According to English law, property is generally divided into real and personal. But for some purposes, especially connected with questions of International Law, another division is made, namely, into movable and immovable property. Immovable property consists of tangible things which cannot be moved, through being connected with the soil. It comprises land and houses or buildings, whatever the interest may be which a person has in the same. It will be seen, therefore, that the term does not coincide with our” real property,” for what are called ” chattels real” are included, that is, such interests as leaseholds, which are, according to English law, personal property. The distinction becomes of importance when a person who is domiciled in this country and who possesses immovable property in some other country dies or becomes bankrupt; for it is a principle of the English courts that they will not entertain any suit which is concerned with immovable property abroad, seeing that, in time of peace, it could have no effective machinery for rendering a judgment of any real value.

All trusts which are recognised in equity are divided into two main classes, those which are

Consideration is at the base of all simple contracts, and provided that there is a consideration, the law will not, generally speaking, inquire into its adequacy, unless fraud is alleged. Nor will it trouble about the nature of it, unless the consideration is, in fact, impossible, when the contract will be rendered void for want of consideration. There are three kinds of impossibility 1. ABSOLUTE IMPOSSIBILITY.This is the case of an agreement to perform anything which is impossible by the laws of nature, as, for example, to alter the velocity of light or sound, or to pierce a hole through the earth. 2. LEGAL IMPOSSIBILITY.This is the case where an act is positively forbidden by the law of the land. 3. ACTUAL IMPOSSIBILITY.This third kind of impossibility is the most important of all, and arises when parties have contracted with respect to a state of affairs which they have assumed to exist, but which has actually been changed between the time of the formation of the contract and the due date of its performance without the knowledge of either. In this third case, however, it must be borne in mind that the parties may, by the terms of the contract, so bind themselves that the impossibility will have no effect upon the legal liability, and the contract itself remain good.

These are special stamps which are required to be used for the following documents Assignments of Policies of Life Insurance. Conveyances. Inland Bills of Exchange (except when the bills are payable on demand, at sight, on presentation, or at a period not exceeding three days after date or sight, when either an adhesive or an impressed stamp may be used). Inland Promissory Notes; Letters of Allotment; Memorandum of Deposit; Mortgages; Scrip Certificates; Transfers. Stamps may be impressed on all instruments or documents except where an adhesive appropriated stamp is necessary. (See Appropriated Stamps.). In certain cases, e.g. agreement under hand, either an impressed or an adhesive stamp may be utilised.

A system of keeping Petty Cash under which a cheque is drawn for such an amount as is estimated will cover the Petty Cash expenses for a certain period, say a week, a fortnight, or a month, the amount being credited to the bank and posted to a Petty Cash Account in the Ledger. The cheque is given to the petty cashier, whose balance in hand at any time, plus the amount he has expended since the last balancing, should equal the amount of the cheque, which is known as the Imprest amount. When the period has expired, the petty cashier analyses the Petty Cash Book and submits it to the cashier, together with vouchers for payments, and the cashier, after examination, initials the Petty Cash Book and hands the petty cashier a cheque for the amount expended, so placing him again in possession of the original amount. The cashier enters the analysed details and the total in the Cash Book, posting direct to the Nominal Ledger Accounts, the Petty Cash Account remaining unaffected. In a business where the amount of Petty Cash expenditure fluctuates considerably, instead of balancing periodically, this may be done whenever the petty cashier is getting short of cash, this in no way affecting the principle of the Imprest System. If desired, the Petty Cash in hand may be cleared at the end of each year by crediting the cash instead of the bank with the last amount expended, and also with the balance, debiting the bank with the balance (which is paid in), and debiting cash and crediting the Petty Cash Account with the total. (See also Petty Cash.)

