Chapter XVII: Part 17

When George III. came to the throne he found himself bookless, and the magnificent library of over 80,000 books and pamphlets and 440 manuscripts which he accumulated shows on a large scale the catholic and literary spirit of the book-lovers of his day. As befitted the library of an English king it was rich in English classics as well as in those of Greece and Rome, and the typographical first-fruits of Mainz, Rome and Venice were balanced by numerous works from the first presses of Westminster, London and Oxford. This noble library passed in 1823 to the British Museum, which had already received the much smaller but carefully chosen collection of the Rev. C.M. Cracherode (d. 1799), and in 1846 was further enriched by the wonderful library formed by Thomas Grenville, the last of its great book-loving benefactors, who died in that year, aged ninety-one. A few less wealthy men had kept up the old public-spirited tradition during George III.'s reign, Garrick bequeathing his fine collection of English plays and Sir Joseph Banks his natural history books to the British Museum, while Capell's Shakespearian treasures enriched Trinity College, Cambridge, and those of Malone went to the Bodleian library at Oxford, the formation of these special collections, in place of the large general library with a sprinkling of rarities, being in itself worth noting. But the noble book-buyers celebrated by the Rev. Thomas Frognall Dibdin in his numerous bibliographical works kept mainly on the old lines, though with aims less patriotic than their predecessors. The duke of Roxburghe's books were sold in 1812, and the excitement produced by the auction, more especially by the competition between Lord Spencer and the duke of Marlborough (at that time marquess of Blandford) for an edition of Boccaccio printed by Valdarfer at Venice in 1471, led to the formation of the Roxburghe Club at a commemorative dinner. In 1819 the duke of Marlborough's books were sold, and the Boccaccio for which he had paid L2260 went to Earl Spencer (d. 1834) for L750, to pass with the rest of his rare books to Mrs Rylands in 1892, and by her gift to the John Rylands library at Manchester in 1899. The books of Sir M.M. Sykes were sold in 1824, those of J.B. Inglis in 1826 (after which he collected again) and those of George Hibbert in 1829. The 150,000 volumes brought together by Richard Heber at an expense of about L100,000 were disposed of by successive sales during the years 1834-1837 and realized not much more than half their cost. The wonderful library of William Beckford (d. 1844), especially rich in fine bindings, bequeathed to his daughter, the duchess of Hamilton, was sold in 1882, with the Hamilton manuscripts, for the most part to the German government. Their dispersal was preceded in 1881 by that of the Sunderland collection, already mentioned. The library of Brian Fairfax (d. 1749), which had passed to the earls of Jersey, was sold in 1885, that of Sir John Thorold (d. 1815) in 1884, his "Gutenberg" Bible fetching L3900 and his Mainz Psalter L4950. The great collection of manuscripts formed by Sir Thomas Phillipps (d. 1872) has furnished materials for numerous sales. The printed books of the earl of Ashburnham (d. 1878) kept the auctioneers busy in 1897 and 1898; his manuscripts were sold, some to the British government (the Stowe collection shared between the British Museum and Dublin), the German government (part of the Libri and Barrois collection, all, save one MS. of 13th century German ballads, resold to France), the Italian government (the rest of the Libri collection) Mr Yates Thompson (the MSS. known as the Appendix) and Mr J. Pierpont Morgan (the Lindau Gospels). The collections formed by Mr W.H. Miller (d. 1848, mainly English poetry), the duke of Devonshire (d. 1858) and Mr Henry Huth (d. 1878), are still intact.

Among the book-buyers of the reign of George III., John Ratcliffe, an ex-coal-merchant, and James West had devoted themselves specially to Caxtons (of which the former possessed 48 and the latter 34) and the products of other early English presses. The collections of Capell and Garrick were also small and homogeneous. Each section, moreover, of some of the great libraries that have just been enumerated might fairly be considered a collection in itself, the union of several collections in the same library being made possible by the wealth of their purchaser and the small prices fetched by most classes of books in comparison with those which are now paid. But perhaps the modern cabinet theory of book-collecting was first carried out with conspicuous skill by Henry Perkins (d. 1855), whose 865 fine manuscripts and specimens of early printing, when sold in 1870, realized nearly L26,000. If surrounded by a sufficient quantity of general literature the collection might not have seemed noticeably different from some of those already mentioned, but the growing cost of books, together with difficulties as to house-room, combined to discourage miscellaneous buying on a large scale, and what has been called the "cabinet" theory of collecting, so well carried out by Henry Perkins, became increasingly popular among book buyers, alike in France, England and the United States of America. Henri Beraldi, in his catalogue of his own collection (printed 1892), has described how in France a little band of book-loving amateurs grew up who laughed at the _bibliophile de la vieille roche_ as they disrespectfully called their predecessors, and prided themselves on the unity and compactness of their own treasures. In place of the miscellaneous library in which every class of book claimed to be represented, and which needed a special room or gallery to house it, they aimed at small collections which should epitomize the owner's tastes and require nothing bulkier than a neat bookcase or cabinet to hold them. The French bibliophiles whom M. Beraldi celebrated applied this theory with great success to collecting the dainty French illustrated books of the 18th century which were their especial favourites. In England Richard Fisher treated his fine examples of early book-illustration as part of his collection of engravings, etchings and woodcuts (illustrated catalogue printed 1879), and Frederick Locker (Locker-Lampson) formed in two small bookcases such a gathering of first editions of English imaginative literature that the mere catalogue of it (printed in 1886) produced the effect of a stately and picturesque procession. Some of the book-hoards of previous generations could have spared the equivalent of the Locker collection without seeming noticeably the poorer, but the compactness and unity of this small collection, in which every book appears to have been bought for a special reason and to form an integral part of the whole, gave it an artistic individuality which was a pleasant triumph for its owner, and excited so much interest among American admirers of Mr Locker's poetry that it may be said to have set a fashion. As another example of the value of a small collection, both for delight and for historical and artistic study, mention may be made of the little roomful of manuscripts and incunabula which William Morris brought together to illustrate the history of the bookish arts in the middle ages before the Renaissance introduced new ideals. Many living collectors are working in a similar spirit, and as this spirit spreads the monotony of the old libraries, in which the same editions of the same books recurred with wearisome frequency, should be replaced by much greater individuality and variety. Moreover, if they can be grouped round some central idea cheap books may yield just as good sport to the collector as expensive ones, and the collector of quite modern works may render admirable service to posterity. The only limitation is against books specially manufactured to attract him, or artificially made rare. A quite wholesome interest in contemporary first editions was brought to nought about 1889 by the booksellers beginning to hoard copies of Browning's _Asolando_ and Mr Lang's _Blue Fairy Book_ on the day of publication, while a graceful but quite minor poet was made ridiculous by L100 being asked for a set of his privately printed _opuscula_. The petty gambling in books printed at the Kelmscott and Doves' presses, and in the fine paper copies of a certain _Life of Queen Victoria_, for which a premium of 250% was asked before publication, is another proof that until the manufacturing stage is over collecting cannot safely begin. But with this exception the field is open, and the 19th century offers as good a hunting ground as any of its predecessors.

