The treatment of salaries and wages in the books of account depends largely upon the nature of the work for which the salaries and wages are paid. In the case of manufacturing concerns, the wages paid to workmen and the salaries paid to officials, who are directly engaged in the productive departments may, with advantage, be kept distinct, by the use of a separate wages book, or by an analysis of wages, from those paid to persons engaged upon the distributive side of the business. By this means the manufacturing wages and salaries may be ascertained and charged to the Manufacturing Account, whilst the remainder can be charged to the Profit and Loss Account. In verifying the payment of wages, the auditor has to rely largely upon the system of internal check in force in the preparation of the pay-roll and the subsequent disbursement of the wages to the workpeople. The pay-roll should pass through as many hands as can conveniently be arranged. The time and rates of payment should be written up by one clerk, and the calculations and additions made by another. A third clerk should check them, and the actual payment should be made by some responsible person who has had no hand in the preparation of the Wages Book. The time sheets should be certified by the foreman. The rates of pay should be examined and certified by the manager, whilst each clerk should sign the Wages Book for the actual work he has done upon it, and for which he is responsible. The duties of the clerks may, with advantage, be changed from time to time. The auditor should test the extensions and castings and verify the totals with the cash paid out. He should see that all certificates are properly signed, and should assure himself from time to time that the system of internal check is properly carried out. He may, on occasion, attend at the time of paying the wages, and require an explanation of any apparently unclaimed wages. He should test the individual rates of pay by comparison and carefully watch the total amounts paid week by week, requiring a satisfactory reason for any undue increase. (See also AuDiTiNG.’p. 80, Profit and Loss Account, p. 791.)

This is one of the codifying Acts dealing with the law relating to commercial matters, other important ones being the Bills “of Exchange Act, 1882, the Factors Act, 1889, the Companies (Consolidation) Act, 1908, the Bankruptcy Act, 1914, and the Deeds of Arrangement Act, 1914. The present article will deal only with the more important provisions of the Statute. All the ordinary rules of contract, such as offer and acceptance, the capacity of the parties, consideration, good faith, etc., apply to sale as to other contracts. A sale of goods is defined as a contract whereby the seller transfers or agrees to transfer the property in the goods, the subject matter of the contract, to the buyer for a money consideration called the price. By ” property” is meant the complete ownership in the goods, and ” goods ” include all chattels personal other than choses in action. In order that a contract of sale may fall within the Statute, it is essential that the whole of the rights of the seller should be intended to be passed on to the buyer, and some part of the consideration must be money. If the consideration consists of some other goods, the contract is one of barter, and the Act does not apply. If the goods are transferred without a consideration, the transaction between the parties is a gift. When the sale is carried out at once, that is, when the seller hands over the goods and the purchaser pays the price, no formalities are required. But when the contract is executory, that is, when the transaction is to be carried out at some future time, the sale is not enforceable by action, if the value of the goods is

An account kept in the Nominal Ledger, which is credited with the periodical totals of goods sold, as per Day Books, and debited with the periodical total of goods returned, allowances, etc., as per Inwards Returns and Allowances Book. The balance gives the net sales, and is transferred on balancing from the Sales Account to the credit of the Trading Account. The Sales Account may be kept in columnar form for the purpose of ascertaining departmental sales, separate Day Book and Returns Book being used for each department, or these books correspondingly departmentalised by means of analysis columns.

This is the book of original entry for all goods sold. It contains full detail respecting them, namely, order number, date, name of purchaser, goods mark, quantity, price and total; the total of each entry is posted to the debit of the respective Personal Accounts in the Debit Ledger. The book is totalled periodically, and this total is posted to the credit of Sales or Goods Account in the Nominal Ledger. The invoice sent to the customer is a copy of the Sales Book entry; in fact, it is a common practice to use manifold books, the alternate pages being the printed invoices which may be torn out, and the manifold copies constituting the firm’s Sales Book. This system may be still further extended to enable the order also being entered in duplicate, these being sent to the warehouse for execution. The warehouse retains one copy for the purpose of entering the Stock Books, sending the other, with all particulars noted thereon, back to the office. The two remaining copies (i.e. customer’s invoice and Sales Book entry) are then completed from this information. Where more than one department exists, the book may be detailed for the analysis of the sales to the various departments, and in this case the totals of the analysis columns are posted to the credit of the Departmental Sales Accounts, which may be one account in columnar form, in the Nominal Ledger.