It has been asserted that there was always a right at common law for poor persons to obtain legal aid without expense, if they could satisfy the Court or a judge that they had a good cause of action. At any rate an Act was passed in 1495 by which counsel and solicitors were assigned, under certain conditions, without cost to poor litigants, and this has been known as suing in forma pauperis. The Act just referred to was repealed in 1883, and certain Rules of the Supreme Court dealt with poor persons and their suits. The procedure was not altogether satisfactory, and a drastic change was made in 1914 when new rules came into force. These rules became effective on the 9th June, 1914. This suing in forma pauperis is at present confined to the High Court it has no application in the County Court at all. Also the right to sue is confined to a Court of first instance. Only under very special circumstances will a suitor be permitted to proceed to the Court of Appeal, and the House of Lords is enabled, under the Appeal (Forma Pauperis) Act, 1893, to decline to entertain any appeals of this character. Any person may be admitted to take or to defend, or to be a party to any legal proceedings in the High Court as a poor person on satisfying the Court or a judge that he (or she) has reasonable grounds for taking or defending, or being a party to such proceedings, and that he is not worth

Incidental expenses in the majority of cases form part of the petty cash expenditure and pass through the Petty Cash Book. The auditor should see that the petty cash is kept on the Imprest system and that it is subject to proper supervision. He should require the production of receipts wherever they can be obtained, and should see that the Petty Cash Book is duly examined and certified by a responsible person. Incidental expenses form a charge against Profit and Loss Account.

This form of revenue account or profit and loss account is frequently adopted by non-trading concerns, such as clubs, hospitals, societies, etc. It shows the whole of the income earned and expenditure incurred during the period covered by the account, whether or not the income has been actually received or the expense actually paid. In this respect it differs from a Receipts and Payments Account, in which is included only amounts actually received or paid. The purpose of an Income and Expenditure Account is to show whether or not the concern is paying its way, and it is usual to show the expenditure on the debit side of the account and the income on the credit side. The balance of the account shows the surplus of income over expenditure or vice versa, and is carried to the Balance Sheet. As such an account deals with revenue items only, it is necessary that it should be accompanied by a Balance Sheet in order that the capital items may be shown. Below is given a specimen of such an account. (See also Profit and Loss Account, p. 784.)

The interests or rights of a personal character which have no physical existence. The best examples of these are patents, trade marks, and copyrights.

(1) A Minor is liable to assessment in the name of his legal representative. The guardian, as his representative, is answerable for the doing of all things required by the Income Tax Acts in order to bring about the correct assessment of the minor’s income. He has to make returns or claim abatements or exemption, if the income comes within the specified limits. An interesting point arises in connection with a claim to abatement or exemption, as to whether the minor’s interest in the income is an absolute or vested interest, or merely contingent, that is, conditional upon the happening of some event, such as reaching a particular age. In the former case, a claim to exemption or abatement is allowed, but until 1917, not where the interest was contingent, except that, if part of the income had been properly expended on the maintenance or education of the infant, the claim to relief would be allowed, but was restricted to such actual expenditure. Even on the happening of the event, when the interest became absolute, the authorities would not allow a claim in respect of the ” contingent ” period. This matter received attention in the Income Tax Act, 1918, Section 25, of which reads as follows ” Where in pursuance of the provisions of any will of settlement any income arising from any fund is accumulated for the benefit of any person contingently on his attaining some specified age or marrying, and the aggregate amount in any year of assessment of that income and the income from any other fund subject to the like trusts for accumulation and of the total income of that person from all sources (hereinafter referred to as ‘ the aggregate yearly income ‘) is of such an amount only as would entitle an individual either to total exemption from tax or to relief from tax, that person shall, on making a claim for the purpose within three years after the end of the year of assessment in which the contingency happens, be entitled, on proof of the claim in manner prescribed by this Act, to have repaid to him on account of the tax which has been paid in respect of the income during the period of accumulation a sum equal to the aggregate amount of relief to which he would have been entitled if his total income from all sources for each of the several years of the said period had been equal to the aggregate yearly income for that year ; but in calculating that sum a deduction shall be made in respect of any relief already received.” (2)Lunatics, Idiots, and Insane Persons are assessed in the name of their legal representatives, who are chargeable to the duties upon the income of such persons, and may make claims for abatements or exemption on their behalf. (3)Non-Residents, in so far as income is received by them from property, or a trade, etc., exercised within the United Kingdom, are assessable in the name of their agents, whether such agents have the receipts of any profits or gains of the nonresidents or not. Agents thus assessed are entitled to recoup any duties paid by them out of any moneys belonging to their principal that may be in their hands. (4)Deceased Person. Executors or administrators of a person who dies are liable to pay duties chargeable on the deceased, and the amount so paid by them may be recouped by them out of the estate. If no return has been made by the deceased, they may be assessed in” respect of the profits and gains, which accrued before his death, any time within the year of assessment or within three years after the expiration thereof. Under Income Tax Act, 1918, Schedule D, Miscellaneous 3 (1), application may be made to the Commissioners by the executor or administrator for an adjustment of the assessment, and for such relief as may be just, and under Income Tax, 1918, Schedule D, Cases i and ii, 8 (1), if the death causes the discontinuance of a trade, etc., an adjustment of assessment to the actual profits arising in the year of assessment may be obtained, or a repayment of tax upon such amount as may have been overpaid during the three previous years, when compared with the actual profits of those years. The assessment will be reduced by the 10 per cent, allowance and the personal allowance of