Objects and methods.

While book-collecting may thus take an endless variety of forms the heads under which these may be grouped are few and fairly easily defined. They may be here briefly indicated together with some notes as to the literature which has grown up round them. The development which bibliographical literature has taken is indeed very significant of the changed ideals of collectors. Brunet's _Manuel du libraire_, first published in 1810, attained its fifth edition in 1860-1864, and has never since been re-edited (supplement, 1878-1880). The _Bibliographer's Manual of English Literature_ by W.T. Lowndes, first published in 1834, was revised by H.G. Bohn in 1857-1864, and of this also no further edition has been printed. These two works between them gave all the information the old-fashioned collectors required, the _Tresor de livres rares et precieux_ by J.G.T. Graesse (Dresden, 1859-1867, supplementary volume in 1869) adding little to the information given by Brunet. The day of the omnivorous collector being past, the place of these general manuals has been taken by more detailed bibliographies and handbooks on special books, and though new editions of both Lowndes and Brunet would be useful to librarians and booksellers no publisher has had the courage to produce them.

To attract a collector a book must appeal to his eye, his mind or his imagination, and many famous books appeal to all three. A book may be beautiful by virtue of its binding, its illustrations or the simple perfection and harmony of its print and paper. The attraction of a fine binding has always been felt in France, the high prices quoted for Elzevirs and French first editions being often due much more to their 17th and 18th century jackets than to the books themselves. The appreciation of old bindings has greatly increased in England since the exhibition of them at the Burlington Fine Arts Club in 1891 (illustrated catalogue printed the same year), English blind stamped bindings, embroidered bindings, and bindings attributable to Samuel Mearne (_temp._ Charles II.) being much more sought after than formerly. (See BOOKBINDING.)

Illustrated books of certain periods are also much in request, and with the exception of a few which early celebrity has prevented becoming rare have increased inordinately in price. The primitive woodcuts in incunabula are now almost too highly appreciated, and while the _Nuremburg Chronicle_ (1493) seldom fetches more than L30 or the _Hypnerotomachia Poliphili_ (Venice, 1499) more than L120, rarer books are priced in hundreds. The best books on the subject are: for Italy, Lippmann's _Wood Engraving in Italy in the 15th Century_ (1888), Kristeller's _Early Florentine Woodcuts_ (1897), the duc de Rivoli's (Prince d'Essling's) _Bibliographie des livres a figures venitiens 1469-1525_ (1892, new edition 1906); for Germany, Muther's _Die deutsche Bucherillustration der Gothik und Fruhrenaissance_ (1884); for Holland and Belgium, Sir W.M. Conway's _The Woodcutters of the Netherlands in the 15th Century_ (1884); for France the material will all be found in Claudin's _Histoire de l'imprimerie en France_ (1900, &c.). Some information on the illustrated books of the early 16th century is given in Butsch's _Die Bucherornamentik der Renaissance_ (1878), but the pretty French books of the middle of the century and the later Dutch and English copper-engraved book illustrations (for the latter see Colvin's _Early Engraving and Engravers in England_, 1905) have been imperfectly appreciated. This cannot be said of the French books of the 18th century chronicled by H. Cohen, _Guide de l'amateur de livre a gravures du XVIII^e siecle_ (5th ed., 1886), much of the same information, with a little more about English books, being given in Lewine's _Bibliography of Eighteenth Century Art and Illustrated Books_ (1898). English books with coloured illustrations, for which there has arisen a sudden fashion, are well described in Martin Hardie's _English Colour Books_ (1906). Bewick's work has been described by Mr Austin Dobson.

Appreciation of finely printed books has seldom extended much beyond the 15th century. In addition to the works mentioned in the article on incunabula(q.v.), note may be made of Humphrey's _Masterpieces of the Early Printers and Engravers_ (1870), while Lippmann's _Druckschriften des XV. bis XVIII Jahrhunderts_ (1884-1887) covers, though not very fully, the later period.