A person to whom money or other property is entrusted for the purpose of lending it out to others at interest payable to his principal. The remuneration of a scrivener is a bonus or a commission payable for his work and labour in connection with the transaction. The commission so paid is frequently spoken of as a ” procuration fee.”

Secret Reserves may be created in the books of account (1) by the omission or under-valuation of assets ; (2) by writing off excessive depreciation ; (3) by over-stating liabilities ; and (4) by charging capital expenditure to revenue. The chief object of secret reserves is the maintenance of steady dividends, and, in the case of banks, for instance, the avoidance of the disclosure of heavy and exceptional losses which might seriously affect credit. Where secret reserves have been determined upon, it is preferable to create a distinct Reserve Account in the books rather than to adopt the methods of creation set out above. By this means the actual real values of the assets are maintained in the books, although they may appear in the Balance Sheet at lower values, and the danger of losing sight of assets which have been written down to nil is avoided. The auditor’s duty in this connection is a delicate one. On the one hand, where secret reserves exist, the Balance Sheet is not a true and correct representation of the company’s affairs. On the other hand, the maintenance of a secret reserve may be essential to the well-being of the company. Thejauditor must take each case on its merits. Where the company’s Articles provide tha’t such a reserve may be created, and the auditor is satisfied that the creation of a secret reserve is bond fide, and in the interests of the company, he will probably not incur any liability if he omits to mention its existence in his report to the shareholders. In case of doubt, however, he would appear to have no option but to disclose the facts in his report. (See Auditing, p. 90; Balance Sheet, p. 143; Reserves and Reserve Funds, p. 826.)

These are Ledgers containing a certain section of the accounts ; for example, the Debit Ledgers may be sectionalised into Town, Country, and Foreign, or/and for the debtors whose names commence with certain letters of the alphabet, as A and B, C-E, F-H, etc. When this is done, sectional balancing principles are usually adopted, so that errors may be localised to the ledgers in which they occur, a good system of internal check afforded, the total amount of outstanding balances known at any time without the trouble of abstraction from individual accounts, and final accounts more speedily prepared. (See also Self-Balancing Ledgers, p. 846.)

(See Balance Sheet, p. 137; Bankruptcy Accounts, p. 161 ; Liquidators, Accounts of, pp. 653 and 680.)