A source of fraud which does not involve embezzlement and possibly also not the actual falsification of accounts, is the inflation of accounts by vendors who are disposing of their business, either to another firm or to a limited liability company formed to take over the same. Some of the means of increasing the profits in such circumstances are by the vendors paying business expenses out of their own private pockets, charging consignments to their agents at selling prices, and thus securing the profit on the goods when they are subject to return in the event of their not being disposed of ; large returns, after the close of the financial year, of sales made prior to the close of the year and being returned into stock after the close of the year, not allowed for when closing the accounts, whereby the gross profit on such goods is erroneously taken credit for, and the inclusion in the sales of absolutely bogus sales for which no payment is likely to be made. Several examples of the first-mentioned class of fraud were brought to light after the public house boom of a few years ago. In the licensed trade the tenant is supplied by his brewer and distiller with a Pass Book in which is entered a copy of his account in their Ledger, and houses were freely bought and sold on the basis of the length of lease held by the licensee or vendor together with his monthly payments to his brewer and distiller, this giving sufficient material to form a rough estimate of the value of the property It was found that in several cases publicans had purchased and paid for goods in order to have them entered up in their Pass Books, but the goods were not sold on the premises but poured down the drain, the purpose of the vendor being served by having the goods entered up in his Pass Book On the entry in the Brewer’s Pass Book the vendor could claim having paid a certain sum per month to his brewer or distiller, upon which payment the assessed. OMISSION OP PURCIIASES.-Frequently also . purchases are entirely omitted from the books or entered at a date subsequent to the closing of the accounts, when the goods have been received prior to the close of the year for which the accounts are made up and taken into stock. Anything of this nature should, however be immediately discovered, if any reasonable system ot stock books were in vogue, and would probably be brought to light in the ordinary course of events, if sufficient time were allowed to elapse, but, as a rule, when accounts are prepared for the purpose of a prospectus or a sale, the time at the disposal of the staff is not very great, as it is always desirable to bring the accounts, upon which the sale is made, up to the very latest date. Frauds of this category should, in theory, never materialise. The obvious inference is that the person who purchases a business without having the figures upon which the transfer is based thoroughly investigated by an independent and capable party, is simply laying himself open to the wiles of the unscrupulous vendor. The professional accountant employed upon an investigation for this purpose would, as a matter of course inquire into all the points above enumerated! and thus frequently save many individuals from losing the benefit of their industry. It is surprising however, how many keen business men are willing to accept the statements made to them by vendors rather than pay for the expert knowledge which they naye not had the training or experience to acquire In cases where the transfer of a business takes place, the books of which have been falsified inorder to cover up defalcations of which the vendors have no cogmsance, it is possible that although the purchaser is buying on incorrect accounts, he need not of necessity suffer injury thereby If for instance, the manipulation of the accounts has taken place in the Profit and Loss Account either by the omission or understatement of income or the over-statement of expenses, this will probably only be done to the extent of the defalcations, in order that no glaring discrepancy shall appear in the accounts, as compared with those of previous years, and the net result is, therefore the same as it would have been had there been no defalcations. If, on the other hand, the manipulations take place in the Balance Sheet, either by the understatement of liabilities or the overstatement of the assets, the former are frequently not taken over by a purchaser, but even should this be the case the under-estimation should be discovered in the process of investigating the accounts, whilst as regards the assets, it is unusual for these to be token over except upon an independent valuation The question of goodwill does not need consideration as if this is arrived at by any scientific calculation at all, it will be a certain number of years’ purchase of the profits, which, if in any way falsified have been brought up to a reasonable standard by manipulation in order to cover the defalcations made during the period covered by the accounts.

