 M. FREDERICK JOHNSON 
 
 The note of Geo. Dodwell for $1,750.75, on which you are an 
 endorser, will be due at the First National, Boston, Mass. 
 December i8th, 1899. 
 
 notifying the indorser at the time of making the loan, of the fact of a note 
 bearing his indorsement, giving the amount and the name of the drawer, 
 being in their possession, requesting that they be notified at, once if not 
 right. As the notifications are sent out, the items are checked on the 
 tickler against the name. 
 
 After the paper is duly recorded it should then be filed away in a large 
 pocketbook, containing twelve compartments, one for each month. In 
 large banks a second pocketbook is often used, containing thirty-one 
 compartments, and before the beginning of each month the paper that 
 will be due during that month is distributed in the compartments under 
 their due date. 
 
 When discounts are made it sometimes occurs that the borrowers 
 desire to use the cash immediately, or that they keep no. running ac^count 
 at the bank and simply desire the currency. In these cases two methods 
 are in use, one to put the note through in the regular way, opening a small 
 
 206 
 
account on the individual ledger for the amount of the net proceeds, and. 
 obliging the borrower to present his check for the proper sum. The other- 
 way is to enter the note as a cash note, writing the word cash in the discount 
 register in the column "For whose credit." The cashier then gives the- 
 borrower a charge slip, or order on the teller (see Figure No. 6), which 
 he presents at the paying teller's window and receives the currency. While 
 the latter is the shorter method, the former is much preferable, in con- 
 sequence of the records being more complete, and the bank having the- 
 borrower's voucher for the receipt of the money. 
 
 Two methods are in use by which the individual ledger book-keepers- 
 obtain the proper credits for loans made to depositors ; one is for them to 
 
 Figure 6 
 Charge New York, Sept. 5, '99. 
 
 Bills discounted $20 oo 
 
 dis 20 
 
 19 80 
 Pay Jno. Smith 
 
 post the items from the column of net proceeds on the discount register 
 
 direct to the depositors' accounts, and the other is for the discount clerk 
 
 to make out a credit ticket for each. These tickets are marked by the 
 
 cashier or assistant cashier and are then given to the individual ledger 
 
 book-keeper (or book-keepers, where there are more than one), who enters-. 
 
 them on his scratcher as deposits, noting them as "Dis." to distinguish 
 
 them from the regular deposits, and posting direct from the tickets to the- 
 
 ledger. 
 
 At the close of each day the discount clerk should make out a report 
 
 on a blank. (See form No. 7.) The last three items he gets from the- 
 
 tickler, the balance he gets from the discoimt register. From this reports 
 
 the general ledger book-keeper can make his entries, also the teller. 
 
 L. G. FOY, Cas. 
 Form No. 7 
 DAILY REPORT 
 Discount Desk Sept. 6, 1899 
 
 Notes Discounted, Time '. 
 
 " " Demand 
 
 Collateral 
 
 Net proceeds . . . i 
 
 Discount 
 
 ' Interest 
 
 Exchange 
 
 Time Notes Paid 
 
 Demand Notes Paid 
 
 Collateral Notes Paid 
 
 GEO. FARRAR, 
 
 Disct. Clerk. 
 
 207 
 
On the day following the discounting of paper the items of discounts 
 -should be posted from the discount register to the credit or liability ledger 
 ^nd the items of payments of notes to the same ledger from the tickler. 
 By this ledger the condition of each borrower's loans, and the line the 
 bank is carrying for him, either as maker or endorser, can be learned at a 
 glance. 
 
 All demand and collateral papers should be taken care of separate 
 and apart from the time paper. They should be filed alphabetically in a 
 large pocketbook, kept for that purpose. The collateral should either 
 be filed with the paper, or, as some prefer, filed in a compartment in the 
 ■cashier's safe, each being placed in a large envelope, properly marked with 
 the number, name and date of the loan, and name and amount of collateral. 
 
 When a demand or collateral loan is made and the collateral with- 
 drawn a receipt should always be taken for the collateral. Sometimes 
 while a collateral loan is in force the borrower desires to change the col- 
 lateral. As this makes an entire change in the conditions of the loan, the 
 matter should be treated as though it was a new loan, and a new note 
 stating the new collateral should be given in place of the old one in case 
 the board decides to accept the new collateral. 
 
 Some banks keep a separate register for their demand loans and 
 -another for their collateral loans, thus keeping them apart from their time 
 loans. This is a good plan in large banks, and almost necessary; but in 
 small banks, where the transactions are few, the proper separation can be 
 tnade by the general book-keeper and the corresponding accounts kept 
 on the general ledger. 
 
 In the case of collateral loans great care should be used to see that all 
 certificates of stock left as collateral be properly assigned in blank. While 
 this is properly the cashier's duty, still it is well for the discount clerk to 
 remember it, as he may thereby be the means of protecting his bank from 
 an accidental loss. 
 
 The collection department in a bank is one of the most important, 
 and yet, in consequence of the competition often existing between banks, 
 is sometimes a source of loss instead of profit to the bank. Some feel that 
 by collecting for their depositors without cost they indirectly make money 
 by increasing their custom, and thus increasing their line of deposits, and 
 thereby bringing them more money to handle and more general business. 
 We think, however, that all banks should charge their regular rate of 
 •exchange upon all collections. 
 
 By "collections" as mentioned in this chapter, are meant the notes, 
 •drafts and bills of exchange that are given to a bank to collect, the cus- 
 tomary individual checks upon other banks not being considered. 
 
 208 
 
Many business houses use their bank as a regular collection agency, 
 drawing drafts upon their customers for the settlement of their bills. 
 Sometimes the immense amount of clerical labor necessary to attend to 
 this business is such that the bank should make a regular collection charge, 
 as they have the right to, but competition interferes. 
 
 ,., COLLECTION ncnuca cJanuar^y, is , Isei2. 
 
 NJorpbeio 
 
 
 Cqaoiaseio 
 
 Rav'c-P 
 
 Wljer>e:Sea+ 
 
 A7>ourv' 
 
 Demars>Ka> 
 
 
 
 
 
 
 
 
 The customary employes for this department are a collection clerk 
 and a messenger, or runner. 
 
 Collections are divided into "domestic," or those upon parties in the 
 city where the bank is located, and "foreign," or those upon parties in 
 other cities, and while in a majority of banks the records of both are kept 
 upon the same books, yet in some large banks it is necessary to separate 
 them. 
 
 The collection clerk should be a man of pleasant address and tact, for 
 he is liable to come much in contact with the bank's customers. He must 
 
 /=bnEiON cncDiT Eioon. 
 
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 Ra- 
 
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 Ai7ioun+ 
 
 Cpedii" 
 
 Gcal.Led^ep 
 
 InJ.Led, 
 
 )(ae 
 
 be quick and correct at figures, a man with a clear head, and must be 
 strictly upright and correct in his habits. The position is one requiring 
 much care and good judgment. 
 
 The messenger should be a man above reproach, have muct tact and 
 firmness, and be well posted in the banking rules regarding collections, 
 
 ^O/iM 
 
 - <') 
 
 
 
 rOf^C/CN COL.UCCTION £>OOn 
 
 sSecond 
 
 Not-'l. E>anK,Dovci», N,n, 
 
 Dtffe 
 
 Namecf 
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 Place 
 
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 for many questions often arise and he must know how to act to protect the 
 interest of the bank. 
 
 To a young man desirous of becoming familiar with the banking 
 business, probably no position oflFers better opportunities than the collec- 
 
 209 
 
tion desk. He will find it advisable to familiarize himself with the laws 
 and customs regarding notes, drafts and bills of exchange and the rights 
 and duties of the parties to such transactions, so that he will find that the 
 position is one considerably above the ordinary clerkship. 
 
 The messenger should be a man able to defend himself if necessary, 
 as more than one instance is on record of messengers having been attacked 
 and robbed. 
 
 The principal books used by the collection department are the collec- 
 tion register, the collection tickler, the foreign credit book and foreign 
 collection book. In this list we are also considering the banks who do a 
 heavy foreign collection business as to necessitate their keeping a separate 
 record of them. 
 
 A good design for a collection register will be seen in forms No. i, 
 which speak for themselves. A design for a collection tickler is seen in 
 form No. 2. Form No. 3 gives a design for a foreign credit book, and 
 form No. 4 a design for a foreign collection book. 
 
 A little description of the use of these books may not be out of place.. 
 
 When drafts or notes or bills of exchange are presented to a bank 
 for collection by a depositor, they are given to the collection clerk, who 
 enters them upon the collection register opposite their regular number, 
 using the signs "N.," "D.," "'B.-E.," to denote to which class they belong. 
 If the instructions are "no protest," the sign "N.-P." is placed in small 
 letters in the column "Remarks." The same number indicated by the 
 register should be placed on the upper left-hand corner of the back of the 
 paper. The paper is then entered in the tickler under its proper due date. 
 If the paper is payable in some other city, it must be sent to a bank in or 
 near that place, and this fact is noted in the columns in the register and 
 tickler marked "Where sent," putting also in small figures the date when 
 sent, thus, "1/5." The paper that is to be held until due is then filed 
 away under its due date ; that which is sent away at once is placed among 
 the mail matter, being first stamped upon the back with the indorsement 
 of the bank sending it. 
 
 Collections are generally sent by mail to other banks instructing to 
 "credit and advise," where a reciprocal account is kept between the banks, 
 but where there is no account between the banks the instructions are gen- 
 erally to "collect and remit." 
 
 In sending collections away by mail a letter-press copy of the letter 
 of enclosure should always be made, and the letters should be checked ofif 
 as soon as the advice or remittance is received. 
 
 When collections in hand become due, they are given to the messen- 
 ger, he making a simple list of name and amount in a scratcher. This 
 
 210 
 
should always be done. In one of our large cities a messenger took out 
 his collection items, leaving no list of them. He failed to return. It was 
 only by the greatest difficulty and long, tedious work that the clerks were 
 finally able to learn what he had taken with him. 
 
 Upon his return, the messenger reports to the collection clerk, who 
 checks off the list and verifies it with his tickler, turning the money received 
 over to the receiving teller, together with the proper credit slips bearing 
 the name of the party to whom the credit belongs and the number of the 
 collection. When advice has been received of the collection of a piece 
 of paper the item should be at once entered upon the "foreign credit book," 
 charging the bank from which the advice is received and crediting the 
 proper party ; if another bank, carrying the amount to the column marked 
 general ledger ; if a depositor, carrying it to the column marked "individ- 
 ual ledger." If a collection item that has been sent away is paid by a 
 remittance from the bank to which it was sent, enter the item in the foreign 
 credit book, putting the word "Cash" in the column "Charge," and 
 crediting the proper party. This method may be adopted also in place 
 of the slip system mentioned, although the foreign credit book is usually 
 used exclusively for foreign items, using the other system for domestic 
 items. 
 
 Collection items received by mail are treated similarly, being entered 
 upon the collection register in the column "Endorsed," showing the name 
 of the party or bank from whom received. 
 
 City banks who do a large collection business with country banks, 
 or banks in other cities, find the foreign collection book very useful. In 
 this they keep the collection accounts with the various foreign banks, 
 giving one or more pages to each bank as seems necessary. As the 
 items are collected, they are either remitted for or credited to the depos- 
 iting bank's regular account according to instructions. 
 
 In any instance, when a collection item comes from a foreign party or 
 bank and has been collected, to be remitted, the collection clerk should 
 make out a remittance slip, giving the name of the party or bank to whom 
 the remittance is to be made, the number of the collection, and the name 
 of the payer. This ylip should be given to the cashier or assistant cashier, 
 who, if finding correct, after deducting the' proper exchange, turns the 
 same over to the draft clerk, who makes out the proper draft and returns it 
 with the slip to the cashier. 
 
 Drafts are sometimes made payable at some distant date, as thirty, 
 si;xty or ninety days, and are given to the bank to send to the proper 
 parties "for acceptance and return." These should be properly entered 
 as usual, noting in the column "when due," "accept," in red ink. 
 
 211 
 
When they are returned accepted they should be given back to the 
 owner, as the paper is then in form for him to use as collateral or for 
 discount. 
 
 Any such disposition — in fact, any final disposition of any collection 
 item — should be noted carefully, giving date, in the collection register, and 
 tickler in the column "Remarks." 
 
 The general ledger is, as its name implies, the book in which all the 
 business of the bank is kept. While each department keeps a full record 
 of its own business in detail, in the general ledger is kept an account of 
 the business of each department in aggregate. Besides this, in the general 
 ledger is kept the accounts with foreign or correspondent banks; also, 
 the accounts with the Circulation, Interest, Discount, Expense, Capital 
 Stock, Treasurer of the United States, Dividends, and all such accounts 
 that properly belong to the general business of the bank. 
 
 The daily statement or balance from the general ledger gives a daily 
 history of the condition of the bank. We are sorry to say some banks do 
 not take this ofif more than once a week. This is a careless custom, and 
 no one can keep that strict watch necessary by adopting such methods. 
 
 From the general ledger the profit or loss of the business is deter- 
 mined ; the statements of foreign banks made up, and those received from 
 others reconciled; the reports of condition to the Comptroller made up 
 chiefly; the condition of the bank reserve determined, and all points 
 necessary for the general management of the bank. 
 
 The general book-keeper necessarily fills an exceedingly important 
 position, and usually ranks next to the cashier. He should be a man of 
 more than ordinary ability, and should have passed through the various 
 other departments of the bank to be thoroughly familiar with all the duties. 
 In many banks he fills the position of assistant cashier, and should there- 
 fore be a man of good executive ability. In character none should stand 
 higher. It has often occurred that he has been directed by the ofificers 
 of the bank to make out a false report of condition to send to the Comp- 
 troller to cover some weakness, or some illegal transaction in the bank, and 
 he should have the firmness of character to most positively refuse to con- 
 nect himself with any such transaction. 
 
 The principal books of this department are the general ledger, journal 
 or cash book, foreign scratcher, daily statement book and reconcilement 
 book. In some large banks the general ledger is subdivided, one ledger 
 being kept exclusively for the general accounts, and another for the 
 accounts of other banks. 
 
 Two good forms for a general ledger are the three-column balance 
 ledger, and the Boston ledger, diagrams for which have been previously 
 
 212 
 
given. Although these diagrams were drawn with reference to the indi- 
 vidual ledgers, still they can be used as well for the general ledger, being 
 careful to extend all credit balances in black ink, and debit balances in red 
 ink. All the items are posted to the general ledger from the journal or 
 cash book. 
 
 The journal (or cash book) is the book in which all transactions are 
 finally entered preparatory to posting into the ledger. Fig. No. i (see Cash 
 Book) gives a good form for such a book, and one that is much in use. The 
 form here given is expected to be used in connection with the foreign, 
 scratcher. If no foreign scratcher is used, and therefore all foreign detail car- 
 ried direct upon the journal, it will be found advisable to have two wide col- 
 umns instead of one for the description of the items. No entry should be 
 made upon the journal except from a regular charge or credit slip signed by 
 the cashier, or from the regular daily report of each of the other departments. 
 In other words, no entry should be made without a voucher. 
 
 Where there is much business it will be found of great advantage tO' 
 use a foreign scratcher, as seen in figure No. 2. The figure shows only the 
 left hand or debit page, the right hand or credit page being ruled the same. 
 On the debit side are entered the checks on foreign banks that are to be 
 sent to the correspondents, and on the credit side are entered the checks 
 received from the correspondent banks. At the close of the day the totals 
 of the charges or credits are carried to the journal, charging or crediting^ 
 the respective banks. 
 
 I have mentioned the term "journal or cash book" for the reason that 
 some banks prefer using the book as one and some as the other. When 
 used as a journal the charge items are entered upon the left-hand page, 
 and the credit items on the right-hand page, and a cash account 
 kept in the ledger, which is credited and debited with the total 
 of each side of the journal respectively. The balance of this cash, 
 and a cash account kept in the ledger, which is credited and debited with 
 the total of each side of the journal respectively. The balance of this cash 
 balance being the | cash balance of the bank, which should agree with the 
 cash balance as shown by the paying teller. When used as a cash book it 
 is kept the same as any other cash book, the receipts being entered on the 
 debit side and payments on the credit side, and the balance struck on the 
 cash book, which balance should agree with the teller's balance as before 
 mentioned. 
 
 The general ledger should be posted each day at the close of business, 
 and the daily statement taken ofif then or the first thing the next morning, 
 so that the cashier may see the exact condition before beginning business. 
 
 213 
 
It is a good plan to have the daily statement book made to conform 
 as nearly as possible to the form used by the United States Government 
 in the blanks for the reports to-the Comptroller of the Currency. 
 
 A good form is shown by Figure 3. The book can be made with six 
 days instead of one. 
 
 In' entering the amount of "over-drafts" and "individual deposits," 
 
 the book-keeper must go to the individual ledger, as the Individual Deposit 
 
 account on the general ledger only shows the difiference between those two, 
 
 and it is necessary to show the total credits and total over-drafts. How- 
 
 RESOURCES. LIABILITIES. 
 
 Loans and Discounts Capital Stock paid in 
 
 Overdrafts Surplus Fund 
 
 U. S. Bonds to secure circulation Undivided Profits, less Exp. and Taxes Paid 
 
 U. S. Bonds to secure U. S. Deposits National Bank Notes outstanding 
 
 U. S. Bonds on hand State Bank Notes outstanding 
 
 Premiums on U. S. Bonds Due to other National Banks 
 
 Stocks, Securities, etc Due to State Banks and Bankers 
 
 Banking House, Furniture and Fixtures Dividends unpaid T . . 
 
 Other Real Estate and Mortgages owned. . . Individual Deposits 
 
 Due from National Banks (not Reserve U. S. Deposits 
 
 Agents) Deposits of U. S. Disbursing Officers 
 
 Due from State Banks and Bankers Notes and Bills rediscounted 
 
 Due from approved Reserve Agents. ....... Bills payable ' 
 
 Checks and other Cash Items Liabilities other than those above stated 
 
 Exchanges from Clearing House Total 
 
 Bills of other National Banks 
 
 Fractional Paper Currency, Nickels and 
 
 Cents 
 
 Specie 
 
 Legal-tender Notes 
 
 U. S. Certificates of Deposit 
 
 Five per cent. Redemption Fund with Treas. 
 
 fDue from Treasurer U. S 
 
 Total 
 
 ever, if one has the total amount of the over-drafts, that sum added to the 
 balance standing to the Individual Deposit account as shown by the gen- 
 eral ledger, should give the correct total of credits to individual depositors. 
 
 Then general book-keeper, of course, gets the items making up the 
 cash from the teller, which, as before stated, should agree with his total 
 cash balance. y 
 
 In the item of Liabilities, called "Individual Deposits," is contained 
 certificates of deposits, cashier's checks, and certified checks. These can 
 be noted separately on the daily statement if desired, and I think it prefer- 
 able to do so. This form makes it comparatively easy for a cashier to 
 figure upon the bank reserve, a very necessary matter to keep watch of, 
 as Section 5 191 of the United States Revised Statutes prohibits a jbank 
 making any loans or declaring a dividend if short in its reserve. 
 
 214 
 
The Reconcilement book is simply an ordinary journal-ruled book in 
 which are entered the items of difference when checking off the accounts 
 current of other banks. Some book-keepsr keep these items of difference on 
 memoranda or slips of paper, but these are apt to become lost or mislaid, 
 and a book for that purpose will be found far more satisfactory. 
 
 As the principal business of a bank is the receiving and paying of 
 money, it becomes necessary to have skilled men to handle this money. 
 These men are called "Tellers." 
 
 In small banks one man can often, and does, fill both positions, but 
 in city banks doing any considerable business it is necessary to have two 
 tellers, a paying teller and a receiving teller. In some of our large cities, 
 some banks doing a very heavy business are obliged to have three, and 
 sometimes four tellers. ' 
 
 The position of teller is naturally one of great responsibility. The 
 paying teller is often considered standing next to the cashier, and often 
 fills the place of assistant cashier. 
 
