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Conducted by ALEXANDER MCCLINCHIB, of the New York Bar. The purpose of this department is to present from month to month, short critica summaries of recent decisions, which affect accountants, and to furnish accurate information on legal questions. Inquiries from our readers will be welcome and will receive prompt attention.

Application of Payments. The question of the right to apply payment to one of several debts between the same parties is as confused and confusing as it is important. An accountant can very often render invaluable service if he will instruct his client how to take advantage of the rules of law on this subject.

Direction as to the application of payment can be made by the debtor, by the creditor or by the court. Where a person owes several debts or items to another, he has a right to direct to which item the payment shall be applied. Otherwise the creditor may apply it as he sees fit. There are certain limitations on the creditor's rights, however, to the effect that he cannot apply payment to an illegal claim, such as a gambling debt, or to a claim for usurious interest, or, if we are to follow the case cited below, to a debt outlawed by the statute of limitations.

If at the time of payment neither party communicates his intention to apply it to a particular item, the right remains open to either party. This is the situation when a word from the accountant will save nine from a lawyer at a later time. Instruct your client to give immediate notice of his intention. We suggest the following cases as authorities and as illustrative of the principles above set forth: STONE vs. SEYMOUR, 15 Wend. (N. Y.), 20; PATTY VS. MILNE, 16 Wend. (N. Y.), 557; NATIONAL BANK vs. BIGLER, 83 N. Y., 51, and MARSH vs. ONEIDA CENTRAL BANK, 34 Barb. (N. Y.), 298.

When the parties do not elect, the law will direct payment according to certain rules, which very greatly in the many jurisdictions of the United States. For example in New York the courts follow the Civil or Roman Law, and apply the payment in a way which would be most beneficial to the debtor. Payment will be applied to an interest bearing debt in preference to one that does not bear interest, because the former is the more burdensome. Payment will be applied to a mortgage and to a judgment debt in preference to an account, because the former is the more burdensome to the debtor.

The view directly opposed to that of the New York courts prevails in the United States courts, where payment is always applied first to the poorly secured debt. All the jurisdictions agree that where there is but one continuous account of several items, payments will be applied to the earliest if the parties refer the matter to law. See PATTISON vs. HULL, 9 Cowen (N. Y.), 747; JONES vs. BENEDICT, 83 N. Y., 79; FIELD VS. HOLLAND, 6 Cranch (U. S.), 27, and TRUSCOLL vs. King, 6 N. Y., 147.

The question of direction by law, or, as it is termed by some writers, the presumptions in law on the question of application of payment, are more interesting to the lawyer than to the accountant. If the latter, however, wishes to help settle a case before litigation has been begun and needs more specific directions as to the rules in his jurisdiction he is referred to Munger on " Application of Payments,” and to 2 Am. & Eng., Encyc., 2d ed., 444, et seq., and cases there cited.

Notes on Recent Cases. A creditor held two claims against a debtor, one of which was barred by the statute of limitations. He applied an undirected payment to the barred claim and then sought to recover on the other. The court held that the payment must be considered to have been made on the enforceable claim. CHARLES VS. STEWART, 11 Ont. Wkly. Rep., 421. (See note above.)

A New York statute provided that stock brokers should keep a record of every transaction in relation to transfers of stock and permit an official of the state to inspect the record for the purpose of discovering whether a transfer tax had been paid. The court has held that inasmuch as failure to pay the tax is a criminal offense, the keeping of a record is tantamount to testifying against one's self, and is therefore not to be required. The statute, it holds, is unconstitutional.-PEOPLE vs. REARDON, 39 N. Y. L. I, I7I.

October is one of the nicest months of the year at Atlantic City; the cheap trippers come no more; the children are back at school; there is plenty of room everywhere and still plenty of enjoyment to be had. The American Association of Public Accountants meets there October 20-22, 1908.

NOTES. The Marlboro-Blenheim Hotel, at Atlantic City, has been selected as the place and October 20-22, 1908, as the time for holding the twenty-first annual meeting of The American Association of Public Accountants. The meeting will be under the auspices of The Pennsylvania Institute of Certified Public Accountants.