Among books which make an intellectual appeal to the collectors may be classed all works of historical value which have not been reprinted, or of which the original editions are more authentic, or convincing, than modern reprints. It is evident that these cover a vast field, and that the collector in taking possession of any corner of it is at once the servant and rival of historical students. Lord Crawford's vast collections of English, Scottish and Irish proclamations and of papal bulls may be cited as capital instances of the work which a collector may do for the promotion of historical research, and the philological library brought together by Prince Lucien Bonaparte (_An Attempt at a Catalogue_ by V. Collins, published 1894) and the Foxwell collection of early books on political economy (presented to the university of London by the Goldsmiths' Company) are two other instances of recent date. Much collecting of this kind is now being carried on by the libraries of institutes and societies connected with special professions and studies, but there is ample room also for private collectors to work on these lines.

Of books which appeal to a collector's imagination the most obvious examples are those which can be associated with some famous person or event. A book which has belonged to a king or queen (more especially one who, like Mary queen of Scots, has appealed to popular sympathies), or to a great statesman, soldier or poet, which bears any mark of having been valued by him, or of being connected with any striking incident in his life, has an interest which defies analysis. Collectors themselves have a natural tenderness for their predecessors, and a copy of a famous work is all the more regarded if its pedigree can be traced through a long series of book-loving owners. Hence the production of such works as _Great Book-Collectors_ by Charles and Mary Elton (1893), _English Book-Collectors_ by W.Y. Fletcher (1902) and Guigard's _Nouvel armorial du bibliophile_ (1890). Books condemned to be burnt, or which have caused the persecution of their authors, have an imaginative interest of another kind, though one which seems to have appealed more to writers of books than to collectors. As has already been noted, most of the books specially valued by collectors make a double or triple appeal to the collecting instinct, and the desire to possess first editions may be accounted for partly by their positive superiority over reprints for purposes of study, partly by the associations which they can be proved to possess or which imagination creates for them. The value set on them is at least to some extent fanciful. It would be difficult, for instance, to justify the high prices paid by collectors of the days of George III. for the first printed editions of the Greek and Latin classics. With few exceptions these are of no value as texts, and there are no possible associations by which they can be linked with the personality of their authors. It may be doubted whether any one now collects them save as specimens of printing, though no class of books which has once been prized ever sinks back into absolute obscurity. On the other hand the prestige of the first editions of English and French literary masterpieces has immensely increased. A first folio Shakespeare (1623) was in 1906 sold separately for L3000, and the MacGeorge copies of the first four folios (1623, 1632, 1663-1664 and 1685) fetched collectively the high price of L10,000. The quarto editions of Shakespeare plays have appreciated even more, several of these little books, once sold at 6d. apiece, having fetched over L1000, while the unknown and unique copy of the 1594 edition of _Titus Andronicus_, discovered in Sweden, speedily passed to an American collector for L2000. Information as to early editions of famous English books will be found in Lowndes' _Bibliographer's Manual_, in Hazlitt's _Handbook to the Popular Poetical and Dramatic Literature of Great Britain from the Invention of Printing to the Restoration_ (1867) and his subsequent _Collections and Notes_ (1876-1903), and as to more recent books in Slater's _Early Editions, a bibliographical survey of the works of some popular modern authors_ (1894), while French classics have found an excellent chronicler in Jules Le Petit (_Bibliographie des principales editions originales d'ecrivains francais du XV^e au XVIII^e siecle_, 1888).

In most cases there is a marked falling off in the interest with which early editions other than the first are regarded, and consequently in the prices paid for them, though important changes in the text give to the edition in which they first occur some shadow of the prestige attaching to an original issue. One of the recognized byways of book-collecting, however, used to be the collection of as many editions as possible of the same work. When this result in the acquisition of numerous late editions of no value for the text its only usefulness would appear to be the index it may offer to the author's popularity. But in translations of the Bible, in liturgical works, and in editions published during the author's life the aid offered to the study of the development of the final text by a long row of intermediate editions may be very great.

Another instance in which imagination reinforces the more positive interest a book may possess is in the case of editions which can be connected with the origin, diffusion or development of printing. Piety suggests that book-lovers should take a special interest in the history of the art which has done so much for their happiness, and in this respect they have mostly shown themselves religious. The first book printed in any town is reasonably coveted by local antiquaries, and the desire to measure the amount and quality of the work of every early printer has caused the preservation of thousands of books which would otherwise have perished. (See INCUNABULA.)

The financial side of book-collecting may be studied in Slater's _Book-Prices Current_, published annually since 1887, and in Livingston's _American Book Prices Current_, and in the same author's _Auction Prices of Books_ (1905). While largely influenced by fashion the prices given for books are never wholly unreasonable. They are determined, firstly by the positive or associative interest which can be found in the book itself, secondly by the infrequency with which copies come into the market compared with the number and wealth of their would-be possessors, and thirdly, except in the case of books of the greatest interest and rarity, by the condition of the copy offered in respect to completeness, size, freshness and absence of stains. (A. W. Po.)

BOOK-KEEPING, a systematic record of business transactions, in a form conveniently available for reference, made by individuals or corporations engaged in commercial or financial operations with a view to enabling them with the minimum amount of trouble and of dislocation to the business itself to ascertain at any time (1) the detailed particulars of the transactions undertaken, and (2) the cumulative effect upon the business and its financial relations to others. Book-keeping, sometimes described as a science and sometimes as an art, partakes of the nature of both. It is not so much a discovery as a growth, the crude methods of former days having been gradually improved to meet the changing requirements of business, and this process of evolution is still going on. The ideal of any system of book-keeping is the maximum of record combined with the minimum of labour, but as dishonesty has to be guarded against, no system of book-keeping can be regarded as adequate which does not enable the record to be readily verified as a true and complete statement of the transactions involved. Such a verification is called an audit, and in the case of public and other large concerns is ordinarily undertaken by professional accountants (q.v.). Where the book-keeping staff is large it is usually organized so that its members, to some extent at least, check each other's work, and to that extent an audit, known as a "staff audit" or "internal check," is frequently performed by the book-keeping staff itself.

