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Koninklijk NIVRA
206D 017 3030
• i
f
k
N
51
THE
ACCOUNTANT'S HANDBOOK.
Ipart jfirst
•^^'^^ST STATES, DECIMAL CALCULATIONS,
IGNMENT AND JOINT ACCOUNTS, &c.
part Seconö.
NOTES ON MONEY, FOREIGN EXCHANGES,
AND PRICES.
ROBERT COCKBURN MILLAR,
jrKMBLlR OP TOE SOCIETY OF ACCOUNTANTS IN EDINBUKOn INCOItPORATED BY ROYAL CRAKTER,
ANT) LRCTURER OS PRACTICE OF C03IMERCE IN THE UERIOT^VATT COLLEGE, EPINBURGIT.
f9C
NEW EDITION.
J. ?*IENZIES & CO., EDINBURGH AND GLASGOW.
LONDON : SIMPKIN, MARSHALL & CO.
1 8 9 1.
THE ACCOUNTANT'S HANDBOOK.
A
T H E
ACCOUNTANT'S HANDBOOK
OP
INTEREST STATES,
DECIMAL CALCULATIONS, CONSIGNMENT
AND JOINT ACCOUNTS, h.
BY
ROBERT COCKBÜRN MILLAR,
MEMBKR OP THE SOCIETY OF ACCOUNTANTS IN EDINBURGH INCORPORATED BY ROYAL CHARTER,
AND LECTURER ON PRACTICE OF COMMERCE IN THE IIERIOTWATT COLLEGE, EDINBURGH.
THIRD EDITION.
J. MEK^ZIES & CO., EDINBURGH AND GLASGOW,
LONDON; SIMPKIN, MARSHALL & CO.
1 8 9 L
PREFACE.
Tins work was undertaken, at the suggestion of some
professional friends, for the purpose of providing a complete
set of forms of Interest States and of Consignment and Joint
Accounts, with the relative bookkeeping entries.
The chapters on Decimal and Logarithmic Calculations do
not contain anything new, but are designed to promote their
use among business men.
The sections dealing with the Equated Time of Payment,
Banking, Eent Charges, the Apportionment Acts, and I^roperty
and Income Tax, are of general usefulness.
The Author's intention throughout has been to instruct by
example, and to introduce only examples which would be
suggestive.
Bookkeeping is progressing, in spite of the opposition to
change for which bookkeepers are proverbial. The use of
press copy outvoices in place of detailed day books; of springbound
invoices in place of detailed invoice books; and of the
columnar method in all the books where it can be usefully
employed, is attended with a saving of labour and expense,
and also with greater efficiency and less risk of error. The
maximum of result with the minimum of effort is the.aim of
bookkeepers as of other men; and if this book should, in
that direction, help on the development of boolikeeping as a
science, the labour bestowed on it will have its reward.
EOBEKT C. MILLAR
56 GEORGE STREET,
EDINBURGH, Slst October 1889.
f
1(
l .
15
14
CONTENTS.
1. DECIMALS OF £1, . . . .
Conversion of £ s. d. by Inspection,
Apjiroximate Rule for do.,
Precise Rule for do.,
Table of Decimals of £,
Rule for converting Decimals of £ 1 to J .s. rf.,
2. MULTIPLICATION OF DECIMALS, .
Contracted Method,
3. DIVISION OF DECIMALS,
Contracted Metliod,
4. LEAP YEAH, . . . .
5. INTEREST, . . . . .
Calculation of Simple Interest,
6. DISCOUNT, . . . . .
Banker's Discount really foreliand Interest,
True Discount and Present Value,
7. DEPOSIT RECEIPT INTEREST,
Construction of Deposit Receipt Interest Table,'
Use of do., . . . .
Spiecimen of do., Year 1889,
Reverse method of do. for use at Bank balance,
8. INTEREST ON BANK CASH CREDITS AND OVERDRAFTS,
Cash Credits, . . . .
9. INTEREST ON MINIMUM MONTHLY BALANCES,
Form of Bank Ledger Account,
10. ACCOUNTS CURRENT,
U. EQUATED TIME OF PAYMENT,
12. AvERAGiNci ACCOUNTS CURRENT,
13. INTEREST STATES, . . . . .
Merchant's Ledger Form,
Bank Ledger Form, . . . .
14. METHODS OF STATING INTEREST ACCOUNTS,
Periodical Interest State balanced de die in diem,
With Interest Products, .
With Interest Valued,
Mercantile Metliod Interest Products, .
Interest calculated on each item to closing date.
Do. Interest Valued,
Foreign House Method, each item discounted back to first
date and Interest adjusted on balance for jioriod of account.
Bill of Exchange .settled by Instalment.?,
Periodical Interest Form, .
Account Current Form.', .
Advance against Good.?, Dr. and Cr. Interest,
PAGE
1
1
1
2
3
4
4
5
6
7
10
10
11
13
13
13
15
16
17
]8
20
20
44
21
29
21
23
25
27
28
29
30
31
31
32
33
33
33
35
36
37
38
40
vin CONTENTS.
Mercantile Factor's Cash Account, Interest at different rates.
Dr. and Cr., . . . . . .
Do. Account Current Form, witli one rate of interest.
Do. Periodical Interest Form, varying rates, .
Solicitor's Cash Account, varying rates.
Do. Columnar Method, . . . .
Merchant's Account Current, with items after date for settlement,
. . . .
Interest calculated to date of last item, and deduction of
Intere.st on balance from last date to date of settlement.
Interest to date for settlement, and deduction of discount
on later items back to that date,
Account Current Form, Discounts in Ked,
Do. Interest calculated to date beyond closing date, and
balance discounted.
Do. each item discounted to first date.
Accumulation of Interest,
Curatorial or Factorial Accounts,
15. INTEREST TABLES, CONSTRUCTION AND USE OF,
16. TABLE FOR CONVERSION OF PRODUCTS INTO INTEREST,
17. LOGARITHMS FOR THE COUNTINGHOUSE,
18. THE APPORTIONMENT ACTS,
Apportionment of Dividends between Capital and Income of
Executry Estate, . . . •
Apportionment of Price of Liferented Stocks Sold,
Apportionment of Halfyearly and Quarterly Payments of
Interest, . . . . . .
Debenture Coupons, when money invested between terms.
Apportionment of Eents, . . . .
Pastoral Farms, . . . . .
Arable Farms, . . . . .
Houses, &c., . . . . .
Apportioiuuent of Bui'dens, . . . .
Exemptions under the Acts, . . . .
19. INSTALMENT LOANS, KENT CHARGES, &C..
Tables for division of payments into Principal and Interest.
Bookkeeping Entries of do., . . . .
20. PROPERTY AND INCOMETAX, . . . .
On Interest payable at Whitsunday and Martinmas, .
21. CONSIGNMENT ACCOUNTS, . . . . .
Account Sales of Consignment received,
Joiu'nal Entries of do..
Account Sales of Consignment made, .
Journal Entries of do.,
22. JOINT ACCOUNT, WITH EXAMPLES, ACCOUNT SALES, ACCOUNT
CURRENT, and INTEREST STATE, JOURNAL AND LEDGER
ENTRIES, 92100
23. TABLES OF FOURPLACE LOGARITHMS FROM 1 TO 9999, . .102
Tables of Autilogarithms, . . . . . 104
41
42
45
46
47
4856
48
49
50
52
57
58
60
62
6368
6880
69
70
72
74
74
75
76
77
78
80
81
8183
84
84
85
88
89
89
90
91
THE ACCOUNTANT'S HANDBOOK.
DECIMALS OF £1.
ALTHOUGH the people of Britain and most British colonies
are denied the advantage of decimal money enjoyed by nearly
the whole world beside, yet expert calculators have for a
long time converted British money into decimals of £1, to
facilitate their calculations. A rule for conversion may be
deduced from the following table:—
£ s.
1 
 10
 5
 2
 1
— _
_ _
 
d.
^
_
_
_
6
1
4
No. of
Farthings.
960
480
240
96
48
24
4
1
Decimals
of£l.
!•
•5
•25
•1
•05
•025
•00410
•0010416
5 florins.
•21 „
1 ..
1 M or 50 mils.
1 11 or 25 mils.
41 mils.
1 mil. + —^ mils.
To CONVERT £ S. d. INTO DECIMALS OF £ 1 BY INSPECTION.
Approximate Rule.—Place the £'& before the decimal point;
in the first place, after the decimal point, insert florins or
half the even number of shillings; fill the second and third
places with the number of farthings in any odd shilling, pence,
and farthings, adding thereto 1 if the number of farthings be
24, 2 if 48, and 3 if 72 or more (the number of farthings can
never amount to 96, because 96 farthings = 2s. = •I).
This operation is equivalent to reducing the whole of the
shillings, pence, and farthings to farthings, and adding 1 for
every 24 farthings.
A
2 THE ACCOUNTANT'S HANDBOOK.
The reason for adding 1 for every 24 farthings is, that instead
of the £ being divided into 960 farthings, it is, in a decimal
system, divided into 1000 mils. JSTow, 960 : 1000 : : 24 : 25;
i.e., every 24 farthings must be increased by 1, in order that 24
may bear the same ratio to 960 as 25 does to 1000.
Limit of Error.—By this rule the error can never amount to
a farthing. If, however, the multiplier be large, the error may
become considerable, and the following easily remembered rule
gives the exact decimal:—
Precise Rule.—For the first place, take half the even number
of shillings; reduce any odd shilling, pence, and farthings to
farthings, adding 1 if there be 24 farthings, 2 if 48, and 3 if
72 or more for the second and third places; if the number for
the second and third places be under 25, multiply it by 4, if
above 25, multiply its excess above 25, 50, or 75 by 4, adding
to the product, 1 if there be 24, 2 if 48, and 3 if 72 or more,
and put the result in the fourth and fifth places; then treat
this number as before: if under 25 multiply by 4, if above 25
multiply the excess above 25, 50, or 75 by 4, adding 1 if there
be 24, 2 if 48, 3 if 72 or more, for the sixth and seventh
places, and so on until the decimal terminates or repeats.
Exaiii]jle—
1 4 / 6  TO THE DECIMAL OF £\.
1st place, .
2nd and 3rd places,
4th and 5tli places,
6th and 7th places,
8th and 9fcli places.
Half of the shillmgs = l i = 7 = £7
] 61 = 26 farthings, ) .^„„
• 1 to which add 1 = 27 I ~ ^'^'
. { %   f   *  «  } =00008
• r'tothiSaudi = 33 [ = 0000033
• i 1 ; 1 : 3 2 add 1 = 33 } = 000000033
£•727083333
i.e., £727083
Care should be taken to insert the cipher when any two
places are to be filled by one figure {e.g., the fourth and fifth
places in the above example).
TABLE OF DECIMALS OF £ 1 . 3
TABLE OF DECIMALS OF £.
d.
4
1
2
1 1
n
u If
2
H
H
2f
3
H
H
H
4
H
^
4
5
H
5 J
5f
6
H
H
6f
7
7i n
71
8
H
H
8
9
9i
H
9
0010416
002083Ö
003125
0041666
0052083
00625
0072916
0083333
009375
0104166
0114583
0125
0135416
014583S
015625
0166666
0177083
01875
0197916
0208333
•021875
•0229166
•0239583
•025
0260416
•0270833
028125
0291666
0302083
03125
0322916
033333S
034375
035416Ö
0364583
0375
0385416
0395833
040625
s. d.
10
101
lOi
lOf
11
Hi
ii'l
111
1/
i/i
i/i
i/f
1/1
i/ii
i/ij
i/if
1/2
i/n
1/2
1/3
l/3i
/ 4
l/3f
1/4
l/4i:
l/4è
1/4
1/5
l/5i
/ 4
i/H
l/5f
1/6
1/6J
l/6è
1/6
1/7
l/7i
l/7i
0416666
0427083
04375
0447916
0458333
046875
0479166
0489583
05
051041Ó
0520833
053125
0541666
0552083
05625
0572916
0583333
059375
0604166
0614583
0625
0635416
0645833
065625
0666666
0677083
06875
0697916
0708333
071875
0729166
0739583
075
0760416
0770833
078125
0791666
0802083
08125
s. d.
1/7
1/8
l/8i
l/8è
l/8f
1/9
l/9i
l'9i
1/9
1/10
llOj
1/lOi
1/1 Of
1/11
1/111
l/llj
1/llf
2/
3/
4/
5/
6/
7/
8/
9/
10/
11/
12/
13/
14/
15/
16/
17/
18/
19/
20/ 1
21/ 1
22/ 1
•0822916
•0833333
084375
•0854166
0864583
0875
0885416
0895833
•090625
•0916666
•0927083
•09375
•0947916
•0958333
•096875
•097916Ó
•0989583
•1
•15
•2
•25
•3
•35
•4
•45
•5
•55
•6
•65
•7
•75
•8
•85
•9
•95
•0
•05
•1
THE ACCOUNTANT S HANDBOOK.
To CoNVEET DECIMALS OF £1 INTO SHILLINGS, PENCE,
AND FARTHINGS.
