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 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.

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:—

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.

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.

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.

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