BOOK KEEPING, is an art of which the importance is universally known; and as commonly practiced, it has been sufficiently explained in the Encyclopaedia Britannica. But since that article was written, a great improvement has been introduced into the art, or rather a new method of book-keeping has been invented, by Mr EDWARD THOMAS JONES, of the city of Bristol, accountant, who calls it the English system of book-keeping; and thinks that by it accounts may be more regularly kept, and errors in accounts more easily detected, than by any other method hitherto known. We are much inclined to be of his opinion; and shall therefore lay before our readers his description of this method, as we find it in the specification of the patent which was granted to him January 26. 1796.
The English System of Book-Keeping requires three books, called a day-book or journal, an alphabet, and a ledger, which must be ruled after the following method, viz. the day-book to have three columns on each page, for receiving the amount of the transactions; one column of which to receive the amount of debits and credits, one column to receive the debits only, and one column to receive the credits only; or it may be ruled with only two columns on each page, one column to receive the amount of the debits, and one column to receive the amount of the credits. There must also be on each page of the day-book four other columns ruled, two on the left side next the amount of the debits, and two on the right side next the amount of the credits, for receiving the letter or mark of posting, and the page of the ledger to which each amount is to be posted.
The alphabet need not be ruled at all, but must contain the name of every account in the ledger, the letter that is annexed to it as a mark of posting, and the page of the ledger.
The ledger must be ruled with three, four, five, or seven columns on each page, as may be most agreeable, for receiving the amounts of the different transactions entered in the day-book. And the process for using these books, or making up books of accounts on this plan, is as follows.
When a person enters into trade, whether by himself or with copartners, he must have an account opened with himself in the ledger; entering first in the day-book, and then to the credit of his account in the ledger, the amount of the property he advances into trade: The account may be headed either with his name only, or else called his stock-account.
If you buy goods, give the person credit of whom you purchase; when you sell goods, debit the person to whom said goods are sold. If you pay money, debit the person to whom paid, not only for what you pay, but also for any discount or abatement he may allow, and give the cashier credit for the net amount paid. If you receive money, credit the person of whom you receive it, not only for what he pays, but also for any discount.
discount or abatement you may allow, and debit the cashier for the neat amount received; taking care in these entries to have nothing mysterious or obscure, but merely a plain narrative of the fact, introducing not one useless word, and avoiding every technical term or phrase except the words debit and credit, which are full and comprehensive, and the only terms that are applicable to every transaction, and may be affixed to every entry.
But as a hurry of business will sometimes take place in almost every counting house, which may cause the entries to be made to the debit instead of the credit of an account in the day book, and to the credit instead of the debit, Mr Jones has endeavoured as much as possible to counteract the evil, by having only one column for receiving the amount of every transaction, whether debits or credits, at the instant of making the entry; and, for the convenience of separating the debits from the credits, previous to posting, which is necessary to prevent confusion and perplexity, he has two other columns on the same page; that on the left side into which the amount of every debit must be carefully entered, and that on the right for the amount of the credits, which columns must be cast up once a month. The column of debits and credits of itself forming one amount; the column for the debits producing a second amount; and the column of credits a third amount; which second and third amounts, added together, must exactly agree with the first amount, or the work is not done right.
By this means the man of business may obtain monthly such a statement of his affairs as will show how much he owes for that month, and how much is owing to him; and the debits being added together for any given time, with the value of the stock of goods on hand, will, when the amount of the credit is subtracted therefrom, shew the profits of the trade.
Our author now proceeds to the process of posting; which begins with opening an account in the ledger with every person to whose debit or credit there has been an entry made in the day-book; affixing to each account a letter, which is to be used as a mark of posting. The person's name, place of abode, and the folio of the ledger, must then be entered in the alphabet, with the same letter prefixed to each name as is affixed to the account in the ledger. Next the page of the ledger on which each account is opened (and which will be seen in the alphabet) must be affixed to each amount in the day-book, in the column for that purpose. The date and amount of each debit must then be posted in the columns for receiving it in the ledger, on the left or debit side of that account to which it relates; entering, as a mark of posting in the day-book, against each amount, the same letter that is affixed to the account in the ledger, to which said amount may be posted. Observing that the debits of January, February, March, &c. must be posted into the column for those months in the ledger, and the credits must also be posted in like manner, filling up each account in the centre, at the expiration of every month, with the whole amount of the month's transactions; thus having, in a small space, the whole statement of each person's account for the year; in the columns to the right and left the amount separately of each transaction; and in the centre a monthly statement.
Having described the process of this method of book-keeping, he thus shews how to examine books kept by
this method, so as to ascertain, to an absolute certainty, if the ledger be a true representation of the day-book; i. e. not only if each transaction be correctly posted, as to the amount thereof, but also if it be rightly entered to the debit or credit of its proper account. This examination differs from the modes that have heretofore been practised, as well in expedition as in the certain accuracy which attends the process; it being only necessary to cast up the columns through the ledger debits and credits, according to the examples given; and the amount of those columns, if right, must agree with the columns in the day-book for the same corresponding space of time. These castings should take place once a month; and if the amounts do not agree, the posting must then, but not else, be called over; and when the time, whether it be one, two, three, or four months, that is allotted to each column of the ledger is expired, the amount of each column should be put at the bottom of the first page, and carried forward to the bottom of the next, and so on to the end of the accounts; taking care that the amount in the day-book, of each month's transactions, be brought into one gross amount for the same time.
But although this process must prove that the ledger contains the whole contents of the day-book, and neither more nor less, yet it is not complete without the mode of ascertaining if each entry be posted to its right account; which may be ascertained by the following method. He has laid down a rule that a letter, which may be used alphabetically in any form or shape that is agreeable, shall be affixed to each account in the ledger, and the same letter prefixed to the names in the alphabet, these letters being used as marks of posting, and affixed to each account in the day-book as it is posted; it is only necessary therefore to compare and see that the letter affixed to each entry in the day-book is the same as is prefixed to the same name in the alphabet; a difference here shews of course an error, or else it must be right.
At the end of the year, or at any other time, when persons balance their accounts, if there be no objections to the profits of the trade appearing in the books, the stock of goods on hand at prime cost may be entered in the day-book, either the value in one amount, or the particulars specified, as may be most expedient, and an account opened for it in the ledger, to the debit of which it must be posted. The casting up of the ledger must then be completed; and when found to agree with the day-book, and the amount placed at the bottom of each column, subtract the credits from the debits, and it will shew the profit of the trade; unless the credits be the greater amount, which will shew a loss. In taking off the balances of the ledger, one rule must be observed, and it cannot be done wrong: As you proceed, first see the difference between the whole amounts of the credits and debits on each page for the year, with which the difference of the outstanding balances of the several accounts on each page must exactly agree, or the balances will not be taken right. By this means every page will be proved as you proceed, and the balances of ten thousand ledgers, on this plan, could not unobservedly be taken off wrong.