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BOOK KEEPING BY DOUBLE ENTRY.*

THIS method of Book Keeping differs from that by Single Entry in two important respects, viz, things, as well as persons, are entered as Dr. and Cr. and as Dr. and Cr. to each other, and each account is entered twice in the Leger. For the latter particular it is called Double Entry.

In the practice of Double Entry, three Principal Books, and four Auxiliary Books are necessary.

PRINCIPAL BOOKS.

These are the Day Book or Waste Book, the Journal, and the Leger,

I. THE DAY BOOK OR WASTE BOOK.

The Day Book begins, as in Single Entry, with an Inventory of all the property and debts of the merchant, and is followed by a regular account of the transactions in business, in the order of time in which they occur, stated in language so explicit and full that there can be no mistake. This book is in Double Entry, a mere record of the changes of property, and Dr. and Cr. are not introduced into it. References are made in it to the auxiliary books, when it is necessary. It is ruled as in Single entry.

To exhibit the difference in the two methods of Book Keeping, the principles of Double Entry will be illustrated by Example 1. of Single Entry.

(1) EXAMPLE I. DOUBLE ENTRY. DAY OR WASTE BOOK.

January 1, 1821.

My whole property is a debt of $400 due me from
Samuel Richards, the balance of my inheritance.
Samuel Richards owes me the balance of my inher-
itance,

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3rd.

Bought of Samuel Richards 105 yards of broadcloth at 3 dolls. per yard.

315

4th.

Sold John Higgins 55yds. of broadcloth at $3 50c. per yard.

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5th.

Bartered 40yds of broadcloth for 24cwt. of Iron, at 5 dolls. per Cwt.

6th.

Received of John Higgins in part,

7th.

120

180

Sold 20cwt. of Iron to S. M. for Cash at 51 dolls. per Cwt.

105

*The general principles of this system of Book Keeping are taken from the System in Rees' Cyclopedia, which is generally adopted by the merchants of London.

Note. In recording transactions in the Day Book, the above order is generally to be preserved, viz. 1st the date; 2d the kind of transaction in the active voice, as owes, sold, bought, exchanged, &c.; 3d the name of the person; 4th the article and quantity; 5th the price; and 6th the amount in the columns of money.

II. THE JOURNAL.

The object of the Journal is to prepare the accounts for the Leger. To effect this, the Dr. and Cr. of every article contained in the Day or Waste Book, is ascertained and expressed in the Journal.

The Journal is ruled with two blank columns on the left, viz. one for the date and the other for the page in the Leger, and with the proper columns for money on the right, as in the following Journal of the preceding Day Book.

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Broadcloth Dr. to Samuel Kichards 315 00
For 105yds. broadcloth at 3 dolls. per yd.
John Higgins Dr. to broadcloth 192 50
For 55yds. broadcloth at $3 50 per yd.
Iron Dr. to broadcloth

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120 00

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Accounts are distinguished in-
Personal accounts are those in

To understand the method of forming the Journal, the following distinctions must be attended to. to personal, real, and fictitious. which a person is entered as Dr. or Cr. and are the same as in Single Entry. Thus, in the preceding Journal, Samuel Richards is Dr in one account.

Real accounts are those of property of any kind, as cash, houses, cloth, furniture, adventure, &c. In the preceding example Broadcloth is Dr. to Samuel Richards, and Iron Dr. to broadcloth, &c.

Fictitious accounts are those of stock, and profit and loss. Stock is used for the owner of the books. In the preceding, Example,

Samuel Richards is Dr. to stock, i. e. to the owner of the books. Profit and loss is used for either gain or loss in the course of trade. This account does not appear in the Journal but in the Leger.

If two or more persons or things are included in the same account in the Journal, they are expressed by the term, Sundries.

RULES for distinguishing Dr. and Cr. in the Journal, are the following.

The person to whom or for whom I pay, or whom I enable to pay, is Debtor.

The person for whom or from whom I receive, or by whom I am enabled to pay, is Creditor.

Whatever comes into my possession or under my direction, is Dr. Whatever passes out of my possession or from under my controul, is Cr.

The phrases, In debtor, and Out creditor, briefly express the points in these rules. Thus, in the preceding Journal, Broadcloth,

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31 To Samuel Richards, 105yds. at $3 per yard, 1 315

Profit and loss,

John Higgins,

27 50

342 50

Dr.

4 1To broadcloth, 55yds. at $3 50,

192 50

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which comes into my possession, is Dr. to Samuel Richards by whom it is paid in part for stock in bis hands; John Higgins is Dr.. to broadcloth; Iron is Dr. to broadcloth, and so on.

III. THE LEGER.

But as

The object of the Leger is the same as in Single Entry. things, as well as persons, are introduced in the Journal, they must have separate accounts in the Leger also, where the respective Drs. and Crs. are to be arranged under their respective heads.

The Leger is ruled with columns for the denominations of money on the right side, immediately before which is a column for reference to the page of the Leger in which the corresponding account is found; and on the left side, is a column for dates, and another for the page of the Journal in which the account may be found. The following Leger for the preceding Example is formed on this plan. See foot of this and the preceding page.

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In posting the Journal to form the preceding Leger, Samuel Richards is posted Dr. to Stock $400, and Stock is posted Cr. by Samuel Richards for the same sum; Broadcloth is then entered Dr. in the next account to Samuel Richards, and Samuel Richards Cr. by broadcloth; John Higgins is posted Dr. to broadcloth, and Broadcloth Cr. by J. Higgins, and so on. It is obvious that each Dr. must have a CE. and each Cr. a Dr. and that every transaction relating to any one account, whatever may be its place în one account in the Leger, must be posted also on the proper side under the head to which it belongs. Thus, while Cash is Dr. to J. Higgins in the 6th account for $180, J. Higgins is Cr. by cash for the same sum in 4th account; and while Cash is Dr. also to iron, Iron is Cr. by cash to the same amount, in the 5th account.

On inspecting the preceding Leger it is evident, that in the personal accounts, as those of S. Richards and J. Higgins, all the ar ticles for which they are indebted are posted on the Dr. side, and all the articles they pay are on the Cr. side of the account; in the real accounts, as those of broadcloth, and iron, the quantity bought is posted on the Dr. side, and the quantity soid on the Cr. side so that the quantity unsold and the profit or loss may be readily ascertained. In the fictitious account of Profit and Loss, the loss is to be posted on the Dr. side, and the profit on the Cr. side, so that the difference must show the net gain or loss, by which the stock has been increased or diminished in the course of trade.

Having ascertained that the accounts have been correctly posted, the next step is to balance the Leger. This is to be dong in the following manner. To show this method more clearly, the preceding Leger is repeated, and the several steps in balancing the accounts are subjoined.

To the preceding Leger subjoin a new account, Balance Dr. and Cr. Begin with the next account to Stock, and place the balance of Dr. and Gr. under the smaller, to make them equal, viz. $85 on the Cr. side. Put this sum on the Dr. side of the account, Balance. For if S. Richards is Cr. by Balance 85 dolls. then Balance must be Dr. to S. Richards for the same sum. Next, to balance the Broadcloth account, the quantity on the two sides must first be made equal, and the value of the unsold cloth, at first cost, be placed under the amount sold, viz. 10 yards at $3, amounting to $50. The whole sum, viz. $342 50 must be equal to the amount bought and the profit on that sold. Then $30 must be placed on the Dr. side of Balance, for if Broadcloth be Cr. for the balance unsold, then Balance must be Dr. for the same sum. Proceed in this manner, through all the personal and real accounts.

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