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If he chooses to keep ledger-accounts of the accumulating items, he can easily prepare the way for that purpose when he analyzes his cash-book, by classing them together, and a little apart from the items which are simply matters of consumption, carrying the sums to account; and if he pleases he can let them stand over for the year or post them monthly. See Appendix XIII.

To balance his accounts he must first balance all the ledger accounts, and draw out a Balance sheet in the usual form, containing on its debit side the balances of his estates, investments, and credits, and add to them the balances of the furniture, library, and other accumulating accounts, which he has carried into his ledger; and on the credit side his debts, and this will be a balance sheet in the usual form. His Profit and loss sheet will simply be made up by placing on its credit side the sums total of the income he has received, and upon the other side all sums spent in articles consumed; and these with the Stock account, balance each other as explained in page 29. A reference to the Appendix XIII. will show clearly the way in which such a balance may be made.

But all this, though it looks like single entry, is really double entry. When a person keeps only a cash-book and makes single entries from it into the ledger, he may suppose he is keeping his accounts by single entry, and so indeed he is; but his cash-book is a ledger account, and it is in that that he has made the other entry. If, however, he post only his personal accounts from his cash-book to his ledger, he is using single entry, and from this he can obtain no results; but if he goes further, and either posts all the other items to the respective branches of Profit and loss, or if he only

makes the analysis explained above, he is actually using double entry, and may have all the benefits of the balance of the double entry system, without the inconvenience of a waste-book or journal; and when he writes down the account of his receipts and expenditure as in Appendix XIII., he is then really writing down the profit and loss sheet which balances the account.

I cannot close this branch of the subject without pointing out the necessity of removing bad debts from the ledger. Unless this is done, they are included in the stock, and make the annual profits appear larger than they are. If these apparent profits are drawn out as real profits, the consequence must be speedy and inevitable ruin. Their removal is effected by opening a bad debt account, which is a branch of the profit and loss, and carrying every bad and doubtful debt to its debit side, and crediting it with all compositions and debts unexpectedly recovered. It is also advisable to make an allowance for bad debts, which may be effected by debiting the amount of all the sales with a per centage of 2 or 3 per cent. for bad debts, and crediting the bad debt account with the same sum. This plan will be found a most efficacious protection to a merchant, and will be sure to keep him upon the right side.

CHAPTER V.

PARTNERSHIP.

THE most complicated branch of account is that which relates to partnership; and it is rendered still more perplexed in this country by the differences which exist between the law of the land respecting partnership and the customs of merchants, universally adopted here and in every country in which the Italian system of accounts is used.

Merchants continue to carry on their partnership accounts upon the clear and distinct principles of the Italian method, regardless of the law of England; and so long as things go on prosperously among partners, no difficulty occurs; but the moment it becomes necessary for them to sue, or be sued by, third persons, or to have any dispute between themselves decided, or to dissolve their partnership, or to have recourse in any manner to the English courts of law or equity, the simple principles of merchants are superseded; and the difficulties become so formidable, as to amount in many instances to an absolute denial of justice: and, ndeed, where justice is obtained, the machinery of the court of equity through which it comes is so dilatory, and the system of taking accounts in that court is so much at variance with the system of mercantile accounts, and the process so expensive, that the legislature has at last been forced to turn its attention to the

subject. By an order of the House of Commons evidence has been taken, and a very valuable report made by Mr. H. Bellenden Ker, in which the difficulties are stated at length. With respect, however, to some of the remedies which have been proposed to obviate these difficulties; I must take the liberty of dissenting, and would beg, with much diffidence, to call attention to some of the mercantile principles of partnership accounts, which have been hitherto as much overlooked in the courts of law and equity and by professional men, as have the principles of the courts been disregarded by merchants and accountants. I am thus anxious to bring forward these discrepancies at this moment, when it appears to me that there is a possibility of introducing some measures which may rather tend to increase than alleviate the mischief; when almost every evil may perhaps be remedied at once, and with but every little alteration.

The common law of England is properly the custom of the land. In its earliest progress it was simply defined by the decisions of the judges. The only accounts which in ancient times came under the cognizance of the courts were the accounts of the Exchequer, or accounts of a nature strictly similar, such as the accounts of stewards or bailiffs to their lords; and for such accounts as these, where one party only was accountant, the machinery of the courts was fully adequate; nor was it till the more complicated accounts of merchants (where both parties were mutually accountant to each other) came under its consideration, that any deficiency was felt.

The customs of merchants were not originally among those customs of the land which were regarded as its law; but as points of mercantile law arose, the judges.

felt the necessity of adopting the mercantile customs and amalgamating them with the law of the land. The judges of the courts of equity in particular endeavoured, without a very clear notion of the subject, to ingraft the customs of merchants upon the common law and practice of accounts to which they had hitherto been accustomed. The assistance of merchants was from time to time called in, as difficult points presented themselves for the decision of the judges, and hence arose that extraordinary confusion of Mercantile customs, Roman, Canon, and English law, which constitutes the present law of partnership in England.*

This confusion, indeed, became so great, that the courts of common law found themselves and their machinery inadequate to deal with the subject; while in the courts of equity there has been a continued struggle to approximate more and more to the customs of merchants, and to remove the stumbling-blocks presented by the old foundations of the common law, which obstruct the erection of a system in accordance with the wants of the commercial classes of the nation. Indeed there is no branch of the law in which the exceeding merit of Lord Eldon is more strongly exhibited than this, in which, with the most painful and patient attention, he laboured to obviate and overcome the difficulties of the subject, and by a particular examination and careful adoption of the custom of merchants, to establish such principles as would eventually bring the law and practice of the courts of equity into conformity with the necessities of an extended commerce: and we find him repeatedly lamenting the strange rules so obviously at variance with mercantile customs with which he had to

* See Collyer on Partnership, p. 1.

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