Formerly, when credit was a considerably less important factor than now in commercial transactions, book-keeping was frequently limited to an account of receipts and payments of money; and in early times, before money was in use, to an account of the receipt and issue of goods of different kinds. Even now what may be called the "cash system" of accounts is almost exclusively used by governments, local authorities, and charitable and other institutions; but in business it is equally necessary to record movements of credit, as a mere statement of receipts and payments of money would show only a part of the total number of transactions undertaken. As for practical purposes some limit must be placed upon the daily record of transactions, certain classes show only a record of cash receipts and payments, which must, when it is desired to ascertain the actual position of affairs, be adjusted by bringing into account those transactions which have not yet been completed by the receipt or payment of money. For instance, it is usual to charge customers with goods sold to them at the date when the sale takes place, and to give them credit for the amount received in payment upon the date of receipt (thus completely recording every phase of the transaction as and when it occurs); but in connexion (say) with wages it is not usual to give each workman credit for the services rendered by him from day to day, but merely to charge up the amounts, when paid, to a wages account, which thus at any date only shows the amounts which have actually been paid, and takes no cognisance of the sums accruing due. When, therefore, it is desired to ascertain the actual expenditure upon wages for any given period, it is necessary to allow for the payments made during that period in respect of work previously performed, and to add the value of work performed during the current period which remains unpaid. In the majority of businesses those accounts which deal with various forms of standing expenses are thus dealt with, and in consequence the record, as it appears from day to day, is _pro tanto_ incomplete. Another very important series of transactions which is not included in the ordinary day-to-day record is that representing the loss gradually accruing by reason of waste, or depreciation, of assets or general equipment of the business; proper allowance for these losses must of course be made whenever it is desired to ascertain the true position of affairs.

History.

The origin of book-keeping is lost in obscurity, but recent researches would appear to show that some method of keeping accounts has existed from the remotest times. Babylonian records have been found dating back as far as 2600 B.C., written with a stylus on small slabs of clay, and it is of interest to note (_Records of the Past_, xi. 89) that these slabs or tablets "usually contain impressions from cylinder seals, and nail marks, which were considered to be a man's natural seal," thus showing that the modern method of identifying criminals by finger prints had its counterpart in Babylonia some 4500 years ago. Egyptian records were commonly written on papyrus, and contemporary pictures show a scribe keeping account of the quantities of grain brought into and removed from the government store-houses. It will thus be seen that some form of book-keeping existed long before bound books were known, and therefore the more general term _accounting_ would seem to be preferable--the more so as the most modern developments are in the direction of again abandoning the bound book in favour of loose or easily detached sheets of paper or card, thus capable of being rearranged as circumstances or convenience may dictate. Most of the earlier accounting records are in the nature of a mere narrative of events, which--however complete in itself--failed to fulfil the second requirement of an adequate system of book-keeping already referred to. Prior to the use of money nothing in this direction could of course well be attempted; but for a long time after its employment became general money values were recorded in Roman figures, which naturally did not lend themselves to ready calculation.

At the present-time it may be generally stated that all book-keeping records are kept in three distinct columns, dealing respectively with the date of the transaction, its nature, and its money value. The earliest extant example of accounts so kept is probably a ledger in the Advocates' library at Edinburgh, dated 1697, which, it is of interest to note, is ruled by hand. Prior to that time, however, double-entry book-keeping had been in general use. The exact date of its introduction is unknown; but it was certainly not, as has been frequently stated, the invention of Lucas de Bergo, in or about 1494. This, however, is the date of the first issue (at Venice) of a printed book entitled _Everything about Arithmetic, Geometry and Proportion_, by Luca Paciolo, which contains _inter alia_ an explanation of book-keeping by double-entry as then understood; but in all probability, the system had then been in use for something like 200 years. It is perhaps unfortunate that from 1494 until comparatively recent times the literature of accounting has been provided by theorists and students, rather than by practical business men, and it may well be doubted, therefore, whether it accurately describes contemporary procedure. Another illusion which it is necessary to expose in the interests of truth is the value attached to _Jones's English System of Book-keeping by Single or Double Entry_, published at Bristol in 1796. Before publishing this book, E.T. Jones issued a prospectus, stating that he had patented an entirely new and greatly improved system, and that subscribers (at a guinea a copy) would be entitled to a special licence empowering them to put the new invention into practice in their own book-keeping. With this bait he secured thousands of subscribers, but so far as can be gathered his system was entirely without merit, and it is chiefly of interest as indicating the value, even then, of advertising.

Modern methods.

It is impossible here to describe fully all the improvements that have been made in methods of accounting during recent years, but it is proposed to deal with the more important of these improvements, after the general principles upon which all systems of book-keeping are based have been briefly described.

