counts as money when given up, that is, as money due or money owing); the clerks of the several accounts of goods give up all their unsold remainders at cost prices; the clerks of the several personal accounts give up vouchers for the sums owing to or from the several parties; and so on. But where more has been paid out than received, the balance-clerk adjusts these accounts by giving instead of receiving; in fact, he so acts as to make the debtor and creditor sides of the accounts he visits equal in amount. For instance, the A account is indebted to the concern 55, while payments or discharges to the amount of 78 have been made by it. The balance-clerk accordingly hands over 23 to that account, for which it becomes debtor, while the balance enters itself as creditor to the same amount. But in the B account there is 96 of receipt, and only 59 of payment or discharge. The balance-clerk then receives 37 from this account, which is therefore credited by balance, while the balance acknowledges as much of debt. The balance account must, of course, exactly balance itself, if the accounts be all right; for of all the equal and opposite entries of which the ledger consists, so far as they do not balance one another, one goes into one side of the balance account, and the other into the other. Thus the balance account becomes a test of the accuracy of one part of the work: if its two sides do not give the same sums, either there have been entries which have not had their corresponding balancing entries correctly made, or else there has been error in the additions.
But since the balance account must thus always give the same sum on both sides, and since balance debtor implies what is favourable to the concern, and balance creditor what is unfavourable, does it not appear as if this system could only be applied to cases in which there is neither loss nor gain? This brings us to the two accounts in which are entered all that the concern began with, and all that it gains or loses—the stock account, and the profit-and-loss account. In order to make all that there was to begin with a matter of double entry, the opening of the ledger supposes the merchant himself to put his several clerks in charge of their several departments. In the stock account, stock, which here stands for the owner of the books, is made creditor by all the property, and debtor by all the liabilities; while the several accounts are made debtors for all they take from the stock, and creditors by all the responsibilities they undertake. Suppose, for instance, there are £500 in cash at the commencement of the ledger. There will then appear that the merchant has handed over to the cash-box £500, and in the stock account will appear, “Stock creditor by
cash, £500;” while in the cash account will appear, “Cash debtor to stock, £500.” Suppose that at the beginning there is a debt outstanding of £50 to Smith and Co., then there will appear in the stock account, “Stock debtor to Smith and Co. £50,” and in Smith and Co.’s account will appear “Smith and Co. creditors by stock, £50.” Thus there is double entry for all that the concern begins with by this contrivance of the stock account.
The account to which everything is placed for which an actual equivalent is not seen in the books is the profit-and-loss account. This profit-and-loss account, or the clerk who keeps it, is made answerable for every loss, and the supposed cause of every gain. This account, then, becomes debtor for every loss, and creditor by every gain. If goods be damaged to the amount of £20 by accident, and a loss to that amount occur in their sale, say they cost £80 and sell for £60 cash, it is clear that there is an entry “Cash debtor to goods £60,” and “Goods creditor by cash £60.” Now, there is an entry of £80 somewhere to the debit of the goods for cash laid out, or bills given, for the whole of the goods. It would affect the accuracy of the accounts to take no notice of this; for when the balance-clerk comes to adjust this account, he would find he receives £20 less than he might have reckoned upon, without any explanation of the reason; and there would be a failure of