 The teller should be a man of absolutely irreproachable character and , 
 of high abilities. He should be expert in the handling of money, both bills 
 and coin ; of good judgment, pleasant address and much patience. He 
 should have passed successively through all the various desks of the bank 
 and be familiar with the working details. 
 
 The paying teller, of which we shall speak first, is, as we have said, the 
 principal one of the two, the receiving teller being in reality his assistant. 
 He is the disbursing officer of the bank, and keeps charge of the cash, 
 paying out the money upon presentation of the proper vouchers. He 
 should be a particularly careful man in the handling of the money. Some 
 tellers we have seen seem to feel their importance to such a degree as to 
 almost destroy their usefulness. Let us give one instance. A paying 
 teller who was so exceedingly puffed up by his own conceit that it was 
 difficult for him to treat anyone with ordinary courtesy, had a large sign 
 made and hung at his window which read : "No errors corrected after cus- 
 tomer leaves the counter." With a "slap-dash" manner of handling the 
 money he rather prided himself upon his rapidity. One day a large check 
 ■was presented, in the part payment of which ten $ioo bills were asked for. 
 In his "slap-dash" way he reached for his till and counted out the ten bills 
 among the others. That night he was $9,000 short and every clerk had 
 to stay till midnight hunting for the difference, and so for two more nights. 
 On the third day after the transaction the same customer came in the 
 bank on other business. Reading the sign out loud, he asked the teller if 
 he kept that rule strictly, to which the teller answered, "Certainly." The 
 customer then replied: "I am satisfied, for I am $9,000 ahead." Of 
 
 215 
 
course the teller was then very obsequeous, and after worrying him for a 
 few minutes the customer handed him over ten $i,ooo bills which the teller 
 had counted out in place of ten $ioo bills. The sign was taken down, and 
 the lesson did that teller good. 
 
 The paying teller should have a good memory for faces and names, for 
 it is very trying to a customer having been once introduced or identified to 
 have to go through the ordeal again. Besides this, a stranger might pass 
 himself ofif as another party and defraud the bank unless the teller's mem- 
 ory is good. 
 
 The most customary vouchers are checks or orders of the depositors 
 upon the bank. In the payment of these checks or orders many things 
 have often to be considered. 
 
 In the first place, checks made payable to the order of an individual 
 oi; firm must be properly endorsed by the payee before being paid, and if 
 the endorser is not known at the bank he must be identified as the party 
 named in the check by someone with whom the bank is acquainted. 
 
 Some banks have a rule requiring all checks to be endorsed by the 
 party to whom the money is paid, whether they are made payable to order 
 or to bearer, thus requiring a receipt for the money paid. This is a safe 
 rule and has often prevented trouble ; at the same time I doubt if legally 
 a bank has the right to insist upon endorsement and identification where 
 a check is made payable to bearer, as the drawer of the check waived all 
 such demand when he drew the check in that way. The question of iden- 
 tification is often very troublesome to strangers, and the teller should be 
 able to use good judgment in some peculiar cases. 
 
 Identification is not always secure, as men have for a time passed 
 under fictitious names, and a man bearing the same name as that men- 
 tioned in the check may still be the improper party and have obtained 
 the check either accidentally or fraudulently. Here again the judgment 
 of the teller must come to his assistance, and upon any suspicious appearances 
 or surroundings he should refuse to pay the check until conferring with the 
 maker. 
 
 Paying tellers must be on their guard continually against dishonest 
 people, or thieves, and careless customers. A few incidents will probably 
 explain the matter. A man opened an account in a bank and deposited 
 sums until $5,000 stood to his credit. He then came one day just before 
 3 o'clock and checked out the $5,000. The next morning early he was 
 there and deposited $5,000, and again drew out it out about 3 p. m, and 
 so continued daily at the same hours to deposit $5,000 in the morning and 
 check out $5,000 at night for several months. He was gentlemanly 
 appearing, talked to no one, but all thought him eccentric. One day he 
 appeared as usual about 3 o'clock with his $5,000 check, which was paid, 
 
 216 
 
and after closing it was discovered that he had not deposited the $5,000 
 in the morning, as he had been accustomed to do, and had nothing to his. 
 credit. He had swindled the bank out of $5,000 and was never seen again. 
 The paying teller was the loser. 
 
 Sneak thieves watch every opportunity to fall in line or crowd around, 
 a teller's window on a busy day, and take advantage of any little oversight 
 or carelessness of either teller or customers to seize the money, sometimes, 
 in so cool a way as to disarm all suspicion. For this reason the paying 
 teller should pay attention to his customer and know positively that the 
 man who takes the money is the one who presented the check. 
 
 A man presented a check for $1,000, which was paid. The man 
 counted the money on the shelf at the side of the teller's window and. 
 immediately shoved it back, saying it was $20 short. The teller counted 
 it, and, finding it so, paid the $20. The man had by a deft movement of 
 the hand quickly withdrawn $20 from the package, and the teller was the 
 loser. A depositor presented a check for $500, and while he was speaking- 
 to a friend beside him the teller passed out the money. A sneak thief 
 picked it up as though he was the proper man and passed out. 
 
 Paying tellers should be on their guard against raised checks. Some 
 very skillful work has been done by experienced sharpers in this direction. 
 
 In our clearing house cities it is through the paying teller's hands, 
 that the exchanges pass. He must carefully examine all the checks com- 
 ing from the other banks to see that the checks are good for the sums- 
 mentioned, and, if not, to return them at once to the banks from which, 
 they came. He is the one who settles with the clearing house, and draws, 
 due bills. 
 
 At the close of the day the paying teller receives all the money and 
 checks on other banks (exchanges) from the receiving teller, and gives, or 
 should give, a receipt for them. 
 
 .-o=« . 1 ' 
 
 JvJo.aes.1; .1 
 Da-fe j 
 
 ■4. i 
 
 100 ; 
 
 Nurnbep 
 
 CL.CAP11NQ i-iouse oue- e>il.l. 
 
 <5=cond Nat BanK .■, , 
 
 Duety SECOND NATIONAI- BANK. PbiUd=lpKia cjune, 1, IS95 
 
 To,..r. ,_.„., 
 
 'I 
 
 ^ ; 
 
 "TFjio auc Dill 1& oQlv ^ood wn&o .&i4nea Dv one ona coLnir&Fiispdr>ed hy 
 anoTl?erayipeP*of>^ and 1© payable ar^y irvlrje excrjonded inF>ourfI-\ 
 7a^ 0"£ar»irv(^ nou«>c "ihe day aner* \&£*ia^, / / 
 
 %. { . . TilL,-. 
 
 / 
 
 The books of the paying teller's department are few, the principal ones- 
 being the due bill book and the cash settlement book. The due bill book 
 is like a large check book, the due bills being arranged five on a page with/ 
 
 217 
 
-Stubs. Figure No. i gives a customary forrn of clearing house due bill. 
 
 Figure No. 2 gives a good form for a cash settlement book. 
 
 The paying teller is sometimes called the first teller, and the receiving 
 "teller the second teller. The receiving, or second, teller should also be a 
 -^killed man in the handling of money and a good judge of counterfeits, 
 
 for he is the one who receives all the money paid into the bank. His 
 ..special duty is to receive deposits, and naturally all kinds of money comes 
 
 D (.SCOU r-viS" 
 
 C , n . Q old CepJttf^cates 
 
 O.S.Le^sil Tcl'r..Cer»"nfi. 
 Due. E>"ill.& 
 
 Rec.,~TeilIeP> Rec«ic5f& 
 
 
 ' 
 
 1 
 
 1 
 
 — 
 
 
 
 
 
 
 
 
 ^^ 
 
 
 
 
 To-fe.1 
 
 Temporaaroy- L.oan^ 
 pm.a'5lTeltei« «er,-(- "^ 
 feCleapIrj^ MouoeJ 
 Naf'l. DarvKlslofee. 
 NceKle» and Cerfla. 
 QoU Coir\'- 
 
 U.5,GoU.Ce4i^.;-fe. 
 c.n,. " 
 
 Silvew D<illars>.& 
 O.a. Si'lver. Cent" fi. 
 rf»acTior»Al »3ilvcr» 
 0.&,~T%e««.. rNo-tea, 
 " 1_ ej^ala. ^ 
 " Cer.t;fa. of Dep. 
 "TpciS a , 
 Mi&cel. CKeoKs sndi 
 
 e>ttier» CfihsK "Tleme 
 Cxpe rises. 
 CJer<er»c»l OKec.Ks 
 1 nvciividtjal Cne.eK.«& 
 
 
 
 
 ( 
 
 
 
 
 
 
 
 
 
 ' 
 
 
 
 
 
 
 into his hands. Except in very large banks, he must receive all the money 
 ■paid in on account of collections from notes or drafts, consequently his 
 'labors are arduous and responsibility great. 
 
 The principle books of the receiving teller are the deposit scratcher 
 
 upon which he enters from the deposit tickets the various individual 
 •deposits by name and amount, and the settlement book. The deposit 
 
 218 
 
scratcher is simply an ordinary journal-ruled book. The receiving teller's 
 settlement book is the book upon which he balances up his cash at night 
 preparatory to turning it over to the paying teller. A good form for this 
 book can be seen in Figure 3. 
 
 /too/^ ,3. (mi 
 
 . I, \e>3z 
 
 Ternpoi=ar3^ J—oOins 
 
 Na+'l. Bank NJcle-, 
 Ni'crKles ar>pl Oerits. 
 Gold C oirN 
 
 ' Tr><:s,s> Cep>+ificeites. . 
 
 rnacTicna^ Silvera 
 l_e^a.l.3 . 
 
 M;e.,CK«s, & Cask -terns 
 
 Ind, Deposfe 
 Generaal DeposjiTS. 
 Retc.ei"p5ti>- fraom Coll-s> 
 
 \ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 When turning over his money to the paying teller it is a good plan to 
 have a brief statement accompany it. A form for this statement is seen in 
 Figure 4. 
 
 oec£i\^//^c TSi-usa^ 
 
 .5 TV) -r£/^CN 7- 
 
 
 ^"= -* -Tucaday, cJurie.l. lS©2-.» 
 
 C xe:Kan^e-e» ' 
 
 
 
 
 Dij& bx 1st. teller. 
 
 
 
 
 Sundraie* 
 
 
 
 
 Gold 
 
 
 
 
 Si Ivers 
 
 
 
 
 Ma.-+'l,E>a.nK Nol«& 
 
 
 
 
 1_ «^At d 
 
 
 
 
 OKetcKe^ 
 
 
 
 
 
 Doa-fe Id" Teller. 
 
 
 
 
 Oie>,ai-)cl Cc.lI«<iiTon& 
 
 
 
 
 
 
 
 3cr»afe.Ker» 
 
 
 
 
 
 
 
 SuricJ r»ie. a> 
 
 
 
 
 
 
 
 Hitherto we have treated entirely of the clerical work, and the methods 
 of keeping the accounts. An equally important part in banking — in fact, 
 neither good get along without the other — is the managing, or the 
 administrative and executive department. 
 
 The officers of the executive department are the president and the 
 cashier, and in many large banks an assistant cashier (some with extensive 
 business have more than one assistant cashier). The administrative 
 department consists of the board of directors. 
 
 219 
 
Upon the organization of a bank, a stockholders' meeting is held and 
 a board of directors elected (national banks are required to have not less 
 than five), and the National Banking Law provides that no stockholder 
 can become a director unless he owns at least ten shares of stock, and he 
 must be able to make oath to this fact ; also that his stock is held in his own 
 right, and that it is not hypothecated or pledged in any way for any debt 
 or loan, also that he is a citizen of the United States. (Three-fourths of the 
 directors must be residents of the State in which the bank is located.) 
 These are very useful provisions, as they were intended to place the man- 
 agement of the bank in the hands of those who would be most likely to take 
 the greatest interest in it. 
 
 The board of directors then holds a meeting and elects from among 
 its number a president and vice-president. 
 
 They also appoint, or elect, a cashier, an assistant cashier (if neces- 
 sary), and the various clerical force of the bank; also fix the salaries to 
 be paid, and the amounts of the various bonds to be given by the ofificials 
 and clerks. 
 
 The duties of the directors are often not considered sufficiently as they 
 should be, and many bank failures have resulted from this. 
 
 No man is under obligation to become a bank director, but, having 
 accepted the position, he should feel the responsibility that has been placed 
 upon him, and attend faithfully to his duties. He should try to attend all 
 meetings of the board and endeavor to familiarize himself with the business, 
 and take a personal interest in all that is going on in the bank. 
 
 One of the chief duties of the director is the careful looking after 
 the loans or investments, never forgetting that the bank's funds so loaned 
 or invested are not the personal property of the board, or of the bank, but 
 the property of the depositors and stockholders, which the bank is holding 
 in trust, and on no account should he favor a loan that he would not make 
 with his own money. 
 
 Directors should keep in touch with the business of the bank, not 
 taking for granted too much that is told them by the bank officers, but by 
 inquiries learn facts for themselves. They, or a committee of them, should 
 make examinations into the afifairs of the bank, especially the loans, the 
 teller's cash, the collaterals, and the individuals deposits, looking well 
 after the over-drafts, if there are any. 
 
 The position of the bank director is often very trying, demands fre- 
 quently being made upon him to use his influence in securing loans for 
 acquaintances or friends, who are not even depositors with his bank. Some- 
 times, the loans are of such a character that he cannot conscientiously 
 accede to their wishes. He should then be firm in his refusal, considering 
 
 220 
 
tirstthe interest of his bank. A bank's duty in loaning money is to accom- 
 modate, its own depositors first; after that, if it has the funds, it may 
 consider the wants of outsiders. 
 
 It will be seen that in the selecting of a board of directors great care 
 should be exercised to secure men of the highest standing, and sternest 
 rectitude, and men of business experience, and it will generally be found 
 well to select them from various lines of business, as this will be of advan- 
 tage in judging of the value of paper presented for discount. 
 
 It is the usual custom, unless otherwise provided for in the by-laws, 
 for the board of directors to fill vacancies on the board themselves, without 
 resort to a stockholders' meeting and election. 
 
 This custom is open to some criticism, and some banks, recognizing 
 it, and also recognizing the fact that they are the agents of the stock- 
 holders, prefer to wait until the usual annual stockholders' election, to fill 
 any vacancies, providing they have a quorum for the transaction of 
 business. 
 
 Boards of directors often delegate certain portions of the management 
 to committees. The chief of these are the finance committee and discount 
 committee. In some small banks the finance committee performs the 
 duties of both. 
 
 The times of meetings of the board of directors are specified in the 
 by-laws, and vary considerably, according to circumstances, many in the 
 country banks being held only once a month. Directors are, however, apt 
 to lose the run of the business unless meeting more frequently. In the 
 large city banks daily meetings are most always held, as many questions 
 are continually arising that need prompt attention. 
 
 The finance and discount committees generally meet either once or 
 twice a week, in the interim the president and cashier being permitted 
 by a resolution of the board to pass or reject any paper that may be pre- 
 sented for discount. When this is done, however, all the papers discounted 
 by them should be presented to the discount committee at its next meeting 
 for their approval or criticism. The fact should never be lost sight of that 
 the board of directors is in fact the managing power of the bank, and the 
 president and cashier are their agents or employes. 
 
 The president of a bank is too often selected because of wealth or 
 popularity. Experience, and the practical knowledge of the business, 
 should always be a prime factor in the banking, as in any other business. 
 The best and most successful bank presidents are those who have grown 
 up in the business. 
 
 While the bank president seldom attends to, or directs, the detail of 
 the bank work, still he should be familiar with it, as he is in a measure a 
 
 221 
 
sort of general manager, and many questions are continually arising which 
 he must be in a position to answer wisely and promptly. 
 
 The president, as the chairman of the board of directors, should 
 demand the full co-operation of his board. In the making of loans he 
 should show no favoritism, but should ever be guided for the best interests 
 of the bank. We speak here of the loans made between the meetings of 
 the board, which the president or cashier are usually authorized to pass 
 upon. 
 
 The president of a bank should always be an affable gentleman, easily 
 approached, and a man of good, sound judgment, and highest personal 
 character. 
 
 Many a bank has been ruined by its president being unfortunately 
 of a speculative temperament, or an aspirant for high political position, 
 and the stockholders will always be on the safe side to avoid such types 
 of men in the election of their board. 
 
 The cashier is in reality the head of the executive department of the 
 bank, and not, as is sometimes felt, merely the "chief clerk" of the president 
 and board of directors. They sometimes unfortunately become such by 
 allowing themselves to be treated in that manner. 
 
 No one connected with the bank should be better posted in all its 
 detail than the cashier, consequently he should be a man who has had 
 long practical experience in the banking business. He must be well 
 acquainted with banking laws, and should, by constant reading of the 
 reports on bank cases, keep himself posted. 
 
 In consequence of his familiarity with the detail of the work of the 
 bank, and being the officer in reality in charge of that department, he is 
 generally permitted, and should always be, to choose the individual mem- 
 bers of his force. In making such choice he should show himself a man 
 of good judgment, a good judge of character, and should be firm in per- 
 mitting no personal influence to interfere in making his selections. 
 
 The cashier officiates as secretary of the board of directors, and 
 records the transactions of their meetings. He presents before them the 
 paper offered for discount, and the offering book, upon which this paper 
 is recorded, for their signatures. 
 
 He should be ready at all times to answer any questions put to him 
 by the board regarding the general or detail management of the bank. 
 
 The cashier should have a daily report, made in a book for that pur- 
 pose, which should show the exact condition at the close of business each 
 day. By means of this he is able to keep in close touch with the daily 
 business ; knows the condition of the cash, the loans, the foreign accounts, 
 the individual deposits, the discount, interest, and expense accounts. He 
 should also know daily the condition of his reserve. 
 
 222 
 
The cashier is called upon five times a year by the Comptroller of the; 
 Currency to make a report of the condition of the bank upon blanks fur- 
 nished by the Comptroller. While it is often customary for the cashier 
 to delegate the filling up of the report to the general ledger book-keeper, 
 yet he should examine it carefully, and be sure that it is correct, as he will 
 be obliged to make oath to its correctness before a notary. 
 
 He must also make out the semi-annual returns regarding circula- 
 tion, and attend to the payment of the tax upon the same. 
 
 At each semi-annual meeting of the board of directors he should pre- 
 sent a statement of the condition of the bank, showing the increase or 
 decrease in the business, and its expenses and profits. From this the jaoard 
 declares the dividend, if a profit has been made. It is then his business 
 to properly distribute the dividend among the various stockholders, and 
 make out cashier's checks for the payment to each individual. The divi- 
 dend book should be kept by him, and he should take in it the receipt of ^ 
 each stockholder for his dividend. 
 
 The stock certificate and the transfer book are also kept by the cashier,, 
 and the certificates of stock are signed by him and by the president. 
 
 The cashier should keep a general run of the depositors' accounts, so- 
 as to be able to talk or act intelligently regarding them when required,., 
 especially when applications are made for loans. 
 
 The correspondence generally falls to the cashier to attend to. In 
 large banks it is necessary to have it distributed, some to the assistant 
 cashier and some to the president or vice-president, but usually the cashier- 
 attends to the most of it. In some banks the correspondence clerk attends 
 to the usual business correspondence, all special matters being left to the 
 cashier to answer. 
 
 In the selection of a cashier the board of directors cannot be too par- 
 ticular, as the immense responsibility requires a man of much ability,, 
 besides the highest character. No man with a tendency to speculation,, 
 or vice or dissipation of any kind, should be for a moment considered for 
 the position of cashier, no matter what his ability, or knowledge of bank- 
 ing. He should have no other business on his hands but banking, and. 
 should be willing to devote his whole energies in that direction. For this 
 reason bank cashiers deserve good salaries, much better than is often paid 
 them. It is one of the most unwise policies to attempt to cut expenses in 
 this direction. 
 
 The cashier, should be a genial gentleman, one calculated to make 
 friends, as he is the one whom the customers of the bank, meet most fre- 
 quently. If he is endowed with that tact which can refuse in such a way 
 as to make the recipient feel he has been granted a favor he is certainly- 
 gifted, and I have seen such. 
 
