THE

CHAPTER, III.

OF BOOK-KEEPING.

By Book-keeping, or Merchants' Accounts, is meant the

art of recording, with order and accuracy, all mercantile or commercial transactions.

By this art the merchant or trader obtains a particular and complete statement of every branch of his affairs, exhibiting the profit or loss arising from each separate transaction, as well as from the whole course of his business, and affording satisfactory information on all matters in which, as a man of business, he is concerned.

A merchant's books should contain an account of the whole amount of his property employed in trade, whether consisting of cash, bills, public funds, goods in hand, ships, houses, lands, debts, &c. &c.; and by comparing at different periods the state of these several kinds of property, he will discover the true situation of his affairs, whether prosperous or the contrary, and thence be enabled to manage them to the best advantage.

Various modes of book-keeping have been adopted in the mercantile world, but that which has acquired the approbation of the best judges is, the Italian method of bookkeeping by double entry.

In keeping books by single entry, only such articles are entered as are bought or sold on credit: no account being

kept

kept of such as are bought or sold for ready money or other immediate payment: consequently books kept in this way can furnish no statement of the trader's concerns, unless assisted by his taking an account of the stock of goods remaining unsold, and so calculating the amount of gain or loss on his transactions; single-entry is therefore chiefly applicable to small dealings or retail business.

Book-keeping by double-entry, on the contrary, is applicable to large, extensive, and complicated transactions; possessing this advantage, that by merely inspecting each account, or the periodical balances of his whole concerns, the merchant can at once form a correct idea of the situation of his affairs.

In keeping accounts by single entry two books are required, the Day-book and the Ledger. The Day-book contains an account of the trader's property in business, followed by a regular statement of each transaction in the order in which it occurs. The Ledger contains, in one account under the head of each person, the several transactions of the Day-book in which that person is concerned; stating on opposite pages the different articles in which he may be debtor or creditor, and thus furnishing a state of affairs with him. The manner of keeping these two books will be readily understood from the following specimen of accounts kept by single entry.

On the 1st of January 1808; I purchase on credit from James Martin 86 yards of Silk at 5sh. per yard, value £21 10; on the 4th of January I sell to Joseph Jones on credit 52 yards of the same silk at 6sh. Sd. per yard value £1 7 6 8 ; on the 7th January, Joseph Jones pays me £12 in part of his account; and on the 8th January I pay James Martin 11 10, in part of my debt to him. These articles will appear in the Day-hook as follow.

DAY

1

To Silk, for 52 yards, at 6s. 8d. per yard 17 6 8

The same articles will appear in the Ledger, as in the following specimen.

LEDGER.

Here it is to be observed, that as the person who receives any money or article of merchandize becomes the Debtor, and the person who gives away any money or article of merchandize becomes the Creditor; having purchased silk on credit from James Martin, I am his debtor and he becomes my creditor for the value; I therefore enter his name in the Day-book as Creditor for a certain quantity of silk at a certain value, and place the amount in the money-columns.

In the next transaction, by selling on credit to Joseph Jones a quantity of silk, he is entered as Dr. for the value.

In the following transaction Joseph Jones having paid me a part of his debt, I give him credit for the amount; that is, he is entered as Cr.

And in the last transaction, by paying to James Martin a part of what I owe him; that is, by giving him a sum of money, he is entered as my debtor, or he is debited for the

amount.

In this manner is the Day-book filled up, but in the Ledger, a separate account is allotted for each person with whom I have dealings; room being left to contain entries of all such transactions as may probably occur between him and me. This book is laid out in folios, each folio containing two opposite pages, both numbered with the same figure which expresses the folio.

In the example here given the name of James Martin is written at the head of his account, on the left hand of the folio, appropriated to the Dr. side; and on the right hand is written the Latin word Contra (meaning against or on the other hand,) for the Cr. side; in which, as he is my creditor, I enter the date, nature and value of the transaction.

Again; an account is opened for Joseph Jones similar to that for James Martin; but as by parting with goods to him he becomes my debtor; the date, nature and value of the transaction is entered on the Dr. side of the folio.

When Joseph Jones pays me a part of his debt, I give.