EXERCISES ON BILLS.

(The Bills are to be written out in full from the particulars here given.)

1. You owe William Wilson £90:15s. for goods bought of him. Settle this by a promissory-note, at 2 months from 1st March.

2. Kemp & Lowe are indebted to you £120:12:6; draw on them for the amount, at 3 months from 1st May. Show the acceptance of this bill; and indorse it specially to Richard Jones.

3. A bill is drawn on 1st September at 4 months, and discounted on 15th October; for how many days will discount be charged?

4. Watson & West of Manchester owe you £320:16:8 for goods got from you; and you are indebted in a sum not less than this to Thomas Deighton & Son, same place. Settle this by a bill at 3 months from 1st July, payable at Union Bank, London. Show the acceptance of the bill, and explain by whom, and at what cost steps are taken to retire the bill in London.

5. Newlands & Son of London have purchased muslins from Thomas Campbell of Glasgow, to the value of £850; while T. Campbell is indebted for cochineal in a sum not less to Scrooge & Marly, also of London. Show the double payment by bill.

6. Naldo Gherardi of Marsala has shipped to Grainger, Brothers, of Liverpool, wines, fruit, etc., value £524:16s. sterling; while the latter have exported iron to Andrea Calani & Co., of Palermo, to an amount somewhat exceeding this. Show the set of Exchange, consisting of three bills at 30 days' sight, which Grainger, Brothers, will draw in order to discharge their debt to Naldo Gherardi.

7. Putzler & Sons of Riga draw on Hill, Wells, & Co. of Liverpool, a set of three bills in favour of Alexander Home, merchant there, May 22d (old style), at usance, for 1350 roubles 50 copecks, exchange at 3s. 2d. per rouble; which A. Home accepts; payable at the City Banking Co., London.

SECTION IL

OF THE USE OF THE TERMS DEBTOR AND CREDITOR.

17. The use of these terms depends on the two following principles, which the learner must keep steadfastly before him.

He will soon come to appreciate fully their immense importance in saving time and securing accuracy:—

First. A person never appears as "Dr." or "Cr." in his own books.

Secondly. Each transaction, so far as the terms Dr. and Cr. are concerned, is entered without reference to any former transaction; though there may be former transactions with which it is intimately connected.

Definitions.

18. I. In the language of Book-keeping, a person is said to be Debtor when he becomes accountable to me, or when I cease to be accountable to him; and Creditor when I become accountable to him, or when he ceases to be accountable to me.

Thus, when I sell goods to William Lawson on credit, or lend him cash, in either case he becomes accountable to me; in other words, he is my Debtor. Again, if I buy goods or borrow cash from Robert Simpson, I am, in either case, accountable to him; and he is of course my Creditor. All this is obvious enough. But when Lawson afterwards pays me, it is not so obvious why I call him Creditor, when he only ceases to be my Debtor. The reason is furnished by the second of the above principles:—an entry is made at the moment, as if the person making it were ignorant of the previous transaction, or had forgotten it. Now, if no former transaction had taken place, it is plain that I should have been actually accountable to Lawson-i.e., he would have been actually my Creditor. In like manner, when I pay Robert Simpson, I call him Debtor ; because he would actually be my Debtor but for the previous transaction, of which, at the moment, I take no cognizance.

If a person ceases to be accountable to me in any other way than by paying what he owes me, in this case also, regarding something that has occurred as equivalent to payment, I call him Creditor. Thus, through feelings of compassion for misfortune, or in the case of composition with a bankrupt, I may remit a debt, in whole or part; it may be shown me that the original charge made for goods sold was too great, and requires deduction on some of the articles, or that goods had sustained some damage before leaving my care. I regard these considerations as equivalent to payment of whole or part of my charge, and call the person "Cr."

19. II. A thing is said to be Debtor when it comes into my possession, or when any charge attends it; and Creditor when it goes out of my possession, or when it brings me in any thing.

The goods which I buy from Robert Simpson, I expect to sell at such a price as will not only bring me in the original cost, and indemnify me for carriage, storage, and other charges, but also leave me a profit to remunerate me for my time and labour. I expect, in fact-to use a common phrase that the goods will "pay." The same is done in Book-keeping; the goods, by a natural personification, are represented as accountable to me, and so are made Dr. Even if I were to receive a present of goods, the case would not be altered; I should endeavour to sell them so as to cover all charges and leave a profit besides; and thus the goods are considered as accountable to me, and made Dr.

On a like principle, goods will be made Cr. when they bring me in anything, or when they go out of my possession. And even when they go out of my possession without bringing me any equivalent, they are made Cr., on the same principle that a person is made Cr. (Art. 18), when he is released, in whole or part, from a debt without making any payment.