 223 
 
Let him be frank and honest, and capable of winning the confidence 
 of all ; cheerful and pleasant with the employes, and be sure the machinery 
 will run as though well oiled. 
 
 Stock Accounts. — rAfter the subscriptions have been made for the 
 organization of a bank and the payments made representing these subscrip- 
 tions, stock certificates must be issued to shareholders. The National Bank- 
 ing Act states in Section 5139 that "the capital stock of each association shall 
 be divided into shares of one hundred dollars each." Some of the State laws 
 permit the issue of shares of a smaller amount. 
 
 Unless a very careful and complete record is kept of all the issues of 
 stock, and the transfers which will surely take place, much trouble is liable 
 to arise. 
 
 The certificates should always be bound in a book with a roomy stub, 
 printed according to figure No. i. 
 
 STUB OF CERTIFICATE OF STOCK BOOK. 
 
 Certificate No. 18. No. of Shares, 100. 
 
 Date of Issue ' 
 
 Name 
 
 Receipt of Stockholder 
 
 TRANSFERS. 
 
 Date of Transfer , . , 
 
 To whom Transferred 
 
 To what Certificate No 
 
 Loose certificates should never be allowed in a bank. The stubs 
 ■should be numbered consecutively by the printer, the numbers correspond- 
 ing to those on the certificates. ' 
 
 The upper part of the stub should always be filled out completely upon 
 the issuing of a certificate, and the receipt of the stockholder should be 
 taken upon delivery to him. If the certificate is t'o be mailed to a stock- 
 "holder, enclose a receipt properly filled out. with a stamped and directed 
 •envelope for return, and paste this receipt on the stub in its proper place. 
 
 If a stockholder disposes of his stock, or of any portion of it, such 
 transfers, to be legal, should be made upon the books of the bank. The 
 Tiottom part of the stub should show the first transfer record, giving the 
 date of transfer, to whom transferred, and to what certificate number or 
 numbers transferred ; this latter is particularly important. 
 
 When a transfer is made the certificate should be properly indorsed 
 on the back and the signature witnessed. 
 
 The transfer having been completed, the old certificate should be 
 marked or stamped "Cancelled," giving the date of cancellation, the sig- 
 
 224 
 
natures of the president and cashier should then be mutilated, one of the 
 best ways being to cut a small triangiilar piece from the bottom of the 
 9ertificate through each signature, thereby cutting out a small portion of 
 the signature. The old certificate should then be pasted to its proper stub 
 in the certificate book. Any certificates that have been accidentally 
 mutilated, or filled out erroneously, should remain in the certificate book 
 attached to their stub, being marked "Cancelled," the stub also being 
 cancelled. The record of every stub should be complete, nothing being 
 destroyed. 
 
 From the certificate book the items must be posted into a stock ledger. 
 If this ledger is properly and carefully kept balance sheet for it should show 
 the capital stock, and should agrete with the balance of that account on the 
 general ledger. 
 
 The stubs of the certificate book, with no certificates attached, show 
 the outstanding stock, and their sum total should agree with the balance 
 of the capital stock account on the general ledger. 
 
 Certiiicates should always be made out to the proper bona fide stock- 
 holders. Some banks often have the certificates made to an officer of the 
 bank, he transferring them to a genuine stockholder. This is, an unsafe 
 plan and has more than once opened the way for irregular and fraudulent 
 transactions. 
 
 Credit Reports. — The value of an accurate record of the worth and 
 credit of actual and possible customers properly indexed must be of consid- 
 erable valixe to the banker. A great many banks now use a system of cards 
 for this purpose, such as below illustrated. In case of removals, failures, 
 deaths or retirements, the cards representing the concerns afifected are 
 removed, thus freeing the record from useless matter. 
 
 Expiration oe Insurance on Collaterai,. — These are also some- 
 times recorded by cards, which, in this case, are arranged in order of date 
 as per accompanying illustration. In front of the index cards, representing 
 the proper days, are filed the record cards representing property, policies, or 
 
 225 
 
collateral. As these cards are consulted day by day, there is no possibility 
 of error. 
 
 
 pi -..«; n«ii n^ t~.-^ 
 
 Collection ot Notes and Drafts. — The prompt collection of cus- 
 tomers' notes is very important, as is also the prompt collection of a bank's 
 own paper. The card system is also used in this connection for the purpose 
 of keeping track of due datefs and following up the collection until it is 
 finally disposed of. The cards in this case are arranged chronologically, and 
 a card is filled out for each note. It is filed ahead to the day oh which it is 
 to be sent to another bank for collection or needs attention. Then it is filed 
 ahead from time to time until finally disposed of, when it is transferred to an 
 
 alphabetical index, becoming a supplementary record to the credit system 
 first referred to. 
 
 Customers' Signatures. — Some of the advantages of keeping records 
 of customers' signatures on cards instead of in bound books are hereunder 
 quoted : 
 
 "The system has many features of advantage germane to the banker. 
 Principal among these is the ease with which useless and out-of-date signa- 
 tures may be instantly removed. The list is always up-to-date, and it is 
 as easy ^o find the signature of a depositor who opened an account thirty 
 years ago as it is to find the signature of a day's standing. 
 
 "Information pertaining to any customer represented by a card may 
 be much more complete than the similar record in a book, and special infor- 
 mation for the teller or cashier only can be kept on the card that could not 
 be put in a book that must be handed to customers indiscriminately to 
 receive their signatures. 
 
 226 
 
"The card system is permanent, and no matter how long the bank 
 continues in business, it never has to be rewritten or renewed. With books, 
 the signature of a customer who is an invalid or a non-resident must be 
 obtained on a slip of paper and pasted in the book, which soon becomes 
 unwieldly and clumsy. With the card system, it is very simple to secure 
 signatures through the mail by forwarding the cards. 
 
 "If the teller should be suspicious that certain signatures are apt to be 
 forged, or should feel that his unfamiliarity with certain sig^natures might 
 render a close comparison necessary, the cards bearing these signatures 
 
 n 
 
 ^ 
 
 ^^^ \E=:^ 
 
 
 aoTir/canr sxif^aruoe: | 
 
 
 
 
 ^Uk^ AA 
 
 
 
 
 
 
 
 
 """""w. w.„ ^„ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 , 5 ,h.». mr 
 
 can be removed from the file and kept in a convenient place for instant and 
 unobserved comparison. 
 
 "Banks have often been inconvenienced by the necessity of introducing 
 a certain signature in evidence, as the entire book would have to be produced 
 or mutilated. With the card system, only the card involved is removed 
 from the file. 
 
 "The card system is very simple in operation. Cards of different 
 colors are ordinarily used to distinguish between the commercial and sav- 
 ings depositors, holders of certificates and subscribers to the safety deposit 
 
 vaults. These cards are usually printed with a different form for each 
 purpose. 
 
 "For the commercial department the card is very simple. Besides the 
 space allowed for the signature, it provides sufficient room for other data 
 which may be filled in by the customer or by the teller. When firms or 
 
 227 
 
corporations open an account, the authority of the directors or of the 
 individuals comprising the firm for the acceptance of certain signatures of 
 individuals authorized to sign checks and other financial obligations is 
 shown with the signatures to be recognized, and the official titles, if any. 
 Further particulars, such as the addresses of the depositors, dates of opening 
 accounts, names of persons introducing the depositors to the bank officials, 
 the number of accounts, etc., are usually added. 
 
 "In the savings department the printed form usually provides for more 
 detailed items of identification. 
 
 "With the exception of the cards for the savings department, the index 
 is usually alphabetical. In the savings department the cards are arranged 
 numerically, and guide cards at intervals of twenty-five or fifty are aids 
 in the rapid finding of any card desired. 
 
 "The cards are withdrawn from the file w'hen the account is closed and 
 either filed away with the pass book or in an auxiliary index, where they 
 can be referred to with as little inconvenience as in the regular index. The 
 closed pass books of each day show what cards should be removed." 
 
 Bank Balance Sheet. — This should exhibit the following par- 
 ticulars : 
 
 ASSETS. LIABILITIES. 
 
 Cash on hand, gold, silver, currency, bills, Capital account. 
 
 etc. (to be shown in separate totals). Depositors: 
 
 Cash in other banks at call. Accounts at call. 
 
 Loans to other banks at call. Certificates of deposit. 
 
 Overdrafts (loans to customers at call). Other bankers: 
 
 Bills receivable, due in one month. Loans at call. 
 
 Bills receivable, due in two months. Current accounts. 
 
 Bills receivable, due in three months. On current accounts: 
 
 Bills receivable, due in four months. • Customers' daily balances. 
 
 City, County and State warrants. Bills payable. 
 
 Loans on real estate mortgages. Certified checks. 
 
 Investments: Collection accounts. 
 
 Real estate. Letters of Credit. 
 
 Mortgages of real estate. Special liabilities, etc. 
 
 Bonds. 
 
 Stocks and shares. 
 
 Municipal loans. 
 Doubtful accounts. 
 Special assets, etc. 
 
 Daily Balance Book. — The daily balance book is ruled in a manner 
 similar to a trial balance book and may be varied in form to meet the require- 
 ments of any small bank. The first series of entries on the debit side is 
 composed of all charges of whatever nature against depositors whose names 
 appear in the individual ledger, received during the day over the counter or 
 through the mails. When received over the counter, the amount of each 
 
 228 
 
separate item is jotted down in pencil, and the check placed on the spindle, 
 which disposes of it as far as the day's balance is concerned, its future 
 course lying through the individual ledger to the check file. When received 
 from correspondent banks the items are checked in the letter as usual, pinned 
 together, and the footing of the letter entered in total, the bunched checks 
 being spindled as a single item. The first series of entries on the credit side 
 represents the total of each customer's deposit slip, or of any credit to 
 depositors received during the day, and the total footing of these debit and 
 credit items respectively must correspond with the total debit and credit 
 footing of the individual ledger for the day, the items being posted to the 
 latter directly from the checks and deposit slips after the day's work has 
 been balanced, or on the following morning. 
 
 The debit to bills discounted is the total amount of notes discounted 
 during the day, as shown by the discount register, and the credit to the same 
 account is the total amount of notes paid or renewed during the day, as 
 shown by the tickler. 
 
 The debit to certificates of deposit represents the amount of certificates 
 paid during the day, and the credit to the same account is the total of certifi- 
 cates issued for the day, as shown by the stub of the certificate book. 
 Certificates, when paid, are treated similarly to checks as regards spindling, 
 and in case interest is allowed on any, the amount paid is noted on the face 
 as a verification in the event of a search for errors in the day's work. 
 
 The debit to loss is the total of the various charges to that account, 
 whether for exchange, postage, etc., unless it is deemed preferable to carry 
 separate accounts for such items, from which a better idea may be gained 
 of their relation to the business. In the form shown, they are treated as a 
 whole for brevity's sake. The credit to profit, treated in a similar manner, 
 is the total footing of the exchange columns of the draft registers, and the 
 amount of the various collection charges received on foreign checks cashed 
 over the counter. 
 
 The debit to interest is made up of the amounts of interest paid on 
 deposits or certificates of deposit, and the credit to the same account, is the 
 footing of the discount and interest column of the discount register for the 
 day, or of interest received from legal depositories, etc. 
 
 The debit to protest account is the amount of protested notes of the 
 previous day with the fees added, and the credit to the same account repre- 
 sents the total amount of protested notes paid during the day. 
 
 The various debits and credits to banks and bankers, a portion of which 
 are omitted in the form shown, are treated precisely as they would be in a 
 journal. 
 
 229 
 
The amount of cash on hand at the beginning of business for the day, 
 as shQ\yn by the cash book, is entered on the credit side of the balance book, 
 the debit to the same account being the amount on hand at the close of the 
 day's business. 
 
 After the book is in balance the totals of the various accounts are posted 
 to the general ledger, which shows, when the debit and credit balances are 
 brought forward, a statement of the bank's resources and liabilities at the 
 close of the day. 
 
 The entries on the balance book are made in pencil and can be jotted 
 down in a few seconds, errors are easily corrected, checking from the 
 checks and deposit slips on the spindles rapidly accomplished in case of 
 non-balance, and the amount of cash on hand found by the time the same 
 can be counted. In case the cash does not agree with the amount shown 
 by the balance book, the location of errors is an easy matter. 
 
 "Cash over or short" is of frequent occurrence in all banks, and the 
 same rules for the location of errors apply in the use of this form as would 
 obtain were a journal used. By its use fewer counter items are carried 
 over into the next day's business, as the book remains open for entries up 
 to closing time, and the checks of the invariable late customer may be dis- 
 posed of as easily as those presented earlier in the day. 
 
 Reconciliation of Statements. — There are several methods of 
 reconciling accounts current with correspondents. Inasmuch as the most 
 important correspondent with the majority of banks is the New York cor- 
 respondent, we will discuss the reconcilement of monthly balances with the 
 New York bank. 
 
 On the credit side of the New York draft register appears the amount 
 of every draft drawn on the New York bank, with a number corresponding 
 to a similar number on the stub of the draft book. If the draft be incorrectly 
 drawn, and cancelled, its amount should appear in sequence, and be footed in. 
 the daily total credit to New York. On this side of the register also appears 
 tbe amount of any charge for collection made by New York, or the amount 
 of any of the country banks' checks sent from New York for credit and 
 advice, and of currency sent from New York by express. 
 
 On the debit side of the New York draft register appears a record of 
 all items sent to New York for credit, transfers of credit from other corre- 
 spondent banks, currency by express to New York, and the amount of 
 interest paid by the New York correspondent on the daily balances of the 
 country bank. On this side also appears the amount of what is termed 
 "Returned Drafts," i. e., drafts issued to customers, but returned to the 
 bank and cashed, or drafts incorrectly drawn and cancelled. The letter "R" 
 is marked in the check column after the amount of each returned draft, the 
 
 230 
 
draft stamped "Paid," with the date of payment, and filed away until the 
 end of the month, when the debit and credit totals of each day are footed, 
 and the monthly balance of the draft register brought down. 
 
 If all the drafts were paid within a few days of their issue, the recon- 
 cilement of balances would be an easy matter, but often drafts are outstand- 
 ing for months, and these, with the remittances in transit, make many thou- 
 sands of dollars difference between the balance of the draft register and that 
 shown on the New York statement. 
 
 The checking of the amounts in the draft register should be carefully 
 done, the cashier calling the number of each draft from the statement, and 
 the assistant calling back the amount of the draft corresponding to the 
 number called, and marking in red ink, in the check column of the register, 
 the number of the month for which the statement is sent. After every item 
 of debit and credit on the statement is correctly checked, the return drafts 
 paid during the month are also checked on the register in the same manner, 
 including the letter "R" after the month number. 
 
 On a sheet of paper, ruled as below, is entered the number of each credit 
 page of the register having any amounts unchecked by red ink, and opposite 
 the page number, the amount of the unpaid drafts on such page, up to the 
 end of the month, and the amount footed in total. This sheet should be pre- 
 served until the following month, as it facilitates locating the pages having 
 unpaid drafts. 
 
 S6 $ 2 60 
 
 140 250 00 
 
 182 500 00 
 
 222 30 00 
 
 223 
 
 229 
 
 230 
 
 231 
 
 232 
 
 700 
 
 00 
 
 16 
 
 00 
 
 17s 
 
 00 
 
 66 
 
 SO 
 
 14 44 
 
 8965 
 
 329 
 
 67 
 
 275 SO 
 
 22 
 
 00 
 
 83 
 
 34 
 
 650 
 
 00 
 
 488 
 
 24 
 
 99 90 
 
 491 
 
 88 
 
 23 90 
 
 329 57 
 
 27 
 
 13 
 
 600 
 
 00 
 
 2,339 75 
 
 3,761 
 
 86 
 
 Drafts unpaid June l $11,366 93 
 
 231 
 
If the work thus far has been correctly done, the reconcilement of bal- 
 ances is comparatively easy, as will be seen from the following exhibit : 
 
 RECONCILEMENT FOR MAY. 
 
 DEBITS. 
 
 Total debit of register $118,73225 
 
 N. Y. St. Dr. Bal. May ist 41,765 04 
 
 Items sent in April, credited in May 2,218 30 
 
 $162,715 59 
 *I 38,74s 13 
 
 $123,970 46 
 *2 103,30s 15' 
 
 N. Y. Bal. June i $20,66531 
 
 Items sent in May, not credited 8,83522 
 
 Our Dr. Bal. May 1st 29,90991 
 
 *l $ 38,745 13 
 CREDITS. 
 
 Total credits $"8,732 25 
 
 Drafts unpaid May 1 14,07341 
 
 $132,805 66 
 *3 29,500 51 
 
 *2 $103,305 IS 
 
 Drafts unpaid June i '. 11,366 93 
 
 Our Dr. Bal. June ist 18,133 58 
 
 *3 29,500 SI 
 
 After the correctness of the New York figures has been proved, the 
 statement with the two forms above shown and all drafts paid during the 
 month should be filed in a convenient place for reference, if necessary, the 
 following month. 
 
 Another method of reconciling the New York account is as follows: 
 We will suppose the account current received from New York states the 
 balance due the country bank as $7,456.19. The balance, as shown by the 
 books of the country bank is $8,208.60. The reconcilement reported by the 
 country bank to its New York correspondent as follows : 
 
 "Gentlemen — We have received your statement of account as of the 
 close of business, Oct. 31, 1899, showing that there is a balance due us 
 according to your books of $7,456.19. 
 
 We respectfully submit the following reconcilement : 
 
 232 
 
Yon state balance due us $7,4S6 i?' 
 
 A. We charge, you do not credit: 
 
 Our letter Oct. 30 41967 
 
 Our letter Oct. 31 864 17 
 
 Allowing for these items our balance would be .$8,740 03, 
 
 B. We credit, you do not charge: 
 
 Checks drawn by us on you, and not yet charged to us 267 $ 45 61 
 
 268 46 72 
 274 III 14 
 276 24 71 228 i8. 
 
 Allowing for these items, our balance would be $8,51 1 85 
 
 C. You charge, we do not credit: 
 
 Your letter to us, Oct. 30 $468 17 
 
 Your letter to us, Oct. 31 214 63 682 80 
 
 Allowing for these items (credited by us since Oct. 31st), our balance 
 
 would be $9,19465- 
 
 D. You credit) we do not charge: 
 
 Oct. isth, collection on Madison, Wis. (when did we send?) $ 67 42 
 
 Oct. 29th, collection on Chicago 91863 98605. 
 
 Allowing for these items, our balance would be $8,208 60 
 
 Which agrees with our books. 
 
 Please advise particulars concerning item $67.42 credited to us by you,. 
 Oct. 15th." 
 
 Below we give another method based on the same principles, the same 
 figures being used. By using the ordinary blank book as a reconcilement 
 book, the calculations can be transferred from month to month. 
 
 RECONCILEMENT BOOK. 
 Left-hand Page. 
 
 We state bal. due us.... $8,20860. 
 
 We credit, they do not charge our checks on them — 
 
 No. 267 , 4561 
 
 No. 268 , 4672^ 
 
 No. 274 Ill 14 
 
 No. 276 2471 
 
 They credit, we do not charge — 
 
 Oct. 15, Coll. Madison, Wis 6742- 
 
 ' Oct. 29, Coll. Chicago 918 63 
 
 Total .-. $9,422 83. 
 
 Right-hand Page. 
 
 They state bal. due us $7.4S6 i9' 
 
 We charge, they do not credit — 
 
 Our letter, Oct. 30 41967 
 
 Our letter, Oct. 31 864 17 
 
 They charge, we do not credit — 
 
 Their letter, Oct. 30 468 17 
 
 Their letter, Oct. 31 214 63 
 
 Total ?. $9,42283; 
 
 233 
 
Still another method is below illustrated. It is intended to use either 
 a reconciliation book or to make a memorandum of same on the journal. 
 Hew York Correspondent account Country Bank — 
 
 Dr. 
 
