Each account is divided into two parts, which are distinguished the one from the other by the terms "debtor" and "creditor,"* and we are guided in making the entries in them by the directions of the following general rules:

Rule 1.-Accounts of persons are to be debited for the debts they owe us, and credited for the debts we owe them.†

Rule 2.- Accounts of property are to be debited for the property that comes into our possession, and credited for the property that goes out of our possession.

Rule 3.-Accounts of profit and loss are to be debited for any loss, and credited for any gain on these accounts.

Rule 4.Our own account is to be debited for the property we take out of the concern, and credited for the property we bring into the concern. ‡

REMARKS ON THESE RULES.

1. The book containing the various accounts which it is found necessary to open is called the Ledger, and the two parts of each such ledger account are usually placed the one beside the other, either on the same page or on opposite pages, the debtor part being on the left, and the creditor part on the right; but in other accounts, the one part is frequently placed under the other, whether the two parts are equal or not in amount. See the Ship's Consignee's Account, in Part III.

2. In the general ledger form of accounts, arithmetical subtractions are not used; and, therefore, in order to take off a sum of money from one side of an account, it is placed upon the other side of the account; and thus, as we debit a person's account for the money he owes us, we, on the reverse, credit his account for what he pays us, as becoming indebted to him for the same.

3. Accounts of property are debited for the property we possess at the commencement of our transactions, and they are frequently debited and credited from other causes than those stated in the rule, as for disbursements on the one part, and for returns or reimbursements on the other part, as may be seen in the Ship's Husband's account, in Part III., and in the Ship's account, in the following Ledger.

4. Accounts of profit and loss are such accounts as those of charges, interest, commission, &c., which are frequently opened in the ledger for the purpose of showing how much has been gained or lost under each of these heads; but when such particular information is not re

*This is not always the case with separate accounts of property, for the two sides of a cash account are sometimes marked with the words received and paid, of a goods account, with bought and sold, &c.; but in ledger accounts of this nature, the debtor and creditor form is always used; and it is to such accounts that reference is made in discussing the principles of book-keeping.

To debit or credit an account is, it hardly need be said, to make an entry on the debtor or creditor side of that account.

The word "concern" is used to signify trade or any other purpose, as the ownership and management of a vessel, for which capital is employed.

quired, entries of this nature are commonly made, as in the following ledger, in the general profit and loss account.

5. The account opened for the proprietor of the concern appears in the ledgers of different persons under different heads or terms. Some call it a Stock account, some a Capital account, and others keep it in their own names, as is done for the account of William Barclay in the following set of accounts.

6. As general remarks on the heading of the accounts comprised in the first three general rules, it may be noticed, first, that the terms debtor and creditor are applied to accounts of persons in accordance with their literal meaning, as being our accounts with those persons; secondly, that these terms are used for accounts of property and profit and loss, solely for convenience of direction and reference, or for avoiding the use of that multiplicity of terms which would be required if each part of each account bore that appellation which would show the nature of its contents; thirdly, that the two portions of the second and third rules are arranged as stated, in order to let the debit or credit of an account of property, &c. form that balance or counterpoise to the credit or debit of a personal account, which is required for making up the ledger upon the principle called double entry, as will be further shown in the remarks on the forms of direction.

Forms of Direction and Reference.—The original entries of transactions are commonly made in some other book or books than the ledger; and, for the purpose of assisting the proper carrying of them to account, directions for the debit and credit are usually given in the following manner :

To direct the debit of an account, we write the word Dr after, or the word By before, the title of the account.

To direct the credit of an account, we write the word Cr after, or the word To before, the title of the account.

REMARKS ON THESE FORMS.

1. When one account is to be debited, and another account is to be credited for the same transaction, the first form of direction is to be used for the first account, and the second form for the second account. Thus supposing, that in consequence of N. Goodwyn having become indebted to us, we have to direct the debit of his account, and that in consequence of cash having been paid him (or having gone out of our possession), we have to direct the credit of the cash account, we may give such directions in either of the following forms:

Directions like these are often read in this manner:-
Debtor, N. Goodwyn-Creditor, Cash.

If we further suppose the sum of money to be £100, the entries when carried to account in the ledger will thus appear :—

2. When the entries of either single transactions or classes of transactions are made in the ledger, as in the foregoing manner, or with the amounts of the debits being made equal by counterpart entries to those of the credits, or the reverse, the ledger is said to be kept by double entry; but when it is intended that the information to be derived from the ledger should be limited to the knowledge of only what debts are owing to and by the party whose books are kept, then the accounts of property and profit and loss being excluded from the ledger, the counterpart entries cannot of course be made, and this book is then said to be formed by single entry.* It is therefore only with reference to the ledger that these terms of bookkeeping, single and double entry, apply; although, according to which of the two methods is practised, some difference is made in the heading of the entries in the journal.