It frequently happens that it becomes necessary to replace assets in the nature of buildings, plant, etc. It is well recognised that only such proportion of the expenditure as represents the added value of the asset should be capitalised. In other words, the original asset, less the value of any old materials sold or utilised in the new construction, should be written off against revenue, and the actual costs of the new asset placed to capital. Now the Board, to enable them to show substantial profits in the past, may have neglected to make adequate provision for the wastage in the value of the original asset, and they are accordingly faced with the proposition as to whether they will disclose the true state of affairs by writing off the amount standing in the books on the old account, or capitalise the whole of the expenditure without dealing with the cost of the original asset, which has ceased to exist. It is easily seen how the opportunity may be taken to misrepresent the true situation. There is another point of a similar nature, i.e. the charging to capital expenditure of amounts which are rightly of a revenue character. It is frequently found renewals are deliberately capitalised on the ground that the value of the property is thereby increased, but really because if such payments were properly treated, the results of trading would be so unsatisfactory that confidence in the management would probably cease to exist. Carrying forward a proportion of expenditure is also a favourable method of concealing bad trading. This frequently arises in the case of current advertising. The initial cost of placing i a new product on the market may quite rightly be spread over a short period of years, but immediately the article has become established, further expenditure is properly chargeable against the period in which it is made. Any other method is delusive.From the foregoing, it must not be inferred that all frauds committed by those in charge of the control or direction of a company must of necess ty be carried out by the inflation of the assets of the business, or the understatement of its liabilities. Cases occur where, for reasons well known to, and carefully considered by, themselves, it is possible for those in control of a company to understate intentionally the profits, and less frequently to overstate the liabilities, with a view to depressing the price of the shares, so that they may be thrown on the market by weak holders and sold for considerably less than their real value, as the outside shareholder would not have the same opportunities as the directors of ascertaining the intrinsic merits of the undertaking. In this case, were the Transfer Register examined, it would be seen that the shares when sold were probably purchased by those in control of the company. Similarly, the profits of successful undertakings are frequently understated eVen with the knowledge of the whole of the shareholders, under the guise of ” strengthening the financial stability of the company.” As to how far such strengthening should be insisted upon by a controlling majority of shareholders represented on the directorate, in the face of opposition on the part of the minority of shareholders, is a very moot point, especially in cases where it can be traced that all shares coming on the market have passed the hands of the controlling majority. Further, there is a well recognised practice of depreciating to such an extent that valuable assets are written down to a nominal figure, and so creating ” secret reserves.” Whilst the advisability of such a proceeding is generally admitted in the case of banks and similar institutions, it is a debatable point as to whether such financial prudence does not carry with it an element of danger in the case of undertakings of less repute than those referred to in view of the fact that it may pave the way to irregularities by those in control, which might operate hardly on succeeding shareholders.