 To Bal. per Ledger $8,20860 
 
 Oct. IS, Coll. Madison, Wis 6742 
 
 To Oct. 29 Coll. Chicago 918 63 
 
 By letter, Oct. 30 $ 46817 
 
 By letter, Oct. 31 214 63 
 
 By Bal. due Country Bank 8,511 85 
 
 $9,194 65 $9,194 65 
 
 ■Country Bank account New York Correspondent — 
 
 Cr. 
 
 By Bal. per Ledger $7,4S6 19 
 
 By letter Oct. 30 419 67 
 
 By letter Oct. 31 864 17 
 
 Dr. 
 
 To checks (not in) No. 267 $ 45 61 
 
 No. 268 46 72 
 
 No. 274 Ill 14 
 
 No. 276 24 71 
 
 To Bal. due Country Bank 8,511 85 
 
 $8,740 03 $8,740 03 
 
 BANKABLE. — In mercantile law, bank notes, checks, and other securi- 
 "ties for money received as cash by the banks in the place where the word 
 is used. 
 
 BANK ACCOUNT BOOKS.— The books generally used in a bank are 
 as follows : 
 
 Minute book, stock certificate book, stock register and transfer book, 
 stock ledger, general cash book or journal, general ledger, daily statement 
 book, certificate of deposit register, draft register, cashier's check register, 
 individual ledger, individual scratchers, discount register, offering book, 
 note tickler, credit or liability ledger, collection register teller's cash, dividend 
 "book. 
 
 BANK BALANCE. — The balance standing to the credit of a business 
 at a bank subject to check or on deposit. (Auditing — This balance must be 
 "verified by comparison with the bank pass book. ) 
 
 BANK COLLATERAL ACCOUNT.— An account sometimes car- 
 ried in which to charge Bills Receivable deposited with a bank as security 
 for loans. This is properly a contingent liability. 
 
 BANK DISCOUNT.— The charge made by a bank for discounting 
 aiotes, etc. 
 
 234 
 
BANK EXCHANGE.— The charge made by a bank for clearing 
 country or foreign checks. Every day there are thousands of checks sent 
 to the wholesale houses in our large cities by their country customers. These 
 checks are personal to a large extent and are payable at the town where the 
 drawer of the checks resides. The customer sends his personal check to 
 avoid the expense of buying a draft on New York or Chicago, etc. When 
 these checks are received by the wholesalers they have to be returned to the 
 town from whence they came to be cashed, and the country bank charges 
 the wliolesalers' bank for making the collection from the man wro drew 
 the check. 
 
 This system causes a great deal of annoyance and trouble, and large 
 coujitry houses now carry an account with a New York or Chicago bank, 
 and by this means avoid the expense of purchasing exchange, or the annoy- 
 ance of being charged with collection by the wholesale houses. 
 
 BANK DRAFT. — A bill of exchange drawn by one bank on another 
 for the purpose of making payments to the persons specified thereon. 
 
 BANK EXAMINATION.— The national banks of the United States 
 are subject to examination by a corps of bank examiners. It is well known 
 that the examinations of these officials are extremely cursory and that their 
 findings have little value. As a rule, they do not att empt to verify the cus- 
 tomers' or depositors' accounts, claiming that it would call for ari expend- 
 iture of too much time. 
 
 It is gratifying to note as a consequence of the numerous embezzlements 
 of large sums which have occurred mostly through the inefficiency of these 
 examinations, banks are beginning to see the necessity of employing public 
 accountants to do the work. 
 
 The general detail of such an audit is very similar to that of any com- 
 mercial audit. All bills receivable should be carefully examined to see that 
 over-due bills are not included as live assets. All securities should also be 
 inspected, and at one sitting, the whole of the securities being in the pos- 
 session of the auditor until the inspection has been completed. 
 
 Special attention should also be called to overdrawn accounts. In order 
 to verify customers' balances, it is a very good plan to send out statements 
 showing the balances of accounts as at date of closing, the customer being 
 requested to return the statement duly verified. 
 
 It is also considered important that in verifying the cash balance the 
 checks on hand should be forwarded to the clearing house and correspond- 
 ents, etc., by the auditor himself. 
 
 On September i, 1899, there were sixty-two national bank examiners 
 and 3,710 national banks in the United States receiving instructions from 
 and reporting to the comptroller of the currency. These banks are organized 
 
 235 
 
under a federal law passed June 3, 1864, some thirty-five years ago, and by 
 ,the same act the office of comptroller of the currency was created with its 
 corps of clerks and examiners and charged with the responsibility of inter- 
 preting and applying the law and of supervising banks organized under it. 
 Hugh McCulloch, afterwards Secretary of the Treasury, was the first comp- 
 troller of the currency. ' Mr. McCulloch was president of the Bank of the 
 State of Indiana when thus honored, and being a practical banker, with broad 
 views and possessed of integrity and foresight, this department at once came 
 into prominence as one of the most important offices in the government. 
 Through his efforts many precedents were established that have always been 
 respected by bankers and his successors in that office. 
 
 Since then there have been few changes made by Congress in the national 
 bank act, so that the system of national banks has come to be recognized by 
 the people as a stable system that has, for this reason and because its scope 
 was general rather than local, enjoyed their confidence to a greater extent 
 than any other system of banking. 
 
 Yet who is there that doubts we have made progress in business in the 
 past thirty-five years, that while we have doubled our population we have 
 more than trebbled the volume of credit which banks are organized to handle, 
 and have changed our methods of granting the same to keep pace with the 
 conditions as they exist to-day? Not only is this true, but the forms of 
 credit have likewise changed, while the federal government has, as I have 
 stated before, made no important changes in the national bank act passed 
 thirty-five years ago. The people have, however, done much through their 
 several State Legislatures to meet the demands of the times, so that in almost 
 every State laws have been passed that are by no means uniform, permitting 
 the organization of State banks, savings banks and trust companies, and 
 establishing a ban^cing department with its corps of clerks and examiners. In 
 Indiana, Ohio and Illinois this department is placed in charge of the Auditor 
 oi State, while in Massachusetts, New York, Wisconsin, Michigan, Penn- 
 sylvania and many other States the application of the law and supervision 
 of banks is placed in a separate department, styled the commissioner of 
 banking. There are of this class of banks about 10,000, or about three times 
 as many as there are national banks, which, with about 4,000 private banks, 
 hold the deposits and extend credit to 65,000,000 people. I have called your 
 attention to the foregoing facts that }'^ou may better understand what I shall 
 hereafter say to impress upon you that America's greatness lies largely in her 
 commercial industry, her high credit and the strength, stability and character 
 of her financial institutions. 
 
 Before looking at a bank from the standpoint of an examiner let us 
 better understand what a bank examiner is. I have been one myself and 
 
 236 
 
have met many others, and I have found them all to be, first, human beings, 
 some with a larger comprehension than others, some are firmer in their 
 positions than others, but all of them recognize the responsibility of their 
 office and as best they know how attempt to do their duty by it. All bank 
 examiners do not see things alike, nor do all examiners work under the 
 same law. They are all, however, agents of some department of the govern- 
 ment or State, charged with the responsibility of the execution of the law, 
 and as the law varies in each State or between the States and the federal 
 statute, so does their duties vary. It may, however, be said that they have 
 performed their duty when they have made the required examination of the 
 affairs of a bank and the men that manage it and reported the facts to their 
 superior officer, which is always done once a year, and sometimes oftener. 
 There is much virtue in the laws governing banks and much protection td 
 the people from bank examinations in the way of preventing bad investments 
 and wrong-doing of bank officials, yet withal, I have long ago concluded 
 that the people have come to expect too much from bank examiners and fail 
 to recognize as much as they should what is transpiring around them daily, 
 and that the greatest security behind a bank counter is an honest man. 
 To judge a bank in one or two days' visit, to ascertain if it is being run as the 
 law directs, if it is solvent, and if the men entrusted with its management 
 are honest, and to report those facts to the proper officers constitutes the 
 responsibility of a bank examiner. He may have had to do more or less with 
 the politics of his city or State, and this may be to his advantage, for by 
 reason of it he is likely to become a better judge of human nature and broader 
 in his comprehension of affairs. 
 
 It is, however, detrimental to the interest of the people no less than to 
 the banks themselves to have these officers of the law appointed as a reward 
 for political services, or have them changed in office for political reasons. 
 This, however, rests almost entirely with the appointing power, and with 
 most comptrollers of the currency has been of minor consideration. 
 
 It would seem to me to be wise on the part of the people through their 
 representatives in Congress or the legislators of the various States to vote 
 to pay better salaries to bank examiners, to fix their term of service during 
 good behavior, and to eliminate political considerations entirely in choosing 
 them. The office is too responsible and the faithful discharge of their duties 
 requires a special kind of training and ability and the interest of all are too 
 great to be wisely left to any one person or party to dictate the appointments 
 or not to merit a more reasonable compensation than is now generally paid 
 for such services. 
 
 Understanding something of the number and different kinds of banks 
 and the duties of bank examiners, I will attempt to describe an ideal commer- 
 
 237 
 
cial bank, whether State or national, speaking of those things only that my 
 experience taught me were most important. First of all, a bank should be so 
 organized as to weld together the different classes and conditions of the 
 community where it is located. It is best it should be broad-gauged in its 
 policy, so that all may be benefited by its existence, and the more people 
 contribute to its success and prosperity. As an organized and legalized 
 money lender it will succeed best when it distributes its loans and does not 
 loan to any one branch of the business of the community in preference to 
 another. Over-loaning either to friends or to enterprises in which the bank's 
 officers are interested is one of the greatest weaknesses in the management of 
 banks to-day. The first requisite of a successful banker's education is to 
 learn who to trust and to say no, rather than part with a depositor's money 
 unless he has in its stead good security. In this connection many banks, 
 especially in the larger cities, have established credit departments and require 
 from thfeir customers statements of their financial condition. This is as it 
 should be. Bankers can not be too careful in their investment of trust funds, 
 and customers that desire the confidence of their banker and the highest 
 credit will gladly furnish them all the information they may require bearing 
 on this point, for no bank can afford to loan without collateral to any 
 individual or firm refusing to make a clear and explicit statement of its 
 affairs. 
 
 The funds of a commercial bank should always be loaned upon short 
 time. It is only by this means a bank can best meet its obligations when 
 called upon. Notes carried by a bank and continually renewed should be 
 scanned with suspicion by the examiner for fear the makers can not pay 
 when asked. Continual renewals of accommodation paper frequently gives 
 the bank only its interest for awhile and ends by making the bank the chief 
 mourner at some old customer's funeral. No merchant or borrower should 
 expect a bank to furnish continually a large part of the capital for his 
 business, and every bank should insist upon the payment of a part of a debt 
 at each renewal, unless it be a collateral loan and amply secured. 
 
 Past due notes in a bank or loans on overdrafts are never indicative of a 
 healthy or prosperous condition. The efficient, successful banker, likewise 
 bank examiner, is opposed to past due notes, overdrafts or cash items of 
 long standing. They should both be of one mind, that favor and benevolence 
 are not the attributes of good banking— strict justice and the rigid perform- 
 ance of contracts is the proper foundation. The depositor exacts it of the 
 bank, even though he may be a borrower also. Is it not equally fair for the 
 bank to exact it from those to whom it extends credit? Fair play should- 
 mean that the bank should extend every just consideration and courtesy it 
 safely can to its depositors and borrowers alike, but they are entitled to no 
 greater consideration than the banker is entitled to from them. It is he that 
 
 238 
 
becomes responsible, or his bank, for the funds of the rich and poor alike 
 entrusted to his care which he has loaned in part to the people of his- 
 community that have not sufficient money of their own for the conduct of 
 their business. So a banker occupies a dual and very trying position. 
 
 Outside of the quality and character of a bank's investments, or assets, 
 the question of its reserve is most important. 
 
 Organized banks can not loan all their deposits; the law requires at 
 least 1 5 per cent, to be held out as a reserve fund, and in so-called reserve- 
 cities 25 per cent, must be kept on hand. This is a wise provision, though 
 one frequently broken when borrowers are plenty. A commercial bank 
 with demand liabilities and no reserve would be like an engine without a 
 balance wheel — likely to run away with itself. A bank's reserve is to provide 
 for any unusual demands made by depositors and is not for borrowers. The- 
 law plainly states that when the reserve is deficient no loaning can legally 
 be done until it is made good. This fund is, therefore, strictly speaking, 
 a percentage of deposits held to meet any unusual demand made hy 
 depositors. 
 
 While to the public the men in charge, the officers, stand for the bank, 
 yet the examiner knows that much importance attaches to the position of a 
 director. It is the directors that elect the officers and should decide the policy 
 of the bank. The directors should never assume the duties of the officers, 
 and advise and counsel them. They should be broad and liberal minded men. 
 of the highest character and standing, representing all lines of business, 
 and who will examine the bank personally or by committee quarterly and 
 meet regularly each month to consider the bank's welfare. There is a feeling" 
 in some quarters that a director should not be a borrower from his own bank. 
 On this point there is no law whatever, nor should there be. A director 
 should be given the same consideration that he would receive if not a 
 director. He should himself insist upon giving ample security and of 
 keeping within the limits now prescribed by law. If he does this his loans 
 cannot be detrimental to the bank. 
 
 The trouble, if any, arises from directors not exacting from each other- 
 the same security as from others, and the too frequent indulgence of officers 
 of banks in borrowing to invest in outside enterprises that are purely 
 speculative. 
 
 The best managed banks are those in which the officers and directors 
 have the largest holdings of stock, and when they have either in stock or on 
 deposit a sum in excess of what they owe the bank for money borrowed 
 they can usually be depended upon to look after the welfare of the bank, 
 in at least the matter of its investments. 
 
 239 
 
A bank must have the necessary books and they must be well kept. 
 Daily balances of the cash and frequent trial balances of its ledgers, loans, 
 •certificates of deposit, etc., are to be found in an ideal bank. There is, 
 however, almost as much of peculiarity in bank books and methods as there 
 is in people. The general ledger headings are really the only thing that are 
 uniform, and this is so because the government reports require it. So that 
 to judge of a bank's books and determine its condition its books must be 
 always well kept and in balance and the examiner must be sufficiently skilled 
 in books and the bank's methods to verify them, criticise when necessary, 
 and advise when yoU| can do so with propriety. In this connection let me 
 :say that the growth of banks, the locality and nature of their business, has 
 much to do in deciding the system of books they should keep, and that a 
 proper division of the work in a bank is now looked upon as insuring honesty 
 in book-keeping quite as much as a fidelity bond. 
 
 A bank examiner must also take into account the position a bank takes 
 with regard to its neighbors and competitors. It is of utmost importance 
 -that there should be a community of interest between banks. If it does not 
 -exist there is danger which a banker and a bank exarniner can not safely 
 overlook. Bankers should enjoy the confidence of one another and frequently 
 meet for an exchange of views on general subjects. There is business for all 
 well managed institutions and every bank officer should face competition 
 fairly and squarely and say : "If I am not able to hold the business of my 
 bank there must be some fault of management in my institution for which 
 I am to blame." 
 
 Let us learn from each other and from experience that truth and har- 
 mony are after all worth more than money, that honest men only can be 
 trusted with other people's money, and that under all circumstances and all 
 occasions bankers should stand together for that which is for the greatest 
 ^ood. 
 
 If I interpret the signs of the times aright the next few years will see 
 this nation and the banking business freed from many conditions and 
 alliances that are now and have heretofore been embarrassing and at times 
 ■disastrous. There will be an improvement in bank examination and bank 
 supervision, in bank book-keeping and bank assets, in the methods of 
 granting credit and the preventing of its extravagant use, so that this 
 ■country, whose prosperity is restricted to no one territory, and to no one 
 industry, will be sought in friendly commercial alliances by the govern- 
 ments of the world to an extent never yet considered possible. — G. B. 
 Caldwell. 
 
 BANK LEDGERS.— See Balance Ledgers. 
 
 Some banks who do not use the tabular ledger system provide two 
 
 240 
 
posting columns on both debit and credit side of the ledger, one column being 
 devoted entirely to postings of cash. This has been found to be a very con- 
 siderable aid to the prompt balancing of the books, as it practically provides 
 a separate cash ledger. Another ledger used by banks is entitled the New 
 York loose leaf daily balance ledger. "This system," says one who has used 
 it, "contains many desirable features. It is constructed upon the loose leaf 
 or perpetual plan. The current ledger (where all live accounts are kept) is 
 self indexing. I give to each customer one leaf and when the account is 
 opened up it is given a number. No matter how long it may remain it always 
 retains the same account number. If the depositor withdraws his account 
 I simply unlock my ledger, take his sheet out and put it away in the transfer 
 ledger, which is provided with a set of leather tab index sheets same as in 
 the current ledger and the sheet is indexed under the sj^ne division of the 
 alphabet as it occupied when an active account. If this depositor should at 
 any time in the future again open up an account with us I go to my transfer 
 ledger, get his sheet and put it back in the current ledger in the same place 
 that it originally occupied. 
 
 "In the back part of the ledger I have a silicate extension balance book, 
 the names being entered in alphabetical order, followed by their account 
 number and only those accounts which by reason of their debit or credit 
 entries do I pay any attention to. If the balance has changed I make the 
 proper notation on the ledger sheet in ink and on the silicate balance book 
 I erase the old balance and enter the new. The silicate balance book is 
 detachable from the ledger and can be handed to the cashier or teller for 
 examination as to any customer's balance. 
 
 "On each depositor's sheet I itemize all checks, no matter if there be ten 
 or fifty in one day. At one time I bunched or lumped them ; if I had twenty- 
 five checks I would enter them as twenty-five checks, then follow with the 
 total. Experience has taught me that it is safer to itemize each check. The 
 beauty of this system is that I can keep each customer's account by itself 
 no matter if any particular account should stay with us during the corporate 
 existence of the bank. I could at the expiration of say twenty years have all 
 the sheets relating to this account by themselves." 
 
 BANK NOTES or BANK BILLS— (Com. Law).— The promissory 
 notes of incorporate banks, payable to bearer on demand, and designed to 
 be circulated as money for an indefinite period. 
 
 Bank notes are not legal tender, but current bank notes are regarded 
 as a lawful tender in payment of debts, unless the debtor makes objection to 
 them when offered. 
 
 241 
 
The bona fide holder of a bank note can recover against the bank or 
 retain it against the real owner, though it was lost or stolen. The holder, 
 however, must have come by the note in the usual course of business, and for 
 a calculable consideration, if he is to retain it against the real owner. The 
 holder of a lost or stolen bank note does not get an absolute title which he 
 can transfer to a purchaser who has notice of the loss or theft. 
 
 The finder of a lost bank note may recover against a bailee with whom 
 he has placed it for safe keeping, if the real owner does not claim it. 
 
 The person disputing the holder's title must show that the holder came 
 by the note in bad faith. 
 
 Where a bank note has been partially or wholly destroyed the person to 
 whom it belonged can recover from the bank. Sufficient and satisfactory 
 evidence as to the identity and ownership of the note, and the destruction 
 thereof being given by the owner, such questions being questions of fact for 
 the jury. An indemnity bond to secure the bank has been held to be 
 necessary, but the question is still open. "■ 
 
 BANK PASS BOOK.— A book in which is recorded by the bank for 
 customers' use, the amount of customers' deposits and checks withdrawn. 
 Also exchange on collections, discounts, etc. (Auditing — ^After allowance 
 has been made for unpaid checks the bank's pass book is considered a suffici- 
 ent voucher for the amount of the balance at bank called for by the cash 
 book.) 
 
 BANKS — (Com. Law). — A bank is an institution for the custody 
 and loan of money, the exchange and transmission of the same by means of 
 bills and drafts, and the issuance of its own promissory notes, payable to 
 bearer, as currency ; or for the exercise of one or more of these functions. 
 
 Banks are of three kinds: banks of deposit, banks of discount, and 
 banks of circulation; and comprise National, State, Savings and Private 
 banks, and in a popular sense loan and trust companies. 
 
