Marshalling the Assets and Liabilities. 21. Before proceeding to consider what Journal entries we require to pass in order to record in the Books the above position of Mr. John Jones' affairs, let me call your attention to the order in which I have placed (or marshalled) the above items, Nos. 1 to 13. The Assets are placed directly in the order in which they could be readily realized, and the Liabilities are similarly shown, in the order that Mr. John Jones would be called upon to meet them: this is an important feature for Mr. John Jones to bear in mind, not only for his own sake, but more especially should he have occasion to consult his Bankers (Messrs. L. S. D.) for accommodation at any time, when it is a great thing for them to be able to see at a glance what are really liquid assets, and in what relation they stand to liabilities pressing to be met, and which must be met as they mature. We will deal more particularly with this point again in our second paper, meanwhile I think it not amiss to prepare you for the same, that you may think the matter out between this and then. The Journal 22. The Journal entries necessary to open Mr. John Jones' Books, in accordance with the particulars given at paragraph 20, would be two detailed and explicit ones, of which the following are the outlines, say : If you have carefully followed me at paragraphs 12 to 15, I should think you ought of yourselves now to be able to post these two Journal entries yourselves to PRIVATE LEDGER (P.L.), SALES LEDGER (S.L.), and BOUGHT LEDGER (B.L.), respectively. Let me just, however, impress upon you one or two essential features, viz.: 1. Make your Journal entries (especially the opening ones) clear, explicit and full, so that he that runs may read. 2. Remember that the DEBTORS posted to SALES LEDGER (S.L.), folios 1 to 95, and the CREDITORS posted to BOUGHT LEDGER (B.L.), folios 1 to 100, and to PRIVATE LEDGER (P.L.), folios 61 to 65, want detailing and posting separately to their individual folios, 1 to 95, 1 to 100, and 61 to 65 respectively. 3. And then, perhaps, you will allow that the 4 books referred to at paragraph 11, and detailed at paragraphs 12 to 15, are on all fours with the JOURNAL, so that so far we have not got beyond the JOURNAL, and therefore it behoves us to hurry on. Cross adjust- 23. Just as the JOURNAL is all essential for opening entries, so also is it equally so for the cross, adjusting and closing entries at the end of the financial period. I desire you to bear this fact in mind. We shall have more to say upon this point next week; at the same time it is not impossible that one or two points bearing hereon may come up for consideration this evening, for the JOURNAL is certainly ubiquitous and all-reaching. The Journal as in use in the office of Messrs. Blank and Co., merchants, of the 24. So far, for the sake of brevity, I have rather dealt with the JOURNAL as used by the MANUFACTURER or GENERAL TRADER, and not by the MERCHANT. At the same time I should here state that in the office of MESSRS. BLANK & Co., MERCHANTS, OF THE CITY OF LONDON, the entries from every intermediary Book, as also from the CASH BOOK itself, are all passed into the JOURNAL monthly, and from that Book, and that alone, posted to the LEDGER. In that way the City of London. JOURNAL contains in chronological order, particulars of every transaction of the House, and is thus in itself a complete Book of Record, from which at any time the LEDGER can be written up; the entries in this latter Book (the LEDGER) are thus materially minimised. This, in fact, is the system in force on the Continent and elsewhere, where the Code Napoleon prevails, as already mentioned in paragraph 10 hereof. It would take too long to go into the matter this evening, it being, in fact, a subject in itself; but if any of you desire to go more fully into it, I would refer you to two papers I have already read, and bearing directly upon the subject. They are entitled respectively : "A MERCHANT'S OFFICE."-London, 8 November, 1887. "A MERCHANT'S ACCOUNTS."-Sheffield, 28 November, 1888. Copies of these papers are in your Library, and I shall be happy to present it with further copies should it be so desired. The Cash 25. THE CASH BOOK is not necessarily one Book: it often consists of many books, for instance, it is not unusual to have two separate CASH BOOKS, viz., one for Cash Received, and the other for Cash Paid, and thus, often the GENERAL CASH BOOK in Manufacturers' and General Traders' Businesses, except for entries to the PRIVATE LEDGER (where the record and posting are direct), only records the totals of which the details and postings are given in the following sub. CASH BOOKS, viz:For Cash Received, TOWN CASH BOOK (or Books), COUNTRY CASH BOOK (or Books), and FOREIGN CASH BOOK (or Books), the items of which are posted to the credit of the SALES LEDGERS; and for Cash Paid, the BOUGHT CASH BOOK (or Books), the items of which are posted to the debit of the BOUGHT LEDGER. You will notice I say "BOOK" (or Books), it being found convenient in large businesses to divide these into alternate days, say one set for Mondays, Wednesdays, and Fridays, the other set for Tuesdays, Thursdays and Saturdays. In this way the daily work of the Cashier is not interfered with, and does not clash with that of the LEDGER Clerk. The day's totals of these various sub CASH BOOKS, are entered in the GENERAL CASH BOOK, which (subject to adjustment for outstandings) corresponds to and agrees with the BANK PASS BOOK, and of which periodical and frequent agreements are both necessary and advisable. Before dismissing from our notice these sub CASH BOOKS, I would mention that they (and not the GENERAL CASH BOOK) deal with the entries of discounts and allowances (see paragraph 17 hereof), for which they have special columns. I refer to this matter more particularly again at paragraph 32 later on. The posting of the Cash Book. 26. In all large well-conducted businesses the invariable and uniform rule prevails that the one who keeps the CASH BOOK (or Books), has nothing whatever to do with the posting of it: this duty devolves on another (or others), it being advisable that the Cashier and Bookkeeper be always distinct persons: to have them the same might invite fraud. The form of the Cash Book. 27. The Form of the CASH BOOK differs materially in different businesses. In some cases the objectionable plan is pursued of keeping and recording in it office Cash-that is to say, not banking every thing as it is received, but keeping back a portion of the Cash in hand, and out of it paying accounts in Cash instead of paying everything by Cheque. Of course I do not here refer to PETTY CASH, which is a necessary adjunct, but which should be kept altogether distinct, as I explain at paragraph 36 hereof. Office Cash. 28. As I do not approve of the system of office Cash, I purposely avoid giving you a form embodying it, simply confining myself to stating that where this mischievous system prevails an extra money column is needed both on the debit and credit side of the CASH BOOK, and that any Transfers from "Office Cash" or vice versâ to "BANK" are passed from the one money column to the other without being posted, a simple contra tick (thus "") recording the respective debit and credit. Ruling in general use for a Cash Book where all is banked. 29. The ruling in general use for a CASH Book where everything is banked is as shown in the form below, where I have sketched at the same time a few simple entries viz.— [For the Form see next page.] |