In all businesses of any magnitude, it is necessary to include in the system of book-keeping a number of ledgers, more particularly for the purpose of keeping the accounts with the debtors or creditors of the concern for goods sold or purchased. In order to reap the full benefit of the system where many such ledgers exist, the books should be so arranged that each ledger is self contained and can consequently be balanced without reference to any other ledger. Unquestionably such an arrangement involves more clerical work, but the extra work and time occupied in posting and other detail work is amply repaid by the closer supervision which can be exercised and the greater facility with which errors can be traced and detected and the books as a whole balanced. In the case of concerns where operations cover a large area, and in the case of concerns trading in an article or commodity universally used, the number of ledger accounts is consequently considerable, and it is convenient to subdivide the sales ledgers alphabetically or according to district. For the purpose of facilitating reference, or of rendering the posting as simple as possible, alphabetical subdivision is the better, but where the undertaking depends largely for its sales upon the energies of a large staff of travellers, each one of whom is allotted a particular district, the ledgers may be divided according to districts. In such case a close control can be kept upon each traveller, not only regarding the total sales to the customers in his particular district, but also for the purpose of ascertaining the bad debts incurred amongst customers introduced by him. It is usually found convenient to allot to each ledger a certain number of districts, the ledger being subdivided into sections in order that each district may have a certain number of pages allotted to it, each section therefore recording the accounts of the customers for whom a particular traveller is responsible. In a business of magnitude each ledger clerk is made responsible for one particular ledger, and it is his duty entirely to complete the postings to his own ledger. Quite apart from other advantages which this method possesses, an interest is added to the work of each ledger clerk which, in practice, cannot but assist and expedite the otherwise monotonous and wearisome work of ledger posting. It will be found that, given the sole charge of a particular ledger, a ledger clerk is encouraged to give to his own work a greater attention to accuracy, neatness and general thoroughness, knowing that a quick and satisfactory balance of the ledger entrusted to his care will reap its own reward from the reports of the auditors to the chief ledger clerk. In comparing a system involving self-balancing ledgers with a system with no such arrangement, it is apparent that the only disadvantage possessed by the former is the fact that more clerical work is involved by reason of the additional posting required and by reason of the analysis of the subsidiary books (explained below). Against this disadvantage may be summarised the following advantages. ADVANTAGES OF (1) As each ledger is capable of being balanced separately, the preparation of a total trial balance can be proceeded with without waiting until the whole system has been completed and balanced. (2) Errors can be localised and the postings re-checked into the ledger or ledgers concerned. (3)The total amount of the balances on any ledger may be ascertained with a minimum of delay and without the work involved in extracting the balances of the accounts in detail. (4)Office organisation may be greatly assisted by the subdivision of clerks’ labour. (5)Statements to customers may be prepared and despatched and statements from suppliers checked with a minimum of delay. (6)The possibility of fraud is lessened, particularly as it is in the knowledge of each clerk that, on detection of an error in posting, addition or balancing, or the questioning of the authority for the making of an entry in a subsidiary book and its subsequent posting, the clerk or clerks involved can be immediately ascertained. In order to minimise the danger of collusion between clerks it is the practice in some concerns at irregular intervals to give instructions for all ledgers to be balanced and, on completion, the clerks are made responsible for ledgers other than the ones they have formerly kept. This practice acts as an effective deterrent on any incipient tendency towards fraudulent manipulations of the books on the part of any clerk who may feel himself particularly gifted in that direction. Although a system of self-balancing ledgers may be applied to any business whatsoever, it is seldom that such a system obtains except where the nature of the business is such that a number of ledgers is necessitated to record the various transactions, such as a concern for the purchase (or manufacture) and the sale of goods in every day use. The examples in this article are of a system in such a concern. ADJUSTMENT ACCOUNT.It is obvious that, to render a ledger capable of being balanced separately, it is necessary to have a record of all items posted from subsidiary books to that ledger distinct from items of a similar nature posted to other ledgers. This record is obtained by a complete analysis of the items contained in the subsidiary books, or books of first entry. The totals of these analyses having been obtained, they are posted to an account which forms a ” Control (or Adjustment) Account” for the ledger to which the details in the first place have been posted in the ordinary way. In this way the Control Account will be a summary of the ledger which it represents. The Control Account for each ledger should be kept in a separate ” Control Ledger” which, although not in itself an essential part of the system of books taken as a whole, yet is a necessary adjunct to each ledger if it be desired to balance each ledger separately. The title ” Self-Balancing Ledger ” is in itself a misleading one in so far as it is necessary to refer to the particular Control Account in the Control Ledger to obtain the total figures relating to any one ledger. The term ” Sectional Balancing System,” which is a term referring to the same system, is, for this reason, a more suitable descriptive title. In some concerns adopting the system it is the custom to keep the Control Accounts in the Private or Impersonal Ledgers. This method is convenient, as the ledger then containing the Control Accounts is in itself a complete summary of all the ledgers. One other method obtains also, which is to post the analysed totals of the subsidiary books both to a Control Account contained at the end of the ledger to which it relates on the opposite side to that to which the details of the analysis have been posted and also to a Control Account in the Private or Impersonal Ledgers as in the alternative method mentioned above. The advocates of this method maintain that, to make each ledger strictly self-balancing, such a course is necessary, but obviously an additional amount of posting is involved which serves no useful purpose. The use of the Control Ledger, which may be regarded as a Memorandum Ledger only, and which is used solely for the purpose of the various Ledger Control Accounts, is the one least open to objection, and theoretically more correct when it is borne in mind that the Control Accounts are not an essential part of a system of book-keeping, but are necessary only where it is desired to ” prove ” each ledger separately. APPLICATION OF THE