 The distinction between a bank and a trust company is well defined. 
 The powers of the trust company depend upon the terms of its charter, but 
 they are not banking powers. The trust company, like the savings bank, 
 pays interest upon deposits, but its deposits are strictly loans, not subject 
 to check. It may not issue its own notes for circulation, nor does it buy or 
 sell exchange in the ordinary course of its dealings. 
 
 To a large degree the limits of any bank's powers are defined by 
 statute, or its charter. 
 
 BANKRUPTCY LAW.— The following is the form of statement of 
 the affairs of a bankrupt required by English bankruptcy law : 
 
 242 
 
THE BANKRUPTCY ACTS 1883 & 1890 
 
 statement of affairs. 
 
 In the Court of 
 
 In Bankruptcy No. of 189 , 
 
 Re K. 
 To THE Debtor:— You are required to fill up, carefully and accurately, this sheet, and the several sheets A, 
 B, C, D, £, F, G, H, I, J, and K, showing the state of your affairs on the day on which the Receiving 
 Order was made against you, viz., the day of 189 . 
 
 Such sheets, when filled up, will constitute your Statement of Affairs, and must be verified by oath or 
 declaration. 
 
 Gross 
 Liabilities 
 
 £ s d 
 700 
 
 £700 
 
 Liabilities 
 
 (as stated and estimated 
 
 by debtor) 
 
 Unsecured Creditors as per list 
 (A) 
 
 Creditors fully secured £ s d 
 as per list (B) 
 
 Estimated value of se- 
 curities 
 
 Surplus 
 
 Less amount thereof 
 carried to sheet (C). 
 
 Balance thereof to 
 contra 
 
 Creditors partly se- 
 cured as per list (C) . 
 /.^jj- estimated value 
 of securities 
 
 Liabilities on Bills discounted 
 other tfian debtor's own accept- 
 ances for value, as per list (D) 
 viz 
 
 On Accommodation 
 Bills as drawer, 
 acceptor or indor- 
 ser £ 
 
 On other Bills as 
 drawer or indorser £ . 
 
 £ 
 
 Of which it is expected will rank 
 
 against the estate for dividend 
 
 Contingent or other 
 
 Liabilities as per list 
 
 (E) £ 
 
 Of which It is expected will rank 
 against the estate for dividend 
 
 Creditors for rent, 
 &c., recoverable by 
 distress, as per list 
 *F) 
 
 Creditors for rates, 
 taxes, wages, &c., 
 payable in full, as 
 per list (G) 
 
 Sheriff's charges pay- 
 able under s. 11 of 
 the Bankruptcy Act 
 1890, estimated at.._ 
 
 Deducted contra A 
 
 £ s d 
 
 Expected 
 
 to rank 
 
 £ s d 
 700 
 
 £700 
 
 Assets 
 (as stated and estimated 
 
 by debtor) 
 
 Property, as per list (H), viz. 
 
 (rt) Cash at bankers 
 
 id) Cash in hand 
 
 {c) Cashdepositedwith solicitor 
 
 for costs of petition 
 
 {d) Stock-in-trade (cost 
 
 £ ) 
 
 , Machinery 
 
 ) Trade fixtures, fittings. 
 
 utensils, &c 
 
 Farming Stock 
 
 Growing crops and tenant 
 
 right 
 
 Furniture 
 
 Life Policies 
 
 Other property, viz, — 
 
 Reversionery Interest 
 under Will of John Smith 
 (deed) 
 
 
 Total as per list (H). 
 
 Book debts, as per list (I), viz. — 
 
 Good 
 
 £ s d 
 
 Doubtful 
 
 Bad 
 
 £ 
 
 Estimated to produce. 
 
 Bills of Exchange or 
 other similar secur- 
 ities on hand, as per 
 list (J) £ 
 
 Estimated to produce. 
 
 Surplus from securities in the 
 hands of Creditors luUy secured 
 (per contra) 
 
 Deduct Creditors for distrainable 
 rent, and for preferential rates 
 taxes wages, sheriff's charges 
 &c., (per contra) 
 
 Deficiency explained in statement 
 (K^ 
 
 Estimated 
 to produce 
 
 £ s d 
 
 500 
 
 200 
 
 £700 D 
 
 £700 
 
 £700 
 
 £700 
 
 I of in fhe County of 
 
 , make oath and say that the above statement and the several lists hereunto 
 
 annexed marked A, B, C, D, E, F, G, H I, J, and K, are to the best of my knowledge and belief a full 
 
 true and complete statement of my affairs on the date of the above-mentioned Receiving Order made 
 
 against me. 
 
 Sworn at in the County of 
 
 this ' day of 189 
 
 Before me 
 
 Signature- 
 
 243 
 
BARGAIN (Com. Law) means an agreement between persons con- 
 cerning the loan, exchange or sale of property. More technically, a bargain 
 is a mutual agreement or contract between two parties, the one to sell goods 
 or lands, and the othfer to buy them. 
 
 BARGE REGISTER.— A record of the work on a barge and of the 
 time of employees in charge of same. It is generally ruled with headings 
 somewhat as follows : 
 
 Name; date and time of leaving; loaded with; quantity; destination; 
 date and time of arrival; date and time of discharge; date and time of 
 return; date and time of arrival (at dock) ; time occupied on return; time 
 idle. 
 
 BARTER {Com. Law) is a contract by which the parties exchange 
 goods. The term is not applied to contracts concerning land, but to such 
 only as relate to goods and chattels. 
 
 BEAR — (Stock Exchange). — An attempt to depreciate the market 
 price of a stock or commodity of fluctuating value. 
 
 BEARER — (Com. Law). — The bearer of a bill or note means a person 
 in possession of a bill or note which is payable to bearer. 
 
 It has been held that the word also imports dominion, as ownership. 
 
 BENEVOLENT SOCIETIES.— Societies established for the aid of 
 the needy or sufifering and whose maintenance is usually provided for by 
 donations, subscriptions and legacies. 
 
 The accounting for such societies should consist in keeping a record of 
 cash received from donations, subscriptions, legacies, interest on invest- 
 ments, etc. A form of statement to be furnished to the patrons and members 
 of the society should be on the following lines : 
 
 INCOME AND EXPEN DITURE ACCOUNT. 
 
 Dr. Cr. 
 
 To Housekeeping. By Balance from last year's account. 
 
 " Clothing and General Expenses. " Subscriptions and Donations 
 
 " Salaries and Wages. " Interest on Investments. 
 
 " Rates, Taxes and Insurance. 
 " Gas Lighting and Coals. 
 " Medical Officer and Chaplain. 
 " Printing, Stationery and Advertising. 
 " Cash expended in Charity. 
 " Balance, being in excess of income 
 over Expenditure to date. 
 
 CAPITAL ACCOUNT. 
 Dr. Cr. 
 
 To balance carried forward to next year's By Balance from last year's account, 
 
 account. " Legacies. 
 
 BALANCE SHEET. 
 LIABILITIES. ASSETS. 
 
 To Capital Account. Investment on Capital Account 
 
 " Revenue Account Consols. 
 
 Freehold Buildings. 
 Cash at Bankers: 
 On Capital Account. 
 " Revenue Account 
 
 244 
 
BETTERMENTS AND ADDITIONS.— A term used to define 
 repairs made over and above that which is necessary to keep a fixed asset at 
 its present value; also used to define the cost of such additions as increase 
 the value of an asset. When such betterments are made in connection with 
 buildings, machinery and plant, their value in the balance sheet as an asset 
 is frequently fictitious and represents expenditures for which no return can 
 ever be expected. 
 
 BID — (Com. Law). — ^An offer to pay a specified price for an article- 
 about to be sold at auction. 
 
 An offer to perform a contract for work and labor or to supply materials 
 at a specified price. 
 
 BIDDER — (Com. Law). — One who offers to pay a specified price for 
 an article offered for sale at a public auction, or offers to perform a contract 
 for w^ork and labor or supply materials at a specified price. 
 
 The bidder has a right to expressly withdraw his bid at any time before 
 it is accepted, which acceptance is generally manifested by knocking down 
 the hammer; or the bid may be withdrawn by implication, as by an. 
 adjournment of the sale before the article under the hammer is knocked 
 down. 
 
 The bidder is required to act in good faith, and any combination, 
 between him and others to prevent a fair competition, would avoid the sale 
 made to himself. But there is nothing illegal in two or more persons agree- 
 ing together to purchase a property at sheriff's sale, fixing a certain price 
 which they are willing to give, and appointing one of their number to be the 
 bidder. 
 
 BILAU — Com. Law). — A term used in Louisiana to designate a book 
 in which bankejs, merchants and traders write a statement of all they owe 
 and all that is due to them. A balance sheet. 
 
 BILL.' — A record of goods purchased ; service rendered or work done,, 
 showing price and total cost for the information of the purchaser or client, 
 A sales ticket. An invoice. 
 
 BILL — (Com. Law). — In mercantile law the creditor's statement in 
 writing of his claim, specifying the items. 
 
 It differs from an "account stated" in this, that an account stated is a 
 statement which has been assented to by both parties, while a bill is the 
 creditor's statement. 
 
 It has been held in New York that merely presenting a bill, no payment 
 er agreement as to the amount being shown, does not prevent the party 
 from suing for a larger sum. 
 
 245 
 
BILLING. — The operation of making bills. 
 
 The usual method oL billing is to copy the items of the charge from 
 sales book or sales ticket on the bill. A new labor-saving method has, how- 
 ever, been devised, which works very satisfactorily in a number of businesses. 
 By this method the sales book is printed in the form of a bill, each numbered 
 page being preceded by a perforated page. A carbon is placed between the two 
 pages and the bill is made out on the perforated page with a manifold pen, so 
 that the entry in the sales book and the bill are made by one operation. 
 
 BILL BOOK. — A record book in which are entered full particulars of 
 Notes Receivable and Notes Payable. See Bills Receivable Book and Bills 
 Payable Book. 
 
 BILL CLERK. — The clerk who makes out the bills or invoices. 
 
 A bill clerk is quite an important official in large mercantile houses, is 
 well paid and must be very expert at extensions, being able to make them 
 mentally as the goods are called to him. This efficiency can only be obtained 
 by long experience and close application. 
 
 In large establishments these bills are made out at the dictation of a 
 clerk who assembles goods for each customer and dictates to the bill clerk 
 the quantities and prices of goods sold. The bill clerk extends the amounts 
 and either sends a duplicate to the office or enters same in a sales book. 
 When the particulars of goods sold are entered in a sales book, such entries 
 are generally made simultaneously with the making out of the bill by an- 
 other clerk. These two clerks then calculate the extensions independently, 
 the one being a check on the accuracy of the other. 
 
 BILL OF CREDIT— (In Mercantile Law).— A letter sent by an 
 agent or other person to a merchant desiring him .to give credit to the bearer 
 for goods or money. 
 
 BILLS DISCOUNTED. — An account carried to show the amounts of 
 bills receivable deposited with the bank for discount. A column is usually 
 provided in the Bills Receivable Register to record transactions of this 
 nature. 
 
 BILL OP EXCHANGE. — A written order to one person to pay an- 
 other person named on the bill a specified amount on a certain date. A bill 
 of exchange, therefore, may affect three persons, whereas a promissory note 
 affects only two. See negotiable paper, drafts. 
 
 BILL OF EXCHANGE— (Com. Law).— A written order from one 
 person to another, directing the person to whom it is addressed to pay to a 
 third person a certain sum of money therein named. 
 
 An open (unsealed) letter addressed by one person to another directing 
 him, in effect, to pay, absolutely and at all events, a certain sum of money 
 therein named, to a third person, or to any other to whom that third person 
 
 246 
 
may 6rder it to be paid, or it may be payable to bearer or to the drawer 
 himself. 
 
 A bill of exchange may be negotiable or non-negotiable. If negotiable 
 it may be transferred either before or after acceptance. 
 
 The person making the bill, called the drawer, is said to draw upon the 
 person to whom it is directed, and undertakes impliedly to pay the amount, 
 with certain costs if he refuses to comply with the command. The drawee is 
 not liable on the bill till after acceptance, and then becomes liable as prin- 
 cipal to the extent of the terms of the acceptance ; while the drawer is liable 
 to the payee and indorsees conditionally upon the failure of the acceptor 
 to pay. The liabilities as between indorsers and indorsees are subject to the 
 same rules as those of indorsers and indorsees on promissory notes. 
 
 A foreign bill of exchange is one of which the drawer and drawee are 
 residents of countries foreign to each other. In this respect the states of the 
 United States are foreign to each other. 
 
 An inland bill of exchange is one of which the drawer and drawee are 
 residents of the same state or country. 
 
 The distinction between foreign and inland bills of exchange becomes 
 important with reference to the question whether protest and notice are to 
 be given in case of non-acceptance. 
 
 The bill must be written. It should be properly dated both as to place 
 and time of making, but this is not essential to the validity of the bill ; if not 
 dated it will be considered as dated at the time it was made. Bills are 
 sometimes ante or post-dated for convenience. 
 
 The subscription of the sum for which the bill is payable will aid an 
 omission in the bill, but it not indispensable. 
 
 The time of payment should be expressed, but if no time is mentioned 
 it is considered as payable on demand. 
 
 The place of payment may be prescribed by the drawer, or by the 
 acceptor on his acceptance, but is not. generally done, in which case the 
 bill is considered as payable and to be presented at the usual place of 
 business of the drawee, at his residence where it was made, or to him 
 personally anywhere. 
 
 Such an order or request to pay must be made as demands a right, 
 and not as asking a favor, and it must be absolute and not contingent, 
 but mere civility in the terms does not alter the legal effect of the instru- 
 ment. It must contain words requiring payment. 
 
 To make a bill negotiable it must be payable to the order of the 
 payee or to bearer, or must contain words of negotiability. But nego- 
 tiability is not essential to the validity of a bill. 
 
 247 
 
The sum for which the bill is drawn should be written in full in the 
 body of the instrument, as the words in the body govern in case of doubt. 
 And the amount must be fixed and certain and not contingent, and it must 
 be payable in money and not in merchandise; and is not negotiable if 
 payable in "bank bills" or in "currency," or other substitutes for legal 
 money of similar denominations. It is not necessary, however, that the 
 money should be current in the place of payment, or where the bill is 
 drawn, it may be in the money of any country whatever. 
 
 "Value Received" is of no use in a negotiable bill. 
 
 The bill should be subscribed by the drawer, though it is sufficient if 
 his name appears in the body of the instrument ; and should be addressed to 
 the drawee by the christian name and surname, or by the full style of 
 the firm. 
 
 The parties to a bill are the drawer, the drawee, the acceptor and the 
 payee. Other persons connected with a bill in case of a transfer are the 
 indorser, indorsee and holder. All the various parties need not be different 
 persons. It sometimes happens that one or more of the apparent parties to a 
 bill are fictitous persons. The rights of a bona fide holder are not thereby 
 prejudiced, even when the payee and indorser are fictitious or even where the 
 drawer and payee are both fictitious. 
 
 BILL OF LADING. — A form containing a declaration of goods to be 
 shipped, receipt by the shipper, and an undertaking by the shipper for the 
 conveyance of goods to their specified destination. Originally applied only 
 to carriage by ship, but is now a term generally used by railroads. 
 
 BILL OF LADING— (Com. Law).— "The written evidence of a 
 contract for the carriage of and delivery of goods sent by sea." 
 
 "A written acknowledgment of the receipt of certain goods and an 
 agreement for a consideration to transport and to deliver the same at a 
 specified place to a person therein named or his order." 
 
 "A memorandum or acknowledgment in writing, signed by the master 
 or captain of a ship or other vessel, that he has received, in good order, on 
 board of his ship or vessel, therein named, at the place therein mentioned, 
 certain goods therein specified, which he promises to deliver in like good 
 condition (the dangers of the sea excepted) at the place therein a'ppointed 
 for the delivery of the same, to the consignee therein named, or, to his 
 assigns; he or they paying freight for the same," or a similar acknowledg- 
 ment made by a carrier by land. 
 
 A through bill of lading made by a carrier by land is one where the car- 
 rier contracts to transport over its own line for a certain distance certain mer- 
 chandise or stock, there to deliver the same to its connecting lines to be 
 transported to the place of destination at a fixed rate for the whole distance. 
 
 248 
 
A bill of lading should contain the name of the shipper or consignor,, 
 the name of the consignee, the names of the vessel and her master, the 
 places of shipment and destination, the price of the freight, and, in the 
 margin, the marks and numbers of the things shipped. 
 
 Though it is not necessary that the shipper should sign the bill of 
 lading, yet if the terms of the bill restrict the carrier's common law liability, 
 his assent thereto must be shown. This assent need not be express ; it is. 
 sufficiently indicated by an acceptance of the bill of lading containing the 
 restrictions. 
 
 A bill of lading is usually made in three or more original parts, one of 
 which is sent to the consignee with the goods, one or more others are sent: 
 to him by other conveyances, one is retained by the merchant or shipper, 
 and one should be retained by the master. Where one is marked "original" 
 and the others "duplicate," "triplicate," etc., they are all in effect originals. 
 
 Where a bill of lading is given, and accepted without objection, it is the- 
 real contract by which the mutual obligations of the parties is to be gov- 
 erned and not any prior agreement. 
 
 Exceptions in a bill of lading are to be construed most strongly against 
 the carrier. 
 
 BILLS PAYABLE. — A ledger account showing in detail or in totals, 
 the amount of bills payable issued in settlement of liabilities ; the amounts- 
 paid on same and balance due 
 
 BILL PAYABLE — (Com. Law). — A promissory note whereby one 
 has engaged to pay money, or a bill of exchange accepted. It is so called 
 as being payable by the party. An account is usually kept of such bill in a^ 
 book entitled "Bills Payable," and also in the ledger. 
 
 BILLS PAYABLE REGISTER.— The method of keeping Bills' Re- 
 ceivable as described under that heading is appropriate also to the record, 
 of bills payable. 
 
 BILL RECEIVABLE— (Com. Law).— A promissory note, bill of 
 exchange, or other written security for money payable at a future date, 
 which a party holds. So called because the amounts which they represent 
 are receivable by the party. An account of same is usually kept in a "Bills- 
 Receivable" book and the ledger. 
 
 BILLS RECEIVABLE. — A ledger account showing in detail or in- 
 totals the amounts of bills, promissory notes, etc., received from customers- 
 or debtors ; the amount paid on same and balance outstanding. 
 
 The proper manipulation of Bills Receivable Account and Bills Receiv- 
 able Register, or record, is so closely interwoven that it is necessary to treat 
 them together. The proper end in view is to devise a system that shall always- 
 give complete information promptly when required and dispense withneed- 
 
 249 
 
Jess labor. Many plans have been evolved to accomplish this, including the 
 •combination in one book of the features of register and ledger. This will 
 be considered later on under the head of "Bills Receivable Ledger." 
 
 Where the ordinary Bills Receivable Account is carried in the ledger, 
 we would recommend the use of key numbers instead of endeavoring to 
 write the credit directly opposite the charge when the bill is paid. The latter 
 method results in great inconvenience when taking off the trial balance, 
 which is entirely obviated by the use of key numbers. We append an 
 ■example of Bills Receivable account to illustrate the idea. 
 
 o= 
 
 
 A 
 
 
 
 A^cce/va 
 
 6/= 
 c 
 
 % 
 
 
 D 
 
 Cn _ 
 
 D^te 
 
 Nq 
 
 INarrsc 
 
 ISllo 
 
 Key 
 
 AfTXOcjrVi' 
 
 Date 
 
 Wo 
 
 Nlarrxc 
 
 fSl.O 
 
 K«:y 
 
 An-\oar\+| 
 
 
 r 
 
 1 
 
 
 «o 
 
 
 loo 
 
 n(~i 
 
 '2^^ 
 
 p, 
 
 1 
 
 \A/'^ F^nr^wr^ 
 
 .'ift 
 
 - .■=^ 
 
 ?%r><-i 
 
 Ofl 
 
 
 n 
 
 ■? 
 
