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The foregoing description applies chiefly to the binding of books in leather, and in the strongest manner; but an immense number of books are now bound entirely in cloth, a style of binding which, though less strong, is cheaper and more expeditious. In this case the book is very often left uncut, the projecting side and bottom edges being merely trimmed a little with a large knife without the folds of the paper being cut. The rounding of the back is now commonly effected by means of a machine for the purpose, instead of by the hammer. The cloth covers or "cases are made up complete - embossed, gilt, and lettered before being attached to the book, the ornaments being stamped upon them by presses not very different, except in power, from the fly-press for embossing leather. The covers are attached to the books by means of strips of coarse thin canvas, which are glued to the backs of the books, and which project one half or three fourths inch on each side. These projecting strips are glued to the boards, and to conceal this arrangement, and give a neat finish to the book, some white or colored lining paper is glued in. The books are then pressed for a few hours, and may now be said to be finished. So rapidly can books be done up in cloth, that in a large establishment as many as, say, 1,000 copies of an octavo book can be finished in about six hours. Another method of binding, which dispenses with the processes of sewing, gluing, and rounding, is now commonly practised in the case of engravings, atlases, manuscripts, etc., which are either in single leaves, or have little or no margin left for stitching. This method consists in smearing the back of the book, while placed in the press, with a solution of caoutchouc, by which means each paper edge receives a little of this tenacious substance, and all are firmly kept in their places. Such books open up quite flat at once.

No remains of ancient binding, before the art of printing, have been transmitted to our time. After the invention of printing, books were variously decorated in binding. Strength and durability appear to have been the first objects of attention. Sometimes the books were covered with velvet, but most commonly the covers were of wood, planed to a suitable thickwhich leather or parchment was ness, over fastened. Sometimes brass ornaments were affixed to the sides, and pieces of brass were put on the corners of the books with the view of increasing their durability. Some of the most valuable books were covered with clear vellum, then overlaid with gold-leaf, and ornamented with various devices. Not unfrequently the year in which the book was bound appeared in large figures on the cover. In England the monks and students in monasteries were an

ciently the binders of books. Of their ingenuity and skill the various missals and other works preserved in our public and private libraries furnish abundant evidence.

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Bookkeeping is the recording of the transactions of a business so that the resources and liabilities may be readily exhibited. Transactions are recorded in the order of their occurrence in such books of original entry as may be imposed by the nature of each business or which conform to the requirements of the accounting system in use. If but a single book is used for this purpose, its form is usually that of the

day-book, which contains a narrative of all the transactions as they occur. Formerly this was the general procedure, but it is found that business can be expedited by classifying the transactions in separate books, consequently the cashbook, purchase-book, and sales-book are now commonly used concurrently. Whatever may be the character and extent of the original records, the transactions are ultimately transferred in classified form to the ledger, which is the principal book of accounts. There are two systems of bookkeeping in use, namely, single and double entry. The primary element in each of the two systems is the Account. In bookkeeping by single entry only accounts with persons are kept in the ledger, and the profits and losses are ascertained solely by comparison of past with present conditions; in other words, by taking the difference between the net worth at the beginning and the net worth at the close of a stated period. The principal books used in single entry are the day-book, cash-book, and ledger. Being a simple though necessarily imperfect method, single entry is used chiefly by retail traders. Bookkeeping by double entry, as the term implies, is that mode in which every transaction is entered twice, first on the debtor side of one or more accounts, and next on the creditor side, thereby keeping the ledger perpetually in balance. The chief objects of keeping accounts, it may be stated, are to determine (1) the amount of profit or loss during a definite period, and (2) the amount of net capital or net insolvency at the end of such period. The system of double entry gives the net capital or net insolvency in two different ways, from two different sources, the one corroborating the other, and constituting what is called the balance of the books. Upon the classification resulting from this arrangement rests the claim of double entry bookkeeping to be considered as a science.

Bookkeeping, like most other sciences, has adopted a terminology of its own to avoid circumlocution. For example, the terms debtor and creditor, usually abbreviated Dr. and Cr., are used arbitrarily to designate the right-hand and left-hand side, respectively, of an account. An account is a collection of items, under an appropriate title, so arranged as to give a result by comparison.

