160.

ture and any other matter which it is desirable to keep separate and distinct. In short, the well known rules of good bookkeeping should be as rigidly adhered to in the office of a public company as they are in the best regulated counting-house of a merchant. Strict regularity should be insisted upon in keeping the ledger well posted up, and its correctness may be easily tested by the simple process of a trial balance.

BANKING LEDGER.

In nine cases out of ten this book is entirely superfluous. A properly checked pass-book will always show how a company stands with its banker; and if it is also deemed desirable to have a record of these transactions in the office, nothing can be easier or more effectual than to rule a separate column in the cash book, and place therein all amounts which pass through the banker, and periodically post the totals to banking account in the ordinary ledger. Indeed, in the case of a public company, it is well that all cash transactions should take place through the medium of a banker, and the cash-book will then be a counterpart of the pass-book, and the column just mentioned be rendered unnecessary. If the company has

more than one banker, a separate column may be ruled in the cash-book for each.

ROUGH BANKERS' BOOK.

161.

Unnecessary. See last Clause.

WAGES' LEDger.

162. This book is only required when the business of the company renders it necessary to employ labour, and will have to be framed to meet its special requirements.

163.

LETTER BOOK.

This, of course, is indispensable, and is too well known to need any remarks from us, further than that when indexing a letter it will be found useful to place the folio of those immediately preceding and following it (if any) in the corner of the page, for the purpose of forming a continuous reference, and thus obviating the necessity of constantly turning to the Index.

164.

165.

From the foregoing remarks, it will have been seen that if our suggestions are adopted, a public company having its capital divided into shares will in the majority of cases only require the following books: viz.—

First Set.-Cl. 121.

Application and Allotment Book. Cl. 7.

Numerical Register of Shares. Cl. 130.
Certificate Book. Cl. 131 and 132.

Shareholders' Ledger and Register of Members. Cl. 133
to 135.

Register of Transfers. Cl. 136 to 138.

Shareholders' Minute Book. (Rough and Fair). Cl. 140.
Shareholders' Dividend Account Book. Cl. 141.
Register of Proxies. Cl. 143.

Directors' Minute Book. (Rough and Fair.) Cl. 144.
Directors' Agenda Book. Čl. 146.

Second Set.

Cash Book and Petty Cash Book. Cl. 154 and 155.
Postage and Delivery Book. Cl. 156.

Waste Book. Cl. 157.

Journal. Cl. 158.

Ledger. Cl. 159.

Letter Book. Cl. 163.

The above are, of course, the principal books, and are applicable to most companies having their capital divided into shares, but there may be many others of a special nature required also, and which, as we have already stated, must be framed to meet the company's particular requirements.

There are also other books of minor importance, such as guard books, for arranging and indexing invoices and other documents, receipt books, &c., which will have to be procured, but which are so well known that it would be a work of supererogation for us to make any further allusion to them.

BALANCE SHEET AND ACCOUNTS.

I.—As to preparing Balance Sheet and Accounts.

II. As to the Duties of Auditors in reference thereto.

66

166. If the form of Articles of Association set forth in the first Schedule to the Act" has been adopted without altering those clauses which refer to the making out of the accounts,

167.

168.

169.

170.

the balance sheet will have to be brought down to a period not
exceeding three months before the date of the meeting at
which it is intended to lay it before the shareholders. (See
Cl. 100 to 102).

The statement or balance sheet so made out shall show-
I. The amount of gross income, distinguishing the several
sources from which it has been derived.

II. The amount of gross expenditure, distinguishing the
expense of the establishment, salaries, and other like

matters.

Every item of expenditure fairly chargeable against the
year's income shall be brought into account, so that
a just balance of profit and loss may be laid before
the meeting; and, in cases where any item of expen-
diture which may in fairness be distributed over
several years
has been incurred in any one year, the
whole amount of such item shall be stated, with the
addition of the reasons why only a portion of such
expenditure is charged against the income of the
current year. (R. 80).