The centre of all book-keeping systems is the _ledger_, and it may be said that all other books are only kept as a matter of practical convenience--hence the name "subsidiary books" that is frequently applied thereto. Inasmuch, however, as the transactions are first recorded in these subsidiary books, and afterwards classified therefrom into the ledger, the names _books of entry_ or _books of first entry_ are often employed. Subsidiary books which do not form the basis of subsequent entries into the ledger, but are merely used for statistical purposes, are known as _statistical_ or _auxiliary books_. In the early days of book-keeping the ledger comprised merely those accounts which it was thought desirable to keep accessible, and was not a complete record of all transactions. Thus in many instances records were only kept of transactions with other business houses, known as _personal accounts_. In the earliest examples transactions tending to reduce indebtedness were recorded in order of date, as they occurred underneath transactions recording the creation of the indebtedness; and the amount of the reduction was subtracted from the sum of the indebtedness up to that date. This method was found to be inconvenient, and the next step was to keep one account of the transactions recording the creation of indebtedness and another account (called the _contra account_) of those transactions reducing or extinguishing it. For convenience these two accounts were kept on opposite sides of the ledger, and thus was evolved the _Dr._ and _Cr._ account as at present in general use:--

_Dr._ A.B. Contra. _Cr._
-------+-------------+---------++-------+------------+---------
Date. | Narrative. | Amount. || Date. | Narrative. | Amount.
-------+-------------+---------++-------+------------+---------
| | L s. d. || | | L s. d.
| | || | |
| | || | |
| | || | |

In this form of account all transactions creating indebtedness due from the person named therein to the business--that is to say, all benefits received by that person from the buisness--are recorded upon the left-hand, or _Dr._ side, and _per contra_ all transactions representing benefits imparted by him, giving rise to a liability on the part of the business, are recorded upon the _Cr._ side. The account may run on indefinitely, but as a matter of convenience is usually ruled off each time all indebtedness is extinguished, and also at certain periodical intervals, so that the state of the account may then be readily apparent.

Single-entry accounts.

A mere collection of _personal accounts_ is, however, obviously a very incomplete record of the transactions of any business, and does not suffice to enable a statement of its financial position to be prepared. So at an early date other accounts were added to the ledger, recording the acquisition of and disposal of different classes of property, such accounts being generally known as _real accounts_. These accounts are kept upon the same principle as personal accounts, in that all expenditure upon the part of the business is recorded upon the _Dr._ side, and all receipts upon the _Cr._ side; the excess of the debit entries over the credit entries thus showing the value placed upon those assets that still remain the property of the business. With the aid of personal and real accounts properly written up to date, it is possible at any time to prepare a statement of assets and liabilities showing the financial position of a business, and the following is an example of such a statement, which shows also how the profit made by the business may be thus ascertained, assuming that the financial position at the commencement of the current financial period, and the movements of capital into and out of the business during the period, are capable of being ascertained.

STATE OF AFFAIRS AS AT 31ST DECEMBER 1906

+----+--------------------+----------------++------------------+---------------
| | _Liabilities._ | || _Assets._ |
| | | || |
| | Trade Creditors | L4,961 10 0 || Fixtures, Furni- |
| | Bills Payable | 2,620 18 4 || ture, &c. | L1,269 4 3
| | Balance, being ex- | || Stock on hand | 5,751 3 10
| | cess of assets | || Trade Debtors | 3,842 7 9
| | over liabilities | || Bills Recievable | 7,468 14 3
| | (or "Capital") | || Cash at Bank | 4,169 5 5
| | at this date | || |
| | carried down | 14,918 7 4 || |
| | +----------------++ +---------------
| | |L22,500 15 6 || |L22,500 15 6
| | +----------------++ +---------------
| | Amount of Capi- | || Balance brought |
| | tal on 1st Jan. | || down |L14,918 7 2
| | 1906 |L15,010 1 7 || |
| | Balance, being net | || Amount drawn |
| | profit for the | || out of business|
| | year ended this | || during year |
| | date | 1,408 5 7 || ended this date| 1,500 0 0
| | +----------------++ +---------------
| | |L16,418 7 2 || |L16,418 7 2
+----+--------------------+----------------++------------------+---------------

The method of accounting hitherto described represents _single-entry_, which--albeit manifestly incomplete--is still very generally used by small business houses, and particularly by retail traders. Its essential weakness is that it provides no automatic check upon the clerical accuracy of the record, and, should any mistake be made in the keeping of the books, or in the extraction therefrom of the lists of assets and liabilities, the statement of assets and liabilities and the profit or loss of the current financial period, will be incorrect to an equal extent. It was to avoid this obvious weakness of single-entry that the system of double-entry was evolved.

Double-entry.

The essential principle of double-entry is that it constitutes a complete record of _every_ business transaction, and as these transactions are invariably cross-dealings--involving simultaneously the receipt of a benefit by some one and the imparting of a benefit by some one--a complete record of transactions from both points of view necessitates an entry of equal amount upon debit and credit sides of the ledger. Hence it follows that, if the clerical work be correctly performed, the aggregate amount entered up upon the debit side of the ledger must at all times equal the aggregate amount entered up upon the credit side; and thus a complete list of all ledger balances will show an agreement of the total debit balances with the total credit balances. Such a list is called a _trial balance_, an example of which is given below. It should be observed, however, that the test supplied by the _trial balance_ is a purely mechanical one, and does not prove the absolute accuracy of the ledger as a record of transactions. Thus transactions which have actually taken place may have been omitted from the books altogether, or they may have been recorded to the wrong accounts, or the money values attached to them may be incorrect; or, yet again, fictitious records may be entered in the ledger of transactions which have never taken place. A _trial balance_ is thus no very adequate safeguard against fraud, nor does it bring to light mistakes in the monetary value attaching to the various transactions recorded. This last point is of especial importance, in that the monetary value of transactions may have been correctly recorded in the first instance, but owing to altered circumstances may have become inaccurate at a later date. This of course means that the altered circumstances constitute an additional "transaction" which has been omitted.