Journalizing is the mental process of deciding how every transaction is to be disposed of in the ledger; that is, what accounts are to be debited and credited in each case. Posting is the transferring of debit and credit items to their proper accounts in the ledger. A trial balance is a list of the open accounts in a ledger together with the debit and credit footing of each account. A business statement is a summarized exhibit of those accounts which comprise all items of revenue, otherwise denominated a profit and loss account. A financial statement is a compilation of those accounts having to do with capital, in other words, a balance sheet. A balance sheet is a condensed statement of the resources and liabilities of a business. It is usually compiled from the trial balance and inventory schedules at the end of a fiscal period and it is frequently accompanied with a profit and loss statement which confirms the increase or diminution of finance as displayed in the balance sheet proper. The function of a balance sheet is,


therefore, to present a scientific statement of the financial condition of a business at a specified date.

The problem presented in bookkeeping, as may be inferred from the foregoing, is that of exhibiting financial transactions as they occur in the most minute detail, and ultimately in the most condensed form. The best solution of this problem in any given instance, depends largely upon the nature of the individual business the operations of which are to be recorded.

The advantages of the double entry system over the single entry system may be summarized briefly as follows: (1) The susceptibility of infinite modification in its minor features without disturbing the general results as shown in the balance sheet; (2) the constant equilibrium of debits and credits, the mathematical proof of which is afforded in the trial balance; (3) the separate classification of capital and revenue accounts, the resultant statement of each class being confirmatory of the accuracy of the other; (4) the displaying of the channels through which profit and loss items have accrued, thus revealing the methods by which the movements of the business have been financed; (5) the provision for the ascertainment of gross profit on the different departments of a business by means of the trading accounts; (6) the working economy resulting from the introduction of special columns in the books of original entry; and (7) the ease with which a thorough audit can be conducted at any time, this circumstance serving as a check upon erroneous entries.

A double-entry ledger, as before stated, is the book of accounts. As such it is a concrete expression of the principle of classification, and the philosophic basis of the "science of accounts is displayed therein with mathematical precision. Each separate account contained in the ledger is built up on the theory of comparison. Thus, the items of one side denote increase or plus of financial ability, those of the other side denote its decrease or minus. Hence, to know the proper place in the ledger in which to assign each item in a transaction, is to know the laws, principles, and objects of each account in the ledger; and a false entry can only be proved false by showing its want of conformity to some principle of the ledger. Take the cash account for illustration: The left-hand or debit side contains the items of cash received; and the right-hand or credit side the items of cash disbursed; the difference between the receipts and payments will, necessarily, be the balance or amount of cash on hand, which, in this case, can be confirmed by actual count. Again, the merchandise account shows on the debit side the value of the goods on hand at the beginning and the cost of all subsequent purchases; the credit side shows all returns or sales of such goods, to which is added the value of the goods on hand at the end; the difference or balance, being the excess of production over cost, or of cost over production, as the case may be- in other words, the gain or loss. Each separate account, therefore, is constructed in accordance with a fixed and unalterable plan and each contributes a definite result which must be considered in the final showing. Being based upon the theory of the equation, there follows a double record of each item in every account with the result that the total debits always equal the total credits when the several accounts are taken


together. It should be noted in this connection that finance, only, is the essential object of accounts, namely, cash, notes, book debts, or their equivalents; any other property is only introduced into the books to show how far it contributed to the increase, or occasioned the diminution of finance, and so to corroborate the actual amount of financial ability found to exist. The great and almost the only source of confusion in double entry is that of confounding an account kept to show financial ability with an account to ascertain how much the profit on some property dealt in has contributed to whatever augmentation may be found in the state of the finances after a certain period of business.

It will be apparent that two distinct ideas are concurrently promulgated through all movements of the business directed toward an increase of wealth. These two ideas are concentrated in the cash and merchandise accounts, respectively, as types of the two classes of accounts. These two classes of accounts have been denominated, business and financial: the former revealing the movements of the business, the latter its financial results. In other words, business accounts show the losses and gains, and financial accounts show the resources and liabilities. Thus it will appear that the debits of the financial accounts show an increase of wealth and the credits decrease, and that the business accounts simply show the same thing reversed. Accordingly, the sum of all the resources of a concern less the sum of all its liabilities is its net capital. All increase or diminution of net capital comes from the receiving of more or less for property than its cost or the appreciation or depreciation of property while in possession, or from rent, interest, taxes, and service. The net gain or net loss of a concern, therefore, during any specified period must be exactly equal to the increase or decrease of net capital during the same period. In a manufacturing concern, for example, it is important that the progress of the business be shown at frequent intervals. It should be possible at any time to ascertain the cost of production of each article manufactured and to verify this cost by a statistical comparison with previous costs. This implies (1) that such a system of stock-keeping be inaugurated as shall show the amount of material consumed in the process of manufacture; (2) that the expenditures for labor be shown for each of the successive steps essential to bringing the article to a completed condition; (3) that costs of superintendence and incidental shop charges be pro-rated; (4) that the general expenses be distributed among the goods manufactured; (5) that adequate provision be made for depreciation; (6) that specific reserves be set aside for bad debts, taxes, contingencies, etc., and (7) that final profit shall be based on the total inclusive cost of production. The application of scientific principles to the accounting system should enable the management to have placed periodically before it, such facts relating to the cost of production as are essential to the shaping of a successful policy in these times of intense industrial competition.