Another means of 1 fraud is by the manipulation of the stock of a trading or manufacturing company. ^.Unless great care is taken, the stock may be brought in either in excess quantity or at a price in excess of the cost price of the raw material, plus any labour spent thereon, and in certain trades, possibly interest. Although accountants take no responsibility for the value at which stock appears in the accounts which they have audited, unless they have express instructions to do so, it nevertheless behoves them to exercise the utmost care as regards the checking, so far as within them lies, of this item in the Balance Sheet. Some very important actions have in recent years been decided upon this question of stock, in several of which attempts have been made to make the auditors of the company liable for the loss sustained, but generally speaking, it may be taken as settled that, in the absence of suspicious circumstances an auditor is not guilty of negligence who relies upon the statements made by trusted officers of a company. In the event, however, of any suspicion at all being created in his mind, it is the place of the auditor to probe the matter to the bottom. The inflation of stock quantities and values is frequently a means of covering a default. It is possible that an employee, owing to lack of supervision, may be in such a position that he has complete control over the stock. It would be a perfectly easy matter for him to extract articles from the stock and sell them on his own account. In such a case it is generally found that this employee is relied upon to take stock at prescribed periods. It becomes necessary for him to cover his deficiency and, especially if the articles are at all numerous, he finds little difficulty in adding to his count a sufficient number to conceal the shortage. If this form of fraud were practised to any great extent, it would probably soon reveal itself in a comparison of the percentages of gross profits to net sales, but in any case it would be a difficult matter for an employee to continue the offence for a lengthy period, as the shortage of those stocks which he has appropriated should soon become apparent. A further instance of manipulation of stocks may occur in a concern where the value of the merchandise dealt in is subject to market fluctuations. A very important part of such a business is judicious buying, and it is easily seen how considerable losses may arise during a financial period through speculations on the part of the responsible officials. To cover these losses the stocks purchased in a high market may have been taken in at cost in spite of the fact that a heavy drop has taken place in the value of the commodity with no prospect of recovery, or on the other hand, cheaply bought stock may be valued at its temporary high market value, thereby anticipating a profit that may never accrue. Such methods for showing good results, or concealing losses are not invariably employed with actual fraudulent intent, but the effect of them, which the officials may not be in a position to foresee, may easily be the means of placing them in the awkward position of proving their innocence of a charge which the facts of the case would seem to imply. Under any circumstances, however, the effect of such over-valuation can only act in one way, and that is to recoil upon the succeeding period. A fraud of a somewhat special nature is that which may be committed as between the active and sleeping partners of a firm or the partner in a firm who has control of the accounts, as against his co-partners, whereby it may be possible for him not only to defraud him or them, but also to defraud the creditors of the business. In such a case, if the responsible partner be so willing, and unless his co-partners keep a close watch on the details of the business, it is possible for him to inflate unduly the assets of the business, thereby himself drawing a larger share of the profits than he would be otherwise entitled, or possibly raising a large amount .from creditors either on loan or in respect of goods, to which creditors, in order to obtain advances, he may possibly have had to show his Balance Sheet. On the other hand, the partner in charge of the accounts may intentionally return the profits of the business below what they should be in order to pay out his partners at a lower rate than they would be otherwise entitled to receive.

Also called House Tax. This is a tax or duty charged upon inhabited dwelling houses in Great Britain according to their annual value, and payable on or before the 1st January of each year. There have been many cases before the Courts upon the point as to what is and what is not an inhabited house so as to be liable to pay the duty. Gensrally speaking, the term would seem to embrace all houses in which some person sleeps, all furnished houses ready for use and occupation at any time, even though no person sleeps therein, and all buildings which have internal connections with those parts of the same which are used for residential purposes. A chamber or apartment in any of the Inns of Court or of Chancery, or in any college or hall in any university, and also a hall or office lawfully chargeable with other taxes or parish rates, are described by statute as inhabited dwelling-houses. The following premises are exempted from the duty (1) Market gardens or nursery grounds occupied by a market gardener or nurseryman bond fide for the sale of the produce thereof in the way of his trade or business. (2) Warehouses and buildings on wharves occupied by wharfingers .who have dwelling-houses there ; also such warehouses as are distinct and separate buildings, not being parts of dwellinghouses or of shops attached, even though adjoining or communicating therewith, but employed for lodging goods or carrying on some manufacture. (3) Houses belonging to the Crown, and public offices. (4) Hospitals, charity schools, or houses provided for the relief of poor persons. (5) Business premises. Where a house is divided structurally and let in different tenements, and any of such tenements are occupied solely for the purpose of any trade, business, profession, or calling by which the occupier seeks a livelihood or profit, or are unoccupied, duty may be charged only on the value of the remaining tenements. Notice must be given to the surveyor of taxes during the year of assessment. Every house or tenement which is so occupied is entitled to exemption, although there may reside on the premises, for the protection thereof, a menial or domestic servant employed by the occupier, or any person of a similar grade or description not otherwise employed by the occupier. (6) Unoccupied houses or tenements being unfurnished, although left in the charge of persons or servants dwelling therein solely for their protection. The duty is charged annually on the occupier of the premises. When there is a change of occupation during the year, duty is apportioned according to the time of possession. When any dwelling-house is divided into different tenements, being distinct properties, every such tenement is chargeable separately on the occupier. Where any house is let in different storeys, tenements, lodgings, or landings, and is inhabited by. two or more persons or families, it is charged in one sum on the landlord. When duty so charged is left unpaid for twenty days, the collector may demand it from or levy for it on any of the tenants, who may in turn make an equivalent deduction from his rent. Where a house, so far as it is used as a dwellinghouse, is used for the sole purpose of providing separate dwellings (a) The annual value of any dwelling in the house which is of an annual value below