Assuming that the company's books have been systematically kept, it will not be difficult to comply with the foregoing regulations. The form of balance sheet will be found at clause 425; but although the principle there laid down is generally carried out, it is seldom adhered to in detail, nor is it abso

lutely necessary that it should be. It is true, that regulation 81, provides that the balance sheet shall contain a summary of the property and liabilities of the company arranged under the heads appearing in such form, but there is added 66 or as near thereto as circumstances admit."

We would not lay down a simpler rule than the following; viz:

On the left hand, or Dr. side of the balance sheet, debit or charge the company with everything it has received or rendered itself liable for; and,

On the right hand, or Cr. side, show how such monies, and the consideration for such liabilities, have been disposed of; or, in other words, let the company account for what it has received.

This principle then being thoroughly understood, the question merely resolves itself into a matter of arrangement and detail.

The first thing to be ascertained is the amount of capital

171.

which has been paid up, and assuming that our hints have been adopted, this may be easily done by referring to the capital account in the general or cash ledger, where the several sums due on deposit, allotment and calls will be credited. If there are no defaulters, the total, or balance of this account, would represent the correct amount, but on turning to the separate accounts opened for deposit, allotment and calls, respectively, it may be found that one or more of them do not balance, and that there are, therefore, some payments still in arrear. If such be the case, the amount should be taken out, and checked with a list of defaulting members, extracted from the share ledger, as before-mentioned in Cl. 134.

This being done, the result may then be entered on the left hand side of the balance sheet, in the following manner.

172.

173.

174.

Thus showing that the company had received, at the date of the balance sheet, the sum of £23,500 of its capital.

Should any of the shares have been forfeited and not disposed of again, the nominal capital will, of course, be reduced accordingly, and the arrears of call, for which the members were liable at the time of forfeiture, must also appear on the balance sheet.

Also, if any of the shares are paid up, they should be stated separately on the balance sheet, otherwise a great deal of confusion might ensue.

The question of capital having been disposed of, the next step will be to ascertain the gross amount of the company's income from every other source, such as trading-commission -interest-transfer fees, &c. As separate accounts will have been opened for these, there will be no difficulty in supplying the necessary materials for this purpose, and entering the particulars thereof on the left hand side of the balance sheet.

175.

176.

177.

After this, a list of all the company's liabilities should be taken out of the ledger, and the particulars clearly stated on the balance sheet. These may comprise, debts due by the company,-bills payable,-loans received on mortgage or otherwise, and, in short, anything that the company may be called upon to pay, in respect of any matter or thing that it has made itself liable for.

Now, having completed the left hand or Dr. side of the balance sheet, and shown how much the company has received, it will be necessary, in the next place, to indicate in what manner the funds, so placed at its disposal, have been dealt with. Under this head will be comprised all investments and expenditure, such as sums paid for preliminary expenses, property, plant, furniture, salaries, wages, directors' fees, rent, rates and taxes, and sundry other outlay. Assuming that proper accounts have been opened for these, the amounts can easily be extracted, and filled in on the right hand or Cr. side of the balance sheet.

Should there be any debts owing to the company, a list of them must be taken out, and the total entered in the balance sheet. In fact, any asset that the company has in its possession, whatever may be its nature, must appear on the credit side of the balance sheet. The utmost care should be used in placing such a value upon the latter, as, in all reasonable probability, would be realised on the same being disposed of; otherwise the public would be misled, and the directors open to just censure.

178. The foregoing remarks refer only to the simplest form of balance sheet, and such as are applicable only to small companies during the first two or three years of their existence; but if a company has at once commenced trading operations, there will, of course, be much more complication in the making out of its balance sheet and accounts.

179.

It will be necessary to draw a profit and loss account, the preparation of which, in ordinary cases, requires some practical experience; but in the case of a public company it not only requires a knowledge of the routine, but it is also requisite that the accountant should be a man of sound judgment, and well acquainted with the general principles of business. When it is considered, that upon the accuracy of this account the legality of a dividend depends, we will be pardoned for thus far speaking of the importance of having a competent person to draw it. (See Cl. 298.)