Rule.—Double the first place after the decimal point for
the even shillings, from the second and third places deduct 50,
if so much, for an odd shillüig, the remainder (after discarding
1 if 25 or more) is farthings.
DECIMALS OF 1 oz. TROY.
In a similar way the troy ounce may be decimalised, counting
I grains like farthings, dwts. like shillings. Unfortunately,
however, most of our weights and measures refuse to mould
themselves so readily to the decimal scale.
MULTIPLICATION OF DECIMALS.
The short method of decimal multiplication has found
most favour with practised calculators. By this method a
result correct to the required number of decimal places is
obtained without writing a single unnecessary figure. The
following example will clearly indicate the rationale of the
process:—
Multiply 3456 by 1324. Correct to 4 places.
•3456 345 6
1324 4231
13824
69120
1036800
3456000
3456000
1036800
69;i20
13 824
•4575744 4575 744
MULTIPLICATION OF DECIMALS. 5
If the above be examined, it will be seen that the results are
the same, though in the second case the multiplier has been
reversed. In both cases, discarding decimal points, the following
have been added together:—
One thousand times . . 3456 = 3456000
Three hundred times . . 3456 = 1036800
Twenty times . . . 3456 = 69120
And four times . . . 3456 = 13824
4575744
Bide.—To multiply two decimals together, retaining n decimal
places.
Ueverse the multiplier, and place the multiplier under the
multiplicand, so that what was its unit figure shall fall iinder
the nth. decimal place of the multiplicand, using ciphers if
necessary, so that every figure of the multiplier shall have a
figure or cipher above it.
Proceed to multiply, beginning each figure of the multiplier
with the one which is immediately above it in the multiplicand;
carrying, however, the nearest ten resulting from the
multiplication of the figure to the right in the multiplicand.
Place the first figures of all the lines under one another,
add as usual, and mark off n places from the right for decimals,
prefixing ciphers when necessary.
Examples.
682036 X 2612180 00 Correct to 7 places of decimals.
630286
1567308000
208974400
5224360
78365
15673
1781600798
6 THE ACCOUNTANT S HANDBOOK.
Correct to 7 places.
2728144 X653045
272814400 0
5403560
1636886400
136407200
8184432
109126
13641
1781600799
Correct to 5 places.
5321569 213 X0032
23000
159647
10643
170290
Correct to 7 places.
24771213x600403
2477121 3
3 3304006
148627278
99085
743
74
7
148727187
Correct to 5 places
•0416 6x25
52
8333
2083
10416
DIVISION OF DECIMALS.
Bvle.—Equalise the iiumher of decimal places in the dividend
and divisor by annexing cipliers * to that which has fewer
places. Then further annex as many ciphers '•' to the dividend
as it is required to have decimal places; neglect the decimal
point and operate as in common division, and mark off the
required number of decimal places in the quotient,
Exairvple.
31 f 0025
0025)310000(12400
25
60
50
100
100
* Or the figures of a recurring decimal.
DIVISION OF DECIMALS. 7
36459 f 31465 Correct to 3 places.
31465)3645900000(115871
31465
49940
31465
184750
157325
274250
251720
225300
220255
50450
SHORT METHOD OF DIVISION OF DECIMALS.
Rule.—Equalise the number of decimal places in the dividend
and divisor by annexing ciphers'"' to that which has fewer
places. Proceed with the division. After the last figure
in the dividend is exhausted, insert the decimal point in the
quotient. If the number of decimal places required be greater
than the number of figures in the divisor, annex ciphers,*
and continue to divide until the number of additional decimal
places required is less than the number of figures in the
divisor; then, instead of annexing a cipher,* cut off a figure
from the right of the divisor, and proceed to divide with this
curtailed divisor, remembering, however, to cairy the nearest
ten from the multiplication of the figure struck off; and so
on at each step, striking off another figure from the right of
the divisor until the required number of decimal places is got.
Note.—If at the end of the equalised dividend there be
ciphers, and if the number of figures required in the quotient,
whether decimal or other, be less than the number of figures
* Or the figures of a recurring decimal.
8 THE ACCOUNTANT'S HANDBOOK.
in the divisor, instead of carrying down a cipher, a figure
may be struck off the divisor at each step, care being talceu
to insert the decimal point in the proper place.
Examples will make this rule quite clear:—
(1.) 3192534^5374 Correct to 4 places of decimals.
5,3,7,4,0)3192534(594070
268700
505534
483660
21874
21496
378
376
(2.) 6731489 4 41432 Correct to 3 places of decimals.
4,1,4,3,2)67314890(1624708
41432
258828
248592
102369
82864
19505
16573
2932
2900
32
33
DIVISION OF DECIMALS. 9
) 123745 416347 Correct to 2 places of decimals.
1,6,3,4,7)12374500(75699
9316
1143
163
16
1
(4.) 3215 469541 Correct to 3 places.
6,9,5,4,1)321500(46231
43336
1611
220
11
4
(5.) 400416hl6S Correct to 6 places.
1633333)4004166(245153
737500
84167
2501
868
52
(6.) 083 430103 Correct to 5 places.
30103)083333(27683
23127
2055
249
10 THE ACCOUNTANT'S HANDBOOK.
LEAP YEAR
By the Julian calendar (Old Style) every year divisible by
4 was a leap year (366 days), so that on the average every
year was reckoned too long by about 11 minutes (365 days
6 hours instead of 365 days 5 hours 49 minutes nearly).
In 1582 the error amounted to about 10 days, and Pope
Gregory XIII. decreed that that year should have only 355
days; and further, in order to reduce the subsequent error to a
minimum, he proclaimed that years denoting complete centuries,
although divisible by 4, should not be leap years unless the
denoting figures were also divisible by 4. Thus 1600 and 2000
are leap years; 1700, 1800, 1900, and 2100 are not leap years.
The Gregorian calendar (New Style) was not adopted in
Britain until 1752, in consequence of religious prejudice. By
this time the error amounted to about 11 days, when it was
enacted by 24 Geo. II. c. 23 that the 3rd of September of that
year should be called the 14th September.
The Eussians, who still use the Old Style, are now 12 days
behind, so that a Eussian letter or bill, dated the 6th December,
means the 18th December of our time.
Banks charge and allow interest for days, so that in leap
years they receive and pay interest for a year and a day.
INTEEEST.
Interest is what is paid for the use of capital. The rate of
interest varies as the amount of capital available, and the demand
for it. It also varies with the credit of the borrower,
because it has included in it a premium of insurance against
loss of the principal sum.
INTEREST. 11
Interest is usually expressed by a rate per cent, per annum,
5 per cent, signifying that £5 (interest) will be charged for the
use of £100 (principal) for one year, and the interest of any
sum for any time at a given rate is du'ectly proportional to the
principal and to the time.
Interest is found by multiplying the rate by the principal
divided by 100, and by the time divided by 1 year.
, Principal sum. Number of days. T j. t
i.e., rate x ^ x ^^ •' = Interest.
The interest of £509 for 153 days at 5 per cent, is found
thus:—
509 153 5x509x153
o x 100 365 36,500
It is usual to multiply both numerator and denominator of
this fraction by 2, because the denominator thus obtained
(73,000) is a simpler one for purposes of division than 36,500,
and the numerator also is simplified, if, as frequently happens,
the rate per cent, has a ^ in it.
Hence the ordinary rule—Multiply the principal by the
number of days and by double the rate per cent., and divide by
73,000.
The above example now stands thus:—
20x_509_x253_ ^ _509xl53 __ ^ ^g^ ^,
73,000 7,300
153
509
1377
765
73)77877(10668
487
497
590
6
12 THE ACCOUNTANT'S HANDBOOK.
Ï 0 divide by a constant divisor, say 73, it is useful to commit
to memory, or to have for reference, a table of all the results of
multiplication of 73 by 1, 2, 3, 4, &c., thus:—
1
2
3
4
5
6
7
8
9
73
146
219
292
365
438
511
584
657
In working the division it saves time simply to write the
result after subtraction, as in the last example.
Instead of dividing by 73,000, that is, taking Y^^^öth of
the product of the principal by the number of days and by
the double rate, some accountants prefer to multiply by
0000137, which gives an approximate result too great to the
extent of one penny in every £40 of interest.
The multiplication may be effected in one of the following
ways:—778770 x 0000137.
1st Ordinary
method.
778770
0000137
5451390
2336310
778770
106691490
£10, 13s. 4fd.
2nd Short method.
Correct to 3 places.
77877000 0
73100 000
7788
2336
545
10669
3rd Method,
by fractional parts.
100 = 77877000
331= I =25959000
3i=jL.= 2595900
i = j L = 259590
137 106691490
To shorten the last method it is customary to omit the last
two figures, taking merely the product and onethird of it, onetenth
of that third, and onetenth of that tenth, adding these
and striking off five places of decimals.
DISCOUNT. 13
DISCOUNT.
The present value of a debt, due at a future time, is the cash
amount you could obtain for it today. Discount is the
difference between the amount of a debt due at a future time
and its present value. It is usually expressed as a percentage.
Commercial discount is generally a certain rate per cent, on the
amount due. If goods be sold for £100, payable in 14 days,
subject to 3 per cent, discount, a settlement would be effected
by the payment of £97 on the due date.
Discount may also be quoted, as by bankers, at a rate per
cent, per annum. Merchants and bankers calculate, at the
quoted rate, interest on the amount of the debt for the given
time. Banker's discount is therefore forehand interest, and is
greater than the true discount by the amount of the interest on
the true discount for the time. The true or mathematical
discount is interest upon the present value of the debt at the
given rate for the given time.
The true discount of \ f i nn \ for one year at 5 per cent, is
I £4, 15s. 2d. }' ^*^^ [ £100 } '^°^^^ ^^^^^ ^ ^^^^ °^ *^®
difference "I ^qc A qi i f ^^ the end of the year, with
interest on the loan at 5 per cent.
Huh for finding the True Discou7it.—As the amount of £100
for the given rate and time is to the interest of £100 for the
same, so is the given debt to the discount.
If, however, a banker discount a bill for £105 at 5 per cent,
on 4th January, due 1/4 January following, his charge
would be £5, 5s., and he would credit the customer with £99,
15s. as the proceeds of the bill. In short, he charges interest
upon the interest which he retains as well as interest upon the
amount he lends. The real discount rate charged is thus in
excess of the nominal rate quoted for discounting bills.
14 THE ACCOUNTANT S HANDBOOK.
Uxample.—A. B. owed to C. D. £2000 on 31st December
1888, and desires one year's delay in payment, agreeing to
give a bill which C. D. may discount, and thus get £2000
from his banker. If the rate be 5 per cent., for how much
ought the bill to be ? One year's interest on £2000 at 5 per
cent, is £100; but £2100 discounted for one year would yield
only (£2100105) £1995, or £5 short. To ascertain the
amount for which to draw, the following proportion must be
worked out, viz.:—
If .£100 yield =£95, how much will be required to yield £2000 ?
95 : 2000 : : 100 : Bill.
100
95)200000(2105263 £2105 5 3^
100
500
250
600
300
15
A simple way of getting at the same result is as follows:—
A. B.'s debt is
Interest thereon for one year, at 5 per cent.
Interest on £100 for one year, at 5 per cent.
Interest on £5 for one year, at 5 j)er cent. .
Interest on 5s. for one year, at 5 per cent. .
£2105 5 3
. £2000
. 100
5
0
0
0
0
0
5
0
0
0
0
0
3
11
c:
t]
a
I
Many merchants, however, would draw only for the smaller
sum of £2100, being the amount of the debt and the interest,
though it is obvious that in that case they would not realise
the full amount of their debt (£2000), but only £1995 if the
bill were discounted at once.
DEPOSIT KBCEIPT INTEREST. 15
DEPOSIT EECEIPT INTEEEST.
Bank Profits are chiefly obtained through borrowing from
the public at a low rate and investing at a higher rate, by
discounting bills and granting loans to customers. In England
interest is not usually allowed on customers' current account
credit balances, while in Scotland 1 per cent, is now allowed on
the minimum monthly balances on such accounts. Interest at
a higher rate is allowed on deposits for a mouth or longer, the
rate varying with the Bank of England minimum rate of
discount. The average Deposit Eeceipt rate over the past fifty
years has been slightly over 2^ per cent., the maximum reaching
6 per cent, for a few days in 1873, when business was brisk
and prices high, and the lowest rate IJ per cent., occurring
recently durmg the period of depression and low prices.
The Scotch banks have for many years adopted a very
clever laboursaving device for the calculation of interest on
deposit receipts. It is suitable to the case of fixed sums at
frequently varying rates, and enables the calculator, by one
calculation, to ascertain the interest for any period, no matter
how often the rate has altered in the interval.