TRIAL BALANCE, 31ST DECEMBER 1906

----+-------------------------+---------------+--------------
| | _Dr._ | _Cr._
1 | Capital account | | L15,010 1 7
5 | Drawings | 1,500 0 0 |
20 | Trade creditors | | 4,961 10 0
24 | Fixtures, furniture, &c.| 1,269 4 3 |
27 | Bills payable | | 2,620 18 4
40 | Bad debts | 71 4 2 |
44 | Stock 1st Jan. 1906 | 4,078 16 4 |
50 | Discounts allowed | 975 3 3 |
53 | Trade debtors | 3,842 7 9 |
60 | Discounts received | | 1,117 17 8
65 | Wages and salaries | 1,865 12 0 |
75 | Depreciation | 141 0 5 |
78 | Rent, rates and taxes | 1,242 13 8 |
82 | General expenses | 1,087 8 0 |
90 | Bills receivable | 7,468 14 3 |
97 | Purchases | 44,731 2 10 |
100 | Sales | | 48,732 4 9
C56 | Cash at bank | 4,169 5 5 |
| +---------------+--------------
| | L72,442 12 4 | L72,442 12 4
----+-------------------------+---------------+--------------

Balance sheet.

It will be observed, therefore, that in order to complete the record of the transactions by double-entry, it has become necessary to introduce into the ledger a third class of accounts, known as _impersonal_ or _nominal accounts_. These accounts record the transferences of money, or of money's worth, which, so far from representing a mere reshuffling of assets and liabilities, involve an increase in or a reduction of the amount invested in the business, i.e. a profit or a loss. Transactions representing profits are recorded upon the _Cr._ side of nominal accounts, and those representing losses (including expenses) upon the _Dr._ side. This is consistent with the rules already laid down in connexion with real and nominal accounts, inasmuch as expenditure which does not result in the acquisition of an asset is a loss, whereas receipts which do not involve the creation of liabilities represent profits. All debit balances therefore that are not assets are losses, and _per contra_ all credit balances that are not liabilities are profits. So that, inasmuch as double-entry provides _inter alia_ a complete statement under suitable headings of all profits and all losses, it is possible by aggregating these results to deduce therefrom the net profit or loss of carrying on the business--and that by a method entirely distinct from that previously described in connexion with single-entry, thus constituting a valuable additional check. Taking the trial balance shown above, the following represent the _trading account_, _profit and loss account_, and _balance sheet_ compiled therefrom. The trading account may be variously regarded as the account recording the movements of goods which represent the stock-in-trade, and as a preliminary to (or a subdivision of) the profit and loss account. The balance sheet is a statement of the assets and liabilities; but--inasmuch as, by transferring the balance of the profit and loss account to the capital account, it is possible to bring the latter account up to date and to show the credit balance representing the surplus of assets over liabilities to date--the balance sheet, instead of showing a difference, or a "balance," representing what is _assumed to be_ the amount of the capital to date, shows an absolute agreement of assets upon the one hand and of liabilities _plus_ capital upon the other. The two sides of the account thus balance--hence the name.

_Dr._ TRADING ACCOUNT for the Year ended 31st December 1906 _Cr._
------+-------------------------------------+-------------++-------+-----------------------------+-------------
| To Stock on hand, 1st Jan. 1906 | L4,078 16 4|| | By Sales |L48,732 4 9
| " Purchases | 44,731 2 10|| | " Stock on hand 31st Dec. |
| " Gross Profit, transferred | || | 1906 | 5,751 3 10
| to Profit and Loss account | 5,673 9 5|| | |
| |-------------++ | +-------------
| |L54,483 8 7|| | |L54,483 8 7
------+-------------------------------------+-------------++-------+-----------------------------+-------------

_Dr._ PROFIT AND LOSS ACCOUNT for the Year ended 31st December 1906 _Cr._
------+-------------------------------------+-------------++-------+-----------------------------+-------------
| To Rent, rates and taxes L1,242 13 8| || | By Gross Profit as per |
| " Salaries and wages 1,865 12 0| || | Trading Account | L5,673 9 5
| " General expenses 1,087 8 0| || | " Discount received | 1,117 17 8
| ----------+ L4,195 13 8|| | |
| " Discounts allowed | 975 3 3|| | |
| " Bad debts | 71 4 2|| | |
| " Deprecation | 141 0 5|| | |
| " Net Profit for the year trans- | || | |
| ferred to Capital account | 1,408 5 7|| | |
| +-------------++ | +-------------
| | L6,791 7 1|| | | L6,791 7 1
------+-------------------------------------+-------------++-------+-----------------------------+-------------

_Dr._ BALANCE SHEET as at 31st December 1906 _Cr._
------+-------------------------------------+-------------++-------+-----------------------------+-------------
| To A.B., Capital account |L14,918 7 2|| | By Fixtures, furniture, &c. | L1,269 4 3
| " Trade creditors | 4,961 10 0|| | " Stock on hand | 5,751 3 10
| " Bills payable | 2,620 18 4|| | " Trade debtors | 3,842 7 9
| | || | " Bills receivable | 7,468 14 3
| | || | " Cash at bank | 4,169 5 5
| +-------------++ | +-------------
| |L22,500 15 6|| | |L22,500 15 6
------+-------------------------------------+-------------++-------+-----------------------------+-------------

