BOOK-KEEPING.—The object of book-keeping is to-exhibit a distinct and correct state of one's affairs, and to enable companies, firms, and individuals in trade, or other-wise occupied, to ascertain at any time the nature and extent, of their business, the amount of their profits or available income, or, as the case may be, the extent of their losses.
To those engaged in trade or commercial pursuits book-keeping is absolutely necessary, as by it all transactions should be regulated, and their results exhibited. The more simple the system the better; but care must be taken that the plan adopted is sufficiently comprehensive and explanatory, to satisfy not only the person keeping the books, but those who may have occasion to refer to them; for, however satisfactory it may be to a trader to follow a system which is intelligible to himself alone, circum-stances might arise to render the inspection of others necessary, and from their inability to follow out transac-tions in the books, suspicions would probably be engendered for which there was no real foundation. Hence the necessity for the adoption of certain recognized and approved systems, which, being plain and easily understood, must prove satisfactory to all concerned.
Book-keeping, when conducted upon sound principles,, is invaluable; it not only shows the general result of a. commercial career, but admits of analysis, by which the success or failure, the value or utter worthlessness of its-component parts, or each particular transaction, can be-easily ascertained. In a word, on the one hand it pro-motes order, regularity, fair dealing, and honourable enterprise; on the other, it defeats dishonesty, and pre-serves the integrity of man when dealing with his fellows.
It would be difficult, and perhaps of little importance, to trace the origin of book-keeping. It was certainly known to the ancients (see Pliny, lib. ii. cap. 7); and Cicero seems to have had bill transactions between Bome and Athens when he arranged for his son's education'with-out the necessity of having to remit money (see Epis. ad Att. xii. 24; xv. 25), which infers some kind of book-keeping. Kelly, however, who wrote on the subject in 1805, asserts, and it is not disputed, that a friar, named Lucas di Borgo, whose work on algebra was the first to appear in print, was the first to write a treatise upon book-keeping, and this was published at Venice in 1495.
This work was followed by many others, possessing con-siderable merit, but so complex as to make them useless. After a time the mercantile community became alive to the fact that a practical system would be preferable to the theoretical suggestions of writers who were utterly ignorant of commercial matters; and men, more or less connected with trade, began to write on the subject. The incubus of prolixity, however, still clung to them, conciseness of style seeming an impossibility, and the great fundamental principles of the art were so smothered by rules and explanations—the volumes sometimes containing 500 or 600 pages—that the difficulty was how to apply them; hence the need of still greater simplicity and improvement.
In 1796 Mr E. T. Jones of Bristol devised a plan "for keeping books correctly," breaking the ice with a treatise: which is still held in very high estimation. After that a great improvement is visible in the writings of authors on this important subject, as in those of Benjamin Booth. (1789), Hamilton (1820), Jones (2d treatise, 1821, 3d treatise, 1831), C. Morrison (1823), W. and R. Chambers, Edinburgh,—the most of them, those of Jones excepted, being elementary works, more particularly adapted to schools, and illustrating the principles of the science by the example of one set of books adapted to foreign trade. In F. H. Carter's Practical Book-keeping, adapted to Com-mercial and Judicial Accounting (3d ed. 1875), which gives a great variety of forms and sets of books, the recognized