Premiums due or paid in respect of various classes of insurance should be charged to ” Insurance Account.” Insurance premiums are payable in advance, and at stocktaking times credit may be taken for the apportioned part of the premiums not accrued due, which as a result will appear on the credit side of the Balance Sheet. The effect of this will be to create an equitable charge for insurance against the period’s Profit and Loss Account. Occasionally it occurs that the risk is carried on for a short period under cover notes, the premiums not being paid by the insured until the policies are prepared. In such cases, where the cover note extends over the period of balancing, there will be an accrued liability to bring into account, and the auditor should make a point of enquiring whether any such liability exists. The auditor should verify the accuracy of all apportionments, and should require the official receipt of the insurance company, or, in the case of the first premium, the policy itself to be produced in support of the amount paid as premium. He should also examine the amounts insured to see that the risks are adequately provided for. (See also Auditing, pp. 77 and 80.)

(See Dividend and Interest Account ; Interest and Discount Account.) INTEREST ACCRUED. (See Auditing, p. 95.)

This account should record only interest on trade debts and on temporary advances (i.e. interest not of an annual nature) and the charges incurred in the discounting of unmatured bills receivable. Interest on loans and other annual interest should be charged in a separate account, in order to facilitate the computation of the assessment of the business to income tax. Cash discounts should also be recorded separately, and should not be confused with the discount on bills, which is in the nature of an interest payment. Interest and discount, such as should be found in an account of this sort, is of an accruing nature, and, in addition to verifying the charges included in the account by reference to the statements of creditors and bankers and bill brokers, the auditor should see that proper provision is made for any accruing liabilities or interest and discount paid in advance, so that the balance of the account shall only represent an equitable charge for interest and discount for the period under review. (See also Dividend and Interest Account.)

Interest on bank overdrafts should be charged to Interest Account and, subsequently, to Profit and Loss Account. The auditor should verify the charge by reference to the Bank Pass Book and to any other documents, such as agreements with the bank, or letters in which the terms on which interest is payable are set out.

Interest on capital, which is found chiefly in partnership accounts, is a charge against the profits of the business, and should be credited to the respective partners’ Capital Accounts. It forms a means of adjusting the claims of the partners inter se, when the capital contributed by them is unequal. Interest on drawings should be debited to the partner’s Drawings Accounts, the totals of which are subsequently carried to the debit of the Capital Accounts. The payment of interest on capital and drawings is dependent on the agreement between the partners. As by the provisions of the Partnership Act of 1890 no interest is chargeable on capital in the absence of an agreement to the contrary, it devolves upon the auditor to ascertain clearly what, if any, agreement between the partners exists upon this matter. For this purpose he should consult the Articles of Partnership, or, where there are no articles, the partners themselves, and thus place himself in a position to determine exactly the terms and conditions under which interest is chargeable on capital and drawings. (See also Adjustments at Balancing Time ; Balance Sheet, p. 148; Consignment Accounts ; Partnership Accounts, p. 738.)

Interest received from investments should be credited to Profit and Loss Account, through the medium of an Interest on Investments Account. The Investments Ledger should be provided with two columns, one for recording the transactions in the capital amounts of the investments, and the other for recording the revenue arising therefrom. Arrangements should be made whereby authority is given for the interest to be paid direct to the recipient’s bankers and not to the investor. The auditor will vouch the interest received by reference to the Bank Pass Book, and the counterpart warrants where such exist. He should in all cases make a point of seeing that the interest is regularly received, and any irregularity should be the subject of a strict inquiry. (See also Auditing, p. 76; Balance Sheet, p. 152; Profit and Loss Account, p. 787.)

A Trading Account prepared by taking the stock at an approximate figure, without waiting for the usual balancing date.

A balancing of the books effected during a financial period, an intermediate Profit and Loss Account and Balance Sheet being also sometimes prepared by means of approximation of stock.

A Ledger through which items may be entered from the subsidiary books, finding their way to the accounts in the principal Ledger to which they are allocatable, by transfer from the Intermediate Ledger.