SYSTEM.The following is the explanation of a system enabling the ledgers to be balanced separately in a trading concern with the following books (1)Day Book (Sales). (2)Sales Returns Book. (3)Invoice Book. (4)Bought Returns Book. (5)Sales Ledgers. (6)Bought Ledgers. (7)Cash Book. (8)Petty Cash Book. (9)Bill Book. (10)Transfer Journal. (11)Impersonal Ledger. (12)Private Ledger. (13)Control Ledger. (1) Day Book. This book is ruled in the ordinary way with columns for date, name and address, folio number and amount, but in addition it is ruled with as many columns as there are Sales Ledgers. Form No. 1 (p. 847) shows such a Day Book for use in a concern with five Sales Ledgers. The Day Book is entered up in the usual way from the ” Invoice Outwards Counterfoil or Copy Book ” by the clerk responsible for this work, complete with all details as regards date, name and address, and the amount charged to the customer for the goods, which is entered in the first or ” Total ” column. The Day Book is then taken by each ledger clerk in turn who posts up the debits to those customers’ accounts contained in his ledger, entering in the folio column the initial or number of his ledger, and the folio ; at the same time he extends the amounts posted by him to the proper column referring to his particular ledger. Each clerk is responsible for totalling the column in the Day Book referring to his ledger. At the end of each month the head clerk, or the clerk responsible for the posting of totals to the Impersonal or Private Ledgers, checks the ” cross-casts,” seeing that the totals of the analysis columns agree with the total of the “Total” column. The “Total” column is posted in the ordinary way by him to the credit of the Sales Account in the Impersonal Ledger. Up to this point the procedure of posting is the usual one but, in addition, in order to complete the material for self-balancing, the total of each analysis column (representing the total of the debits to each Sales Ledger) is posted to the Debit of the Control Account in the Control Ledger referring to the Sales Ledger to which the details have been posted. For the same reason the total of the ” Total ” column is posted to the credit of the ” Impersonal Ledger Control Account ” in the Control Ledger. An alternative method as regards Day Books is to have a separate Day Book for each ledger, the great advantage where such a method is adopted being the fact that all the clerks may be engaged on posting at the same time, each using the Day Book referring to his own ledger and consequently not being obliged to wait until the posting to some other ledger than the one under his charge is completed. The objections to this alternative method are that instead of one posting to the Impersonal Ledger (and to its Control Account) representing the total sales for the month, a number of postings is necessary, according to the number of Day Books. A greater objection to such a method is that the clerk entering up the Day Books from the ” Invoices Outwards ” Counterfoil Book has to enter into a number of Day Books, and has himself to analyse the items of sale. In practice it is found that the former method explained above is safer, quicker and tends more towards accuracy, since the entering clerk has only to enter into the Day Book the particulars of sales as set out in the ” Invoices Outwards ” Counterfoil Book without the complication of analysis at the same time. In any case it is extremely unwise to adopt the alternative method in a system where the Sales Ledgers are divided otherwise than alphabetically, as the responsibility of entering up the items into the proper Day Book is more than should be given to the ordinary entering clerk, and there is a great risk of items of sales being missed. The work of checking the entering, as can be easily appreciated, is necessarily complicated and slower. Another system of arriving at the same result may briefly be touched upon. Under this arrangement the ordinary single column Day Book is used, the clerks inserting in the folio column the initial letter or number of their ledgers and the folio. At the end of each month, or at the end of whatever period at which the Day Book is totalled, a clerk extracts on a rough sheet the analysis of the items posted to the various ledgers, and the analysis so arrived at is copied into the Day Book showing how the total is made up. This method has no additional advantage to recommend it, and unless the distinctive initial or number denoting the ledger to which the item is posted is carefully written in, mistakes in the analysis frequently arise. The only case in which this method should be brought into use is where no system exists for the separate balancing of ledgers, and where for some reason (for instance, where an error exists but cannot be located) it is required to prove the ledgers separately. In such a case there is no alternative but to proceed on the lines indicated. This question is discussed later. (2) Sales Returns Book. This book is ruled in an exactly similar manner to the Day Book, in fact the end of the Day Book may be utilised for recording the returns from customers, the procedure as regards posting being similar but converse. Details are posted to the credit of Customers’ Accounts in the Sales Ledgers, the total of the ” Total ” column being posted to the debit of the Impersonal Ledger. To complete the selfbalancing system the totals of the analysis columns are posted to the credit of the Sales Ledger Control Account in the Control Ledger, the total being posted to the debit of the Impersonal Ledger Control Account. (3) Invoice Book. In the case of the majority of concerns the detail connected with the purchases is far less than that involved in the proper recording of the sales, and consequently one Bought Ledger is usually sufficient. In such cases, from a self-balancing point of view, the extra clerical work is very little and the necessary procedure is simple, following the converse lines of the system connected with the Sales Ledgers. The details of the Invoice Book are posted to the credit of the Bought Ledger Accounts, the total purchases going to the debit of the Purchases Account in the Impersonal Ledger. To complete the system the total is posted to the debit of the Impersonal Ledger Control Account, and to the credit of the Bought Ledger Control Account in the Control Ledger. Where more than one Bought Ledger is necessary the procedure is exactly similar to that obtaining in the case of Sales Ledgers. The Invoice Book is ruled, not only with a ” Total ” column but also with the necessary number of columns into which are extended the items according to the ledgers to which such items are posted, the totals of the analysis columns being posted to the credit of the Bought Ledger Control Accounts applicable. In some concerns it is the custom not to enter the total of invoices into an Invoice Book, in which case it may be necessary to copy into the Invoice Book the complete detail of each invoice, or to file away the invoices for reference, but to gum the invoices into a guard book provided with a posting and folio column. The great advantage of such a system is that the actual invoices are available for ready reference, and a very considerable amount of clerical work is avoided in copying out the details of each invoice. This method is, of course, equally applicable to a self-balancing system. (4) Bought Returns Book. This book is dealt with obviously in a converse manner to the Bought Day Book. Details are posted to the debit