_systems of book-keeping are practically applied, so as to enable any one, without difficulty, to acquire a thorough knowledge of the science.
The questions to which a satisfactory system of book-keeping gives the trader ready and conclusive answers are such as relate—1. To the extent to which his capital and _credit will entitle him to transact business; 2. To the assurance he has that all his obligations are honestly ful-filled ; 3. To the ascertainment of the success or failure of his commercial dealings, and the position of his affairs from time to time.
There are three recognized systems of book-keeping, namely, by " single entry," " double entry," and the " mixed method."
I. SINGLE ENTRY.—This system is denoted by its name, transactions being posted singly, or only once, in -the ledger. Three books are generally kept—the cash book, day book, and ledger, although the first-named is not essential, the cash entries being passed through the day book. Its only use is to check the balance of cash in hand. In the day book are entered daily all the purchases and sales, whether for cash or credit; and all the credit entries are then transferred to accounts opened in the ledger, that is, all goods sold on credit are charged against the customers, and what are purchased are carried to the credit of parties supplying them. In the same way, when cash is received from a customer for goods sold on credit, it is posted to his account, and the reverse entry is made when a trader pays for the goods he has bought. Thus it will be seen that only personal accounts are entered in the ledger.
To frame a balance sheet, or state of affairs, on this system, the book-keeper brings down the balances due by customers to him, also his stock of goods as valued, and the cash he may have in hand, on the left-hand side of the sheet; whilst on the right-hand side he enters the balances still due by him for goods supplied, or money lent to him, and the capital, if any, with which he commenced busi-ness. The difference between the amounts of the two columns is either profit or loss; if profit, the merchant's capital is increased to that extent, and if loss, then he is so much the poorer.
The following skeleton balance sheet will give a better idea of the working and ultimate results of the system :—

== TABLE ==

It will be observed that as the assets exceed the liabili-ties (including capital) by £49, 16s. 7d., that sum, being profit, must be added to capital; if, in the next or following years, any loss should emerge, as a matter of course such deficiency must be deducted from the trader's capital. The advantages of single entry are simplicity and easy adaptation to small retail trades, as the ledger contains only outstanding debts due to or by the trader. The disadvantage is in the difficulty of ascertaining the profits or losses on various goods, or on the several depart-ments of a business.
II. DOUBLE ENTRY.—It is now universally admitted that this system is the best adapted for heavy, responsible, or speculative trades, for foreign trade especially, and for extensive mercantile concerns. As its name implies, it so far differs from the system already described, that every transaction must be recorded doubly in the ledger, that is to say, accounts must be opened in that book, to which all entries in the subsidiary books, after being journalized, are twice carried, to the debit of one account and the credit of another. To illustrate this, let us assume that a merchant speculates in cotton, and purchases so many bales from John Bevan and Co. upon credit; he debits " Cotton account," and credits " John Bevan and Co." He does not pay for it in cash, but gives his bill at three months for the amount; John Bevan and Co. are debited with the bill, and " Bills Payable " are credited. He then sells the whole lot of cotton for cash to Cairns, Brown, and Co., debiting " Cash " and crediting " Cotton account." Lastly, he retires or pays the bill granted to John Bevan and Co., debits " Bills Payable," and credits " Cash." We will now put all these transactions into a "journal," posting there-from to a "ledger," and so illustrate book-keeping by double entry.