General Rules.

20. I. When a thing is delivered to a person on credit, in trust, or as payment, or when a charge is incurred for a person, or an allowance made by him on account of a thing, the person is DR. to the thing.

EXAMPLE 1. Thus, when I sell sugar to John Jones, the sugar is delivered on credit, and it is Creditor by Def. II.; J. Jones is Debtor by Def. I.; but instead of making the statement, John Jones is my

Debtor, Sugar is my Creditor, the practice is to represent Jones as Debtor to Sugar, and to record the transaction under the heading

JOHN JONES Dr. TO SUGAR,

the particulars being stated underneath with such fulness as to make the transaction intelligible at any future time-a rule which should be observed with regard to every entry in a Set of Books.

EXAMPLE 2.-Watson & West have allowed me discount on paying them for goods bought.

Here I cease to be accountable to Watson & West for a certain sum (Def. I.); the goods cost me less than the amount charged when the purchase was made; in other words, they bring me in something (Def. II.) Hence the entry will be

WATSON & WEST Dr. TO GOODS,

the particulars being stated underneath this heading. EXAMPLE 3.-Accepted George Clarke's draft. The bill is delivered in payment, and the entry is

GEORGE CLARKE Dr. TO BILLS PAYABLE.

21. II. When a thing is received from a person on credit, in trust, or as payment, or when any charge is incurred by a person, or allowance made to him on account of the thing, the thing is DR. to the person.

EXAMPLE 1.-Received John Johnson's promissory-note.

The bill is received in payment of goods previously sold; and the entry obviously is

BILLS RECEIVABLE Dr. TO J. JOHNSON.

EXAMPLE 2.-My brokers, Mitchell & Graham, have paid charges on goods forwarded to me.

Here we have Goods Dr. for a charge attending them; and I am accountable to my brokers for the amount. Hence the entry is—

GOODS Dr. TO MITCHELL & GRAHAM.

22. III. When a thing is delivered for me to one person by another, the former is DR. to the latter.

EXAMPLE.-Advised Williams & Co. to hand over to R. Peck certain goods received from me, for which, they inform me, they have no demand. This transaction might be recorded in two entries, by Rules II. and I., as if the goods were first returned by Williams & Co., and then delivered by me to R. Peck. But it is best stated, according to the rule, R. PECK Dr. TO WILLIAMS & Co.

This, however, must not be understood to mean that R. Peck thus becomes indebted to Williams & Co.; such business relations between them would only find a place in the books of each, and not in those of a third person. It denotes merely that R. Peck is my Debtor, and Williams & Co. my Creditors; that is, R. Peck becomes accountable to me, and Williams & Co. cease to be accountable. Bill transactions,

more frequently than any others, give rise to such entries.

23. IV. When one thing is given in exchange for another, or in payment of some charge attending it, the thing received is DR. to the thing given for it.

EXAMPLE.—Sold goods to W. Potsworth, for which I have taken his note at three months.

Here I must make Goods Cr., as going out of my possession, and Bill Receivable Dr., as coming in (Def. II.); hence the entry is—

BILLS RECEIVABLE Dr. To Goods.

24. V. When a thing goes out of my possession without being delivered on credit, in trust, as payment, or in exchange, the thing is CR.; but an imaginary DR. must be supplied.

EXAMPLE 1.-Paid my subscription to the Royal Infirmary.

Here Cash is Cr., as it goes out of my possession; but no person becomes responsible to me on account of the cash paid away, nor do I cease to be responsible to any person; neither does anything come into my possession in exchange for the cash; so that no person or thing can be made Dr. In such a case, therefore, we must create an Imaginary Dr. The Dr. universally agreed on is "Profit and Loss ;" and the entry therefore is—

PROFIT AND Loss Dr. TO CASH.

"Profit and Loss" is thus represented, by an extension of the principle of Art. 18, as responsible to me for all losses, and so is made Dr. in case of loss; while, on the other hand, I represent myself as responsible to "Profit and Loss" for all gains; that is, I make "Profit and Loss" Cr. in the case of gain.

EXAMPLE 2.-Discounted a bill at the Union Bank.

Here I receive cash for a bill Receivable, and pay discount, which is a loss. By Rule IV. Cash is Dr., and Bill Receivable Cr.; also, by this rule, Profit and Loss is made Dr. for the loss. Hence the entry is— SUNDRIES Drs. TO BILLS RECEIVABLE,

CASH-for the money received,

PROFIT & LOSS-for the loss by discount.