The agency business, carried on under stringent agreements by these agencies for their principals, the leading railway and steamship companies, is practically a cash business, a remittance by the agencies for tickets sold being made to the railway companies monthly or weekly, according to the tenor of the agreements. In the case of shipping companies, payment, less commission allowed, is required from the agencies in exchange for each booking. In the case of railway companies, the almost invariable rule is to forbid any deductions from the receipts for tickets, and to settle the agreed commission quarterly or half-yearly. The object of internal checks in the case of such agencies is to ensure that every ticket sold is accounted for, and that the unsold tickets are actually on hand, for which purpose the following procedure should be adopted : A separate Banking Account must be kept by the agencies for receipts on account of principals; which, since the steamship transactions are on a cash footing, means in practice for the railway companies. A Tickets Sold or ” Train ” Book is kept for each railway company, in which are entered full details of the tickets sold each dayamount at the bank, less any payments made on account. The control clerk satisfies himself that these figures do agree and sees the railway office receipt for payments made to them. The foregoing totals are again checked by reference to a elaborately detailed summary of the tickets sold for each company, which has to be prepared and sent to the railway companies at the close of each month. The accuracy of this summary is also verified by the control clerk, who, in addition, takes stock of the railway tickets on hand. By deducting the total stock from the statement of tickets delivered to the agency by the companies, he is able to put an absolute check upon the quantities of tickets sold. A further check is supplied by the fact that the representatives of the railway The total of each Memorandum Book is carried to the credit of the various railway companies in a columnar Railway Ledger (p. 563). The daily total of the cross casts of the columns in the Ledger represents the value of the tickets sold during the day. This total is posted to the debit side of the Railway Counter Cash Book (p. 563). It will be observed that the Railway Counter Cash Book (which is frequently called the Till Book), although relating in the first place only to receipts, has debit and credit columns. This is to meet cases in which railway tickets are not used and are handed back to the office in exchange for cash, thereby reducing the amount payable to the principals. The balance of this cash book at the close of each day should correspond with the cash in the till, which is paid into the separate Banking Account referred to above. The Cash Book and the bank paying-in slip, and eventually the Bank Pass Book, are compared and agreed by a control clerk. The control clerk also agrees the total of the sums carried daily into the Railway Counter Cash Book with the totals due to the railway companies, as shown by the Columnar Ledger. The final totals of both these books (less the value of any cancelled tickets taken back by the agency) represent the amounts payable to the railway companies, as well as the companies attend from time to time to make an inspection of the tickets on hand, and agree the results with their records.