of the Suppliers’ Accounts in the Bought Ledger, the total being p’osted to the credit of the Purchases Account in the Impersonal Ledger. The total is again posted to the debit of the Bought Ledger Control Account in the Control Ledger, and to the credit of the Impersonal Ledger Control Account in the Control Ledger. (5 and 6) Sales and Bought Ledgers. As regards the ledgers, these are on exactly the same lines as obtain in any system, and no complication or adjustment is necessary where a system is on a self-balancing basis. (7) Cash Book. In a system where the ledgers are made capable of being balanced separately it will readily be understood that, to enable the full benefit to be reaped, and in order to achieve the desired result with a minimum of clerical labour, the Cash Book cannot be on the usual lines. Indeed, it is in the Cash Book that the usual lines are departed from more than is the case in the ruling of the Day Books, Invoice Books, and other subsidiary books. Bearing in mind that it is necessary to analyse all receipts and payments according to the ledgers to which they are posted, it can readily be understood that, in concerns where many ledgers form part of the system, the analysis required is considerable. In Form 2 below, a specimen ruling for the receipts side of a Cash Book is set out. These totals are carried to the General Cash Book and are entered up in the columns applicable. Since the details have been already posted to the Sales Ledger Accounts no further posting of these details is required from the General Cash Book, the entries in the folio column can therefore refer to the Subsidiary Cash Book. Taking first this side of the Cash Book, where there are a number of Sales Ledgers it is convenient to have a subsidiary Cash Book containing the record of the cash received from customers in payment of Sales Ledger Accounts. A specimen form of ruling is set out on Form 3. In the first column are entered the discounts allowed to customers, and in the second column the amount of cash received on account of Sales Ledgers Accounts. The details of these two columns are posted by the clerks having charge of the respective ledgers to the credit of the proper accounts. As each clerk posts the items relating to the accounts in the ledger in his charge, he extends the amount of the cash and the discount allowed into the column applicable to his ledger. The form of ruling allows for five Sales Ledgers. In the eighth column is entered the total discount allowed referring to the cash received each day, and in the ninth column is entered the total of the cash received on account of Sales Ledger each day. The Subsidiary Cash Book is ruled off periodically, for example, at the end of each month, the totals being dealt with as follows The total of the discount column is posted to the debit of the Discounts Account in the Impersonal Ledger, and the totals of the analysis columns (comprising both cash and discount) are posted to the credit of the Control Accounts referring to the various Sales Ledgers in the Control Ledger. The total of the discount column is posted also to the debit of the Impersonal Ledger Control Account in the Control Ledger. In the General Cash Book the remaining columns are those for receipts which are posted to the credit of accounts in (1) the Bought Ledger ; (2) the Impersonal Ledger; (3) the Private Ledger. The remaining analysis column is for use in the case of cash contras, or for the purpose of inserting the monthly balance at bank or overdraft, as the case may be. At the end of each month, or on more frequent occasions if desirable, the Cash Book is balanced off and the additions of the analysis columns are made, the cross casts being agreed. The total of the Impersonal Ledger column is then posted to the credit of the Impersonal Ledger Control Account in the Control Ledger, the total of the Private Ledger column to the credit of the Private Ledger Control Account in the Control Ledger, and the total of the Bought Ledger column to the credit of the Bought Ledger Control Account in the Control Ledger. The items contained in the ” Sundry ” column not affecting the ledgers in any way, the total of that column will not require to be dealt with. In order to minimise the labour of posting, it may be desirable to sub-divide the Impersonal Ledger column or the Private Ledger column into the heads under which items contained in those columns may require to be posted. For instance, under the heading, Imperial Ledger Accounts, it may be desirable to have a column into which are entered such frequent receipts as ” Cash Sales ” in order that the total of such receipts may be periodically posted so that the labour involved in posting such receipts in detail may be done away with. Such sub-division in no way interferes with the working of the system so long as it be borne in mind that the total of items so posted to the Impersonal Ledger must be posted also to the Impersonal Ledger Control Account in the Control Ledger. In cases where considerable sub-division is necessary or desirable, from a labour-saving motive, it is convenient to have a subsidiary Cash Book, ruled as required for each ledger, the daily total of each subsidiary Cash Book being carried to the General Cash Book. Quite apart from the question of necessity, it is convenient to have such subsidiary Cash Books as a part of the system in order that the posting of each ledger may be proceeded with with a minimum of delay. Where such subsidiary Cash Books are used, the clerk in charge of any ledger may proceed with the posting of the cash received to his particular ledger without having to wait until the posting to some other ledger has been completed and the value of quick and up-to-date posting cannot be over-estimated, not only from the view of commercial utility, but also when the necessity arises for the drawing of a Trial Balance or the preparation of interim or personal accounts at short notice. Payments Side of Cash Book. A specimen ruling of the payments side of a Cash Book is set out in Form 4. As in the case of the receipts side of the Cash Book it is necessary to provide columns for the analysis of the payments according to the ledgers to which the payments will be posted. In the example of ruling provided, it is assumed that one Bought Ledger only is in use. Should more than one Bought Ledger be in use further columns should be provided as required. In the discount column should be entered the discount allowed by suppliers, and the total of this column should be posted to the credit of the Discounts Account in the Impersonal Ledger in the usual way. In the Bought Ledger column should be entered the payments to suppliers for goods purchased from them, and the total of this column and the total of the Discounts column together should be posted to the debit of the Bought Ledger Control Account in the Control Ledger. The total of the Discounts column should be posted also to the credit of the Impersonal Ledger Control Accounts in the Control Ledger. In the Sales Ledger column should be entered payments to customers on the Sales Ledgers. Such payments in ordinary circumstances will be few in number, and will usually be in repayment of overpayments by customers or refunds of the amounts charged for goods returned by them. S:”ce such payments will be few in number it is entirely unnecessary to provide a column for each Sales Ledger. The total of this column should be analysed, and the amount of such analysis should be posted to the debit of the Control Accounts