The principle of the method may be illustrated thus:—5
days' interest at 2 per cent, is the same as 2 days' interest at
5 per cent.; 15 days' interest at 2 per cent, is equal to 6 days'
interest at 5 per cent.; 15 days' interest at 3 per cent, is equal
to 9 days' interest at 5 per cent. In short, any interest calculation
can be reduced to a 5 per cent, rate by altering the time,
viz., by multiplying the time by the rate and dividing the
product by 5. The same result is got if you multiply the
tune by twice the rate and divide the product by 10. Since
multiplication is merely continuous addition, if you add
together in a table double the rate current for each day and
divide by 10 (which is done by inserting a decimal point
before the last figure), you obtain a series of numbers, which
16 THE ACCOUNTANT S HANDBOOK.
numbers represent the equivalent time at 5 per cent, to the
time during which the table runs at the various rates.
To construct the table, then, commencing from any date,
say 1st January 1884, when interest was at 2 per cent., as no
interest is allowed for the day of deposit, you enter nothing
against 1st January, but against 2nd January you place "4 being
twice 2 divided by 10; against 3rd January . . "8
4th „ . .12
5th „ . . 16
6th „ . . 2
7th „ . . 24
8th „ . . 28
9th „ . . 32
10th „ . . 36
l l t l i „ . . 4
From the 1st to the 11th is a period of 10 days, which at 2
per cent, is the same as 4 days at 5 per cent.
The rate continued at 2 per cent, till February 7th, when
it was raised to 2^ per cent.
Opposite 7th February the number was 37 X 4 =
and on 8th
9th
and so on 10th
11th
by the addition of '5 became
148
153
158
163
168
From the 8th January when the number was 2'8, to the
11th February when it was 168, the difference is 14, indicating
that 14 days at 5 per cent, is equal to 30 days at 2 per cent.+ 4
days at 2  per cent.
On pages 18 and 19 is a partial table for 1889, which may be
completed and kept up by daily entries:—
Eates, 4th October 1888 to 10th January 1889, 3  per cent.
10th January to 24th January, .21
24th January to 31st January,
31st January to 29th August,
29th August to 26th September,
26th September to
DEPOSIT RECEIPT ACCOUNT. 17
It is used by taking out the numbers from the table opposite
the date of deposit and date of withdrawal, and calling the
difference days, turning up any 5 per cent, interest table for
said number of days, and taking out the interest opposite the
amount of the sum on deposit. The interest for the fraction of
a day must be added; and although tables of interest corresponding
to fractions of a day are in use, bankers are accustomed to
employ the more ready method of taking the interest of onetenth
of the principal for ten times the decimal—that is for a
number of days represented by the figure in the decimal place.
For instance, if a banker required to find the interest of £1000
for 229'8 days at 5 per cent., he takes out from his tables the
interest on £1000 for 229 days, and on £100 for 8 days, and the
addition gives the interest required.
Should there be no interest tables at hand, the interest
may be found by multiplying the number extracted from the
table by the principal, and dividing the product by 7300.
The number obtained from the table is the product of the
days by the double rate divided by 10, and by the ordinary rule
of interest, the remaining operation to obtain the interest is
the division by 7300.
The Scotch banks, in calculating interest on deposit
receipts, discard the odd shillings and pence in the principal.
They also deduct the penny inland revenue duty which is
stamped upon deposit receipts to cover the depositor's discharge.
The bank's receipt to the depositor for the money
is free of stamp duty. Auditors ought to have their own
tables for checking deposit receipt interests, but this ought
not to cause them to neglect to require production of the
banker's certificate of the uplifted deposit, for thus only can
the auditor be satisfied that the money was actually in bank
during the period stated.
B
18 THE ACCOUNTANT'S HANDBOOK.
DEPOSIT RECEIPT RATES, from 31st December 1888—SCOTCH BANKS.
1889.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
January
•7
14
21
28
35
42
49
5'6
63
*7
75
8
85
9
95
10
105
11
115
12
125
13
13'5
*14
144
148
152
156
16
16'4
n 6 8
February
171
174
177
18
183
252
March
255
345
April
348
43'5
May
438
52'8
June
531
618
Examples.
I. Required Interest on £500 Deposit Receipt, datod 1st January
1889, uplifted 3rd February 1889.
Opposite 3rd February 1889, per table, . . . . 1 7 7
II 1st January, . . . . . . . '7
Difference, . . 170
and in a 5 per cent, interest table under 17 days, opposite £500 is
found £13
£500 X 17 8500
3è
or— 7300 7300
= £1164
* Indicates change of rate.
DEPOSIT RECEIPT RATES.
Time equalised to 5 per cent, from Day to Day.
19
July
621
711
August
714
Septr.
813
*798
803
808
*938
945
952
959
966
October
973
Novem. December
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
II. Deposit Eeceipt for £1000, dated 26th January 1889, uplifted
1st August 1889.
Opposite 1st August 1889, per table, .
M 26th January, . . . . .
Difference,
Interest for 56 days at 5 per cent, on £1000, .
Interest for 6 days at 5 per cent, on £100,
£1000x566 56600
7300 7300
= £7753.
£7
0
£7
.
13
1
15
714
148
566
5
7
Of
20 THE ACCOUNTANT'S HANDBOOK.
REVEESE METHOD.
The Eeverse Method is used by banks at balancing time to
calculate interest on deposit receipts from their date to the day
of the balance:—
If 1st January 1875 be the day of the balance, and the
interest back to 30th December 1874 were
Then opposite
18th ISTovember 1874 „
31st December, place
30th
29th
28th
27th
11th
3 per cent.
• 21 „
. 6
. 12
. 17
. 22
. 27
107
The clerk making up the balance thus requires merely to
take out the number opposite the date of the deposit receipt,
and ascertain the interest 'at 5 per cent, for that number of days
on the amount.
INTEREST ON BANK CASHCREDITS AND
OVERDRAFTS.
The bank ledger contains an account in each customer's
name, which is credited with all he pays in and debited with
all he draws out. It contains a date column. Dr. and Cr.
money columns, a column for the balance at the end of each
day, and whether Dr. or Cr., and Dr. and Cr. interest columns.*
Into the Dr. interest column there is extended the balance
on each day, including Sundays, and the summation of all
these Dr. balances gives the equivalent of the product of the
principal by the number of days. These products must be
* See form, page 29,
ACCOÜNTSCÜKREXT. 21
summed for each rate separately, and multiplied by double the
rate, and divided by 73,000. There are tables in use for converting
these products at any rate required.
INTEEBST ON MINIMUM MONTHLY BALANCES.
The current deposit accounts of bank customers are kept in
the same way as has been described under the head cashcredit
accounts. Each calendar month stands by itself, and
if at the end of any day during any month the customer
have a debit balance, he receives no interest on sums at
credit during that month, and nothing is entered in the Cr.
interest column, but entries are made in the Dr. interest
column for the debit balances. If the balance be Cr. during
the whole month, the smallest Cr. balance during the month
is selected, and multiplied by the number of days in the
month, and the product is extended into the Cr. interest
column. If the rate of interest be altered, the product must
be divided and the amount at each rate ascertained. The
products are then valued according to the rates current, either
by reference to the interest tables, or by multiplying by twice
the rate and dividing by 73,000.
ACCOUNTSCUEEENT,
An accountcurrent is the account transmitted by a merchant
to his correspondent, showing the present state of the accounts
between them. It is a copy of the merchant's ledger account
in name of the correspondent.
It contains on the left, or Dr. side, the sums due by the
correspondent to the merchant, and on the right, or Cr. side,
the sums due by the merchant to the correspondent.
22 THE ACCOU^'TAXTS HANDBOOK,
The term Dr. is placed on the left hand side of a ledger
account, to indicate that the person whose name heads the
account is debtor, or owes to the person or company whose
ledger it is, the sum placed in the Dr. column.
The term Or. is placed on the right hand side of a ledger
account, to show that the person whose name heads the account
is creditor by, or entitled to credit for, the sum placed in the
Cr. column. Thus, in accountscurrent the correspondent is
Dr. to the merchant rendering the account for all the sums
on the left hand side of the account, and is creditor by the
merchant for all the sums on the right hand side of the
account; the merchant's position is exactly the converse of
this, i.e., when the correspondent is Dr., the merchant is Cr.
These accountscurrent may be stated in ordinary ledger
form, and may be accompanied by a periodical interest state,
or they may contain interest columns, and so form a combined
accountcurrent and interest account.
The term accountcurrent is also used to denote an operative
account with a bank, or a cash account between an agent and
client.
In all properly regulated businesses prompt payments are
strictly required, and all sums not paid when due carry
interest.
The bookkeeper, in preparing accountscurrent to a certain
day, calculates interest on goods, bills, or charges from the day
on which they fall due or are paid, and on cash from the day
of receiving or paying the same; and if the settlement is to
embrace sums not yet due on the day fixed for settling, these
sums must be discounted. The resulting balance of interest
is entered in the accountcurrent.
AVERAGE DUE DATES OR EQUATED TIME OF PAYMENT. 2.3
AVERAGE DUE DATES Oil EQUATED TIME
OF PAYMENT.
When merchants supply goods, the rule is to have definite
terms fixed for settlement, such as by cash on delivery, or
in 7 or 14 days, or in a month, or by a bill at two, three,
or four months.
If a debt be not paid when due, interest is charged from
the due date until payment be made.
It sometimes happens that, instead of drawing half a dozen
bills for six different consignments due at different dates,
one bill is drawn from the average due date or equated time
of payment.
The average due date is an intermediate date at which
the interest on the sums due previous thereto would exactly
balance the interest on the sums due thereafter.
In settling jointadventure accounts it is usual, in order that
interest calculations may be simplified, to find the average due
date of the account sales.
R^ole.—To find the equated time of payment, or average due
date of a number of sums due on different dates, let the
earliest due date be taken as the starting point. Multiply
each sum by the number of days between the starting point
and its due date, add these products, and divide their total
by the total of the sums; the quotient is the number of days
between the starting point and the average due date, which can
consequently be determined.
\st Example.
T. Jones sold E. Eoss goods, payable as follows :—
1st January, £865, 4s.; 18th January, £1027, 12s.; and on
the 16th February, £1132,—Eequired the average due date.
24 THE ACCOUNTANTS HANDBOOK.
Jan. 1, 8652 0
., 18, 10276x17 174692
Feb. 16, 1132 x46 52072
30248 695412(23
9045 2
The average due date of these three sums is therefore the
24th January. That this is so may be proved thus:—
Interest at 5 %•
Jan. 1, £865 4 0 x 23 £2 14 6
M 18, 1027 12 0 X 6 0 16 10
Feb. 16, 1132 0 0 X 23 £3 11 4
£3 11 4 £3 11 4
Example 2.
T. Jones held R. Ross's bills, due as follows :—
January 15th, £100; January 31st, £100; February 7th, £100;
February 15th, £100; February 28th, £100, and March 31st, £500.
R. Ross wished to grant, in exchange, one obligation for £1000, as
from the average due date.—Find the equated time of payment.
Proof.
Days to 5tli Mar. Product.
Jan.
M
Feb.
„
n
Mar.
15,
31,
7,
15,
28,
31,
£100
100
100
100
100
500
16
23
31
44
75
1600
2300
3100
4400
37500
49
33
26
18
5
26
4900
3300
2600
1800
500
13,100
13,000
1000 48900
The equated time of payment is 49 days after the 15th January =
5th March.
Note.—It may be observed that this mode of calculation is
liable to the same objection as the banker's discount. Interest
on sums past due is not fairly compensated by interest
on amounts not yet due.
AVERAGING CÜKRENT ACCOUNTS. 25
AVEEAGING CUEEENT ACCOUNTS.
To find the equated time of payment of the balance of
an accountcurrent.
Let the earliest date in the account be used as a starting
point from which to reckon the interval up to the date
of each subsequent entry. Multiply each sum on the debit
side by the number of days from the starting point to its
due date, and add the products together. Treat the credit
side in a similar way. Find the difference of the sums of
the products, and divide that difference by the balance on
the account; the quotient will be the number of days at which
the balance can be settled without interest,—after the startingpoint
if the balance fall on the side which has the larger
sum of products (Ex. 1)—hefore the startingpoint if the balance
fall on the side which has the smaller sum of products
(Ex. 2).
Example 1. Starting Point May 31st.
Dr. A. in AccountCurrent with B. C?'.
June 15,
Aug. 5,
Nov. 10,
£30
35
50
£115
15 450 May 31, £30
66 2310 July 21, 20
163 8150 Aug. 30, 40
Balance 25
Balance.
Int. Nos.
10,910 £115
25)6250(
4
51 1,020
91 3,640
6,250
10,910
25000
250 daj'S after 31st May = 5th February.
Alternatively.—The average due date of the debtor side
IS . . ^ =95 days = 3rd September.
26 THE ACCOUNTANTS HANDBOOK.
The average due date of the creditor side is „„ = 52 or 22nd
<= 90
July.
If £90 be received on loan from A. on 22nd July, and
the debtor pay £115 on 3rd September, how long is A.
entitled to retain the balance of £25, so as to equalise the
interest ? A. is entitled to retain the £25 till 5th February,
because the interest of £90 from 22nd July to 3rd September
(43 days) = the interest of £25 from 3rd September to 5th
February (155 days).
Exarnple '2.