 (-. r> ^-^rlk 
 
 ;2-2_ 
 
 
 At-tc-1 
 
 t^r~, 
 
 
 A 
 
 ^ 
 
 
 So 
 
 S 
 
 *7or> 
 
 r^h 
 
 
 p. 
 
 ,^ 
 
 WT R^owr, 
 
 .-^.-i 
 
 1 
 
 
 rjo 
 
 n<.+ 
 
 3 
 
 3 
 
 1^ i-i r?^«.-L 
 
 «o 
 
 <S 
 
 .600 
 
 QQ 
 
 Au^ 
 
 3 
 
 4 
 
 -r-r.4T.., 
 
 4^1 
 
 
 Aoo 
 
 
 
 
 4 
 
 
 
 
 
 
 
 A 
 
 <? 
 
 
 jSa. 
 
 1?, 
 
 
 
 
 
 
 
 
 
 
 
 rbtm.p 
 
 2 
 
 _e. 
 
 Cn.Rca-:.!-! 
 
 7s 
 
 z 
 
 :S£2n 
 
 n<? 
 
 _ 
 
 « 
 
 
 
 
 
 
 ^g.Qoo 00 
 
 ^.Z.Soooo 
 
 BILLS RECEIVABLE REGISTER AND LEDGER.— This is one 
 -of the best devices invented for taking care of bills receivable with the least 
 possible amount of trouble. While the form of such a combination book 
 would necessarily be changed to meet the different requirements, the prin- 
 ciple is the same, namely, the addition of two money columns to the ordinary 
 bill book, one being headed credits and the other balance. This practically 
 -eliminates the ordinary Bills Receivable Account from the ledger, as the only 
 postings are made to an account called Bills Receivable Ledger Account, to 
 which at the close of each month are posted the total bills received and the 
 
 
 
 
 •u i.rM«a m.-o Ml 
 
 COM/itON JCNSC 
 
 
 
 
 
 
 
 OMA 
 
 NK 
 
 o/asoeeeMtBL 
 
 S 
 
 QccoreadMaLeooea 
 
 ;- 
 
 rJo 
 
 O-fi 
 
 rKomWhom 
 
 AilcJKsa 
 
 rb^orr^ 
 
 wSe<«a^«)>U 
 
 
 ^^L^^ 
 
 
 
 
 :^C*.„ 
 
 TVo^Whom 
 
 0^ 
 
 m* 
 
 o«),i= 
 
 CioIb^c.:. 
 
 RcmBi>K» 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 total credits. For the efficient use of this method separate columns should be 
 provided for bills receivable in the cash book and journal. The totals of 
 these columns can then be compared with the total debits of the Bills Receiv- 
 able Register as a check on the accuracy of the work. The postings to the 
 credit of Bills Receivable Ledger Account in the General Ledger will also 
 "be made at the end of each month from the columns provided in cash book 
 and journal. By this method the Bills Receivable Ledger does not enter 
 -into the trial balance at all, being represented therein by the balance of the 
 Bills Receivable Ledger Account above mentioned. Example of such a 
 Jedger is appended. 
 
 250 
 
The "when due" column can, of course, be distributed into days if 
 desired. 
 
 The following is an illustration of a Bills Receivable Ledger in a busi- 
 ness where it is the custom to discount all notes received. 
 
 OfiO/ri3 
 
 CjQ£o/-r:s 
 
 »WEA*o«>*/v/Oi_//^ 1 
 
 &Sfe 
 
 No 
 
 "Hma 
 
 Du« 
 
 rj,„ 
 
 Mo+i* 
 
 Cask 
 
 Dafc 
 
 No 
 
 lolio 
 
 D,Wte 
 
 Pcnewal 
 
 C*.U 
 
 Dal nee 
 
 No 
 
 
 Ds+c 
 
 No 
 
 Unpaid 
 
 Diloo 
 
 ■ 
 
 ■ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 BILLS RECEIVABLE SUSPENSE ACCOUNT.— An account to 
 which are transferred doubtful or uncollectible bills receivable, in which 
 account they are retained until it is decided to charge them off to profit and 
 loss. 
 
 BILL OF SALE — (Com. Law). — A written agreement under seal, 
 by which one person transfers his rights to or interest in goods and personal 
 property to another. It is especially used where immediate possession of 
 the goods or chattels cannot be given. 
 
 BLANK ENDORSEMENT'.— The endorsement of a check across the 
 back simply with the name of the person to whom the check is made pay- 
 able. 
 
 BLANKET MORTGAGE.— A general mortgage on all the property 
 of a concern given to further secure bonds already partly secured, to obtain 
 further loans, or secure a reduction of interest. 
 
 BLOTTER. — A term used to signify a rough book of original entry, 
 from which the entries are subsequently copied into another book from 
 which postings are made. Blotters are commonly used for entering sales, 
 orders, cash receipts and payments, etc. 
 
 The use of blotters for cash receipts and payments is particularly inad- 
 visable, as it facilitates fraud. (See Auditing and also Cash.) For the 
 entry of sales and orders they appear under some circumstances to be 
 unavoidable, and in such cases are merely a form of memoranda. 
 
 BOND— (Com. Law). — An obligation in writing and under seal. 
 
 BOND.— A form of negotiable commercial currency issued chiefly 
 by corporations, municipalities, states and governments, but payable at a 
 specified date instead of at demand^ and secured by mortgages, reserve, or 
 sinking fund. 
 
 251 
 
An obligation for the faithful performance of duty or service, secured 
 by property or substantial guarantors. 
 
 Different varieties of bonds will be described under the headings of 
 Coupon, Debenture, Preferred, Dividend, Mortgage, Registered, Guaranty, 
 Bottomry, Municipal, etc. 
 
 Bonds are generally placed on the public market for sale through the 
 medium of a trust company or trustees to whom the mortgage security is 
 executed. As bonds are sold, the amount realized on their sale is charged 
 to cash and the liability credited tb Bonds Payable Account. 
 
 If bonds are sold at a premium the amount of the "premium" will be 
 credited to Bonds Premium Account and go into profit and loss r t the close 
 of the financial year. In like manner if bonds are sold at a discount, the dis- 
 count is charged to Bond Discount Account, and subsequently transferred to 
 the debit of Profit and Loss Account. 
 
 BONDED STOCK REGISTER.— A register of stock imported in 
 bulk or original packages and held in bond for payment of dutiea 
 
 A useful form for .such a register where a large volume of imports 
 must be dealt with is as follows : 
 
 On receipt of foreign invoice and bill of lading the goods should be 
 insured and invoice entered in the "Bonded Stock Book," taking a exact 
 copy of same in francs and centimes, pounds, shillings and pence, marks, 
 pesetas, etc., currency of the country, wheresoever the invoice comes, in the 
 five first columns, and the foreign currency converted into American cur- 
 rency, dollars and cents, then the rate of duty entered according to the cus- 
 tom's rate on each line of the different items of the invoice, and amount of 
 duty of each item carried out in the column for that purpose. 
 
 The detail of freight and charges on bill of lading is then copied under 
 the invoice at the left-hand side, after which the calculation of proportion of 
 freight is made out and inserted opposite each item in the column of charges. 
 After this is done, the office clerk is ready for the custom's entry, which he 
 performs on arrival of goods. 
 
 Proportion of extra charges, such as insurance, wharfage, cartage, etc., 
 could also, in many cases, be calculated in advance, as the rate of same is 
 generally known in advance, especially when such goods have been imported 
 before. This enables the clerk to make the cost price of the goods and gives 
 the importer the great advantage to sell his goods in advance, without 
 having any risk of selling under cost nor losing the sales by making too 
 high price. The cost price of each item is quickly made up, in taking the orig- 
 inal cost of same in dollars and cents, and adding charges and duties, viz. : 
 $820.20 plus $38.53 plus $81.00 equals $939.78 for fifty cases,' thus 
 $187956 per case. The cash discount (5 per cent) is not generally 
 
 252 
 
deducted; this is supposed to cover the interest, insurance and storage on 
 goods for the time they remain unsold, and all other extra losses which may 
 occur, such as shortage, breakage, depreciation, etc. 
 
 After the cost price is established, the clerk proceeds to make the selling 
 price by adding lo per cent, 15 per cent or 25 per cent to the cost, according 
 to the rules of the house. We have, in this case, reckoned the sdling price 
 by adding 10 per cent on the cost, making same in round figures. 
 
 On arrival of goods they are generally put in bond, especially if the 
 amount of duty to pay is large, in order to save interest on same ; cr the duty 
 is paid on them. If put in bond, the number of cases is 'vritten in the col- 
 umn of "Packages in Bond," and when any part of such goods is needed, 
 a custom's entry is passed accordingly, and the number of cases taken out 
 inserted in the little columns of "Packages Out of Bond," with the date of 
 entry over it if desired. This operation is repeated until the last case is 
 taken out, and at the end of every week a recapitulation of goods sold can 
 be made and entered into the column, "Goods Sold." If this is properly 
 
 ffiidfe-. 
 
 •*89^^ (giwou!^ pam^ n ry.^y fi.. Ca 
 
 
 Herna 
 
 Ci«c.-.plTor< of Good. 
 
 of 
 
 
 
 .•', 
 
 Qkw 
 
 of 
 
 :k^ 
 
 
 %^r„ 
 
 i;t? 
 
 hmirt 
 
 n 
 
 
 'Ebl 
 
 
 Goodo 
 
 n.-.».n* 
 
 
 *-. 
 
 
 
 
 
 1,.- ■ ," 
 
 
 
 
 
 t 
 
 
 + 
 
 
 ^ 
 
 H 
 
 
 
 ^^ 
 
 
 
 
 
 ,„„«,». ^--■«-*..'^r^,„ ■ 
 
 ^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ^ 
 
 
 
 
 
 
 o^« - . - . ^Jr-h . 
 
 
 
 nr 
 
 
 
 
 
 
 
 
 
 
 
 J 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ■a-i™T"»t_ 
 
 
 
 ■^ . ■:r'"Y^ F.„. - » 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 -™-,."K.. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ->^1'f- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 inf' 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 IV 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 s-s" i,,-.*:,.*^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ■ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 _ 
 
 
 
 
 
 ■ 
 
 
 
 
 _ 
 
 
 _ 
 
 .,. 
 
 
 
 
 
 kept, the clerk can see at a glance what number of cases there is in bond and 
 in stock, in fact, he could mark it in pencil in the column of "Balance in 
 Bond" and in the column of "Remarks" for goods in stock. This enables 
 the importer to see that no goods have gone astray or been delivered without 
 being charged. The "Remark" column is used to insert "memo ' when cases 
 have been opened, samples given, etc., and to register whatever causes the 
 difference in number of cases imported and the number sold. 
 
 If the duty is paid on goods on their arrival, the number of cases can 
 be entered in the column "Packages in Bond," which can be changed with 
 the pen to "Packages in Stock," and cases sold, entered as above every week 
 in the column "Goods Sold." A small index is pasted inside of the right- 
 hand cover, and journal entries made direct from this book. 
 
 The great advantage of this book is to be able to find all particulars of 
 an importation on a double page, from its smallest to its most important 
 detail, instead of having to refer to several books, which is always a great 
 loss of time and cause of mistakes. It can save the use of extra books for 
 
 253 
 
goods in consignment, as we always have the balance of goods unsold in 
 view. 
 
 BONUS. — A donation by a corporation in consideration of services or 
 value received, or to a corporation in the shape of stock to be sold in order 
 to raise working capital. In the first case, the amount- may be carried in a 
 Bonus Account, to be either closed into profit and loss at the end of the fiscal 
 period or distributed over a number of years, so that the full amount may 
 not be a charge on the first year's profits. The latter course is usually 
 adopted in the case of expenses on account of organization. ' Bonuses of 
 this kind are sometimes paid in stock of the company, the value of which 
 must be disposed of in a similar manner. It has been suggested that where 
 the directors of a corporation do not desire to show a Bonus Account on 
 their books, the assets of the company should be inflated sufficiently to cover 
 the amount, but such a course cannot be recommended or sanctioned by 
 good accountants. 
 
 In the second case illustrated, it is usual to carry stock donated in the 
 Treasury Stock Account until sold, crediting same to an account called 
 "Working Capital." As the stock is sold cash is debited and treasury stock 
 account credited. 
 
 BOOK ACCOUNT. — A ledger account. An account receivable (gen- 
 erally). 
 
 BOOK DEBT.— An Account Receivable. 
 
 BOOKKEEPER. — A person appointed to take charge of the books 
 and accounts of a business. 
 
 While a great deal of good advice has from time to time been given 
 the bookkeeper as to what he should do on entering upon his duties, in the 
 way of verifying the books, cash, assets and liabilities, etc., the average book- 
 keeper will find that his employers do not expect him to take an inventory 
 of the business immediately upon commencing his duties, and would resent 
 any attempt on his part to do so. We recommend, therefore, that the book- 
 keeper should inventory the cash, reconcile the bank account with outstand- 
 ing checks, and take off an independent trial balance. If the trial balance 
 does not agree he should report the fact to his employers, and by means of 
 an error account establish a balance, carrying the difference in the error 
 account until such time as he has had an opportunity to trace the cause of 
 the difference or differences. The new bookkeeper should, of course, make 
 a thorough study of the requirements of the business in which he is employed 
 and of the methods in use, formulate plans for improvements which will 
 give better results and shorten labor and suggest them to his principal as 
 
 254 
 
soon as a favorable opportunity is offered ; thus calling attention to his capa- 
 bilities without causing his employers irritation or annoyance. 
 
 The bookkeeper should always recollect that no matter what system is- 
 employed, it is within his power to make sure of the accuracy of his own 
 work. In the case of a corporation where a number of individual ledgers- 
 are kept and in which adjustment or controlling accounts are kept in a 
 private ledger, with each individual ledger the bookkeeper has only to estab- 
 lish an arbitrary balance in the first place, debiting and crediting a memo- 
 randum account with all the postings that go into his ledger from time to- 
 time, taking these debits and credits from the totals of the books from which 
 he posts. In this way, the bookkeeper can make his own balance of his own 
 ledger whenever he pleases, and is entirely independent of the private ledger 
 so far as the proof of the correctness of his own work is concerned. 
 
 BOOKKEEPING. — ^The science of correctly recording business trans- 
 actions connected with the exchange of values. 
 
 The following points are considered of great importance to the book- 
 keeper, who is recommended to bear them constantly in mind if he wishes 
 to thoroughly understand the "why and the wherefore of a good system of 
 bookkeeping." 
 
 1. "That the record be so explicit that, at any subsequent time, the 
 exact nature of the transaction may be readily perceived ;- 
 
 2. "That the transactions should be so classified that at any time the 
 total result of such transactions, or any particular series thereof, during an3r 
 given period may be readily ascertained ; 
 
 3. "That the amount of labor necessarily involved be reduced to a 
 minimum." 
 
 Books of account may be divided into two classes, (i) the regular 
 financial book and (2) statistical records. The regular financial books are 
 those necessary to carry out the system of double entry, and from these are 
 compiled the main financial statements, such as Balance Sheet, Trading 
 Account and Profit and Loss Account. 
 
 The books of statistical record are devised for the purpose of obtaining- 
 details of cost of production,' selling and general expense, etc. 
 
 The principal financial books consist of sales book, purchase book, 
 journal, cash book, ledgers. 
 
 Samples of statistical records are: Stock ledger, invoice distributioa 
 book, pay roll analysis book, sales recapitulation, and distribution books^ 
 
 etc., etc. 
 
 The following description of a set of bookkeeping devised by aa 
 accountant of considerable prominence may be of interest : 
 
 255 
 
lo. SaIvBS Book. — This book, of course, could be made in two sep- 
 arate ones, if preferred, and it would perhaps be better, if there was more 
 
 •SAUES eoot^ 
 
 follow 
 
 i_=44 
 
 Rl_=cl fcUr.ke, 
 
 DefelU .. 
 
 Ppice 
 
 Itff- 
 
 
 Salcs Lcd^f 1 Ffertfy S. Led^ec= 
 
 Dr 
 
 Cr. 
 
 Dp 
 
 Cr. Mo. 
 
 
 5al=.s 
 
 Rckjmaf •3Ale& 
 
 Rek-nns 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 than one bookkeeper to do the work. The totals of this book are posted thus 
 at the end of each month : 
 
 Dr. 
 Accts. Receiv. S. Ledg. (total Sales) 
 -Accts. Receiv. P. S. Ledg. (total Sales) 
 Mdse. (Returns) 
 JMdse. (Returns) 
 
 Cr. 
 
 Accts. ■ Receiv. S. Ledg. (Returns) 
 Accts. Receiv. P. S. Ledg. (Returns) 
 Mdse. (total Sales) 
 Mdse. (Total Sales) 
 
 
 
 
 
 
 
 
 
 v5>4Z_e^ QEICOQD e>^ P>noVfNC£3 
 
 
 
 
 
 
 
 r-) 
 
 Ppovince. of Qi-te.l3e,c 
 
 Ppoviocte. ofOnfepio pF»ON/ir)c« of Marn^bUft 
 
 WnOLCSAt-C 
 
 FkCTAIL. 
 
 WMOt-ESAUC 1 RETAIL. WMOi.£3AUE 
 
 aCTAIL. , 
 
 ^al^s 
 
 Rcfcnna 
 
 aaU> 
 
 Qeiurnet 
 
 aal«^ 
 
 Re.Te.fai-ie' \5^1ed 
 
 Defcr»nfc 
 
 3ale« 
 
 DcTu f=»os 
 
 sSa «s^ 
 
 Re7upf>«. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 20. Purchase Book. — 
 
 Dr. 
 Mdse. (Total Purchases) 
 •Accts. Pay. (Total Returns) 
 
 Cr. 
 
 Accts. Pay. (Total Purchases) 
 Mdse. (Total Returns) 
 
 
 
 
 PL/Pici-iA&e. e>oo/^ 
 
 
 
 
 
 fK> 
 
 lol IOS> 
 
 CK.% 
 
 De'f^'ils. 
 
 Ppice 
 
 |"tem& 
 
 P<jir'cW<a©e. Led^e.r=> 
 
 Dp. 
 
 Cr>. 
 
 PiJt=.ok. 
 
 RclunruS. 
 
 
 
 
 
 
 
 
 ■ 
 
 
 
 
 30. JouRi^^Ai.. — The total of each column is posted to the Dr. or Cr. 
 side of each of its respective account, as per the heading, in the general 
 
 '•1 
 
 
 
 
 
 
 
 
 
 
 
 
 cJOUOI^^AL. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 i!£SU 
 
 OmLoJ 
 
 &^ 
 
 "t^tJ 
 
 
 c« 
 
 Cl« 
 
 D<^,U 
 
 rsie 
 
 C^ 
 
 fe- 
 
 Acd-Qcc. 
 
 
 0«r).L«J 
 
 ^ 
 
 
 
 
 
 
 
 
 
 
 1 
 
 n 
 
 
 
 
 
 
 
 
 
 
 T 
 
 
 
 
 
 ledger, except the total of the column headed general ledger, which is not 
 •posted. 
 
 256 
 
40. Cash Book. — The total of each column is posted monthly to its 
 account (as it appears by the heading marked with a cross) in the general 
 ledger. The total of general ledger column is not posted. 
 
 
 
 
 oecc 
 
 yp7-J 
 
 
 
 
 
 
 
 
 
 CA.»« 
 
 
 
 / 
 
 
 
 Boon 
 
 
 
 
 
 1 
 
 
 O/^auosiTMsr 
 
 jTJ 
 
 
 <• 
 
 
 Dtdto 
 
 i>b<U 
 
 6L 
 
 ro!« 
 
 c« 
 
 a,i«Lcd#.- 
 
 AniTQms. 
 
 Fi-chU. 
 
 way 
 
 C>en'L«J 
 
 CMt):blra Qalanm 
 
 
 CK*o DebiU 
 
 rsi.o 
 
 :r 
 
 
 J}ato» L..J*e- 
 
 
 OpilJ.=d^ 
 
 i:.p-« 
 
 Ac^lW 
 
 
 /i^fc 
 
 ^lls. 
 