A species of defence to an action at law. Whenever a. plaintiff puts forward a claim in an action, and the plaintiff is at the same time indebted to the defendant in respect of the claim, the defendant, if he specially pleads it, is enabled to cancel so much of the claim as his own covers. Thus, if A claims

The issue of share warrants by a company is governed by the provisions of Section 37 of the Companies (Consolidation) Act, 1908, the effect of which is that, if the Articles provide, a share warrant may be issued in lieu of the certificate representing fully paid shares. The member whose shares are affected ceases to be a member of the company, and instead of the usual particulars in the register an entry is made of (i) The fact of issue of the warrant; (ii) A statement as to shares included in the warrant, distinguishing them by number; and (iii) The date of the issue of the warrant. A warrant so issued is transferable by delivery and gives the holder such rights of membership, if any, as laid down in the Articles, except that his holding will not be qualification for a seat on the board of directors, even although sufficient in amount for the purpose. Share warrants are issued under the company’s seal, and no duty is payable on transfer, as a special duty is paid at the time of issue.

The capital of a limited company is usually divided into shares, the unit of value being of any amount fixed in the Memorandum, or in default, in the Articles. The rights of the holders of shares will depend upon the* conditions of issue, and, if no special rights are attached, the shares will be ordinary shares of the company. Other classes of shares may have privileges attached such as are not possessed by the ordinary shareholder. PREFERENCE SHARES are shares issued to holders who have a preference or priority in respect of dividend, e.g. ” seven per cent, preference shares ” entitling the holder to a seven per cent. dividend in priority to ordinary shareholders. Some preference shares give priority as to repayment of capital on winding up, but this must be specifically provided for. If the conditions of issue do not otherwise provide, the preference shareholders are entitled to receive out of future profits a dividend which has not materialised in any financial year. Such shares are said to be cumulative preference shares. Where this right is expressly excluded they are said to be non-cumulative. Various classes of preference shares giving varying rights to holders may be issued, provided that the rights of existing shareholders are not interfered with without their consent, such consent being obtained by special resolution of the class concerned. There may be thus 7 per cent. preference shares; 8 per cent. A preference shares of 1921, etc. DEFERRED SHARES are shares generally issued to persons who have had some interest in the business previous to incorporation. They are sometimes called “founders shares,” although these are not necessarily deferred, but may be ordinary shares issued to vendors of property to the company. Deferred shares generally are postponed as to dividend, e.g. entitled to the balance of profits after reserves have been adequately provided for and a fixed rate of dividend paid to other shareholders. The auditor has great responsibilities in respect of founders shares as he must protect the interests of the company generally, reporting to the shareholders ^ any attempt to swell the dividends on deferred’ shares at the expense of adequate provision for contingencies, etc. Particulars of deferred shares must appear in the Prospectus. (See Prospectuses.)

