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Dictionary of Law Terms: Bill-book

The Bill-book contains an account of all "bills receivable," that is, all bills which you receive, and "bills payable," that is, all bills which you accept or agree to pay. The book is ruled with several columns to admit of an explicit statement of dates, amounts, length of term, and other particulars of the bill. The blank spaces in the last column toward the right shows the bills remaining in the merchant's possession, and as soon as the bill passes out of his possession by being paid, discounted, or endorsed, it should be marked off from the above column. When a bill is paid it must be marked off from the column toward the right hand; in which case the blank spaces will contain only such of the merchant's bills as are unpaid.

The Ledger is the great book of a business concern. It embraces an abstract of the entries in the Day-book, Invoice-book, Cash book, and Bill-book, the whole collected in a methodic form, under the names of the several persons, whether standing in the relation of debtor or creditor to the merchant; as also an account of the merchant's own private debit or credit. Two sets of columns are assigned to every person's account, one for Dr., and the other for Cr. The copying of the various items from the Day-book, etc., into the Ledger accounts is termed posting. Ordinarily, books are posted after short and regular intervals-not longer than a month. By having a well-posted Ledger, and an inventory of stock and other assets, drawn up with a wise regard to realizable value, the merchant is able at the end of the year to make a balance-sheet, or a condensed statement of his affairs. A balance-sheet, properly kept, should show the amount of capital invested in the form of money, stock, debts, etc.; as well as the amount of liabilities, the expenses of the business, the money drawn on private account, and the profit remaining, after all deductions have been made.

Several other books of a subsidiary kind are kept by large trading housessuch as an Order-book, which contains copies of all orders entered; a Memorandum-book, an Account Sales-book which gives particulars for making out accounts of the sales of goods, which may have been sent for disposal on commission; a Stock-book, in which an inventory is kept of the stock on hand; an Account-book, which contains the list of accounts; a Ware-house book, which contains an account of the quantities of goods; a Letter-book, into which letters sent out by the firm are copied.

With such a set of books, methodically kept, and a few additional memoranda, a merchant could easily strike a balance at the end of the year. He could find out how much was due to him, and how much he was owing to others; how much were his expenditures, and how much would remain over, or how much the deficiency would be, after all accounts pro and con were settled. But this elementary routine could establish no satisfactory check on different departments of his business; and for large and complicated concerns, the system, if not absolutely worthless, would be extremely imperfect. What the wholesale merchant requires is a system of checksone book checking another-the whole reduced to a rigorously methodized system of entries so that every fraction is strictly accounted for.

The distinguishing peculiarity of the method of Double-entry book-keeping chiefly concerns the Ledger. Its object is a system of checks, which may be effected by entering transactions in the Ledger twice-first to the Debtor of one set of accounts, and then to the Creditor of another set. In making the two entries, one is posted to ⚫ an account under the name of the debtor or creditor, while the other is posted to an account under the head of the goods that have been bought or sold. Double-entry book-keeping, or the Italian method as it is sometimes termed, is different from single-entry, in that it makes cash, stock, goods, etc., parties as well as persons, and makes a debtor and creditor account in every transaction. Thus, for example, if the trader purchases a hogshead of sugar from B. Mills & Co., he first enters it in the regular manner to the Cr. of B. Mills & Co.; and then turning to the folio headed "sugar," he enters it on the Dr. side of the account as bought from B. Mills & Co. In the same manner when the sugar is sold to A. Smith & Co., it is entered first to the Dr. of these double parties, and then to the credit side of sugar, as sold to A. Smith & Co. By this system of double entries, each the counterpart of the other, the one set of accounts constantly checks the other set; while a merchant can at the same time ascertain how, when, and at what prices his property has been disposed of. In Double entry, a book called a Journal is frequently used; the entries in the Day-book are abstracted into the Journal, and are thence posted in a brief form into the Ledger. Hence, the use of the Journal is only to save the Ledger from being burdened with details. While acknowledged to be the triumph of accountantship, book-keeping by double-entry does not prove an entire safeguard against frauds and falacies in conducting commercial operations, which independently of every technical aid, require to be sustained by constant integrity, vigilance, and discretion. Among these falacies in the method of keeping books, which are used to sap the stability of the greatest concerns are two, namely, that of including bad or nearly valueless debits in the periodical lists of assets, and that of not estimating stock at its realizable value only. This last may occur without any evil intention, solely from the want of prudent consideration in making due allowance for depreciation of property, etc.

For Single-entry book-keeping a memorial of transactions only is needed, in the order of time as they occur; and a Ledger containing the names of all the parties to the transactions. The debtor account of each party is presented on the right hand and the creditor account on the left. As this method affords the owner no knowledge of the cash, bills, or goods accounts, the Ledger is necessarily defective; and these must be collected from subsidiary books. In a simple trade, the required information may be acquired by a Day book, Cash-book, and Stock-book, as illustrated further on; but where the business is extensive or of a diversified kind, such an arrangement would not be suitable, as the knowledge required could not be readily obtained. The process of posting from several books, when only one is needed, is both tedious, and liable to errors and omissions, and greatly increases the labor and difficulty of balancing. While the Cash-book might be arranged with columns to show the monthly amounts of the cash received and paid out on account of bills receivable and payable; yet the required information for the amount of the sales, of consignments and shipments, etc., could not be obtained.

Although, by the Italian method, the Ledger contains cash, bills of goods, and other accounts, it is nevertheless inadequate for the conduct of a large or complicated business.