A. lends to B. £1000 on 20th January. B. repays £100 on
February 20, and £200 on March 2. A. pays to B, £100 on
March 30, and B. repays £300 on August 5.
Starting point, January 20.
Dr.
1889.
Feb. 20.
Mar. 2.
Aug. 5.
Balance,
£100
200
300
500
31
41
197
A. in a/c with B.
1889.
3100 Jan. 20. £1000
8200 Mar. 30. 100
59100 Balance of
Interest Nos.,
69
Cr.
6900
63500
£1100
500)63,500
70400
63,500 X 2
1000
£1100
= 127
70400
127 days before January 20 is 15th September 1888 ;
oralternatively£600Dr.averageduedate—^TTTj = 117days= 17thMay.
6900
1100 Cr. 1100
= 6 days = 26th Jan.
If £1100 be received on loan on 26th January from A., and B.
repay £600 on dates averaging 17th May, at what date ought B.
to have provided A. with £500 (the balance), so that the interest
would have been equalised ? B. ought to have paid to A. £500 on
15th September 1888, because the interest of £500, from 15th
September 1888 to 26th January 1889 (133 days), is equal to the
interest of £600 from January 26 to May 17 (111 days).
INTEREST STATES. 27
INTEEEST STATES.
If it be required to find the interest on 50 sums for different
periods, but all at the same rate, 49 multiplications by the
double rate, and as many divisions by 73,000 may be saved
thus:—
Rule.—Multiply each balance by the number of days for
which it has been due, add these products together, multiply
this total by the double rate, and divide the result by 73,000.
1. A. B. hi
Dr.
1889.
Jan. 1
Mar. 1
Examples.
a/o with C. D.
5. To Cash, £160
2. To
June 15. To
Date.
1889.
Jan. 15.
Mar. 12.
Mar. 22.
May 16.
June 15.
July 1.
A. B.
To
To
By
By
To
To]
5pe
Do., 36
Do., 40
Dr. and Cr.
£160 X
36
Dr. £196 X
50
Dr. £146 X
115
Dr. £31 X
40
Dr. £71 X
lit. at
rcent. 2 17
Dr. £73 17
1889.
Mar.
May
Days.
56
10
55
30
16
7
7
7
22.
16.
300
Cr.
By Cash, £50
By Do., 115
Product.
8960
1960
8030
930
1136
)21,016(2'879
641 =£2 17 7
576
65
28 THE ACCOUNTANT'S HANDBOOK.
2. There was duo to A. B. on 12th August £170, payment of
which he agreed to accept by instalments as follows, with interest
at 5 per cent.
Date.
Aug. 12.
Sept. 18.
A. B., Dr. andCr.
By £170
To 54
Days.
X 37
Products.
6290
Oct. 17.
Nov 14
To
To
By £116
56
By £60
60
X
X
29
28
7.S
3364
1680
730n0n)"1m1333344( 1552 = £1 11 OJ
403
384
19
Some merchants prefer the following method of obtaining
the daily balance and interest numbers. It is very compact.
1889.
April 3.
„ 24.
May 1.
., 12.
n 25.
June 12.
„ 30.
M tr
To Goods, £155
By Cash,
To Goods, 34
By Cash,
To Goods, 15
To Goods, 62
To Interest,
By Balance,
£63
193
Balances.
Dr. £155
Dr. 92
Dr. 126
Cr. 67
Cr. 52
Dr. 10
Days.
21
7
11
13
18
18
Products.
Dr. Cr.
3255
644
1386
871
936
180
10s.
10,10s. 5465 1807
1807
£266,10s. £266,10s.
3658
To Balance, £10,10s. 10
73,000)36,580(501
The next page shows a bank ledger account:—
Date.
1889.
June
.iuly
„ rr
,,
II
,, Aug.
II
ir
,, Sept.
"
>i
Sept.
30
1
2
8
5
12
16
25
26
31
1
6
7
8
9
10
12
16
27
2
12
20
26
30
30
To
or
By.
To
By
To
By
To
By
To
By
By
To
To
By
To
To
To
By
By
To
To
By
To
By
To
By
To
To
To
By
Individual
Entries.
Brot. for., £
Interest,
Balance,
Balance,
Cheques.
£7,351
8
1,093
296
975
510
112
450
23
24
270
10
66
90
20
1
1,001
£12,294
17
fi
6
0
12
3
9
0
6
2
0
0
17
8
0
3
2
16
5
8
3
0
6
4
1
0
10
7
0
0
0
11
0
7
2
4
Credits.
£7,458
1,011
219
98
181
1,550
193
266
128
85
10
93
997
£12,294
£1,001
19
15
12
5
15
0
17
14
0
0
7
7
0
16
2
11
8
10
0
0
0
1
8
11
0
5
10
0
4
2
D
0
C
C
r. Balances.
; Amount.
r. £107
98
1,110
17
„ 236
D
C
D
D
C
C
r. 59
r. 39
r. 936
r. 754
r. 795
285
172
366
633
183
159
135
263
348
78
68
79
22
115
25
, 1,022
1,002
1,001
r. 1,001
1
2
15
11
b
18
1
3
9
14
5
2
13
10
4
4
18
15
16
16
16
16
3
6
14
5
5
5
2
2
6
lU
6
3
1
11
1
5
5
7
3
2
3
11
11
1
6
5
5
5
5
10
10
8
9
9
9
2
2
Days.
181
5
7
4
9
1
5
31
30
273
Dr.
Product.
190
413
8,424
755
5è% 9,782
Dr.
Valuation.
£1 9 6
0 5 11
1 3 7
Cr.
Product.
8,015
2,108
660
1 % 10,783
Valuation.
5/11
This Form is suitable for any Ledger Account on which Interest falls to he calculated.
30 THE ACCOUNTANT S HANDBOOK.
As an illustration of the use of short methods, it may be
mentioned that bank accountants sometimes value one per
cent, interest on minimum monthly balances, at one penny
for every five pounds per month. This would be correct if all
the months were equal; and in small accounts the errors from
this cause are slight, and tend to balance one another.
In calculating interest on many sums for different periods at
different rates, the frequent division by 73,000 may be avoided
thus:—
BuU.—Multiply each sum by the number of days for which
it has been due and by the double rate, add the products, and
divide the total by 73,000.
When there are both debit and credit items or balances on
which interest falls to be calculated, separate columns are used
for the products of the debtor sums and the creditor sums.
When the interest on debtor and creditor items is at the
same rate, the difference of the total products is multiplied by
double the rate and divided by 73,000.
When the interest is at certain rates on the debtor items
and at other rates on the creditor items, the multiplication
by the double rate must be carried out separately, for the
debtor products at each rate and for the creditor products at
each rate, and the difference between the ultimate debtor and
creditor products being divided by 73,000, will give the
interest.
These cases are exemplified in the following states, which
have been prepared to show the various methods of stating
interest accounts commonly met with in business.
An attempt has also been made throughout the illustrations
to elucidate the principles regulating the heading of accounts
current and the use of the words Dr. and Cr. Some of the
accounts have been repeated in different forms, in order to
demonstrate the necessity of having a clear conception of the
meaning of Dr. and Cr. with reference to the heading of
accounts.
METHODS OF STATING INTEREST ACCOUNTS,
EXAMPLE I.
On 1st January 1889 A. Bow advanced to C. Dow, in cash,
£50; on 12th January, £30; on loth January, £25; on 14th
February, £45; and on 27th February, £50. Calculate interest
at 5 ^ to 31st March, and show amount, with interest, due on
that date, and the settlement thereof.
1st Method.—Account in the form of
C. Dow in a/c with A. Bow
(that is C. Dew's account as appearing in A. Bow's Ledger).
PEEIODICAL INTEREST STATE BALANCED de die in diem*
Date.
1889
Jan.
))
Feb.
J)
Mar.
»
1
12
15
14
27
31
) j
C. Dow. Dr
To Interest,
By Cash,
80 j
25
To Cash (from A. Bow), £ 50
To Do 30
To Do. .
To Do. .
To Do. .
T o £
T o £
T o £
T o £
T o £
105
45
150
50
200
13 8
201 !l3' 8
201113, 8
Days
11
30
13
32
Product.
550
240
3150
1950
6400
12290
10
73,000)122900(1683
499 =£1 13
610
26
From day to day.
32 THE ACCOUNTANT S HANDBOOK.
2nd Method.—Account in the form of
A. Bow in a/c with C. Dow
(that is A. Bow's account as appearing in C. Dow's Ledger).
PERIODICAL INTEREST STATE BALANCED de die in diem.
Date.
1889
Jan.
II
Feb.
ti
Mar.
n
1
12
15
14
27
31
M
A. Bow. Cr.
By Cash advanced to
C. Dow, . £
11 Do.,
B y £
M Do.,
B y £
11 Do.,
B y £
II Do.,
B y £
11 Interest,
B y £
To Cash,
50
30
80
25
105
45
150
50
200
1
201
201
13 8
I
13
13
_
8
8
Days.
11
3
30
13
32
Interest as
Calculated.
1/6
 /8
8/7è
5/4i
l7/6i
£1 13 8
Interest per
Tables.
1/6
/7f
8/7è
5/3
17/6è
£1 13 7
Note.—The interest calculation exemplified in the first
method can not only be more expeditiously performed than by
the use of interest tables as in the second, but is more accurate,
because, as shown there, the fractional errors make a difference
of Id., and where there are many sums this error might amount
to much more.
The column headed 'Interest as Calculated,' is introduced
merely to show the difference between it and interest as
taken from the table, and is never used practically in framing
periodical interest states.
METHODS OF STATIXG INTEEEST ACCOUNTS. 3.3
EXAMPLE II.
On 3rd May 1889, A. Bow sold goods to C. Dow, invoiced
at £50, 4s. 6d. for cash in 14 days, due I7th May, and on the
12th May another parcel invoiced at £63, 15s. 6d., on the same
terms. 0. Dow failed to pay, and was sequestrated on 30th
June. How much does A. Bow claim for ?
3rd MetJiod. C. Dow, Dr. to A. Bow.
Date.
1889.
May
ri
June
3
12
30
To Goods clue 17tla
May, . . £
11 Do. due 26tli May,
II Interest,
£
50
63
0
114
4
15
6
6
12 2
1
"
2
Days.
44
35
Product.
2,200
2,240
4,440
10
73,000)44,400(e08 =
6000 12s. 2(1.
4:th Ifethod. UsiNG INTEREST TABLES.
Date.
1889.
May
II
June
3
12
30
To Goods due I7th
May, . . £
II Do. due 26th May,
II Interest,
£
50
63
0
114
4
15
12
12
6
6
2
2
Days.
44
35
Interest.
e/oi
6 / l 
12/2
In this example each item stands by itself, and has set
against it the number of days between the due date and the
date of closing the account. The 3rd and 4th methods are
generally used among merchants, the advantage of these being
that each item is independent of all the others, and if any
error in calculation has been made in any item, it can be
altered without disturbing the other parts of the work.
c
34 THE ACCOUNTANTS HANDBOOK.
The same transactions, treated according to the 1st and 2nd
methods, stand as follows :—•
1st Method.
Date.
1889
May
ir
June
3
12
30
C. Dow, Dr.
To Goods due 17th
May, . . £
11 Do. due 26th May,
T o £
If Interest, .
£
50
63
114
0
114
4
15
6
6
oto
12 2
12J2
Days.
9
35
Product.
450
3,990
4,440 as before,
V,300
In the foregoing examples the account is stated as it would
be rendered by A. Bow, and as it appears in his ledger. The
complete account in C. Dow's ledger would stand as follows:—
2nd Method. USING INTEKEST TABLES.
Date.
1889
May
11
June
3
12
30
A. Bow, CT.
By Goods due IVth
May, . . £
11 Do. due 26th May,
B y £
11 Interest, .
£
50
63
114
0
114
4
15
6
6
0 0
12 2
u 2
Days.
9
35
Interest per Table.
1/3
10/11
12/2
Note.—It is customary in interest states, when finding the
product of the sum by the number of days, to disregard the
shillings and pence in the sum if under 10s., but to reckon
them as £1 if 10s. or more; e.g., £50, 4s. 6d. above is multiplied
as £50, while £63, 15s. 6d, is reckoned £64.
METHODS OF STATING INTEREST ACCOUNTS. 35
EXAMPLE III.
On 1st January 1889, D. Eae was due to an Indian bank
Es. 10,000, on the 10th January he drew a further sum of
Es. 1000; on the 15th, Es. 1000; on the 25th, Es. 3000. On
the 17th March he called for his account. The interest rate
was 10 per cent.
Uli Method.
Date.
1889.
Jan.
M
ir
M
Mar.
1
10
15
25
17
II
D. Rae, Dr.
To Balance,
II Cash, .
II II
II II
To
II Interest,
Es.
10,000
1,000
1,000
3,000
15,000
282
15,282
a.
0
0
0
0
0
3
3
Days, calculated
back to
1st January.
0
9
14
24
75
Discount Numbers.
9,000
14,000
72,000
95,000
1,125,000
1,030,000
20
73,000)20,600,000(28219
600 =Rs.282 3a.
