At frequent intervals, in the case of the method that has been discussed, the proprietor or his repre sentative will also compare the actual amount of cash with the balance of the cashier's account, and will have the entries in the account verified, in order to check the honesty of the cashier.
The title of this account "Samuel Johnson, cashier" was too long and was soon abbreviated to that of "Cashier," or "Cash." In the course of time, the bookkeeper and others who interpreted the account came to think of cash as the money, itself, rather than as the custodian of the money, but the account still serves the purpose of establishing the cashier's re sponsibility.
10. Application of the personal account to other items.—The idea soon developed that if an account with one class of property or money, was useful, an ac count with other classes of assets—such as merchan dise, fixtures, land, buildings, horses, wagons and cus tomer's notes—would also be useful. At first, un doubtedly, it was assumed that a custodian should be appointed for each class of property and that the ac count, in each case should be opened with this cus todian. It is probable, however, that such a custodian was never actually appointed. The plan just men tioned was in keeping with the so-called "Personal istic Theory," which held that accounts could be con ducted with persons only. An account was consid ered the record of personal relations; a record of land, for example, could be had only if that land were placed in the control of an individual. The account with the custodian of land showed how much land was due to the business, or, in other words, how much it possessed. Later on, the account was known solely by the class of items which it represented, just as the cash account represented the amount of cash possessed by the business.
11. Rules of debiting and ing to the "Personalistic Theory" of accounts, the only rule for debiting or crediting was that which applied to persons; "debit" and "credit" still retained their original significance of "he owes" and "he trusts." This rule was as follows : (1) Debit a person's ac count when he gets into debt to the business or the business gets out of his debt ; (2 ) Credit a person's account when the business gets into his debt or he gets out of debt to the business.
Illustrations.
1. Sold William Jones, for cash, two sacks of flour for $3.
William Jones paid cash for his flour, this transaction had no effect on any personal indebtedness if the proprietor kept no account w ith a keeper of the funds. But, if the shop-keeper had an account with his cashier, this custodian became in debted to the business in the sense of responsibility or accountability to the extent of $3. Consequently, it should be debited, or charged, with $3.
2. Sold Charles Greene, on account, three sacks of flour for $4.50.
Analysis.—Charles Greene gets into debt to the business to the extent of $4.50. Therefore, we should charge him, in other words,—debit his account—with the $4.50, by entering that amount on the left-hand or debit side.
3. Bought from James Rhoades, for cash, 100 bar rels of flour for $300.
Analysis.—Since cash was paid for the flour, the only personal account effected was that of the cashier. He got out of debt to the business to the extent of $300 by paying out that amount on proper author ization. Therefore, his account should be credited with that amount.
4. Bought from Hiram Cole 50 barrels of flour for $150.
Analysis.—In this case, the business gets into Hiram Cole's debt to the extent of $150. Therefore, his account should be credited with $150.
5. Received $4.50 from Charles Greene in settle ment of his account.
Analysis.—By making this payment, Charles Greene gets out of debt to the business to the extent of $4.50 while the cashier who takes custody of the money, gets into debt to the business. Therefore, Charles Greene's account should be credited with the amount that he paid, and the cashier's account should be charged.
6. Paid Hiram Cole $100 on account.
Analysis.—By making this payment, the business gets out of Hiram Cole's debt a benefit to the extent of $100. His account must be charged, and the cash ier's, or the cash account, must be credited, because the cashier gets out of debt to the business by $100.