It is necessary also to observe that Discounts are entered in the Cash book when required for posting to personal accounts only. The actual amounts received or paid, exclusive of discount, are recorded in those transactions which are posted direct from the Cash book to the Private Ledger.

The ordinary postings to the Dr. side of the accounts in the Private Ledger are from the following sources, viz:

(i.) The right-hand side of the Cash book (compare page 62) viz those entries which represent ready-money payments in respect of which personal accounts are not opened. Also Cashier, contra entries.

(ii.) The quarterly totals of the Purchases Day Book (compare page 57), which represent purchases on credit respect of which personal accounts are opened.

or in

(in.) The quarterly totals of the Returns and Allowances (Sales) Day Book (compare page 59).

(iv.) The quarterly totals of the Discounts, Bank and Cash columns on the left-hand side of the Cash book, (compare page 62).

The ordinary postings to the Cr. side of accounts in the Private Ledger are from the following sources, viz:

(i.) The left hand side of the Cash book (compare page 62) viz: those entries which represent moneys received in respect of which personal accounts are not opened, including Bank contra entries.

(ii.) The quarterly totals of the Sales Day Book (compare page 59) which represent sales on credit, or in respect of which personal accounts are opened.

(iii.) The quarterly totals of the Returns and Claims (Purchases) Day Book (compare page 58).

(iv.) The quarterly totals of the Discounts, Bank and Cash columns on the right-hand side of the Cash Book (compare page 63).

In the example the current postings for the six months are in Roman type, and the balances, supposed to be brought from the old Ledgers at the commencement of the year, as well as the closing entries, are in italic.

The treatment of the Private Ledger accounts will be further explained in the subsequent observations relating to the preparation of the Balance Sheet and Trading Account.

In Set II. instances of exceptional transactions are given which cause deviations from the above sources of posting.

By way of exercise in the use of the Private Ledger the reader may ascertain the undermentioned particulars, viz:—

1. The amount paid during a given period for Plant and Machinery, Carriage, Mill Wages, Warehouse, and Office Salaries, Rent and Power, Incidental Expenses, Drawings of A. Crosland, Traveller's Salary and Expenses, &c., &c.,

The voucher for any of the above mentioned payments and the details of Mill Wages and of Incidental Expenses paid through the Petty Expenses book.

2. The amount and details of purchases or expenditure incurred during a given period in respect of Material and Manufacture and Mill Furnishings. Also the amount of goods sold and returned.

DIRECTIONS.

1. By reference to the Alphabetical Index of the Private Ledger find the folio of the account containing the particulars required.

Directed by the reference number in the folio column of the Ledger Account, turn to the page of the Cash Book on which the entry is made, and the consecutive number of the voucher that is fastened in the Receipts BookFile or Guard Book is indicated by the figures in the Voucher Column on a line with the entry of the payment. In the case of the Mill Wages, or Petty expenses, the figures in the Voucher Column denote supposed pages of the Wages Book, or Petty Expenses Book on which the details are to be found.

2. The alphabetical index gives the folio of the account containing the particulars required and the reference number in the folio column of the Ledger account indicates the page in either the Purchases, Sales, or Returns Day Book on which the details are to be found (2). For instance, Material and Manufacture, Jan. 1 to June 30. see Private Ledger, folio 15 (page 50) total £7640 10s. 1d. Purchases Day Book folios 1 and 2 (see pages 29 and 30).

It will be observed that many amounts posted direct from the Cash book to the Private Ledger are briefly described in the Private Ledger accounts. In addition to the advantage of shewing at a glance for what each payment has been made, by help of this brief description it can be at once ascertained whether an account has been paid, although no personal account is kept (e.g. In Incidental. Expenditure account, folio 9, page 48, Jan. 30th, To Cash, A. & N. audit fee for 1883 6 6s. od).

The observations in the foregoing pages are commended to the careful study of the reader, who should endeavour to grasp thoroughly the construction and utility of Private Ledger accounts. When once these are fully comprehended, the chief difficulties of book-keeping will have been mastered.

THE BALANCE BOOK.

In the description of the separate books of entry, and of the Ledgers, it has been shewn that when the quarterly (a) totals of the separate books are all posted to their respective Private Ledger accounts, the aggregate of the postings on the Dr. side of all the Ledgers is equal to the aggregate of the postings on the Cr. side.

(2) As the totals of the separate books are not posted to the Private Ledger until the end of the quarter, particulars required at intervals during the current quarter are obtained from the separate books.

Therefore an abstract of the quarter's (a) postings on the Dr. side of the Ledgers should agree, in total, with an abstract of the quarter's postings on the Cr. side.

The Balance book is designed to receive the details of such abstracts which are prepared to test the accuracy of the Book-keeping and constitute what is termed the Trial Balance (compare page 14).

The book is divided into four sections; the number of pages allotted to each section being regulated by the probable number of accounts to be opened in the respective Ledgers.

The Sections are appropriated as follows, viz:

(i.) For the abstracts from the Purchases Ledger.
Sales Ledger.

(ii.) (iii.)

(iv.) For a Summary of the totals of the foregoing sections. Every page is ruled into eleven vertical divisions and Sections i. to iii. are commenced by entering in columns 1, 2, 3, and 4, the particulars (abstracted from the ledgers) indicated by the headings of the columns, viz:

In columns 1 and 2.

3 19

4.

The folio and name or heading of every account in the Ledger, entered seriatim on the blue lines (c).

The balance of each account (if any), whether Dr. or Cr., on January 1st, 1884.

In Section iv. a Summary is prepared of the totals of the commencing entries of Sections i., ii., iii. (see example pages 54 and 55).

The Balance Book is then allowed to rest until March 31st, when the first Trial Balance is prepared.

As soon as the quarter's postings are completed the sums of the postings during the quarter on the Dr. and Cr. sides of each account are abstracted from the Ledgers and entered in columns 5 and 6 on their respective lines. For instance, (see page 38) Purchases Ledger, Folio 1, Rake, Holling & Co's. account; during the first quarter items amounting to the sum of £1472 Is. 8d. are posted on the Dr. side, and items amounting to the sum of £1097 18s. 4d. are posted on the Cr. side. These two sums are inserted in columns 5 and 6 of Section i. of the Balance Book (see pages 52 and 53) on a line with the name.

(a) Although in the illustrations the totals of the separate books of entry are posted, and the Trial Balance is prepared, at quarterly intervals, exactly the same lines would be followed in each case were monthly, half-yearly, or other periods adopted.

(b) The Bills Ledger is for convenience coupled with the Private Ledger, and is regarded as containing only two accounts, viz, Bills Payable account and Bills Receivable account.

(c) When abstracting the particulars from Ledgers that have been in use previously, the heading of every account already opened therein with which it is expected there will be any future dealings should be entered in the Balance Book, although there may be no balance of the account. The headings of new accounts opened during any quarter are entered when the quarterly abstracts are taken out, and follow in order after the accounts previously entered.

The totals of columns 5 and 6 are summarised in Section iv. and if the aggregate totals correspond, the Dr. with the Cr., the accuracy of the postings for the quarter is thereby proved to be correct. Should the aggregate totals not correspond recourse must be had to the Test Journal in order to discover the error which causes the difference.

The Balance Book is again allowed to rest until June 30th, when another Trial Balance is prepared in exactly the same way as explained above; the quarter's postings from March 31st to June 30th being entered in columns 7 and 8 (d).

When the Trial Balances are completed, there is in the Balance Book, a compendium of the contents of all the Ledgers, and on June 30th the balance of every account is ascertained therefrom (compare page 15), in order to prepare a Balance Sheet and Trading

Account.

The figures on the horizontal lines of the Balance Book are severally added across the page, and the lateral total of each line is inserted in column 9.