160
140
670
This 5th method is in use in some banking houses, and its
advantage consists in enabling the bank at a moment's notice
to make up an account with interest. Every item, as it is entered,
is discounted back to the beginning of the account. On
the day of settlement the balance is multiplied by the number
of days from the beginning of the account to the day of settlement,
and from the product is taken the total of the discount
numbers, and the result multiplied by double the rate and
divided by 73,000 gives the interest.
An example of this method, with both Dr. and Or. balances,
is given on pages 52 and 53.
ób THE ACCOUNTANT S HANDBOOK.
1st Method.
Date.
1889.
Jan.
II
II
II
Mar.
1
10
15
25
17
D. Rae, Dr.
To Balance, .
II Cash,
II Do., .
II Do., .
II Interest, .
To
To
To
To
Rs.
10,000
1,000
11,000
1,000
12,000
3,000
15,000
282
15,282
a.
0
0
0
0
0
0
0
3
3
Days.
9
5
10
51
Product.
90,000
55,000
120,000
765,000
1,030,000
= as Ijefore
Rs. 282 3 a.
S7'd Method.
Date.
1889.
Jan.
II
tr
11
1
10
15
25
17
D. Rae, Dr.
To Balance, .
II Cash,
II Do.,
II Do.,
11 Interest, .
Rs.
10,000
1,000
1,000
3,000
282
15,282
a.
0
0
0
0
3
3
Days to
Date of
Settlement.
75
66
61
51
Product.
750,000
66,000
61,000
153,000
1,030,000
= as before
Rs. 282 3 a.
EXAMPLE IV.
A successful commencement of the great work of codification
of the mercantile law was made in 1882, when the Bills of
Exchange Act was passed.
Definition.—A bill of exchange is an unconditional order in
writing (draft), addressed by one person (the drawer) to another
(the drawee), signed by the person giving it (the drawer), requiring
the person to whom it is addressed to pay on demand,
or at a fixed or determinable future time, a sum certain in
METHODS OF STATING IXTEKEST ACCOUNTS. 3/
money to, or to the order of, a specified person (the payee) or to
bearer.
When the drawee signifies his assent to the order of the
drawer, which he does by signing his name across the draft,
he is called the acceptor, and the document is thereafter called
his acceptance. The acceptor is bound to pay the sum in the
bill to the holder of it at the specified time (with three days
of grace added when the bill is not payable on demand), technically
called maturity. If he fail to meet his acceptance,
the bill is said to be dishonoured, and the holder may recover
as damages the amount of the bill, interest from its maturity,
and the expenses of noting and of protest, where necessary.
The legal rate of interest is 5 per cent., which will be allowed
in the absence of other agreement.
C. Dow failed to meet his acceptance to A. Bain, due 27/30
March 1889 for £300. He liquidated the debt by instalments
—on 15th April, £100; on 30th April, £100; on 15th May,
£50; and the balance, with interest at 6 per cent., on 15th June.
Date.
1889.
Mar.
April
May
June
30
15
30
15
15
II
C. Dow Dr. to A. Bain.
To Bill dishonoured, £
By Cash, .
T o £
II Cash, .
T o £
II Cash, .
T o £
To Interest,
T o £
By Cash, .
300
100
200
100
100
50
50
1
51
51
0
0
0
0
0
0
15
Is
15
0
0
0
0
0
0
8
8
8
Days.
16
15
15
31
Product.
4,800
3,000
1,500
1,550
10,850
12
73,000)130,200(1783 =
572 £1 15 8
610
26
This account may be rendered by A. Bain to C. Uow in the
following form:—It may be read C. Dow, D?: and Or., he being
debited with what he owes and credited with what he pays;
or—
Br.
Date.
1889.
March
June
30
15
To Bill,
II Interest,
£
£
C. Dow ia AccountCurrent with A. BAIN.
300
1
301
0
15
15
0
8
8
Days.
77
Product.
23,100
23,100
Date.
1889.
April
II
May
June
II
15
30
15
15
ri
By Cash, . £
II Do., .
II Do., .
ri Balance of
Interest Nos.,
II Cash, .
£
100
100
50
51
301
0
0
0
15
15
0
0
0
8
8
Cr.
Days.
61
46
31
Product.
6,100
4,600
1,550
10,850
23,100
CO
00
H
a
o> ao <a= ,
>
Co"
K >
Ü
I
W
O
o
Dr.
Date.
1889.
March
June
30
15
To Bill, &
II Interest,
£
C.
300
1
301
0
15
15
0
8
8
Dow in AccountCurrent with A. BAIN.
Days.
77 £
&
Interest.
3
3
15
'
15
Hi
iH
Date.
1889.
April
n
May
June
II
15
30
15
15
tl
By Cash, £
M Do., .
II Do., .
II Balance of
Interest, Dr.,
II Cash,
£
100
100
50
51
301
0
0
0
15
15
0
0
0
8
8
Cr.
Days.
61 £
46
31
£
Interest.
1
0
0
1
3
0
15
5
15
15
oj
lè
l i
8
Hi
W
O
Ö
O
*n
a>
H
ïH> I—I
13
H
w
>
aa oa z
CO
CO
40 THE ACCOUNTANT S HANDBOOK.
EXAMPLE V.—Br. AND Gr. INTEEEST.
Heriot & Co. sold two cargoes of Hemp for Tod & Co., realising
cash on 23rd April 1889, £211, 3s. 7d.; and on 28th April,
£818, 13s. 9d. They advanced Tod & Co. on
31st January . £160 0 0
14th March
3rd April
11th April
2nd May
30th May
160 0 0
65 0 0
200 0 0
200 0 0
194 1 6
Interest Account for settlement.
Date.
1889.
Jan.
Mar.
April
n
M
II
May
II
31
14
3
11
23
28
2
30
Tod&Co.jZV. &Cr.
To Advance, £
n Do.
T o £
.1 Do.
T o £
11 Do.
T o £
By Hemp,
T o £
11 Hemp,
B y £
To Cash, .
B y £
11 Cash, .
B y £
11 Interest,
By Balance, £
30th May. Interest,
Balances.
160
160
320
65
385
200
585
211
373
818
444
200
244
194
50
2
48
0
0
0
0
0
0
0
3
16
13
17
0
17
1
15
5
10
%
0
0
0
0
0
7
5
9
4
0
4
6
10
1
9
Days.
42
20
8
12
5
4
28
119
5%
Products.
Dr.
6,720
6,400
3,080
7,020
1,870
25,090
8,640
7,300)16,450(
185
390
25
Cr.
1,780
6,860
8,640
2253 =
£2 5 1
METHODS OF STATING INTEREST ACCOUNTS. 41
EXAMPLE VA.
A. Begg acted as agent for C. Greig. On 1st January 1889
A. Begg had in hand £130, 15s. 9d. belonging to C. Greig; on
9th January he supplied C. Greig with goods, £13, 15s. net; on
18th January he recovered from T. Eae £35, 16s. 3d., a debt due
to C. Greig; and on 15th February he retired C. Greig's acceptance,
£111, 16s. 3d.; and on 20th February a similar acceptance
for the same amount, £111,16s. 3d. On 31st March he received
from C. Greig in cash £25, 8s. 6d., and on 15th June £150.
Account as rendered by A. Begg on 30th June, allowing interest
at 1 per cent, and charging interest at 5 per cent.
PERIODICAL INTEREST STATE OF A. BEGG'S INTROMISSIONS, as
Agent for C. GREIG, from 1st January to 30th June 1889.
T)afp
1889.
Jan.
It
M
Feb.
It
Mar.
June
II
1
9
18
15
20
31
15
30
ir
A n^— n^. r.«/i rf^
•° ""öS' • ^ '  """^ ""•
To Balance £
By Goods,
To£
To T. Rae,
To £
By Bill, . .
To £
„ Bill, .
By £
To Cash, .
B y £
11 Cash, .
T o £
By Interest,
To Balance, £
130
13
117
35
152
111
41
111
70
25
45
150
104
0
104
15
15
0
16
17
16
0
16
15
8
7
0
13
12
0
9
0
9
3
0
3
9
3
6
6
0
0
0
6
6
Days.
8
9
28
5
39
76
15
Interest Number.
Dr. 1%
1,048
1,053
4,284
205
1,575
8,165
2
16,330
73,000)
Cr. 5 %
•
2,769
3,420
6,189
10
61,890
16,330
45,560C624 =
176 12s. 6d.
30
42 THE ACCOUKTANT'S HAKDBOOK.
If the same rate of interest (5 per cent.) had been allowed and
charged, A. Begg would have been debited with 5s. 5d., thus
making the balance f 104, 18s. 5d., thus:—
Dr. Interest numbers, 8,165
Cr. Interest numbers, 6,189
Dr., 1,976
10
73,OO0)19,760(27O = 5s. 5d.
516
When the rate of interest on both sides of the account is
the same, the ordinary mercantile (ledger account) form is
available, but that form is unsuited to the case of different
rates on the debit and credit sides.
The following account is made up, charging 5 per cent, on
both sides, and it will be observed that although in the preceding
and following cases the interest is calculated at the same
rate (5 per cent.) on both Brs. and Grs., yet they differ from one
another and from the accurate interest, which is 5s. 4d., for the
reason, that when the shillings in any balance or sum reaches 10
they are reckoned as £1, and when they amount to less than 10
they are discarded {e.g., £130, 15s. 9d. is called £131, and
£117, Os. 9d., £117, in finding the product). The shülings
discarded out of the balance on 31st March in the preceding
example, are partly neutralised by the addition to the balance
of 20th February; while in the succeeding example the whole
of the debits happen to be accentuated by accretions, and thus
it arises that the interest happens to be unduly reduced in that
case. When the account is long, the excess on one side is
usually nearly balanced by the deficiency on the other.
Dr. C. GEEIG in AccountCurrent with A. BEGG. Or.
Date.
1889.
Jan.
Feb.
It
June
tr
9
15
20
30
II
To Goods, £,
II Bill, .
1. Do., .
II Balance of
Interest, .
M Balance,
13
111
111
104
342
15
16
16
18
5
0
3
3
2
8
Days.
172
135
130
Product.
2,408
15,120
14,560
1,885
33,973
Date.
1889.
Jan.
It
Mar.
June
June
1
18
31
15
30
By Balance, £
II T. Eae,
ti Cash, .
II Do., .
II Interest,
130
35
25
150
0
342
15
16
8
0
5
5
9
3
6
0
2
8
Days.
180
163
91
15
Product.
23,580
5,868
2,275
2,250
33,973
1 1 1 1
73,000)18,850(258 = 5s.2d.
425
60
00
44 THE ACCOUXTAST'Ö HANDBOOK.
If a varying rate of interest is to be charged on both sides, the
sums are multiplied by the number of days and by double the
rate per cent., the products being set down in the interest
number columns, and the difference of the totals only requires
to be divided by 73,000.
The cashcredit rate is the rate charged by banks on cash
credit accounts, which were introduced by the Eoyal Bank of
Scotland in 1728 and by the Bank of Scotland in 1729, and
have ever since been a prominent feature in Scotch Banking.
The cashcredit is the name siven to an arrangement between
the bank and a customer, who desires the privilege of drawing,
as and when required, advances from the bank to an extent
agreed on, and for which security to the satisfaction of the
bank is provided, interest being charged by the bank at cashcredit
rates iipon the actual balance due by the customer from
day to day, he having right to payin money, and thus reduce
the balance subject to interest whenever he is able. This
enables the customer to utilise his money to the utmost, and
in that way the cashcredit is equivalent to a fixed advance at
a much lower rate of interest. The cashcredit rate is usually
charged on secured overdrafts, but unsecured overdrafts, when
permitted, are subject to a higher rate than cashcredits.
The cashcredit rate charged by Scotch banks was 6 per cent,
to 10th January 1889, 5 per cent, to 23rd April, and 4^ per cent,
after that date. The accountcurrent form can be used, splitting
up the days into the number at each rate, but the periodical
interest form which follows is simpler.
METHODS OF STATING INTEREST ACCOUNTS. 45
1889.
Jan.
It
t!
Feb.
ri
Mar.
June
"
1
9
18
15
20
31
15
30
A Tinn^n. Di o,i,i n^ 1
To Balance, £
By Goods, .
T o £
To T. Eae, .
T o £
By Bill, .
T o £
1, Do.,
By £
To Cash, .
B y £
11 Do.,
T o £
II Interest,
T o £
130 15 9
13 15 0
1
117 1 0 9
35^16 3
152 17 0
111 16 3
1
41 0 9
111 16 3
' 1
70
25
45
150
104
0
104
15
8
7
0
13
6
19
6
6
0
0
0
3
3
1
Days.
8
{I
28
5
39
f 23
] 5 3
15
Rate
%•
6
6
5
5
5
5
5
Interest Number.
Dr.
12,576
1,404
9,360
42,840
2,050
14,175
82,405
59,505
73,000)22,90(1
100
27
5
Cr.
27,690
10,350
21,465
59,505
(•313 =
6s. 3d.