The accounting firm of Amos D. Albee and Associates will hereafter be known as Amos D. Albee, Son & Co., 630 Exchange Building, Boston, Mass. The members of the firm are: Amos D. Albee, Herbert H. Albee, Richard L. Harper, who are Fellows of the Incorporated Public Accountants of Massachusetts, and members of The American Association of Public Accountants.

On May 22, 1908, Governor Harris appointed as members of The Ohio State Board of Accountancy: Mr. J. S. M. Goodloe, of Columbus, for one year; Mr. J. H. Kauffman, of Canton, for two years; Mr. Guy H. Kennedy, of Cincinnati, for three years.

The fifth anniversary dinner of the Ohio Society was held on Saturday afternoon, June 13, 1908, at the Columbus Club, Columbus, Ohio.

C. P. A. Question Department.


Criticism and exchange of ideas will clear many a doubt and at the same time improve shortcomings. To solve, compare, and criticise C. P. A. problems, and thereby to aid ia bringing about a uniform American standard for C. P. A. examinations, is the object of this department. With the aid of suggestions and criticism from the professional brethren, it can undoubtedly be achieved. Inquiries will be cheerfully answered.

The following are three representative problems set by The Society of Accountants and Auditors in London, England, at the Intermediate Examinations, held December 4 and 5, 1907, under the heading, “ Bookkeeping and Accounts and General Commercial Knowledge," and "The Adjustment of Partnership and Executorship Accounts,” respectively, with solutions.


You are required to make up from the following particulars the
Capital Accounts of each partner in the firm of A, B and C for the six
months ending December 31, 1906:

Profits are divisible in the proportions A, 4/10; B, 3/10; C, 3/10.
Interest at 4 per cent. per annum to be credited on Capital.
The net profits before adjustment of interest are $24,380.

The partners have drawn on the last day of each month, A, $500; B, $375; C, $375.

Capital at June 30th, 1906: A, $94,500; B, $52,500; C, $43,750.

State also if in your view it is necessary to charge interest on drawings and give reasons.

II The firm of X and Z suspend payment, and you are supplied with the following particulars from which to prepare a statement of the firm's affairs and a deficiency account:


Cash in hand
Accounts receivable
Inventory (mdse.)
Machinery and plant
Trade fixtures
Land and buildings


250.00 36,000.00


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Z's account, balance on January 1, 1907... ... $3,37
Net loss




The partners' drawings have each been at the rate of $1,250 per annum and have been paid in cash and charged as a working expense. The assets have to be depreciated as follows:

Land and buildings, 25 per cent.
Inventory (mdse.), 15 per cent.

Machinery, 10 per cent. The Accounts Receivable represent: Good, $2,000; Doubtful, $1,500, and Bad, $600. Value the Good Debts at 10 per cent off, the Doubtful at half their nominal amount, and the Bad at nil. The partners have no separate liabilities, and Z alone has assets represented by household furniture, $250.

Prepare the required accounts.


III A, B, C and D are partners. On January 1, 1904, their respective Capital accounts stood at $7,500, $4,000, $6,200, and $6,800. The trading for the three years has resulted as follows: Year ending December 31, 1904, loss....

$600 Year ending December 31, 1905, profit.

Year ending December 31, 1906, profit...
The partners' drawings have been as follows:


Year ending Dec. 31, 1904.. $1,250 $800 $900 $1,000
Year ending Dec. 31, 1905.. 1,300 600 950 1,550

Year ending Dec. 31, 1906.. 1,150 650 1,050 1,200 Credit each partner with interest on Capital at the rate of 5 per cent. per annum, ignoring interest on drawings.



Dec. 3.1, By Interest on Investment (4%)

4-10 share of profits...


Capital Account.

$1,890.00 8,226.00

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July 31, To Withdrawals.
Aug. 31,
Sept. 30,

Nov. 30,
Dec 316

1906. Dec. 31, To Balance.

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1906. Dec. 31, By Interest on Investment (4%)... $1,050.00 3-10 share of profits.


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