It will be observed that all sums abstracted from the Cr. side of the Purchases Ledger are entered on the blue or upper lines (see Balance Book, Section i., columns 4, 6 and 8, pages 52 and 53) and that all sums abstracted from the Dr. side of the Purchases Ledger are entered on the red or lower lines (see columns 3, 5, and 7, pages 52 and 53). In the abstracts from the Sales and Private Ledgers (Sections ii. and iii.) the position of the figures is reversed; the Dr. figures being on the blue or upper lines and the Cr. figures being on the red or lower lines.

This plan is contrived so that all sums on the Dr. side of each account being on a line distinct from those on the Cr. side, lateral additions may be made across the page as on June 30th, and the respective totals of the Dr. and Cr. sides of each account ascertained. By reversing the position of the figures, as above explained, the larger total in nearly every instance comes on the upper line, thus facilitating the process of subtraction. The totals at the foot of each page are likewise carried out on distinct lines.

The totals of the two (blue and red) lines relating to each account are compared and when unequal the smaller amount is subtracted from the larger. When the total of the horizontal line bearing abstracts from the Cr. side of the ledger exceeds the lateral total of the line bearing abstracts from the Dr. side, the difference is entered in column II as a Cr. Balance (see Section i., page 53) and vice versa, when the total of the Dr. line exceeds the total of the Cr. line, the difference is entered in column 10 as a Dr. Balance (see Section ii., page 53).

(d) In Set II. the Balance Book is extended, by the addition of four extra money columns, so as to provide for four quarterly Trial Balances instead of two, and the book might be further extended indefinitely.

The totals of columns 10 and 11 are summarised in Section iv., and the aggregate totals, Dr. and Cr., if the work is correctly performed, must necessarily correspond (e).

A list of balances abstracted independently from the Ledgers on June 30th would be identical with columns 10 and 11 of the Balance Book and the balances may thus be individually verified (ƒ).

With the assistance of the list of balances contained in columns 10 and 11, the Balance Sheet and Trading Account are constructed in the manner described in pages 77 to 80.

Immediately after the preparation of the Balance Sheet each section of the Balance Book should be re-commenced on a new page in readiness for the next half-year's accounts.

At the end of any quarter the amount of the outstanding balance of any particular account, or of the total of the outstanding balances in each of the ledgers, can be readily ascertained by adding laterally the blue and red lines, and subtracting the smaller total from the larger. Thus, to ascertain the total of the Dr. balances in the Sales Ledger on March 31st. See pages 52 and 53.

The Test Journal, which is simply ruled with one money column, is used to facilitate the discovery of errors in the book-keeping at the preparation of the Trial Balance.

The design of the book is based upon the fundamental principle that all the entries in the separate books are posted (either individually or in total) on both the Dr. and Cr. sides of the Ledgers.

At the end of the quarter, when the Trial Balance is prepared, the totals (g) of all the separate books of entry, and also the totals of

(e) It has been shewn that the aggregate totals of the alternate Dr. and Cr. columns 3 to 8 correspond one with the other, and the process of subtraction in ascertaining the balances does not affect the equilibrium but merely cancels a like amount on both Dr. and Cr. sides.

(f) In the appendix several methods of balancing are described, and the preparation of a list of Dr. and Cr. Balances abstracted direct from the Ledgers, such as above referred to, appears at first sight to be the shortest possible process. The simplicity of this plan has led to its general adoption, but it affords no clue to the whereabouts of errors in the book-keeping. This defect frequently causes the tedious operation of re-checking all the books in order to discover a mistake.

A recognition of the paramount importance of localising errors, combined with other objects, has caused many large establishments to prepare detailed analyses of their Ledgers, wherein all the postings are dissected, classified and reconciled respectively with the separate books of entry.

(g) As explained in the note at foot of page 62 the Cash Book, by means of its six columns, answers the purpose of six separate books, and we therefore enter the total of each column in the Test Journal.