EXAMPLE VI.—VARYING EATES OF INTEREST.
At 31st December 1888 0. A. owed W. S. £500, and he
borrowed £400 on 4th January and £100 on 15th January.
On 15th May W. S. received £2000, price of property sold for
C. A. On 10th June W. S. paid C. A. £500, and on 31st July
settled the balance, after charging interest.
In this case the interest being at varying rates, the periodical
balance method of calculation is usually followed.
Form of Cash Advance Account. Interest allowed 1 per cent,
minimum monthly balances. Interest charged bank overdraft
rates, 6  per cent, to 10th January, 5i per cent, thereafter.
46 THE ACCOUNTANT S HANDBOOK.
Br.
Date.
1888.
Dec.
1889.
Jan.
Jan.
May
June
July
31
4
15
15
10
31
C. A. in a/c with W. S
To Balance, . . £,
n Advance,
To^
II Advance,
To£
By Price of Property sold, .
By£
To Cash
By£
M Interest. £19 4 10
,1 Cash, 480 15 2
500
400
900
100
1,000
2,000
1,000
500
500
500
4
\ 5
120
2 mos.
6è
5è
1
73,0(
Cr.
Interest.
Dr.
26,000
70,200
49,500
1,320,000
Cr.
61,000
61,000
)0)1,404,700(1924
674
177
31
Where the rates vary often and there happen to be many
transactions, it is advantageous to divide the interest column
where the varying rates occur into several columns for the
different rates, as 4J, 5, 5, 6, 6, placing in the respective
columns the product of the amount by the days at the different
rates. The total products at each rate must then be multiplied
by twice the rate, and the results being added together produce
the total to be divided by 73,000, where the interest falls on
one side. Where there are both Dr. and Cr. products, the
difference of the respective totals, after multiplication by the
double rates, divided by 73,000, gives the interest.
EXAMPLE VIA.
If in the above example the interest payable by W. S. were
to be calculated on the daily balance at 1 per cent, up to May
30, 1 per cent, up to June 6, and 2 per cent, to June 30, and
1  per cent, thereafter, the following will illustrate the columnar
method:—
Date.
1888.
Dec.
1889.
Jan.
ri
May
June
July
31
4
15
15
10
31
W. S., Dr. and Cr.
By Balance, . . £
11 Advance,
B y £
II Advance,
B y £
To Price of Property,
T o £
By Cash, . . . .
To£
ir Interest, £17 19 6
11 Cash, 482 0 6
Periodical
Balances.
500
400
900
100
1,000
2,000
1,000
500
500
500
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Days.
4
{I
120
M5
\ ^
( 4
j 20
131
Dr. Products.
17o
15,000
15,000
2
30,000
67,500
56,000
153,500
14 7=
7,000
15,500
22,500
3
67,500
2 7.
4,000
10,000
14,000
4
56,000
Cr. Products.
4,500
120,000
124,500
11
1,369,500
96,200
1,465,700
153,500
64 7o
2,000
5,400
7,400
13
96,200
73)1,312,200(17975 =
582 £17 19 6
712
550
13 oa o
CO
O
I'd
CO
13 >
13
lH
<Z
(—k
63
13
w
CO
> O
Q
O aa
CO
•f^
390
48 THE ACCOUNTANT'S HANDBOOK.
EXAMPLE VII.
WITH ITEMS AFTER CLOSING DATE.
John Bell, Leith, acted as factor for G. Diez, Eio, and was
required to render and settle his Account on 30th June 1889, for
the six months preceding. His transactions were as follows:—
On 31st December 1888, John Bell had in hand £35. He
then sold a cargo, realising £1500, due 10th February. On 12th
February he retired G. Diez's acceptance for £1600. Another
cargo was sold by Bell on 1st May for £2100, due 15th July;
and Bell accepted Diez's draft for £2000, due 1/4 August.
The charges amount to £20. Interest 5 per cent.
1. CALCULATION OF INTEREST to date of last item, and DEDUCTION
OF INTEREST ON BALANCE from last date to date of
settlement.
1888.
Dec.
1889.
Feb.
n
July
Aug.
June
II
31
10
12
15
4
30
II
John Bell, Jh: & Cr.
To Balance, £
11 Cargo, .
T o £
By Bill, .
B y £
To Cargo, .
T o £
By Bill, .
T o £
n Charges,
T o £
To Interest,
To£
35
1,500
1,535
1,600
65
2,100
2,035
2,000
35
20
15
4
19
0 0
0 0
0 0
0 0
0 0
0 0
0
0
0
0
0
13
13
0
0
0
0
0
3
Days.
41
2
153
20
Ob
Interest Number.
I>r.
1,435
3,070
40,700
l,2L'.n
45,205
Or.
9,945
1,225
34,035
45,205
METHODS OF STATIXG INTEREST ACCOUJ^TS. 49
2. CALCULATION OF INTEREST to date of settlement, and DEDUCTION
OF DISCOUNT on later items back to that date.
1888
Dec.
1889
Feb.
II
Jmio
July
Aug.
Juno
31
10
12
30
15
i
30
John Bell, Dr. d; Or.
To Balance, £
11 Cargo, .
To£
By Bill, . .
By£
II Charges,
By£
To Cargo, £2,100
By Bill, 2,000
To£
To Interest,
To£
35
1,500
1,535
1,600
65
20
85
100
15
4
19
0
0
0
0
o'o
OiO
1
0
0
0
n
0
0
0
n
0 0
13j3
13 3
Days.
41
2
138
15
35
Intere^jt Number.
Dr.
1,435
3,070
3i,:)uu
70,000
74,505
Or.
8,970
31,500
7U,U0U
34,035
74,505
I n the above case there oidy occurs one red number on
either side, and the simplest mode of treatment is to enter the
red numbers again in black on the opposite side. The same
result would have been obtained by entering in black in the Dr.
side the balance of the red numbers 38,500. "When there are
many red numbers on each side, the practice is to sum the Dr.
red numbers and the Or. red numbers, and carry the difference
in black to the side opposite to that on which there is an
excess of red numbers.
I)
50 THE ACGOÜNTAXï'S HAXDBOOK.
Dr. G. DiEZ in AccountCurrent
Date.
1889.
Feb.
May
June
12
1
30
To lull,
II Acceptance,
CI Charges, .
Pioduct from Cr.,
Balance of Products,
To Balance, .
Due date.
Feb.
Aug.
12
4
£1,600
2,000
20
19
£3,639
0
0
0
13
13
0
0
0
3
3
Days
138
3a
Product.
220,800
70,000
31,500
34,035
286,335
Interest.
£30
0
4
4
4
11
6
13
lOS
H
3i
3
£39 1 4, 5i
Note.—In this example the credit products exceed the debit
])roducts, and the difl'ereuce is therefore credit interest. John
Bell was owing money to CI. Diez, and must allow interest on
it, which must be entered to the credit of G. Diez in the
current account. It is necessary to enter the balance of
interest products, 34,035, in the products cohtmn, and the
balance of credit interest, £4, 13s. 3d., in the interest column,
both on the Dr. side' for the same reason that the credit
balance of £19, 13s. od. nuist be entered on the Dr. side of
the accountcurrent, viz., in order to balance or equalise the
debit and credit sides. The interest is transferred from the
debit interest column to the credit of the current account in
METHODS OF STATIX(! INTEREST ACCOUNTS. 51
with JOHN BELL. Cr.
Date.
1888.
Dec.
1889.
Feb.
May
June
June
31
10
1
30
30
By Balance, .
ri Cargo,
„ do.,
Product from Dr.,
ri Interest,
11 Balapice,.
Due date.
Feb.
July
10
15
£35
1,500
2,100
i
0
0
0
13
0
0
0
3
£3,639 13; 3
19 13 3
Days
181
140
15
Product.
6,335
210,000
r!1.5iiO
70,000
286,335
Interesï.
£28
9
£39
17
15
11
3
9i
4 5i
•«
the same way as the £19, 13s. od. is carried down to the credit
of the next account. Discounts are entered in red, as being
subtractive and not additive. By booklveeping usage, however,
it is not customary to perform the subtraction, the same result
being obtained by leaving the sum out of account on the one
side and adchno it to the other side of the account. The red
O
products on the Dr. side are accordingly added together and
carried to the Cr. side, and entered there in black, and so with
the red products of the Cr. side, or the difference of the red
products may be taken and the excess carried to the opposite
side to that on which it occurs.
52 THE ACCOUNTANT'S HANDBOOK.
Interest calculated to a date (31st Dec), beyond the closing date
Dr. G. DiEZ in AccountCurrent
Date.
1889.
Feb.
May
JuilG
12
1
30
M
To Bill, .
II Acceptance,
Product from Cr.,
Balance of Products,
To Cliarges, .
M Balance, .
Due date.
1889.
Feb.
Aug.
12
4
£1,600
2,000
20
19
£3,639
0
0
0
13
13
0
0
0
3
3
Days
to 31st
Dec.
322
149
Products.
515,200
298,000
6,440
34,035
853,675
Each item discounted back to the first date in the Account,
the date of settlement,
Dr. JOHN BELL in Account
Date.
1888.
Dec.
1889.
Feb.
May
June
June
31
10
1
30
ir
II
30
To Balance, ,
II Cargo,
II do,,
,il.^.
Balance of Products,
To Interest, .
II Balance, .
Due date.
1889.
Feb.
July
June
10
15
3U
£35
1,500
2,100
4
£3,639
£19
0
0
0
13
13
13
0
0
0
3
3
3
Days
from
31st
Dec.
0
41
196
Ibl
Products.
61,500
411,600
2,715
34,035
507,135
Note.—In the last example the Cr. products represent
discounts or interests to be added to the Dr. side, and that is
the reason why the red product of the Dr. Balance, £15 for
METHODS OF STATING IXTEKEST ACCOUNTS. 53
(30th June), and the balance then discounted back to 30th June.
with JOHN BEI,L. Cr.
Date.
1888.
Deo.
1889.
Feb.
May
.June
June
31
10
1
30
30
By Balance, .
11 Cargo,
ir do.,
£.A^
II Interest, .
II Balance, .
Due (late.
1889.
Feb.
July
JlUll
10
15
•M
£35
1,500
2,100
4
£3,639
£19
0
0
0
13
13
13
0
0
0
3
3
3
Days
to 31st
Dec.
365
324
169
1H4
Protlucts.
12,775
486,000
354,900
6,440
853,675
and Interest calculated on final balance from the first date to
Current with G. DIEZ. Cr.
Date.
1889.
Feb.
May
Juno
12
1
30
By Bill, .
11 Acceptaaice,
H Charges, .
J^i'oducls from ]_)r.,
11 Balance, .
Due (late.
1889.
Felj.
Aug.
June
12
4
30
£1,600
2,000
20
19
£3,639
0
0
0
13
13
0
0
0
3
3
Days
from
31st
Dec.
43
216
181
Products.
68,800
432,000
3,620
2.715
507,135
181 days, is carried and entered in black among the Cr.
products. This also explains why the diflerence in this case
though an excess on the Cr. side, represents Dr. interest
54 THE ACCOÜXÏAXTH HANDBOOK.
Br.
EXAMPLE VIII.—ACCOUXTCUKRENT
Low & Co. in Account
Date.
1888.
June
July
rr
Aug.
Nov.
It
Dec.
ir
M
rt
Dec.
30
3
11
1
27
30
11
12
14
31
To Balance, .
II Sugar/). 'Juno,'
II 3 months' draft on
Fry & Co., .
II i month's draft on
Sym & Co., .
II Goods,
II Flourj!). 'Ceres,'
II 3 months' draft on
Fry & Co., .
II Sugar j». 'Jimo,'
II Goods/) 'Vulcan,' .
Balance of Products,
311 To Balance, .
i
9,348
12
73)112,] 76(1.'536=£1,
391
267
486
Due date.
1888.
June
July
Oct.
Sept.
1889.
Jan.
'1
Mar.
1888.
Dec.
II
10/8.
30
17
14
4
27
30
14
26
28
£113
61
50
20
59
83
200
120
230
£938
£22
1
12
0
0
1
15
0
1
9
1
5
1
3184
Product.
20,792
3 167; 10,354
0
0
6
4
0
8
1
1
10
78
118
27
30
73
5
3
3,900
2,360
J, 5'J 3
2,520
14,600
600
690
9,348
10,713
48,044
METIIOUS OF STATIXG IXTEKEST ACCOUNTS.
rendered at 6 per cent. to 31st December 1888.
Current with Fox & Co. Cr.
Date
1888.
July
Aug.
II
Sept.
Oct.
Nov.
'1
Dec.
ir
11
II
•1
14
18
28
11
30
8
15
1
II
28
31
II
By our draft to T. Cox, .
11 Goods ^). ' Star,'
II reuiittaucc on Cox
and Co.,
II our draft to T. Cox, .
11 Coods ^). ' Star,'
II Goods,
11 our draft to Jones
and Co.,
11 do.,
r Goods,
11 remittance, GO days'
sight, .
lialanco, rod product»,
11 Balance of Interest, .
11 Balance, .
Due (late.