The legal title to shares may be passed from one person to another either by act of law or by act of party. The commonest form of a change of ownership by act of law is by transmission on the death of the owner to his legal personal representative for the benefit of the next of kin or legatees, as the case may be. Change of ownership by act of party is by means of a properly executed transfer, completed by registration in the books of the company. The form of transfer is governed by the Articles of Association, which may require the formality of a deed Where Table A applies the following or some form approved by the Board is used I, A B ofin consideration of the sum of

The office of sheriff is undoubtedly one of the most ancient known to the law of England. Originally elective, the appointment has been vested in the Crown since the reign of Edward II, and now it is made annually in a specially constituted Court of the King’s Bench Division, consisting of the Chancellor of the Exchequer and a number of the Common Law Judges, which sits ‘.’ on the morrow of St. Martin’s Day,” the 11th November. Three landowners of each county are selected from a prepared list, and the final choice of one of the three is made by the King in Council, which is known as ” pricking for the sheriff.” The appointment is confirmed finally by a warrant signed by the Clerk of the Council. The sheriff has always been the representative of the central authority of his own county in the execution of the law. He is the returning officer for the Parliamentary divisions of his county ; he attends to the collection of the revenue; he waits upon the judges on assize ; he summons

A bill of exchange or a promissory note mus+ be made payable at a fixed or determinable luture time. This time may be calculated in days, weeks, months, etc., but it may also be expressed as “on sight ” or ” after sight.” A bill payable ” on sight ” is known as a ” sight bill,” and is the same as a bill payable on demand, that is, it is payable as soon as it is presented to the acceptor. Days of Grace do not attach to sight bills. If a bill is payable so many days after sight, the due date of payment is calculated from the date of presentment for acceptance, and the drawee on accepting should note on the bill the date of his acceptance. (See After Sight.)

A Latin word, used to signify simply, directly, immediately, absolutely, or without any circumstances of qualification.

Any system of book-keeping the balance sheet in which shows the capital and liabilities of whatever nature, and the assets of whatever description, on one statement. The term, although also applying to a Single Entry system presenting its final position by means of a statement of affairs, is usually given to accounts kept by Double Entry, and presenting its final position at each balancing by means of a balance sheet in the ordinary form as hereunder. The title has come into use in contradistinction to what is known as the Double Account System, under which the balance sheet is divided into two parts. The first part shows, on the credit side, the capital and permanent loans raised, and on the debit side the permanent assets on which it has been expended. The balance of this account is carried to the second part or General Balance Sheet, which, of course, also contains the fluctuating liabilities and floating assets. (See also Auditing, p. 85.)