The expression internal checks denotes the means by which waste or leakage are controlled, departments linked together, necessary details circulated from one to the other, and information in an organised form conveyed to the counting-house or book-keeping department to be embodied in what are known as the original books of account. The original books may in their turn be tested by a reference back to the material provided by the system of internal checks, which, it should be added, are quite distinct from such mechanical checks as relate solely to the arithmetical accuracy of the original books themselves. Internal checks, therefore, serve two distinct functions. They supply and circulate information and they control waste or leakagethe latter, however, within recognised limits. For example, cash or securities can be periodically counted or verified and agreed exactly, and can in any case readily be kept in safe custody. Stocks and stores, on the other hand, are more difficult to control closely, since continuous taking of the whole of large stocks of many varieties, often in bulk, is impracticable, as is also, in many cases, absolutely safe custody. As to labour, precise records of time worked can be kept, but unless employed upon piece work, or work of which the results can be readily measured, the only effectual check upon the proper use of time is personal supervision. In other words, there is no such thing as a complete automatic or mechanical check. In every system of check there is some point at which personal supervision is indispensable. Internal checks enter into every undertaking, and include the handling of correspondence, recording and dealing with orders and inquiries, the receipt and payment of cash, the receipt and issue of stocks and stores, the despatch of goods, the control of labour and the working out of costs. The receipt and issue of stocks and stores, the control of labour, and the working out of costs are dealt with in separate articles under those headings. In this article it is proposed to explain the system of internal checks in general use, and then to describe the checks peculiar to such special undertakings as hotels, theatres, railway booking offices and benefit societies. The organisation of departmental stores is dealt with in a separate article {vide p. 380). The reader who has mastered the contents of this and the other articles referred to above, should find no trouble in devising a scheme of internal check for any undertaking. CORRESPONDENCE, ORDERS AND INQUIRIES.A register for letters should be kept ruled as followsAll letters received having been opened by a principal (an expression which, whenever used in this article, is intended to include his duly appointed delegate or a control clerk), should be entered in the register as and when they are opened and at once stamped ” Attended to.” ” Date ” They should then be put into baskets (one for each department) labelled ” Letters to be replied to,” which are handed to the departmental managers for attention. After a letter has been ” attended to,” it should be initialed by the person who has dealt with it and then placed in a basket labelled ” Letters to be filed,” a carbon copy of the reply being attached to it, for it is assumed that all letters are typed in duplicate. If a letter has to stand over for any reason, it should be placed in a basket marked ” Letters in abeyance.” The letters in this basket must be examined daily and cleared up as quickly as possible. The ” Letters to be filed ” basket should be cleared each evening and the contents put in an alphabetical case of the ordinary type, and the appropriate column in the register of letters marked off showing that the letters have been attended to. If a letter relates to more than one department copy extracts should be made and passed to the respective departments. The register should be examined by the principal from time to time in order to see that the letters have been dealt’with. Orders. Copies of all orders, without prices and other private details (and when a general letter includes an order a copy of the part relating to such order), should be typed in duplicate on thin paper. Each order should be dated and numbered, and one copy sent to the factory or department concerned, and one copy retained at the office. At the factory or department, and the office, an Order Book should be kept ruled as follows As to orders received by telephone or word of mouth, particulars should be typed and dealt with in the same way. In factories where there are several processes necessary to make the finished article, instructions for the factory should be made out on numbered tickets in duplicate. The original ticket is retained in the office. The other is detached and sent to department No. 1. This ticket follows the order from department to department till it reaches the warehouse with the finished article, where it is marked off against the original order in the counterfoil book. Where work is commenced simultaneously on one order in more than one department tickets are sent to each of these departments and circulated until they finally meet at a point in the manufacture whence they reach the warehouse as before. The principal should examine the Order Book from day to day and follow up orders which are in arrear. Inquiries. The same procedure, so far as appropriate, should be adopted, as in the case of letters or orders, and Inquiry Books suitably ruled should be kept. The original orders and inquiries, and correspondence relating thereto, are filed in alphabetical cases, labelled ” orders” and ” inquiries” respectively. The Inquiry Book should also be inspected by the principal periodically. Letters Outwards. All letters sent out should be recorded in a Register ruled as follows Date. Name. Address. Matter. The postage should be totalled daily or weekly and entered in the Petty Cash Book. For the purpose of agreeing the petty cash, stamps on hand may be treated as ” cash.” Receipt ol Cash. Cash may be received (a) By post. (b) Across the counter. (c) Through travellers or collectors. (a) Receipts by Post. As the letters are opened (see above) the principal should make a note on each letter covering a remittance, of the nature and the amount of the remittance whether an acceptance, cheque, postal order, notes, cash or traveller’s remittance. He should at the same time jot down the name of those remitting and the amounts on a rough slip of paper and total up same for use as mentioned below. All uncrossed cheques and postal orders should at once be crossed by means of a rubber stamp such as the following The remittances and covering letters are then handed to the cashier, who at once enters the necessary details in his Cash Received Book, fills up the paying-in slip in the Bank Paying-in Book, and pays the total into the bank. The bank cashier stamps the counterfoil paying-in slip as correct. The principal compares the rough slip referred to above with the Cash Book and counterfoil paying-in slip as stamped by the bank, and periodically agrees the amount in the Bank Pass Book itself with the paying-in slip. Counterfoil receipts numbered in consecutive order, and stamped where necessary, are made out by a receipts clerk, who enters the Cash Book folio on the counterfoil of the receipt, and the number of the receipt in a column in the Cash Received Book, and also compares his receipts with the covering letters (if any) sent out, and with the principal’s rough note referred to above. The principal must see that acceptances received are entered by the bills clerk in the Bills Receivable Book, and if discounted, duly entered in the Cash Book. The date of discounting and the Cash Book folio should also be entered in the Bill Book, which in practice usually serves as a ledger as well as a record for bills receivable, and should be suitably ruled for that purpose. The principal should periodically agree the balance of the Bills Receivable Account with the bills on hand. For receipts by letter delivered by hand the same routine should be observed. The principal’s rough list duly followed up is the best safeguard against irregularities. Receipts through Travellers. It is better that all monies should be remitted direct to the headoffice by customers, but it is often convenient to utilise the traveller also as a collector, especially in the case of dilatory accounts. The traveller should be furnished with a list of the accounts to be collected on his journey, a duplicate being retained. by the principal. The traveller should also be given a counterfoil receipt book containing official forms of receipt numbered consecutively and duly stamped. If there are many small items below