1888.
Sept. 17
II
Aug.
Dec.
1889.
Jan.
1888.
Nov.
1889.
Feb.
Mar.
1888.
Dec.
1889.
Mar.
1
28
14
30
22
18
4
14
1
£100
49
0
12
150 ' 0
75
86
143
64
35
100
110
1
22
£938
9
4
2
9
4
1
0
10
5
1
P
1
0105
9121
1
0
6
9
9
4
3
3
0
8
10
1
125
17
••',0
39
19
03
17
GO
Product.
10,500
6,050
18,750
1,275
2,580
5,577
3,130
2,205
1,700
6,600
4,192
14,521
48,044
56 THE ACCOUNTANT'S HANDBOOK.
Example 8.
On 30th June 1888 Low & Co. owed to Fox & Co. a balance
of £IU, Is. 3d.
On 3rd July Fox <fe Co. sold them sugar, due in 14 days,
£61, 12s. 3d.
On 11th July Fox & Co. remitted to them a draft on Fry and
Co., due 14th October, for .£50.
On 14th July Fox & Co. drew upon Low & Co., at 2 months,
for £100, in favour of T. Cox.
On 1st August Fox <fc Co. remitted to Low & Co. draft for
£20, on Sym & Co., due 4th September.
On 18th August Low &: Co. sold to Fox & Co. goods,
£49, 12s. 9d., due 1st Sejjtember.
On 28th August Fox & Co. received from Low & Co. a demand
draft on Cox & Co. for £150.
On 11th September Fox & Co. drew on Low & Co., at 3 months,
for £75, 9s. 6d., in favour of T. Cox.
On 30th October Low & Co. sold to Fox & Co. goods, ex 'Star,'
due 30th January 1889, £86, 4s. 9d.
On 8th November Low & Co. sold them goods, due 22nd
November, £143, 2s. 9d.
On 15th November Fox & Co. drew on Low & Co., at 3 months,
in favour of Jones & Co., for £64, 9s. 4d.
On 27th November Fox & Co. sold Low & Co. goods, due 27th
January, £59, Is. 6d.
On 30th November Fox & Co. sold Low & Co. flour, ex 'Ceres,'
due 30th January, £83, 15s. 4d.
On 1st December Fox & Co. drew upon them for £35, 4s. 3d.
at 3 months, duo 4th March, and purchased from Low & Co.
goods, duo 14th December, for £100, Is. 3d.
On 11th December Fox & Co. remitted to Low & Co. a 3
'months' draft on Fry & Co., due 14th March, for £200.
On 12th December Fox & Co. sold Low & Co. sugary. 'Juno,'
due 26th December,'£120, Is. 8d.
On 14th December Fox & Co. sold Low & Co. goods, ex 'Vulcan,'
due 28th December, £230, 9s. Id.
On 28th December Fox & Co. received from Low & Co. a 60
days' sight draft for £110, due 1st March.
Prepare AccouutCurrent and Interest State, showing balance
with interest at 31st December 1888. Interest—6 per cent.
ACCUMULATION OF INTEREST. 57
EXAMPLE IX.
ACCUMULATION OF INTEREST.
On 1st January 1888, curator was in advance for his ward
£50; on 1st July he advanced £20; on 1st April 1889, £30;
and on 1st July 1889, £20. Close the account on 1st August
1889, with 5 per cent, interest accumulated annually.
Dato.
1888.
Jan.
July
1889.
Jan.
April
July
Aug.
1
1
1
1
1
1
The Curator, Dr. <fc Or.
By Balance, . £
11 Cash, .
B y £
II Interest,
B y £
II Cash, .
B y £
II Cash, .
B y £
11 Interest,
B y £
50
20
70
3
73
30
103
20
123
2
125
0
0
0
0
0
0
0
0
0
14
14
0
0
0
0
0
0
0
0
0
1
1
Days.
182
184
90
91
31
*
Product.
9100
12880
732)21980(3002
20
6570
9373
3813
73)19756(2706
515
460
By the 37th section of the Pupils Protection Act, hanks
must accumulate interest and principal once a year on judicial
deposits.
Note.—The Creditor gains hy frequent accumulation of interest.
On the other hand, a hill discounter makes more interes
on longdated than on shortdated hills, for he gets interest in
08 THE ACCOrXTANTS HANDBOOK.
hand earlier and holds it for a longer time. The discount, for
instance, on a hill of £1000 for 2 years at 5 per cent, would lie
£100, and for 73 days only £10. The hill discounter gains hy
having the difference, £90, in hand to trade with. Higher rates
are charged on longdated hills, because the risk is greater the
longer the credit.
EXAMPLE X.
CURATORIAL ACCOUNT CURRENT BALANCED de die in diem,
WITHOUT INTEREST.
Date. The Curator, Dr. and Ci:
1889.
Jan. 1 To Balance,
.1 12 By Debt paid,
II 14 To Interest received, £130
By Paid into Bank, 130 130
Periodical
]5alance.
Dr. £10 0 0
160 0 0
Cr. £150 0 0
Bank
Account.
Cr. £15
19 By Account paid, £40 _ Cr. £145
To Drawn from Bank, 40 ' 40
Cr. £105
II 23 By Law Agent's a/c paid, 7 5 0
Cr. £157 5 0
GURATOKIAL INTEREST STATES.
In preparing de die in diem interest states for a curatory,
factory, or trust, it is necessary to show, when the curator is in
advance to the estate and claims interest on his advance, that
there was no money in the estate l)aiik account out of which
he could have repaid the advance or part of it to himself. To
the extent that his advances could have been so repaid he is
not entitled to interest.
In calculating interest due to the curator on the foreooinoaccount,
the sum in bank must be deducted from the Cr. Imlance
before calculating interest on it at 5 per cent, {see Account,
page 59). The curator is not entitled to advance money at
5 per cent, when there were curatory funds available in bank.
Date
1889.
Jan. 1
12
14
'•
19
II
23
31
. The Curator, Dr. tfc Or.

To Balance in Curator's
hands, . . . .
By Debt paid, .
To Interest received,
By Bank,
11 Account for Board,
To Bank,
By Law Agent's Account,.
ir Interest,
To Balance,
By Balance,
£
10
130
40
157
337
s.
0
0
0
7
7
d.
0
0
0
5
£
160
130
s.
0
0
40 0
7
0
5
2
5'337 7
157 7
d.
0
0
0
0
5
5
5
Cash Balance.
Dr.
Cr.
Cr.
£
10
150
157
s.
0
0
5
d.
0
0
0
Cr.
Bank
Balance.
£15
15
145
105
Balance
bearing
Interest.
£
135
5
45
52
s.
0
0
0
5
d.
0
0
0
0
Days.
2
5
4
8
Interest, Cr.
270
25
180
416
7,300)891(122 =
161 2/5
150
SI
a;
CO
60 THE ACCOUNTANT'S HANDBOOK.
INTEEEST TABLES.
To form a 5 per cent. Interest Table for one day. Since
£7, 12s. Id. yields one farthing at 5 per cent, in one day, by
continued addition the following table is formed, and from it
graduated tables in the usual form can be readily prepared:—
Principal.
£ s. d.'
7 12 1
15 4 2
22 16 3
30 8 4
38 0 5
45 12 6
53 4 7
60 16 8
68 8 9
76 0 10
83 12 11
91 5 0
Day's Interest,
5 per cent.
1
1
'4
1
I5
12
If
2
H4 n 3
Principal.
£ s. d.
• 98 17 1
106 9 2
114 1 3
121 13 4
129 5 5
136 17 6
144 9 7
152 1 8
159 13 9
167 5 10
174 17 11
182 10 0
Day's Interest,
5 per cent.
H
H
H 4
4j
41 4 5
H 51
5f
6
The table on page 62 is slightly modified from a table prepared
by Edward T. Jones for his Treatise on Bookkeeping. It
will be found useful for checking interest calculations in the
absence of more extended interest tables. If the rate be 5 per
cent., and the total of the addition of the products of the
various sums in an interest account by the number of days be
600,062, the interest corresponding to this is at once obtained
by reference to the table.
Opposite 600,00677 in the column headed principal is J82 3 10J
Interest tliereon for one day—
„ •'^3229 „ „ 1
600,059999 „ „ £82 4 Ó
and the odd 2 gives loss than  interest.
If it be required to convert any product at another rate than
5 per cent., multiply by double the rate and strike off the right
INTEKESï TABLES. 61
hand figure, and use the result to obtain interest by the table.
Thus, total products, 33,010, interest 4 per cent.—33,010 x 8
= 264,080 = 26,408 at 5 per cent., and by the table—
20,006562
6,007291
304166
9125
£2 14 9
0 16 5
0 0 10
0 0 3
26,409269 £3 12 4 4
Alternatively, to convert interest at 5 per cent, to any other
rate, multiply the interest at 5 per cent, by double the said rate
and divide by ten.
Thus 33010 at 5 per cent. From the table we find—
30006041 £i 2 2i
3003645 0 8 2
33009686 £4 10 51
Interest at 5 per cent., £4521
£36168^10
£36168
Interest at 1 per cent., £3 12 4J
To find interest corresponding to the same product at 13
per cent.
26
Interest at 5 per cent., 4521 x ,j^
62
9042
2713
11755
Interest at 13 per cent., £11 15 ll
62 THE ACCOÜXTASTS HAXDBOOK.
INTEREST TABLE for 1 Day at 5 per cent, per annum, arranged
for the Conversion of Products into Interest.
Principal.
7604
15208
22812
30416
45625
53229
60833
76041
83645
9125
106458
205312
304166
403020
501875
COO729
707187
806041
904895
1,00375
2,0075
3,003645
4,007395
5,003541
6,007291
7,003437
8,007187
9,003333
10,007083
20,006562
30,006041
40,005520
50,005
60,004479
70,003958
80,003437
90,002916
Interest.
£
1
1
1
2
4
5
6
s.
1
1
1
1
2
2
2
5
8
10
13
16
19
1
4
7
14
2
9
17
8 4
9 11
10 19
12 6
d.
i
h
1 1 n
11
2 n
2f
3
H
62
10
H
4
7Ï
Hi
H
H
9
6
2
l lf
8^
51
H
iH
8
5 n
2h n
0
ii
9.V
4 7
Principal.
100,002395
200,004791
300,007187
400,001979
500,004375
600,006770
700,001562
800,003968
900,006354
1,000,001145
2,000,002291
3,000,003437
4,000,004583
5,000,005729 I
6,000,006875
7,000,000416
8,000,001562
9,000,002708
10,000,003854
20,000,000104
30,000,003958
40,000,000208
50,000,004062
60,000,000312
70,000,004166
80,000,000416
90,000,004270
100,000,000520
200,000,001041
300,000 001562
400,000,002083 ,
500,000,002604
600,000,003125
700,000,003645
800,000,004166
900,000,004687
1,000,000,005208
Interest.
£
13
27
41
64
68
82
95
109
123
136
273
410
547
684
821
958
1,095
1,232
1,369
2,739
4,109
5,479
6,849
8,219
9,589
10,958
12,328
13,698
27,397
41,095
54,794
68,493
82,191
95,890
109,589
123,287
136,986
s.
13
7
1
15
9
3
17
11
5
19
19
19
18
 18
18
18
17
17
17
14
11
9
6
3
0
18
15
12
5
17
10
3
15
8
0
13
6
d.
I l l
11
l l i
lOf
10.1
1 0 
nH
H
8f
H
H
11
7f
4è
1
9f
H
H
H
9.S
Oi
3 
6f
10
1
i \
7i
•9 1.
H
5
01
7.V n
10
H
Oh
LüUARiniMS FOR TUE COUNTIXGUOUSE. 63
LOÜAEITHMS FOK THE COUNTINGHOUSE.
Had we a decimal system of money, weights, and measures,
logarithms would be used by every one who valued time. With
our present system their use is restricted to those familiar with
decimals, who find them advantageous in saving labour. There
are reproduced on pages 102105 the wellknown tables of fourplace
logarithms and antilogarithms, which are so easily used
that an intelligent boy can make himself master of this most
powerful aid to calculation by a few liours' practice. One may
be able efficiently to use logarithms who knows nothing of the
method by which they are calculated.
The logarithms in these tables are common logarithms, the
base being 10. The common logaiithni of any number is the
index of that power to which, if 10 be raised, the said number
is the result. Thus :
Number.
•01
•1
1
10
100
l,0iJ0
10,000
The logarithm of any iiuml)er from 1 upwards, but under 10,
is a decimal fraction; from 10 to under 100, 1 followed by a
decimal; from 100 to under 1000, 2 followed by a decimal.
The integral part of the logarithm (0, 1, and 2 in these cases) is
called the characteristic and is found by rule. The decimal
part is found by referring to the Table of Logarithms. Thus, to
Base. "" 's
lo^
101
10»
10'
102
10»
10+
Loi ai'ithiu.