This is a system under which only one entry is made for the majority of the transactions, these being for the purpose of keeping a record of the Personal Accounts. The accounts are written up from the Waste Book entries, the sales being often kept in a separate book, but, if so, the totals of same, although they may be made, are not brought into account. The sales are debited to the .Personal Accounts, to which cash is credited from the Cash Book, discounts, etc., inserted, and the account ruled off. No Purchases Book is kept, but the Ledger Accounts of the creditors are credited direct from the Waste Book, and, on payment, the accounts are debited with cash received, a note made of discounts and allowances, and ruled off. The Cash Book usually contains only one column on each side, in which both cash and bank items are entered, its balance being a combined cash and bank balance. Although a memorandum of discounts may be inserted in the Cash Book, and a column may be provided for them, the totals of discounts are not brought into account. In regard to payments for expenses, these simply appear as payments in the Cash Book, no postings being made to Nominal Accounts. Ledger Accounts are, however, often kept for the purposes of keeping a record of the fixed assets, and introduction of capital. A trader who keeps his books by this system can only ascertain the position of his affairs at the end of the year by taking out a statement of assets and liabilities, known as a Statement of Affairs, the balance being the capital invested in the business at that date. The difference between such capital and that at the beginning of the year, with the addition of personal drawings, and the deduction of any capital introduced during the year, is assumed as the profit or loss which has been made.

The advent of the typewriter and of the adding machine has paved the way to the introduction of numerous time and labour-saving devices, enabling business records to be more speedily and accurately dealt with. SALES.This is particularly so with regard to the sales records, and an outline of a slip system of dealing with this department must be of interest and profit. When ledger accounts are entered up from original slips, dockets or documents, instead of from a subsidiary book into which such slips, dockets, or documents have first been copied, the system is spoken of as the slip system. Such a system has long been in use in banks, where the postings to the customers’ ledgers are made direct from the paying-in slips, cheques, bills, etc. In business houses, the methods of posting from the original invoices vary according to the system employed, and to the nature of the subdivision of the sales ledgerswhether alphabetical, geographical, or departmental.S Generally speaking, every business provides for the sectional balancing of its books, with, in consequence, an adjustment or control account in the General Ledger for each ledger in use. In the ” slip system,” invoices are typed in multiple copiesone for the customer and the others for the sales records. The number of copies typed would depend upon the nature of the records kept in the particular business. Where no Sales Day Book is kept, the total of the sales may be obtained by means of an adding machine attached to the typewriter, or by means of a separate adding machine through which the amount of each invoice is brought on to a slip and the daily, weekly, or monthly total sales obtained. This total would be dealt with through the General Ledger by being debited to ” Debts Collection Account ” and credited to ” Sales Account.”

An action is technically said to sound in damages when it is brought, not for the specific recovery of lands or goods, or for the granting of an injunction, but for the recovery of damages only, as in actions of covenant, trespass, etc.

In the ordinary course any defence to an action at law can be raised by the defendant in his own behalf; but if the defence is one which, when raised, does not affect the validity of a contract but simply gives the defendant an opportunity of raising a point which is legally open to him, this is a special defence, and, speaking generally, the law demands that a defendant who wishes to raise such a point must plead it specially in the High Court or give notice of it in an action in the County Court. The following are illustrations : Infancy, Statutes of Limitations, Gaming, Statute of Frauds, Sale of Goods Act, Public Authorities Protection Act. The existence of any liabilities under contracts made in connection with the first five of these is only abated by special statutes, and the liability in the case of any tort under the sixth is only excused by the Statute of 1893. There is notliing otherwise affecting either the validity of the contract in the first case or the liability for the tort in the latter. In order, however, that these weapons of defence shall be made use of, the law demands that the points shall be raised as a special defence in an action, and that none of them shall be of any avail without such defence being put forward.

A contract under seal, so named, in contradistinction to a simple contract, because of the special circumstances attendant upon the method of its execution. (See Deed.)

These are debts which are created by deed, and as such take a higher standing than debts by simple contract. At one time they enjoyed a priority over simple contract debts, but the preference was taken away by Hinde Palmer’s Act (qv.).

Exemptions. Section 18 of the Finance Act, 1920, provides that a married taxpayer may deduct from his assessable income

Two important factors to be considered in arriving at the yield of an investment are (1) whether the purchase is made at a premium or a discount; and (2) whether the security is definitely redeemable on a given date, or whether it may be regarded as being irredeemable. If the investment be a terminable one, the difference between the prices of purchase and redemption should be extinguished during the currency of the transaction. This may be effected by calculating the true yield on the basis of compound interest, and what is sometimes termed splitting the dividend or interest by giving to capital and to income their due proportions. Let us take, for example, a 5 per cent, bond for