_Dr._ A.B., CAPITAL ACCOUNT _Cr._
------+-------------------------------------+-------------++-------+-----------------------------+-------------
| || 1906. | |
1906. | To Drawings account | L1,500 0 0||Jan. 1 | By balance from last account|L15,010 1 7
Dec 31| " Balance carried down | 14,918 7 2||Dec. 31| " Profit and Loss account, |
| | || | being net profit for the |
| || | year ended this date | 1,408 5 7
| +-------------++ | +-------------
| |L16,418 7 2|| | |L16,418 7 2
| +-------------++ | +-------------
| | || 1907. | |
| | ||Jan. 1 | By Balance brought down |L14,918 7 2
------+-------------------------------------+-------------++-------+-----------------------------+-------------

In the foregoing example the customary method has been followed of deducting withdrawals of capital from the capital account and of adding profits thereto. Sometimes, however, the balance of the capital account remains constant, and the drawings and net profits are transferred to a separate account called _current account_. This plan is but rarely observed in the case of undertakings owned by individuals, or private firms, but is invariably adopted in connexion with joint-stock companies, although in such cases the name _appropriation of profit account_ is generally employed.

Journal.

Although it is now usual to employ several books of first-entry, in the case of comparatively small businesses one such book is sufficient for all purposes, in that it is practicable for one person to record all the transactions that take place as and when they occur. A book of this description is called the _journal_, and for many years represented the only book of first-entry employed in book-keeping. An example of the journal is given below. The entries appearing therein are such as would be necessary to prepare the trading and profit and loss accounts from the trial balance shown above, and to bring the capital account up to date.

In modern times, however, with the growth of business, it was soon found impracticable to keep one book of first-entry for all transactions, and accordingly it became necessary either to treat the journal as an intermediate book, in which the transactions might be brought together and focused as a preliminary to being recorded in the ledger, or else to split up the journal into numerous books of first-entry, each of which might in that case be employed for the record of a particular class of transaction. The first method has been generally adopted in the continental countries of Europe, as will be shown later on, whereas in Great Britain and in North America the latter method more generally obtains; that is, instead of having one journal in which all classes of transactions are recorded in the first instance, it is usual to employ several journals, as follows:--a _sales journal, sales book_ or _day book_, to record particulars of goods sold; a _bought journal, invoice book_ or _purchases book_, to record particulars of goods purchased; a _returns inwards book_, to record particulars of goods sold but subsequently returned by customers; a _returns outwards book_, to record the like particulars with regard to goods purchased and subsequently returned; a _bills receivable book_, to record particulars of bills of exchange received from debtors; and a _bills payable book_, to record particulars of bills of exchange given to creditors.

JOURNAL 1906

-------+----------------------------+----+---------------+---------------+
| | | _Dr._ | _Cr._ |
Dec. 31|Trading account |110 | L48,809 19 2 | |
| To Stock account | 44 | | L 4,078 16 4 |
| " Purchases account | 97 | | 44,731 2 10 |
+----------------------------+ | | |
" |Sales account |100 | 48,732 4 9 | |
|Stock account | 44 | 5,751 3 10 | |
| To Trading account |110 | | 54,483 8 7 |
+----------------------------+ | | |
" |Trading account |110 | 5,673 9 5 | |
| To Profit and Loss | | | |
| account |120 | | 5,673 9 5 |
+----------------------------+ | | |
" |Profit and Loss account |120 | 5,383 1 6 | |
| To Rent, rates and taxes | 78 | | 1,242 13 8 |
| " Salaries and wages | 65 | | 1,865 12 0 |
| " General expenses | 82 | | 1,087 8 0 |
| " Discounts allowed | 50 | | 975 3 3 |
| " Bad debts | 40 | | 71 4 2 |
| " Depreciation | 75 | | 141 0 5 |
+----------------------------+ | | |
" |Discounts received | 60 | 1,117 17 8 | |
| To Profit and Loss account|120 | | 1,117 17 8 |
+----------------------------+ | | |
" |Profit and Loss account |120 | 1,408 5 7 | |
| To A.B., Capital account | 1 | | 1,408 5 7 |
+----------------------------+ | | |
|A.B., Captial account | 1 | 1,500 0 0 | |
| To Drawings account | 5 | | 1,500 0 0 |
| | +---------------+---------------+
| | |L118,376 1 11 |L118,376 1 11 |
------------------------------------+----+---------------+---------------+

DAY BOOK 1906

-----+----------------------------------+---------+-----------
| Forward | |L3761 7 8
+--------- 27th December. ---------+ |
| A. Brown, | |
| 492 New Street, Walworth-- | |
471 | 2 doz. V.C. port 31/- | L3 2 0 |
| 1 " A.C. pale brandy 49/- | 2 9 0 |
| | |
-----+--------- 28th December. ---------+---------+ 5 11 0
| Fredk. Newton, | |
| Farleigh House, Epsom-- | |
216 | 1 gall. E. Pale sherry 13/6 | L0 13 6 |
| 2 doz. O.B. Heidsieck 1892 160/- | 16 0 0 |
| 2 gall. P. Scotch 21/- | 2 2 0 |
-----+----------------------------------+---------+ 18 15 6
| Robert French, | |
| 214 High Road, Sutton-- | |
408 | 6 doz. F.D. Pommard, 1899 30/- | L9 0 0 |
| 1 " M.F. Margaux, 1893 66/- | 3 6 0 |
| 2 " A. Niersteiner 24/- | 2 8 0 |
| +---------+ 14 14 0
| | +-----------
| | |L3800 8 2
| | +-----------
| | |
| | | 100
| | |
-----+----------------------------------+---------+-----------