 
 .. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 .w 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Column No. 2 on the Dr. side and 3 on the Cr. side, should be posted in 
 red ink, so as to distinguish them in the ledger, when making statements; 
 from Mdse. or cash items. Besides, columns No. i and 3 on the Dr. side 
 shows you what has been collected on open accounts during the month and 
 No. 2 what proportion has been paid on account, on notes. 
 
 Da-tea 
 
 Defalls Elioo 
 
 Ck 
 
 Dp, 
 
 CK 
 
 Cr=.: 
 
 CK 
 
 Df! Dal. 
 
 CK 
 
 Cp.Dal 
 
 RernapKe. 
 
 
 
 ._ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 70. The column headed "Remarks" in the Sales Ledger, is merely to 
 keep a memo of the notes given by customers and how same are met at 
 maturity. 
 
 80. The Petty Sales Ledger. — This ledger is for customers who 
 buy only a few items during the year and are generally, though numerous, 
 small amounts and not settled by notes. We allow several of these accounts 
 in one page. There is an index at the bottom. 
 
 PcTT^ 3AUCS t-cbcea 
 
 DaTes. 1 N£>rrica> 
 
 A.cldpefi.& 
 
 foMO 
 
 CK 
 
 Dro CK 
 
 1 C... 
 
 Ck 
 
 Dp.Dal.|CK 
 
 Cp&al. 
 
 a|e> 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 c 
 
 D 
 
 E 
 
 r 
 
 
 
 r-l 
 
 1 
 
 «J 
 
 k| I_ 
 
 M 
 
 M 
 
 
 
 p 
 
 Q 
 
 5J 
 
 s\ 
 
 T 
 
 u |v 
 
 " 
 
 X 
 
 V 
 
 2 
 
 90. Of course in making the trial balance the whole amounts must be 
 taken. 
 
 100. "ProoE." — The object of this is plain enough not to need any 
 further explanation than those already given by the headings or the writings 
 in the margin. Every ledger, as you can see, may be balanced separately, 
 and besides, having an Account Payable and Receivable, acct. opened in the 
 general ledger, a trial balance may be made in a very comparatively short 
 time. Now, should we desire to subdivide the expense account or keep 
 the mdse. account by departments and make only one posting a month for 
 
 257 
 
each, we can do it by means of an abstract sheet, with the proper headings ; 
 and, items taken from the sales book for the sales, from the purchase book 
 for the purchases and so on, the total to be transferred from these abstract 
 sheets to the book to which it belongs, at the end of the month. Should it 
 happen that we sell to some of our creditors, we open him an account in the 
 sales ledger and when a settlement is made, we transfer one account to the 
 other through the journal. 
 
 " ' (V) 
 
 i«»»=J60/=- 
 
 
 5aleeLjec)^'n. 
 
 e+y3aleaL«J 
 
 FiK.LfdJ Gen.Led 
 
 
 Dr. 
 
 Cr> 
 
 Dr- 
 
 Cr. 
 
 Dp 
 
 Cp 
 
 Dp 
 
 Cp 
 
 AnnourC)» Tr»on^ }aaY^ morn?? . 
 • cJour>nat • 
 
 
 
 
 
 
 
 
 
 Any entry through the journal, concerning notes, should be posted in 
 
 red ink. Should we wish to know the exact amount of sales on credit, 
 
 wholesale or retail by Provinces, we can fill in the form marked "By 
 
 Provinces" from the sales book for sales on credit or from the counter 
 
 checks for cash sales. 
 
 * *. * 
 
 One of the first essentials of accurate bookkeeping is for the proprietor 
 of a business to have a right conception of his own relation to it. On no 
 account must the business be considered a milch cow, nor must the propri- 
 etor's own personal expenditure be looked upon as of no importance. It 
 should be regarded more in the light of a trusteeship than of a financial 
 speculation, but the cautious methods of the former should on no account 
 be allowed to cripple the enterprise of the latter. Looked at in this light an 
 accurate and adequate account would naturally require to be kept of every 
 transaction, and a proper record preserved of the growth and development 
 of the business. But before this can be done the A, B, C, of book-keeping 
 must be learned and the right use of various terms understood. 
 
 Speaking generally, every accretion to a business and every purchase 
 may be expressed by the sign -f plvis, every diminution or sale by the sign 
 — minus ; thus we establish, as it were, the two sides of an account Dr. or 
 plus, and Cr. or minus, and we understand to debit is to charge or add and 
 that to credit is to subtract or allow (i) Since accretion equals plus and 
 diminution equals minus, it follows that a business is debtor to what it 
 acquires and creditor by what it distributes or disburses, that is to say, 
 that it has to account for capital introduced and goods purchased by capital 
 expended, by sales, and by expense (2). 
 
 m . . ^'■- Cr. 
 
 To capital Bv Capital expended 
 
 To Purchases By Sales 
 
 To Profit By Expenses .'.'.'.".'.'.'.'.'.'.'.'.'.'.'.' 
 
 25S 
 
Now as there are always two parties to a transaction, a seller and a 
 buyer, and since it is one of the essentials of accurate book-keeping that every 
 transaction should be recorded in its entirety, it follows that two accounts 
 must be opened (one for the seller and one for the buyer), and the transac- 
 tion as it affects both parties be recorded (3). Prom this we get the rule- 
 that, since it must be a debit or an accretion in the one case and a credit or a. 
 diminution in the other, "every debit must have a credit and every credit a 
 debit." To take an example, Jones buys from Robinson 60 yards of material 
 at 2 1 -a yard, Jones opens two accqunts in his ledger, debits his own account, 
 which he will style Goods Account or perhaps Material Account, and credits- 
 Robinson's account, 
 
 JONES (GOODS) ACCOUNT. ROBINSON (PERSONAL) ACCOUNT 
 
 Dr Cr. 
 To Purchases, £6 o o By Goods £6 o a 
 
 and from this we get the feature of all true trial balances, the total amount 
 of the debits equal to the total amount of the credits. There are several 
 methods of effecting this cross entry, but whatever be the method adopted 
 the rule must be unquestionably accepted and inflexibly followed. Jones, it 
 will be noticed, instead of opening accounts in his own name for purchases 
 for the business opens impersonal accounts, with such headings as Materials, 
 Hosiery, etc. ; these several accounts, however, bear the same relation to the 
 business in respect to Purchases, Sales, Profits, etc., as Jones himself (5), 
 
 Dr. Cr. 
 
 To Purchases By Sales 
 
 To Profit By Stock 
 
 the difference between the two sides of each account being the gross profit, 
 the amount of which is carried to the credit of Trading or Profit and Loss 
 Account. Against gross profit will be charged all the expenses of the busi- 
 ness, such as rent, rates and taxes, salaries, etc., separate accounts being 
 opened for each of these. 
 
 In the final accounts of the business or of the financial year the expense 
 accounts will be grouped into one account — ^the general profit and loss 
 account of the business ; or, what is better, the latter can be split up into 
 two accounts, termed respectively the trading account and the profit and loss 
 account. If this latter method be adopted, all impersonal accounts relating 
 to the commodities, both debit and credit, in which the tradesman deals, 
 and all impersonal accounts, the particulars of which enter directly into the 
 cost of production, will belong to the trading account — and all impersonal 
 accounts representing the expenses incurred in carrying on the business, 
 and all gains incidental to it, will belong to the profit and loss account ; the 
 net balance of this latter account being the net profit or loss for the period. 
 
 259 
 
The distinction, however, between the expenses incurred in the carrying on 
 of the business and costs which enter into the production of the goods must 
 be firmly borne in mind, otherwise an accurate statement of the year's trad- 
 ing will 43e impossible. 
 
 One rule only need be remembered so far as the keeping of the profit and 
 loss account is concerned — all payings out and losses are debits, everything 
 received or gained is a credit. This arises from the fact that you debit your- 
 self or goods account with all you acquire, and credit yourself or sales 
 account with all you sell or dispose of. If a loss be effected in the operation 
 it will be an excess debit, that is the amount by which the debit of the whole 
 transaction exceed the credits, or if a gain vice versa. The distribution of the 
 net gain or loss will be governed by the nature and condition of the business ; 
 generally speaking, the profit will be carried to the credit or the loss to the 
 debit of capital account in a private business, whilst in the case of a public 
 company the profit will figure on the debit side of the balance sheet, to be 
 afterwards dealt with in general meeting ; or the loss to the credit side, to be 
 afterwards severely commented on by both interested and uninterested 
 parties. 
 
 Now we come to the balance sheet — the final object of all book-keeping. 
 First of all remember that it is a balancing sheet, and therefore in the result 
 the two sides must balance. Secondly, remember that it is not a mere state- 
 ment of liabilities and assets, but a complete financial statement of the posi- 
 tion of a business, therefore employ the terms Dr. and Cr. and not liabilities 
 and assets in the heading thereof. Thirdly, rem.ember that it is a financial 
 statement of a business as at a certain date, therefore that date must be stated 
 in the heading, and all transactions must be carried and calculated up to that 
 date. Fourthly, remember that the items of the balance sheet are debit and 
 credit balances affecting capital, and that in accordance with (2) debit bal- 
 ances of the business, representing as they do capital expended, will appear 
 on the credit side of the balance sheet and credit balances oil the debit side. 
 Fifthly, remember to arrange your debits in order of priority of claim, and 
 your credits in order of easiness of realization; thus, in the latter, cash in 
 hand should come first and the other items in the order in which you would 
 readiest realize them. 
 
 Thus far we have treated of some of the essential principles of correct 
 account-keeping, it behooves us now to inquire in what order a oet of accounts 
 should be opened and why. When in individual contemplates starting a 
 business the first necessity is capital, therefore, capital account should come 
 first ; if the principal here suggested be followed throughout it will readily 
 be understood that a banking account, lease, goodwill, fixtures, furniture, 
 and stock-in-trade accounts follow in a natural sequence. Order is heaven's 
 
 260 
 
first law, and if book-keepers desire a heavenly tranquility to reign over their 
 Virork they must not be afraid of paying a compliment to their maker. 
 ^Recapitulated we get in Jones' books — 
 
 (i) Dr.=plus=add=charge. Cr.=minus=subtract=allow. 
 
 (2) Dr. Cr. 
 
 To Acquirements. By Employments. 
 
 (3) ROBINSON (from whom Jones Cr. , 
 
 buys). By Goods 
 
 GOODS. 
 Dr. 
 
 To Purchases 
 
 (4) SMITH (who buys from Jones). 
 Dr. 
 
 To Goods 
 
 GOODS. 
 
 Cr. 
 By Sales 
 
 (5) GOODS. 
 
 Dr. Cr. 
 
 To Purchases By Sales 
 
 To Gross Profit By Stock 
 
 (6) TRADING ACCOUNT. 
 
 Dr. Cr. 
 
 To Net Profit. By Gross Profit from Goods Account. 
 
 To Expenses. 
 
 Thus we get the framework of a set of accounts. 
 
 BOOT AND SHOE ACCOUNTING.— A very important part of 
 accounting for the boot and shoe business consists of records of cost of pro- 
 duction into which the following enters : 
 
 Rent (this is either in the shape of some money actually paid out, if we 
 hire, or of capital absorbed and depreciation if we own land and buildings). 
 Taxes, insurance, machinery, tools and repairs (depreciation and wear and 
 tear), upper leather, tappings and linings, sole leather, miscellaneous sup- 
 plies. (This account covers all materials, not leather, that enter into the 
 construction of a shoe, and the cost of which can be found readily and figured 
 separately in each case of shoes, such as counters, gore, strappings, etc.) 
 Findings (materials common to all shoes, such as gum, trag., blackings, box 
 paper, lasting, tacks, etc.). Boxes and cartons, power, heating and lighting 
 (materials consumed for these purposes, coal, waste, lubricating oils, etc.) ; 
 royalties, incidentals (office supplies, postage, etc.) ; freight and truckage, 
 labor. 
 
 For the purpose of arriving at the cost of labor it will be found neces- 
 sary to divide into day and piece, and also to subdivide into the general 
 operations performed in the construction of a shoe, viz. : Cutting upper, 
 
 261 
 
crimping, fitting, cutting soles, making heels, bottoming, finishing, treeing, 
 packing and shipping. 
 
 Power, heating and lighting (wages of engineers and firemen) ; general 
 expenses (wages of watchman, porter, etc.) ; supervision and general office 
 expense (salaries of superintendent, foreman, book-keeper and clerks. So 
 much of this account as belongs to the expense of selling the goods will be 
 carried to that account in closing). 
 
 In addition to the divisions here shown, it may be convenient in some 
 instances to make still others, but in most cases these are all that will be 
 required. In some shops an account is kept with lasts, instead of charging 
 to tools and repairs. If pegged work, as well as stand screw and sewed, is 
 made, this will be found the more correct way, for the reason that when 
 wood-bottom lasts are used for the pegged the cost is great enough to form 
 a separate charge to each case, while the expense of lasts for stand, screw 
 and sewed work is very small. 
 
 In keepong account with employees who work by the piece, the coupon 
 tag system is the most universal. The stub end of the tag should have on 
 it a full description of the shoe, the coupon number, the customer's case 
 number, and his name or the number by which he is designated in the office. 
 It is also a good plan to have some design running through all the coupons 
 to guard against counterfeiting. It is very convenient to use tags of differ- 
 ent colors to represent different kinds and grades of work. All the coupons 
 should be numbered to correspond with the working number of the case. 
 This is the consecutive number, running through the year in the order in 
 which the orders are entered in the tell-tale hereafter described. 
 
 These coupons are cut by the different operatives when they perform the 
 work, and are tied up by them, each kind by itself, in packages' of 25, 50 or 
 100, all properly arranged for convenience in counting. A blank is provided 
 upon which the workman makes out his account, and which he returns to 
 the office with his coupons at the close of each pay term. After the coupons 
 are counted and compared with the workman': bill, they are again tied to- 
 gether, the workman's name written upon the bunch, and they are then 
 safely locked up until settled for, when they are taken to the boiler room 
 and burned. When this is done, some reliable person should go along and 
 see that they are all destroyed. The prices, extensions and footings on the 
 workman's blank are now gone over, and all necessary corrections made. 
 The day help also make out their accounts on the same 'blanks, which are 
 approved by the foreman and sent to the office. They are now separated so 
 as to conform to the different accounts to which we desire to charge each 
 division, arranged alphabetically and entered on the pay-roll book, leaving 
 two or three lines between each account. 
 
 262 
 
As to the method of paying, there are many varying opinions. If the 
 workmen are to come to the office and to sign the pay-roll, the putting of the 
 money in envelopes is simply a waste of time, for it takes nearly as long as it 
 does to pay off, and there is no reason why the clerk in an office should not 
 be as able to pay out money without errors as the paying teller of a bank. 
 But if the superintendent is up to date he will demur at the time wasted by 
 the operatives in coming to the office, and will insist that they shall be paid, 
 not only in their room, but at their benches. In this case, it will be necessary 
 to put the money in envelopes. As the pay-roll is the pay clerk's only voucher 
 for the money paid, he should, for his own safety, have the signature ot some 
 one to the payment of each item. 
 
 The following is a description of a system of accounting used in a 
 large jobbing and manufacturing shoe business : 
 
 If we take the transactions in their logical order we will commence 
 with the treatment of invoices for goods received. The buyer has given 
 the accountant his duplicate from which to check. As the invoices are 
 received they should be checked against this duplicate to see if the quantities 
 and price are correct. The best way I have found to do this is to have paper 
 with several columns on it, each headed with a price. In each column enter 
 the number of pairs bought at each price in black ink, giving reference to the 
 order number. As the goods come in, enter the invoices by prices in red ink, 
 and when the shipment is completed the black and red ink totals in each 
 column should agree. 
 
 As fast as the invoices are checked against these price sheets they 
 should be filed in alphabetical order for the benefit of the receiving clerks. 
 When the goods are received, the receiving clerk should take the invoice 
 and note the day received, the number of cases, his name, and hand it to 
 the accountant for entry. It is my experience that the value of a vducher 
 system is as .great in this line of business as in any other. Set aside several 
 voucher numbers to be used in paying for goods, enter the name, address, 
 etc., in the voucher record, but do not enter the amount until enough invoices 
 have been passed upon for payment to fill it. The voucher system would be 
 too cumbersome if we attempted to make a voucher for each invoice, so after 
 entering the name and address of the factory on the voucher in the usual 
 manner, enter the date and amount of the invoice, deduct the discount and 
 enter on some form of tickler the date the bill is due. As fast as bills from 
 the same houses are passed upon, enter them in order upon the voucher 
 until it is full or the books are closed for the month. This avoids the use 
 of so many vouchers as would be necessary if each invoice required a 
 separate voucher. The question will arise at once as to how we get receipts 
 if we keep the voucher in the office, as would ncessarily be the case under 
 
 263 
 
this plan. When we first commenced this plan of paying we found that 
 many factories did not know the use of a voucher, and in the face of the 
 usual form of letter which always accompanied the voucher, they seemed to 
 think it was a sort of statement sent for their benefit and did not return it, 
 so where we pay even a single item now we usually send our draft accom- 
 panied by a form of receipt which fits our voucher, and we now have no 
 trouble, for everyone knows the value and purpose of a receipt, even if they 
 haven't heard of a voucher. 
 
 It will thus be seen that we do not have any use for the old style of 
 filing invoice, viz., the scrap book. The voucher system keeps the invoices 
 where they belong, in the office, except for such a time as they are needed 
 for checking in by the receiving clerk. With any system they cannot be 
 found without an index, and it is as easy to find the voucher number as it 
 is to find the page in the scrap book, where the invoice is pasted. 
 
 Another great point in the use of the voucher system I will mention, 
 although it is mentioned wherever the use of a voucher system is mentioned, 
 is the doing away with all accounts with all houses supplying us with goods. 
 
 By having an index to the vouchers we have as good a record of the 
 transactions with each factory as we have any use for. The voucher system 
 shows the amount of each invoice it covers, while the receipts attached show 
 the dates of payment. If it is desired to get the amount of business done 
 with each house it is only necessary to get the numbers of the vouchers from 
 the index and add the amount from the voucher record. Right here it 
 might be well to mention a good form of voucher index. Instead of the 
 usual patent and usually expensive index we use an ordinary record book, 
 which our stationer indexed for us in the usual way. We then ruled it ofif 
 into twelve columns, and after leaving a place for the name, one of these 
 spaces being for eachmonth of the year. This is a great aid in finding the 
 desired voucher. 
 
 For the orders received, we commence by giving them first to a clerk 
 for entry; this clerk enters the name, address, date received and date 
 wanted, and giving it a number, which we call a "house number." This 
 house number is a very handy means of identification later, as there will 
 often be several orders from the same customer in the house at the same time 
 and the number distinguishes them. 
 
 The house number record is indexed by card index as to towns, then 
 names, the house numbers. After the orders are recorded they go to the 
 credit men, who pass on them before they leave the office. 
 
 After the orders pass the credit man and bear his approval they go to 
 the warehouse to be filled. After filling they go to the invoice clerk, who 
 invoices them, taking a carbon copy and puts the house number on the carbon 
 
 264 
 
for use in filing. The invoices are carefully gone over by a second clerk 
 before they are allowed to leave the house. The next step is to enter the 
 date, house number and amount on wide sheets, having four more columns, 
 that we have salesmen. These columns are headed "Job Stock," "Rubbers," 
 "Findings," and "House." The first three columns vgive us the credit - 
 account to which the totals at the end of the month are posted. The fourth 
 column is used in connection with the columns headed with the names of 
 the various salesmen. Every item invoiced is credited either to the sales- 
 man into whose territory the goods go or to the house for such items as. 
 prepared freight or sales not credited to salesmen. The totals of the houses 
 and salesmen's columns will amount to the same as the total invoices. There 
 is also a column on this sheet for the ledger folio. The items are posted, 
 to the ledger' from the carbon copies and the folio entered on the distribution 
 sheet just mentioned. This distribution sheet serves the purpose of a jour- 
 nal and gives a method of arriving at the salesmen's credits in a way that 
 defies criticism or error in the amount, as everything that goes onto the 
 books must show up in the salesmen's column or the sheet will be put of- 
 balance. 
 
