the credit side, and as this is an item of income, it must be carried to the credit side of the profit and loss account also, and this is done without disturbing the equilibrium of the ledger by an operation called balancing the account.

If we were to add up the two sides of an account, and set the lesser under the greater, and subtract it, we should obtain the difference, which would stand upon its proper side as the balance of the account. But this, though the most natural method of ascertaining the balance, is not exactly the method by which an account is balanced or closed. The difference ascertained by deducting the lesser from the greater is not left in the form it would so receive; because that form would leave the account in the shape of a running account. But the difference or balance (so ascertained) is always inserted at the foot of the deficient side; and then, when the account is cast, both sides come out exactly equal: and the account being thus closed and balanced in form, the balance must be inserted

again upon its proper side. If an account is balanced simply for the purpose of closing it and opening a new account with the difference, this difference, after the account is balanced, is inserted again upon its proper side immediately under the old account. And the operation consists only of an insertion of the balance on both sides of the account, which of course makes no disturbance in the equilibrium of the ledger. But after the old account is balanced, there is evidently no necessity to insert the balance again immediately under the old account, but it may be carried into some or any other account that may be convenient, provided only it is entered upon the proper side of the ledger, so that

its equilibrium be not disturbed. In an exhausted account which has been profitable, the gain comes out upon the credit side. We therefore balance the account by entering the sum once upon the debit side of the account, so as to balance and close that old account; and we enter it again upon the credit side of the Profit and loss account, whereby the old account is closed, the gain is carried to the credit of the Profit and loss account as an item of income, while the equilibrium of the ledger is preserved. The Cloth account exhibits an account closing with a profit, which is carried to the credit of the Profit and loss account.

But if a real account closes with a loss, the balance must in a similar manner be carried to the debit of the Profit and loss account, as may be seen in the Paper

account.

Many of the real accounts of a merchant, however, are never exhausted, but are receiving a constant accession of new articles as the old ones are delivered out. They nevertheless yield their profits and losses, which are only ascertained upon what is called a Stocktaking, or Rest, which operation we shall presently explain. It may be sufficient here to mention, that at the stock-taking the profits and losses of these unclosed accounts are carried into the Profit and loss account in the same manner as are the profits and losses of the closed accounts: and so are all the bad debts and matters which turn up upon the stock-taking investigation. Now as all the profits of the merchant find their way to the credit side of the Profit and loss account, that side must exhibit his gross income. And as all the rents, salaries, losses, and outgoings, find their way to the debit side of that account, that side exhibits his ne

cessary charges and expenses, and his losses incurred in respect of trade: and the difference between these sides (provided the merchant draws nothing for his private expenses in the mean time) will exhibit his net income. If, however, the debit side exceeds the credit side, he has been a loser by his business.

It is customary with every merchant once or twice a year to make what is called a Rest, when he balances his books, and examines all his stock in hand, in order to ascertain the amount of his stock and the profits and losses of his business. To this operation he usually devotes that time of the year when business is most flat, and when most of the personal accounts are made up, and real accounts exhausted by the sale of the articles in which he deals. And unless he performs this operation from time to time, he may be going on apparently in prosperity, while in reality he may be fast verging to insolvency.

In making a rest and stock-taking, he has two objects in view,-1st. To ascertain the amount of his stock or property; and, 2dly, To ascertain his profits or losses during the past year.

To effect these objects it is necessary for him to balance his books, and to ascertain also by actual inspection, whether the property he has in hand really is what according to the books it ought to be; or whether he has suffered in any manner by unknown losses, damage, or depredation.

To ascertain what property he actually has in hand, he must accurately inspect all the articles of his stock, and fix an estimated value upon them according to the market prices at which he would at that moment be content to purchase them; or, if they are articles of his

own manufacture, at the lowest price at which he is content to dispose of them.

Having effected this stock-taking, and reduced the results into an inventory, he may proceed to balance the ledger.

In this operation, it has been observed, he has two objects in view: 1st. To ascertain the amount of his stock or property; and, 2dly, To ascertain his profits and losses. His property is distributed over all his ledger accounts, as well as his profits and losses. Some of his profits and losses have been from time to time flowing into his Profit and loss account, and it is now his object to collect there all the rest of his profits and losses; which he may do upon balancing such of his ledger accounts as contain items of profit and loss. But to collect the amount of his present property, he opens another account, which is called the Balance account. And as he balances his ledger accounts, he collects the balances of property or liability which they exhibit into this Balance account.

He balances, therefore, all his real and personal accounts, one after another. The amount of property which any of them exhibits he carries down to the debit of his Balance account, and the amount of liability which any of them exhibits he carries to the credit of the Balance account. And the profits and losses which these accounts exhibit, in like manner he carries down to the Profit and loss account. So that when this operation is completed, these two accounts in fact represent all the real and personal accounts in the ledger; for the real and personal accounts being balanced, need be no more regarded, as their results are exhibited in

the balances carried down into the Balance and Profit and loss accounts.

It may be here observed, that these balances and profits and losses should at a rest be collected upon two separate loose sheets of paper, and the balancing operations be performed in pencil, and not be reduced into writing and inserted, till all errors have been detected and rectified.

The personal accounts, as well as the cash, which is a real account, are easily adjusted by simply balancing them one after another, and carrying their balances into the Balance account. But the real accounts are not so

easily disposed of.

To balance a real account, two distinct operations are necessary the first has respect to the quantity and value of the stock in it, and the other to the profit and loss that has accrued upon it.

In those real accounts which have become exhausted by a sale of all the articles, only one of these operations is requisite; for as all the articles have been already disposed of, there are none to be enumerated among the stock in hand. It is only necessary, therefore, in these exhausted accounts, to close them and ascertain the Profit or loss which has accrued, and carry it into the Profit and loss account.

In closing these exhausted accounts, there is however another matter to be attended to, viz.: that the actual quantity of goods that goes out is very frequently not exactly of the same amount as that which came in. It is often less by reason of loss or damage; but it is not unfrequently more by reason of superabundant measure purposely allowed by the wholesale dealer, or by