== TABLE ==

It may be alleged that there are many unnecessary entries, involving too much trouble and waste of time, in bringing out the above results; but upon examination of the several accounts the great simplicity and utility of double entry is evident. For instance, " Cotton " account shows the actual result of the speculation per " Mary Jane;" " John Bevan and Co.'s " account exhibits the whole transac-tion with them, and how it was settled; " Bills Payable " account at once shows that the cotton bill is retired or paid; and " Cash" account declares a balance of ¿6851 in cashier's hands, being the actual profit on the cotton, as further shown in " Profit and Loss " account.
An infinity of examples might be given, but the above will be a sufficient illustration. A brief outline, however, of the principal books required in this system may be introduced.
1. The CASH BOOK.—In this most important book every cash transaction must be entered of its proper date, and under its dis-tinctive ledger heading, so as to give facility in journalizing ; any balance thereon must be cash in hand, and should agree with the balance on " Cash account" in the ledger.
2. The DAY or WASTE BOOK.—This book records the daily transactions of every description in the rough, which, when properly arranged and classified, are written into the journal, and posted from thence to the ledgers.
3. The JOURNAL.—This may be called the mainspring of the system, and is sometimes called the "posting medium," as in it every transaction of the business is properly recorded before being again distributed into the ledger. There are several forms of journal, but the simplest and best is that of which a specimen has been given, with the addition of a column for the insertion of ledger folios when posted. It will be observed that the debit entries are in one column and the credit entries in another ; if, therefore, the summations of these agree, and the entries therein embraced are correctly posted to the debit and credit of accounts in the ledger, the double entry is correct, and the books of the concern, no matter how multitudinous the entries may be, must come to a true balance.
4. The LEDGERS.—These are important hooks, as they are the
final recipients of every transaction of the concern, branched out or distributed into certain heads or accounts winch tell their own his-tory ; and if unbalanced, must exhibit a difference either in favour of the business as an "Asset," or against it as a "Liability." The usual plan is to have only one ledger, embracing every account, but in large concerns there are debit and credit ledgers, and gene-rally a private ledger, which is accessible to partners only.
The advantages of double entry are many—(1.) Un-less the debit balances exactly correspond with the credits the books are wrong, and the error must be discovered by comparison; (2.) The discovery of such errors is more easily accomplished than in any other system ; (3.) Accounts can be readily analyzed; and (4.) The profit or loss on distinct transactions can be ascertained without difficulty. The disadvantages are—(1.) More manual labour required in transcribing the journal and posting therefrom than in other systems; and (2.) There is not the same privacy, as profits and losses can be seen at a glance by any one having access to the ledger. Nevertheless, no other system as yet devised can at all compare with that by double entry.
III. MIXED METHOD.—This system is now extensively adopted by such companies and firms as begrudge the time expended in journalizing, and are of opinion that double entry is too elaborate, when the same results can be arrived at by a more direct and less laborious plan. There is this identity, however, between the systems, that every trans-action must be recorded somewhere, and eventually twice posted, as in double entry, but without the medium of a journal; moreover, the entries are fewer, summations and not specific items being posted, and what would be the daily labour under one system is reserved under this for a monthly or perhaps longer period. There are only three books required for this system to which we need draw attention, and in doing so we will point out in what respect they differ from those kept in single and double entries.

1. CASH BOOK.—Every entry is posted from this book, but not all to the ledger as in double entry—" Charges " being posted to the day book. It is not journalized, and is in itself a ledger, as it contains the hank account, and reports its own cash balance. On the other hand, it is unlike the '' Cash" of single entry, be-cause every entry is posted somewhere, whereas by the latter system only personal accounts are carried to the ledger.
2. DAY BOOK.—This book also exhibits a marked difference be-tween the journal of double entry and the day book of single entry. The journal is simply a posting medium, and when its use is served is almost valueless. The single entry day book, on the other hand, is only a posting medium to a certain extent, as it does not embrace all transactions ; but in this system the day book unites the characteristics of journal and ledger, and also becomes in itself a profit and loss account, as by deducting the amount of charges from the amount of the business fees (say for solicitors' books) the profit on said business is shown.
3. The LEDGERS.—These books also lose their completeness under the mixed method. It has already been shown that in double entry every amount must appear in the ledger, and in single entry that only personal accounts are posted in it. By this system not only are all personal accounts included, but those applicable to "Capital," to "Banks," "Bills," &c.; whilst, on the other hand, such accounts as "Profit and Loss," "Charges," and "Cash" are excluded.
It would be out of place here to dwell on the many intricacies of this subject, or on the difficulties which are constantly presenting themselves even to the most prac-tical men. With a thorough knowledge of the art, how-ever, and that patience and perseverance so essential to the calling of a book-keeper, the gravest impediments are overcome, and everything becomes simple and plain. Our sole object having been to show the utility of book-keeping as a science, and the peculiar features of existing systems with their advantages and disadvantages, it is unnecessary to enter more minutely into details by describing subsidiary books or forms of accounts, as these are only so many materials out of which the fabric of book-keeping is erected, and can be seen in any counting-house or mercantile esta-blishment where regular systems are adopted, (F. H. C.)







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