The manner of recording transactions before they are arranged in the ledger, varies in almost every business, but this variation presents no confusion whatever when the different accounts embodied in the ledger are thoroughly under


stood. Double-entry accounting, in fact, admits of a great variety of modifications, erroneously, in many cases, called systems. The so-called voucher system, for instance, now extensively used in railway and manufacturing corporations, is an expedient for eliminating from the ledger individual accounts with creditors. At the same time, by the device of special columns in a voucher register, it facilitates the most minute subdivision of revenue expenditures and renders periodic comparison of such items possible to any degree desired. In most lines of business special columns may also be introduced in the cash-book, sales-book, and journal for the purpose of minimizing the mechanical labor of posting, the aggregate of each column being transferred to the corresponding ledger accounts instead of the separate items. The principle of consolidated postings is applied in dividing the accounts of the general ledger among a series of subordinate ledgers, a com


Loose leaf and card ledgers, impression salesbooks, duplicate order blanks, and the many mechanical devices for the curtailing of labor or the securing of expediency or directness in recording, do not come within the limits of this discussion which is intended rather to give a general view of the subject and its underlying principles.

Auditing.- Broadly stated, it is the province. of the accountant to devise the accounting system and to specify the nature and character of the records that shall be kept; it is the duty of the bookkeeper to perform the routine work of recording the transactions of the business in accordance with the plan outlined by the accountant; it is the function of the auditor to examine critically the completed records of the bookkeeper, to compare the entries with the documents, to ascertain if the plans of the accountant have been strictly followed, and, finally, to prepare the profit and loss account and certify FORM OF DAY BOOK.

New York, July 1, 1903.

Joseph Hardcastle began business this day with the following resources and liabilities:

Cash on hand,
Bills receivable, note signed by B. F. Williams,
Elston E. Gaylord owes him on account,
Stock of goods on hand at present value,
Total resources,

Bills payable, for note favor Charles W. Haskins,
Leonard H. Conant for amount owed him on account,
Total liabilities,

Joseph Hardcastle's net capital,


Bought of Henry R. M. Cook on account
200 bush. potatoes @ $1.10,

Received cash for B. F. Williams' note now due,

Sold Edgar M. Barber on account at 30 days,

60 bbls. apples @ $3.50, 400 bush. corn @ 8oc.,


Received from Elston E. Gaylord, cash in full of account, 6

Lent O. P. Kinsey, cash, receiving his note at 90 days with interest at five per cent,

mon division being: general, sales, and purchase ledgers. Each of these ledgers can be made self-balancing, if desired, by means of special columns in the books of original entry, a controlling account being kept in the general ledger, representing the aggregate sums in each of the subordinate ledgers. A separate ledger can thus be appropriated, if the magnitude of the business demands it, to the names beginning with each letter of the alphabet, or any number of letters may be included in one, as A to K, A to G, etc. By this means separate duties may be assigned by the accountant to a large number of subordinates, the general ledger consisting of but few accounts, from which, however, he is enabled to show promptly the condition of the entire business. A private ledger is kept by some proprietors for the purpose of withholding from subordinates certain information. The difference between the total debits and credits of the private ledger accounts should complete and confirm the general trial balance. Capital, profit and loss, investments, and other accounts can be kept in this manner with perfect security.

Vol. 3-10

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to the correctness of the balance sheet. It is incumbent upon the auditor to exercise every faculty and means in his power to determine (1) that the liabilities are all stated; (2) that the resources are not overstated; (3) that the profit and loss account contains all expenses chargeable to the period under review; (4) that the profits earned are all included; (5) that proper charges against revenue have not been capitalized; and (6) that intentional errors, irregularities, and fraudulent entries have not been permitted. The professional duties of the competent public accountant and auditor, therefore, cover a wide range of technical knowledge and commercial experience. A large number of text-books on elementary bookkeeping have been published, principally for schoolroom instruction. For a broader treatment of the subject application for special reference books may be made to members of the State Societies of Certified Public Accountants and the American Association of Public Accountants, or the following works may be consulted: Lisle, 'Accounting in Theory and Practice'; Dicksee, Auditing); Broaker, American Accountants' Manual';

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