With a view still further to split up the work, thus enabling a large staff to be simultaneously engaged, the ledger itself is now generally kept in sections. Thus the cash account and the bank account are frequently bound together in one separate book called the _cash book_, showing in parallel columns the movements of office cash and of cash at the bank, and by the addition of a third column for discounts the necessity of keeping an additional book of first entry as a _discount journal_ may also be avoided. Of late years, however, most businesses pay all moneys received into their bankers without deduction, and pay all accounts by cheque; the necessity of an account for office cash thus no longer exists, save in connexion with petty payments, which are recorded in a separate book called the _petty cash book_. With regard to the remaining ledger accounts, personal accounts--which are the most numerous--are frequently separated from the real and nominal accounts, and are further subdivided so that customers' accounts are kept separate from the accounts of trade creditors. The customers' accounts are kept in a ledger (or, if need be, in several ledgers) called _sales ledgers_, or _sold ledgers_; while the accounts of trade creditors are similarly kept in _purchases ledgers_ or _bought ledgers_. The nominal and real accounts, if together, are kept in what is called the _general ledger_; but this may be further subdivided into a _nominal ledger_ and a _private ledger_. This last subdivision is, however, rarely made upon a scientific basis, for such accounts as the profit and loss account and trading account are generally kept in the private ledger although strictly speaking nominal accounts; while the bills receivable account and the bills payable account are generally kept in the nominal ledger, so as to reduce to a minimum the amount of clerical work in connexion with the private ledger, which is kept either by the principal himself or by his confidential employee. By the employment of _adjustment accounts_, which complete the double-entry record in each ledger, these various ledgers may readily be made self-balancing, thus enabling clerical errors to be localized and responsibility enforced.

Tabular book-keeping.

Of recent years considerable attention has been devoted to further modifications of book-keeping methods with a view to reducing clerical work, increasing the speed with which results are available, and enabling them to be handled more quickly and with greater certainty. _Tabular book-keeping_ is a device to achieve one or more of these ends by the substitution of books ruled with numerous columns for the more usual form. The system may be applied either to books of first entry or to ledgers. As applied to books of first-entry it enables the same book to deal conveniently with more than one class of transaction; thus if the trading of a business is divided into several departments, by providing a separate column for the sales of each department it is possible readily to arrive at separate totals for the aggregate sales of each, thus simplifying the preparation of departmental trading accounts. As applied to ledgers, the application of the system may be best described by the aid of the above example (the proceedings of the columns being given only), which shows how a very large number of personal accounts may be recorded upon a single opening of a ledger provided the number of entries to be made against each individual be few.

-------+-------+-------+-------+-------+-------+-------+-------+-------+-------+-------+-------
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l)
-------+-------+-------+-------+-------+-------+-------+-------+-------+-------+-------+-------
| |L s. d.|L s. d.|L s. d.| |L s. d.|L s. d.|L s. d.|L s. d.|L s. d.|
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |

(a) Reference No. (b) Name of Debtor.
(c) Amount due on 1st Oct. 1906 (d) Charges for Current Quarter.
(e) Total Debit. (f) Date received.
(g) Amount Received. (h) Discounts.
(i) Allowances. (j) Bad Debts.
{k} Amount due on 31st Dec. 1906 (l) Remarks.

Slip system.

Another important application of modern methods consists of what may be described as the _slip system_, which is in many respects a reversion to the method of keeping records upon movable slabs or tablets, as in the Babylonian accounts referred to at the beginning of this article. This system may be applied to books of first-entry, or to ledgers, or to both. As applied to books of first-entry it aims at so modifying the original record of the transaction--whether it represents an invoice for goods sold or an acknowledgment given for money received--that a facsimile duplicate may be taken of the original entry by the aid of a carbon sheet, which instead of being immovably bound up in a book is capable of being handled separately and placed in any desired order or position, and thus more readily recorded in the ledger. Postings are thus made direct from the original slips, which have been first sorted out into an order convenient for that purpose, and afterwards resorted so that the total sales of each department may be readily computed; after which they are filed away in a form convenient for reference. Sometimes the process is carried a step further, and the original slips, filed away with suitable guide-cards indicating the nature of the account, themselves constitute the ledger record--which in such cases is to be found scattered over a number of sheets, one for each transaction, instead of, as in the case of the ordinary book ledger, a considerable number of transactions being recorded upon a single page. This adaptation of the slip system is impracticable except in cases where the transactions with each individual are few in number, and is not worth adoption unless the exceedingly large number of personal accounts makes it important as far as possible to avoid all duplication of clerical work. The more usual adaptation of the slip system to ledgers is to be found in the employment of _card ledgers_ or _loose-leaf ledgers_. With card ledgers (fig. 1) each ledger account is upon an independent sheet of cardboard suitably arranged in drawers or cabinets. The system is advantageous as allowing all dead matter to be eliminated from the record continuously in use, and as permitting the order in which the accounts stand to be varied from time to time as convenience dictates, thus (if necessary) enabling the accounts to be always kept in alphabetical order in spite of the addition of new accounts and the dropping out of old ones. An especial convenience of the card system is that in times of pressure any desired number of book-keepers may be simultaneously employed, whereas the maximum number that can be usefully employed upon any bound book is two. The loose-leaf ledger (fig. 2) may be described as midway between card and bound ledgers. It consists of a number of sheets in book form, so bound as to be capable of being readily separated when desired. The loose-leaf ledger thus embraces most of the advantages of the card ledger, while remaining sufficiently like the more old-fashioned book ledger as to enable it to be readily handled by those whose previous experience has been confined to the latter. Both the card and loose-leaf systems will be frequently found of value for records in connexion with cost and stores accounts, quite irrespective of their advantages in connexion with the book-keeping records pure and simple of certain businesses.

Legislative Requirements.