 At the end of the month these sheets, showing the salesmen's credits, 
 go to stenographers, who list each man's sales, giving date of shipment, name- 
 and address of the customer and the amount of the invoice. If the selesman 
 is paid on a commission basis, the statement can be filed with the voucher, 
 showing how the amount is arrived at on which the commission is paid. 
 
 The carbon copy of this statement is sent to the salesman for his infor- 
 mation, together with a statement of his account with the house, so that 
 he may check it up and be thoroughly satisfied with it from month to month, 
 and not wait until the end of the trip before the account is rendered. 
 
 The customers' ledger is arrangel alphabetically, like an index, so that; 
 it is not necessary to have the usual index. This form, together with the: 
 card index for the house number records by towns, gives us a complete 
 index of our customers by name and by town. By making up my statements 
 in part during the month it is possible to get them out on the first and to- 
 close and balance the customers' section. 
 
 As to the general books, I find that in a large jobbing and manufacture 
 ing business a great many expense accounts are advisable. In arrang- 
 ing my general ledger I grouped the accounts as their relation to each other 
 rather than alphabetical order. My first account is, of course, "Capital 
 Stock." Next follows "Vouchers Payable," "Discount," "Bills Payable," 
 "Cash," "Interest," "Exchange," "Real Estate and Buildings," "Furniture 
 and Fixtures" and "Salesmen's Equipment." Following these columns the 
 factory investment, represented by such accounts as are indicative of the 
 
 265 
 
TToom and the character of the investment, such as "Cutting Room Fixtures," 
 "Cutting Room Tools," and following with the investment in each depart- 
 ment of the factory. By having numerous accounts it is easy to trace the 
 •cost of each department, and if taking an inventory of machinery by rooms, 
 see how near it comes to the original cost. We find it advisable to keep 
 the following expense accounts : Advertising, General Traveling expenses, 
 Salaries, Stationery and Printing, Legal expenses, Office expenses and Sup- 
 .plies, Insurance, Miscellaneous General expenses, Selling expenses, Light, 
 Fuel, Water, Warehouse expenses and Supplies, Warehouse labor, and add 
 more from time to time. 
 
 The use of some of these accounts will be apparent from their names, 
 but a brief explanation of some of. them may not be out of place. The 
 account "General Traveling Expenses" is charged with the expense of the 
 .buyer and traveling expense other than the salesmen's traveling expenses. 
 Miscellaneous general expenses includes such items as dues to commercial 
 bodies, subscriptions to public objects aside from charities, etc. 
 
 The stock bought is charged according to the nature of it to "Job 
 Stock," "Rubber Stock" or "Findings." Separate accounts are also kept 
 for freight and one for drayage, but the latter item is not divided. The sales 
 :are credited to "Job Sales," "Rubber Sales" and "Findings Sales." 
 
 F. M. Weaver. 
 
 BOSTON BANK LEDGER.— See Balance Ledger. 
 
 BOUGHT INVOICE BOOK. See Purchase Record. 
 
 BRANCH BUSINESS ACCOUNTING.— The treatment of accounts 
 with branches is frequently the subject of inquiry. We think a good plan 
 is to treat a branch somewhat as a department is treated in a department 
 store. 
 
 The question frequently arises as to whether it is best to charge the 
 (branch businesses with the goods at cost or at list. While it may be easier 
 to charge at list prices, it would seem better to charge at cost, as it then 
 becomes a simple matter to determine the profit made by each branch at 
 any time by taking inventory of stock on hand. When branches are charged 
 -at list they are treated as customers and the profit made by branches is 
 merged in the general profit of the entire business. This practice renders 
 it difficult to ascertain the individual profit made by each branch and is, to 
 that extent, objectionable. 
 
 Open an account called "Branch Account." Charge this account with 
 all goods furnished to the branch at cost, and credit a special "Stock" (or 
 Mdse.) account. Let the branch store book-keeper credit "Main Store" 
 .account and charge "Purchase" account (or Mdse.). 
 
 266 
 
Cash advanced to branch store will be charged to "Branch account" 
 and cash received from branch store credited to "Branch account." The 
 branch store boolcTkeeper will debit and credit main office accordingly. 
 
 Branch store sales will not be credited in the main office books, nor 
 accounts opened in the main office books vHth branch store customers, but 
 a report of sales, cash receipts, and expenditures should be rendered weekly 
 to main office by branch store. 
 
 At the end of the month, therefore, the difference between charges and 
 credits to "Branch account" will represent the main office investment in the 
 branch store, and the balance of "Main Office" account in the books of the 
 branch store will represent the branch stores' liability which will be offset 
 by inventory, and cash on hand, and accounts receivable. 
 
 The branch store's trial balance can then be incorporated with the main 
 office trial balance, and combined and separate trading statements, balance 
 sheets, and profit and loss accounts formulated giving all statistics required. 
 
 BALANCE. 3n£:CT 
 
 D«5Ciaip7ion 
 
 Xfel 
 
 Moin 
 OfHce 
 
 C l^icaao 
 
 Plj.la 
 
 n^sscr^pTior^ 
 
 Tdfal 
 
 Ma 
 
 
 
 CKicaxSo 
 
 Pl,Ja 
 
 
 
 
 
 
 / 
 
 
 
 
 
 
 
 
 
 / 
 
 
 
 
 At the end of the year the special "Stock" account in the main office 
 books must be closed out against "Inventory" and "Purchase" accounts, and 
 on the separate trading statement should be deducted from the total of inven- 
 tory and purchases for the year. 
 
 In closing the branch books, the balances of all profit and loss accounts 
 will be transferred to main office account, thus leaving only the balances 
 of assets and liabilities accounts on the branch ledger. 
 
 Where all the books are kept at the main office and all collections made 
 by main office, the only account kept with the branch office is a record of 
 stock furnished and sold, the balance showing amount of goods on hand. 
 See also "Agents' Accounts." 
 
 Where goods are frequently purchased by main offices for branches, a 
 purchase record should be provided with special columns for each branch, 
 the totals ef these columns being debited to the branches at the end of each 
 month. 
 
 Where the branch is instructed to remit to the main office all cash 
 receipts, it is usual for the branch to be allowed a specified sum for petty 
 ■disbursements and to treat the branch generally on the same principle as 
 
 267 
 
what is called the "imprest" system of petty cash. The branch renders an 
 account of its expenditures to the main office, together with vouchers, and 
 after same has been approved the main office sends the branch a check for 
 the amount of its expenditures, thus restoring the cash on hand at the 
 branch to its original amount. 
 
 Where the books of account are kept at the main office, it is usual to 
 furnish the branch with loose cash sheets and journal sheets for use in mak- 
 ing reports. The branch should retain carbon copies of such reports or 
 press copies. 
 
 The amalgamation of branch office trial balances with the main office 
 trial balances is illustrated below. 
 
 BRANCH OFFICE BALANCE SHEET. 
 
 ASSETS. LIABILITIES. 
 
 Accounts receivable $ 6,250 00 Accounts payable $ 1,000 00 
 
 Inventory 12,500 00 Main office 21,750 00 
 
 Cash 2,50000 Surplus 3,50000 
 
 Fixtures 5,000 00 
 
 $26,250 00 $26,250 00 
 
 MAIN OFFICE BALANCE SHEET. 
 
 ASSETS. LIABILITIES. 
 
 Real estate $ 12,500 00 Capital stock $ 75,000 00 
 
 Cash 10,000 00 Accounts payable 10,000 00 
 
 Fixtures 6,250 00 Surplus 10,000 00 
 
 Inventory 25,000 00 
 
 Accounts receivable 19,500 00 
 
 Branch office 2i,750 00 
 
 $95,000 00 $95,000 00 
 
 COMBINED BALANCE SHEET. 
 ASSETS. LIABILITIES. 
 
 Real estate $ 12,500 00 Capital stock $ 75,000 00 
 
 Cash . . .| .' 12,50000 Accounts payable 11,00000 
 
 Fixtures 11,25000 Surplus ^ 13,50000 
 
 Inventories 37,Soo 00 
 
 Accounts receivable 25,750 00 
 
 $99,500 00 $99,500 00 
 
 BREACH OF TRUST— (Com. Law).— The wilful misappropria- 
 tion, by a trustee, of a thing which has been lawfully delivered to him in 
 confidence. 
 
 The distinction between larceny and a breach of trust is to be found 
 chiefly in the terms or way in which the thing was taken originally into the 
 party's possession; and the rule seems to be, that whenever the article is 
 
 268 
 
to be obtained upon a fair contract not for a mere temporary purpose, or 
 by one who is in the employment of the deliverer, then the subsequent mis- 
 appropriation is to be considered as an act of breach of trust. This rule, 
 however, is subject to many nice distinctions. 
 
 BREWERY ACCOUNTING.— Although special treatises have been 
 published on the subject of accounting for the brewery business, there really 
 seems no necessity for such a work, as the problems confronting the brewery 
 book-keeper are simple, and there is nothing unusual to contend with except 
 perhaps in the auxiliary records. 
 
 Special ledgers are frequently used on account of the value of the pack- 
 ages in which the beer is delivered, the customer standing debited with the 
 cost of the same until returned. The sales book must be similarly ruled, 
 i. e., with special columns showing the size and value of package. In Great 
 Britain some of the breweries give each cask an individual number and keep 
 a special cask register with index so that the location of a cask can be ascer- 
 tained at any time. 
 
 Repairs to casks or barrels is also a very important item in the econom 
 ics of the brewery business, and is treated similarily to repairs to machinery 
 in a manufacturing business. 
 
 The purchase record for a brewery should be provided with special 
 columns for the distribution of the ingredients used in the manufacture of 
 beer, such' as malt, hops, grits, sugar, etc. 
 
 We attach samples of tabular brewery ledger and brewery sales book. 
 
 
 
 
 
 r*b 
 
 'netfy 
 
 
 CD< 
 
 3C 
 
 ro 
 
 WapoK, 1 
 
 ao 
 
 
 
 
 
 '-) 
 
 Lroc 
 
 No. 
 
 
 f^arri, 
 
 Amount 
 
 Dafe. p h 
 
 ifcLP 
 
 ^ 
 
 i 
 
 i* 
 
 L.r 
 
 C". 
 
 Dal 
 
 a,t^ ii! 
 
 iiLP 
 
 Di.. 
 
 D=fe ,i 
 
 as LJ- 
 
 c 
 
 B=1. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Months, cf 
 Api*,May. 
 StJanc on 
 PigM- hand 
 
 ^r - 
 
 We^K 
 
 endPH"^ Ti:h.&^ ISOl 
 
 
 
 
 
 
 
 nsBui-Aa Salcs Boon 
 
 
 
 
 
 
 
 
 
 
 
 W 
 
 Nlam&» 
 
 -AdJpcaoc* 
 
 
 
 
 ™ V 
 
 
 T>i 
 
 ■V 
 
 r,i 
 
 ^■»' 
 
 ■n 
 
 
 
 
 H..=e. 
 
 i_.r 
 
 AiTiOuri^ 
 
 R,fc,o<. — 
 
 
 ^ 
 
 ^ 
 
 £i 
 
 •& 
 
 a 
 
 i. 
 
 62 
 
 s 
 
 5 
 
 as 
 
 .a 
 
 . « 
 
 ■i 
 
 i 
 
 4 
 
 i 
 
 i 
 
 
 ^ 
 
 a 
 
 fe 
 
 R=,cc 
 
 i_r 
 
 Arrxoi^n+ 
 
 aln. 
 
 *M>, 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 A good arrangement for the sales book is a tabular form so that each 
 week's sales to each customer can be totaled and posting made once a week 
 instead of posting the daily items. By this plan a separate column is pro- 
 vided for the different sizes of packages in which the beer is sold, together 
 with total columns in which to assemble the amounts at the end of each week. 
 
 269 
 
The footing of the package columns will then give the total of each kind 
 of package sold during the week, and the footing of the total money columns 
 will give the gross sales for the wepk. 
 
 Collections are frequently made by the drivers of the delivery wagons, 
 in which case a system of check must be established in order to ascertain that 
 everything taken out in the wagons is properly accounted for.' Such a sys- 
 tem is described under the head of "Bakery Accounting." 
 
 As agencies form a very important feature of a brewery business, it is 
 usual to keep a separate agency ledger, carrying an adjustment, or controll- 
 ing, account for same in the general ledger and providing special columns 
 for same in cash book and journal. See "Adjustment Account." 
 
 No I Sale» R^corad OP &loffep 
 
 putt AgC.Oor>i- 
 
 Ya 
 
 Ya 
 
 5. 5.5rfMlK 
 
 tJ.JJor\eft 
 
 a Ox PtaXTpa Rile 
 L L. l_,tt)» 
 
 1 Di.Ofe n»t Step 
 
 & & & POWP* 
 
 2 D= PTs DRibboi> 
 
 I. 
 
 JD^ 
 
 DDDay 
 3 Dz. Ofe. Xtiis, Rile. 
 
 CCOole 
 I Di Qts.PSIoppen 
 
 s.Gsf.^BofelSTal 
 
 22. 
 
 7S. 
 
 Z7S 
 2 50 
 I 75 
 
 I SO 
 
 S5C 
 
 The following is a system for keeping record of cases and bottles, the 
 same being charged to the customers at actual cost, designed to show the 
 amount (not quantity) of cases and bottles outstanding, on hand, etc. 
 
 Exhibit No. i shows the daily sales record or "blotter" with three- 
 column ruling, for sales, case and bottle account, and total Each charge 
 
 No 2. RetopH PecoKj-fci&e&'Bo-ttk^') 
 
 arte 
 
 
 1 
 
 Y. 
 
 D B Dl»owr\ 
 2Dz Pta. 
 CCCoItt 
 
 IDs: Ote.. 
 
 2 D= 01S. 
 
 3 0o=c. Pffc.. 
 L.U.l_;-tHe.. 
 
 1 Do^.Ots 
 
 D DDay 
 3 Do=t. PtS. 
 
 "TS-fel 
 
 
 SO 
 so 
 -S5 
 
 1 
 
 1 
 
 oc 
 So 
 oo 
 
 2 
 
 so 
 
 is posted to their respective accounts in the ledger, and the daily totals are 
 posted to their respective accounts, as indicated by the column headings or 
 titles. (It is at this point that it remains optional with the book-keeper as 
 to his debit postings, but too much emphasis cannot be put on the suggestion 
 that if two lines in each ledger account is used for every charge or debit, it 
 
 270 
 
is advisable to do likewise with credits; and especially in this case, owing" 
 to the nature of the business, where cash payments are made in advance of 
 the return of the cases and bottles.) The sales record at the end of each, 
 day will show the actual net sales, the actual amount or cost of cases and 
 bottles shipped or delivered (known as a "secured account," for, whether 
 delivered or in stock, it is always an asset), and the total of both. By mak- 
 ing this distinction the oft-repeated error of charging returnable goods to 
 merchandise of sales account, consequently resulting in a fictitious amount,, 
 is prevented. 
 
 No 3 Case 
 
 £/ 
 
 E3 
 
 ctt 
 
 e ^fo-teoK) 
 
 
 ' 
 
 
 
 _l 
 
 x 
 
 lrvv«r?for»)/ 
 
 500 
 
 00 
 
 Y' 
 
 Deliver»y /^ 
 
 300 00 1 
 
 % 
 
 ^urcK. Jofcjran) 
 
 2J50 
 
 00 
 
 y. 
 
 dc do 
 
 100 
 
 00 
 
 y, 
 
 do <Jo 
 
 I7J 
 
 DO 
 
 '/. 
 
 do do 
 
 100 
 
 00 
 
 % 
 
 do do 
 
 100 
 
 00 
 
 "A 
 
 do do 
 
 150 
 
 00 
 
 NoA Ca&e S/Bottle ^ CDcIiv^pv) I 
 
 ^ 
 
 stsch 'A. 
 
 300 
 
 
 % 
 
 3ale»Rec. 
 
 Z 
 
 75 
 
 *A 
 
 Aa. Jlo* 
 
 100 
 
 
 ■•A 
 
 i^ db. 
 
 A 
 
 OC 
 
 '/ 
 
 do. do. 
 
 100 
 
 
 •yk 
 
 do. do. 
 
 9 
 
 5c 
 
 ■M 
 
 do. do. 
 
 1^0 
 
 
 % 
 
 <Jo, do. 
 
 6oo| 
 
 % 
 
 R.rn. R«c«rJ. 
 
 I 
 
 7.S 
 
 
 
 
 
 '•/. 
 
 do. do. 
 
 2 
 
 5C 
 
 
 
 
 
 % 
 
 do. do. 
 
 A 
 
 oc 
 
 
 
 
 
 Exhibit 2 shows the simple ruling required for the return record (case- 
 and bottles), and any ordinarily ruled record will answer this purpose (its 
 size to be determined by the volume of business). The respective accounts 
 receiving credit for returns daily, and the daily totals charged to the case 
 and bottle account (delivery in contra to the credit allowed by the daily- 
 totals in the sales record). 
 
 NJ0.5. Q«jar\trfe 
 
 OwarsHS 
 
 Pints 
 
 'ZA 
 
 1 a 
 
 C2.A 
 
 3e 
 
 eo 
 
 12 
 
 3e 
 
 Exhibits 3 and 4 are ledger accounts. No. 3 shows the case and bottle- 
 account (stock). This account will show at any stated period, (i) the 
 amount of stock purchased, (2) the amount of stock used for delivery pur- 
 poses, (3) the amount of stock (unused) on hand, which must agree- 
 
 271 
 
T,vith inventory, (4) the debit balance showing actual cost of stock on hand, 
 :since it does not depreciate in value, as does the stock used far delivery 
 purposes. The advantage of this account will be appreciated at periods of 
 inventory^. 
 
 No. 4 shows the case and bottle account (delivery) . From this account 
 •can be ascertained dail)^ (i) the amount of goods outstanding, (2) the 
 -amount of stock being used for delivery purposes, (3) the amount of break- 
 age or loss. 
 
 Exhibit 5 is meant to represent a supplementary column to the sales 
 record or blotter and return record, providing it is tl^e purpose of the inquirer 
 to show quantities and sizes, instead of value, or both, and if so, by ruling a 
 column to the right of date column, in both records, and posting the totals 
 (daily) of same to a stock record, the same results can be ascertained. The 
 figures in exhibit 5 correspond with the entries of exhibit No. i, making it 
 ■seif-explanatory. 
 
 BRIBE — (Com. Law). — The gift or promise, which is accepted, of 
 some advantage as the inducement for some illegal act or omission; or of 
 some illegal emolument, as a consideration for preferring one person to 
 -another, in the performance of a legal act. 
 
 BRIBERY — (Com. Law). — The receiving or offering of any undue 
 reward by or to any person whomsoever, whose ordinary profession or busi- 
 ness relates to the administration of public justice, in order to influence his 
 behavior in office, and to incline him to act contrary to his duty and to known 
 rules of honesty and integrity. 
 
 The term now extends to the offence of giving a bribe to many other 
 •classes of officers. 
 
 An attempt to bribe, though unsuccessful, has been held to be criminal, 
 and the offender may be indicted. 
 
 BRICK WORK MEASUREMENT.— Dimensions of common bricks, 
 7^^ to 8 inches long; 4^ inches wide; 2>4 inches thick. Front brick, 
 8J4 inches long. 4j^ inches wide, 2^ inches thick. Fire bricks, g}i inches 
 long, 45^ inches wide, 2% inches thick. Twenty common bricks to a cubic 
 foot. Fifteen common bricks to a foot of eight-inch wall. 
 
 BRIDGE BUSINESS ACCOUNTING.— Bridges are almost always 
 constructed on contract, so that an account should be opened with each con- 
 tract, to which should be charged cost of production and percentage of gen- 
 eral expense, and to which should be credited the amount at which the con- 
 tract was secured. 
 
 The treatment of uncompleted contracts on the Balance Sheet has been 
 previously considered. 
 
 272