3. The phrases commonly used in ledger entries are for reference to the counterpart entries: thus the phrase To Cash, in the preceding debit of N. Goodwyn's ledger account, refers to the counterpart entry on the creditor side of the Cash account; and the phrase, By N. Goodwyn, on the creditor side of the latter account, refers to the counterpart debit of the former account. As a summary of the significations of these phrases of book-keeping, it may be observed, that they are used only to distinguish one side of an account from the other side; to direct where the entries are to be made in the ledger, or to refer to the counterpart entries; and that the terms debtor and creditor, when applied to accounts of property and profit and loss, are not intended to convey any idea of the personification of these accounts; but, as said before, they are so applied only for the sake of uniformity and convenience of direction and reference.

4. Sometimes there are two or more causes of the debit or credit of an account; and then, in order to avoid making separate journal entries for each part, the whole of them are combined in one entry, the word Sundries being used as a collective term. Examples of such forms of entry are to be found in the last entries in the following journal; and all that is therefore necessary to be here noticed is, that in the enumeration of the accounts to be credited, the sign of credit, To, is placed before each, but in the same of the accounts to be debited, no sign of debit is prefixed.

See the end of Part II. or further observations on single entry.

5. In the making out of accounts, custom has authorised the use of the terms To and By in the sense of for or on account of, as in this form:

6. The principal difficulty in book-keeping consists in the forming of the journal entry; but this difficulty may be readily surmounted by attending to the following directions :

1. Investigate the transaction to be recorded, in order to ascertain in what manner it affects the purposes of book-keeping.

2. Consider into what accounts it is to be entered in the ledger. 3. Give the directions for carrying it to such accounts in the manner explained in the preceding remarks.

In inquiring into the nature of the transaction, we may put to ourselves the following queries.

Has any person become indebted to us?

Have we become indebted to any person ?

Has any property come into our possession?

Has any property gone out of our possession ? *

Have we to record any loss?

Have we to record any gain?

If the answers to the preceding questions are given in the names or titles of the ledger accounts, they will show into what accounts the transaction is to be entered; and in each class of these questions, an answer thus made to the first part will show the account to be debited, and the same to the second part will show the account to be credited.

In order to explain in what manner this proposed investigation is to be put into practice, we will take the supposed transaction before noticed, in which we have to record the payment of money to N. Goodwyn. The reply to the first question would be, N. Goodwyn, as becoming indebted to us; and to the second question, relative to accounts of property, the reply would be, Cash, as going out of our possession. From these replies we find that the accounts in which the transaction is to be entered are those of N. Goodwyn and Cash; and from the general rules, we are directed to debit the first, and credit the second of these accounts; consequently, if this transaction were entered in the journal, the directions, as before shown, would be

If entered in the Cash Book, it would be placed with other payments on the creditor side, and in this form:

BY N. GOODWYN.

The questions which refer to accounts of property frequently require to be varied, or made thus:

Has any disbursement been made on account of property?
Has any return been obtained on account of property?

PART II.

BOOKS OF ACCOUNT.

In the foregoing statements, directions, and observations, only the principles and modes of forming separate entries have been taken into consideration; and, presuming that these have been sufficiently explained, we shall proceed to show the effect of various entries upon some of the usual sorts of accounts contained in the ledger, and the manner in which such accounts are balanced or adjusted for the purpose of ascertaining the state of our affairs, and the gain or loss that has attended our transactions.

As materials for so doing, we shall take, as previously mentioned, the transactions connected with the outfit, and with the out and home voyage of the vessel for which the subsequent ship's husband's account is made out. It must, however, be remarked, that for the sake of conciseness, or to bring the whole within a moderate compass, a sort of skeleton only is given of the entries, and that most of the details which are required in the statements of accounts have, for the same reason, been omitted. Such details, however, do not affect the principles of book-keeping, which alone it is our present object to elucidate: but where they may possibly serve the purpose of affording further explanation, we shall refer to the account in Part III., in our remarks upon the entries to be placed in the journal.

The books we shall employ for these purposes are,
The Diary or Day Book.

N.B. It is recommended to those who may wish to make up the accounts here given, for the sake of practice in the entries of bookkeeping, to adopt the following or some similar method:

First. Having a ledger ruled like the printed copy, and having headed the accounts with their respective titles, to enter into those concerned the balances which are to be brought forward, according to the instructions given in the introduction to the ledger.

Secondly. The state of affairs at the commencement of these books having thus been recorded, the transactions in the diary or day book, which may be either copied or not, may be successively entered in the waste journal, consulting, as each is examined, the remarks which follow this book. As a preliminary trial, the heads of the entries may be formed on a slip of paper in this manner: