BOOK-KEEPING is the art of keeping accounts. In some form or other this art has been practised since the beginnings of commerce ; for wherever there is trade there also must be its records. The accounts, which are the sub ject of book-keeping, are those of financial transactions, not necessarily of cash transactions in the strict sense. At first, ckmbtless, before credit had become so all-pervading a factor in commercial life 'as it is to-day, the transactions the subject of book-keeping were limited to those based on cash. The essential principles of book-keeping are very simple; but in practice the details are often complicated and diversified. Not only would this be the result of the nature of the business dealt with, but just as frequently the consequence of personal in clination. In a business of the simplest character, the system of book-keeping may be either absolutely simple, or, on the other hand, profoundly intricate ; and the latter is not by any means necessarily the better method of the two. Again, the simplest system of book-keeping may, either through ignorance or carelessness, become in fact most intricate and unintelligible. It will be the object of this article to outline the subject in such a way as to teach the busi ness man, or the private individual, how to keep his accounts with some degree of accuracy and judgment. To do more than this would be impossible with in the limits imposed upon the subject.
Before going further into the subject it will amply repay the delay to pause and draw attention to a few very important points. In the first place, business being carried on as it is mainly upon credit, the immediate object of book-keeping is to record credit transactions, in other words, transfers of accounts. When we talk of credit, we do so in the widest sense : a so-called cash transaction, whereby goods in course of transit by sea, the title to which is represented by the bill of lading, are sold upon payment by cheque of the agreed price, is in fact a double credit transaction, or a mutual transfer of two separate and independent accounts. Both the bill of lading and the cheque may be themselves subsequently passed on again in the same manner by their new owners, who in their turn may have made a profit or loss on the transaction without having touched either goods or money. Or v ithout even bills of lading or cheques, goods may be sold and bought as cash transactions —simply by entries in books of account. In fact, the nearer we go to the centre of finance, and the larger quantities of goods and amounts of money we deal with, the less likely are any transactions to be effected other than by means of such entries. At the bottom of our whole commercial system is its
characteristic feature of book-keeping—a feature made up of individual and independent entries of accounts, but yet so entirely the same in principle and accuracy as never to drag, but always to hasten the wheels of commerce. To be a business man, therefore, and indeed to do any business at all upon proper lines, it is necessary to keep a systematic set of accounts. The nearer one may be to perfection in this respect, the nearer will there be a harmonious relationship with the commercial world and successful business operations ; but, on the other hand, failure alone is the inevitable end to the business man without system in the keeping of his accounts.
The next point to which attention should be paid is the objective of all book-keeping. This is The Balance. Any system of book-keeping should have in view as its supreme end the production of a balance-sheet showing the relation of assets to liabilities, and the balance thereof to profit or loss, as the case may be. Upon first consideration it would seem that the real object of book-keeping would be to set out the relative positions of debtor and creditor in the various transactions of the business ; but in spite of first impressions the fact must be insisted upon that the ultimate object is the general balance-sheet of the business. It is because this is so, that quite apart from the particular necessity of circumstances, the debtor and creditor accounts arising in the course of business should be accurately and intelligibly show n. Such accounts are after all subsidiary in the eyes of the proprietor to the final account, which discloses his own position. But nevertheless, though subsidiary, and though not the final object of the book-keeping, they are yet absolutely necessary both in themselves and in the relation to the final object. These accounts must all themselves have balances as an objective leading up to the final general balance. Let the book-keeper grasp the necessity and utility of balances, and it is almost possible for him to arrange for himself, without further knowledge, a sufficiently effective and accurate system of accounts. But let him be regardless of the principle of a balance and his most simple system will be really complex and absolutely unintelligible to any one but himself.