•J
1
0
1
2'
3
4'
64 THE ACCOÜ:N'TAXT'S HANDBOOK.
find the logarithm of 6'3i5; in the column under natural
number, opposite 63, in the fifth column (under 4) is found
•8021 as the logarithm of 6'34, then under 5 in proportional
parts on the same line is found 3, which added to the terminating
figures of '8021 gives '8024 as the logarithm to 4 places of
6'3 45. In seeking out the logarithm of any number you disregard,
in the first instance, the decimal point in the number,
and only use it to determine the characteristic of the logarithm
which goes before the decimal point. The characteristic may
be positive or negative. The decimal portion of the logarithm
is always positive, and is the same for all numbers having the
same digits. For example the number
6345 has for its logarithm 38024
6345 „ „ 28024
6345 „ „ • 18024
6345 M „ 8024
•6345 M „ 18024
•06345 „ M 28024
006345 M M 38024
Buk for finding Characteristic.—The positive characteristic
is always 1 less than the number of digits in the integral part
"of the number. The negative characteristic is the same as the
place of the first significant figure after the decimal point where
the number is a fraction. The negative characteristics are
written with the minus sign above the number. The negative
characteristic is always used in a manner opposite to the
decimal part. If the decimal part be added, the negative
characteristic is subtracted, and if the decimal part be subtracted,
the negative characteristic is added.
The table of antilogarithms is used in a similar way to
ascertain the natural number corresponding to a given logarithm.
For example, the number corresponding to the logarithm
6730 is found by referring to the table of antilogarithms
under '&7, and in the fourth column (under 3) is found 4^7l0,
LOGARITHMS FOR THE COUNTINGHOUSE. 65
the number corresponding to log. 'GVS. The decimal point is
inserted after the 4 because the log. has 0 for characteristic,
indicating that the number lies between 1 and 10.
The practical value of the Tables will appear by a few illustrations.
Multiplication.—The sum of the logarithms of the factors
gives the logarithm of the product.
To multiply 6345 by 7424 add their logs.
Log. 6345 = 8024
Log. 7424 = 18706
Log. of product 4710 = 6730.
The decimal part of the logarithm is positive, and the 1
which is carried from the addition of 8 J 8 cancels the
negative characteristic.
Division.—The logarithm of a quotient, ratio, or fraction is the
excess of the logarithm of the dividend, antecedent, or numerator,
over the logarithm of the divisor, consequent, or denominator.
To divide 7'691 by 3916. Subtract the log. of divisor from log.
of dividend and the antilogarithm of remainder is the quotient.
Log. 7691 = 8860
Log. 39 16 =15929
Log. of quotient 1963=12931
Involution.—The logarithm of the square, cube, fourth, or
nth power of any number is 2, 3, 4, or n times the logarithm of
that number.
To raise 04961 to the fourth power, multiply log. 04961 by
4, and take antilogarithm of result.
(04961)* 26956 x 4 = 67824 the log. of 000006059
(8433)* T9260x4 = T7040 „ 5058
(85)5 r9294x5 = r6470 „ 4436
In the last case the true result is '4437. To obtain very
exact results more extended tables of logarithms must be
employed. One great use of the table of four place logs, is to
check results obtained by extended calculation.
E
6G THE ACCOUNTANT'S HANDBOOK.
Evolution.—The logarithm of the square, cube, fourth, ?ith root
is the half, third, fourth, wth part of the logarithm of the number.
To find the square root of 9216. Divide the log. of the
number by 2, and take the antilog. of quotient.
4/9216 39646^ 2 = 19823 the log. of 9601
^•05432 2735 43 = 15783 n 3787
4/3539 T5489^3 = T8496 t 7073
In dividing the log. by the power 15489 must be regarded
as 54891 or as 254893, which divided by 3 gives 84961
or Ï8496.
Simple Interest.—Required interest on £382, IBs., for 230 days
at 31 per cent.
3829x230x375
36500 Log. 3829 25831
Log. 230 23617
Log. 375 5740
55188
Log. 36500 45623
9565 log. of 9046
£9 0 11
Compound Interest.—
Let p = principal.
M w = number of years.
M ï = interest of .£1 for one year,
tr s = amount of principal and interest.
Then lf'i = amount of £1 principal with interest at end of
first year, and the amount of any other sum will be in the same
proportion.
As 1 is to 1 + i so is any sum to its amount in one year; and
since l + i at the end of the year forms a new principal, its
amount in 1 year gives the amount of £1, the original principal
at the end of the second year.
(1 +iY amount of £1 at end of second year.
{l+if ir II third n
( l + j y M II fourth n
1
1
1
\+i :
. 1 + i ;
• \+i :
: 1+i
: (l+if
: (l + if
LOGARITHMS FOE THE COUNTINGHOUSE. G7
and so on. Therefore, at the end of the nth. year the amount of
£1 and interest compounded would be (1 + i)".
This multiplied by any principal sum gives ^ ( l + t ) " = the
amount of ^ in w years.
Log. s = log. p + n log. (1 + i).
Bide.—Eaise the amount of £1 at the first year's end, viz.,
1+i to the same power as the number of years, and multiply
the result by the principal.
Required the amount of £100 in four years at 5 per cent.,
100 X (105)*.
Log. (1 + O = log 105= 0212
n= 4
Mlog. (l+«) 0848
Log. 100= 2
Log. 100 + 4 log. (105) = 20848, which is the log. of 1215, or
£121, 10s.,—the correct result being £121, l is
Required the amount of £3750, accumulated at 5 per cent, per
annum, for 14 years.
£3750 X (105)1* = £7424, i5s_
14. Log. 105 =0212x14= 2968
Log. 3750 = 35740
38708 the log. of 7427
which gives £7427, or about £2, 5s. more than the correct amount,
arising from the table giving log. 105 as "0212 instead of '0211893.
Present Values.—
As 1 + 4 : 1 ; : 1 : ^^ r =p.v. of £1 due 1 year hence
1 . i l l .,
" 1 + ^ = 1 =^ (TTÏp=(T^)3= " " 3 years „
M 1l + « :1 1 : :,:; 1 r—•  . 1 ^r = ir rr «years n
(l+i)"i (l+ï)" •'
Required the present value of £500, due 10 years hence, at 4 per
cent, per annum, accumulated yearly.
^ ^ = £337, 15s. 7d.
68 THE ACCOUNTANT'S HANDBOOK.
10 Log. 1 0 4 = 0170x10 = 170. Log. 500 = 26990.
26990 170 = 25290 the log. of 3381 or £338, 2s,, or 6s. 5d. in
excess of the true result.
Note.—Where it is desired to accumulate interest at other
periods than once a year, instead of (I + i)'' in either the compound
1 4 — J e.g., for
half yearly accumulations m = 2 . •. (1 + ^1)2"
quarterly n m = 4 .. (1+;i)*"
THE APPOETIONMENT ACT, 1870.
It is enacted that after 1st August 1870—' All rents,
' annuities, dividends, and other periodical payments in the
' natui'e of income shall, like interest on money lent, be con
' sidered as accruing from day to day, and shall he apportion
' able in respect of time accordingly.
' The word " Dividends " includes (besides dividends strictly
' so called) all payments made by the name of dividend, bonus,
' or otherwise out of the revenue of trading or other public
' companies, divisible between all or any of the members of
' such respective companies, whether such payments shall be
' usually made or declared at any fixed times or otherwise;
' and all such divisible revenue shall, for the purposes of this
' act, be deemed to have accrued by equal daily increment
' during and within the period for or in respect of which the
' payment of the same revenue shall be declared or expressed
' to be made, but the said word " dividend " does not include
' payments in the nature of a return or reimbursement of
' capital.'
These clauses, along with the Apportionment Act of 1834,
are very frequently under the consideration of accountants.
The application of the statutes sometimes entails temporary
hardship and inconvenience upon certain persons, such as
THE APPORTIONMENT ACT, 1870. 69
liferenters and others. For example, a testator directs his
trustees to retain in trust certain investments made hy him,
and to pay over the income to a certain beneficiary. The
investments may be bank or insurance shares, payment of the
dividends on which is long postponed. In such cases the
beneficiary may be debarred from the receipt of income for a
year or more after testator's decease. This loss is made good
when the liferent ceases or when the stocks are sold. The
dividends are held to have accrued by equal daily increment
during the period of the account out of which the profits have
arisen, irrespective of the dates of payment of the dividends.
ETnmple.
A testator died on 3rd July 1887, leaving £2900 National Bank
of Scotland stock. The Bank's year ends on 1st November, and
dividends are payable in January and July following.
The dividend at 15 per cent, per annum, due 12th
July 1887, was payable out of profits for year
ending 1st November 1886, and therefore
effeirs to capital, . . . . £217 10 0
The dividend of 15 per cent, per annum, due 10th
January 1888, was paid out of profits for year
ending 1st November 1887, and being for the
first half of that year, viz. to 1st May, it falls
entirely to capital, . . . . £217 10 0
The dividend due 12th July 1888 is the balance of
dividend at 15 per cent, per annum to 1st November
1887, and is therefore apportiouable—
To Income, 121 days from 3rd July to 1st November,
. . . . £144 4 0
To Capital, balance of dividend, . . . 73 6 0
Thus giving to Capital proportion for 244
days from 1st November 1886 to
3rd July 1887, . . . £290 16 0
Two points may be noted in this apportionment, which has
been carried out in the customary manner:—
1> The liferenter might fairly have claimed that the dividend
70 THE ACCOUNTANT'S HANDBOOK.
due 10th January 1888 should have been apportioned as an
instalment on account of dividend from 1st ISTovember 1886 to
1st November 1887, and in which the liferenter was therefore
interested to the extent of 3fsth parts. If that had been done
he would have received £72, 2s. out of the January 1888
dividend, and a similar sum out of the July 1888 dividend.
A liferenter in such circumstances would probably be entitled
to insist on this mode of apportionment if the company failed
before the second half of the dividend became due. It is
usual, however, to defer payment of the apportioned part until
' the entire portion of which such apportioned part shall form
' part shall become due and payable,' in accordance with the
Apportionment Act, 1870, sec. 3.
2, A fair apportionment would not have been effected by
giving to capital out of the July dividend either 63 days'
interest at 15 per cent, on £2900, or i%\ parts of the halfyear's
dividend.
APPORTIONMENT OF PRICE OF LIFERENTED STOCKS SOLD.
In the case Donaldson v. Donaldson's Trs., 12th Dec. 1851,
14 D. 165 ; 24 Jurist 173 ; 1 Stuart 147.
' A party by his trustsettlement constituted his widow
' liferentrix of his property, part of which consisted of shares
' in two jointstock shipping companies. The trustees sold the
' shares in both stocks, receiving £10 per share of the stock of
' the one company " in lieu of dividend " over and above £140
' of price for the shares, and in the other a slump sum: held
' that, although, in the first case, no dividend was paid by the
' company at the end of the year, the widow was entitled to
' payment, out of the price, of such a proportion of the £10 per
' share as effeired to the proportion of the year during which
' the trustees held the stock; and in the second case (in which
' a dividend had been paid), of a sum equal to the like propor
' tion of the dividend paid.' Further, ' That in ascertaining
APPORTIONMENT OF PEICE OF LIFEllENTED STOCKS SOLD. 71
' the proportion thus payable to the widow, the Court would
' not enter into any encj^uiry whether, at the date of the sale,
' any profits had been realised out of which a dividend could
' be paid, but would assume that there had been then realised
' a proportion of the dividend corresponding to the portion of
' the year which had then elapsed.'
Following this case, where liferented stocks are sold a
portion of the price must be transferred to revenue to compensate
the liferenter for the, interest which he would otherwise
lose by the sale of the stock.
In the case Cameron's Factor v. Cameron, 15 Oct. 1873, 1
Eettie 21. ' In a question between a liferenter and fiar, held that
' the price of shares sold in the interval between two dividends
' fell to be divided between capital and revenue, on the basis of
' the dividend admitted by the parties to have been expected at
' the date of sale, and not of the dividend ultimately paid.'
In determining the amount to be treated as revenue interesting
questions may arise. For example, a testator died on 1st
October 1887 leaving the liferent of his estate, consisting inter
alia of 100 shares of the Liverpool and London and Globe
Insurance Company, sold for settlement 30th May 1888 cum
div. The liferenter will therefore fall to be credited, out of
the price, with proportion of dividend on 100 shares at the
rate expected at the time of sale from 1st October 1887 (the
date of the death) to 30th May 1888 (the date of sale), in
respect of loss of income thereby caused to him. The Insurance
Company had in May 1888 declared a dividend for year
1887 at £1, 6s. per share, paid by an interim payment of 8s.
per share on 22nd ITovember 1887, and 18s. per share balance
on 22nd May 1888. In May 1889 a dividend at 28s. per
share for the year 1888 was declared, and it might be argued
that the calculation of the income falling to the liferenter
ought to be made on the 100 shares at the rate of £1, 6s. per
share up to 31st December 1887; and at the rate of £1, 8s.
per share from that date to 30th May 1888 (date of sale).
72 THE ACCOUNTANT'S HANDBOOK.
instead of at £1, 6s. per share for the whole period. It seems
a sufficient answer that at the time of the purchase the buyer
of the shares transacted on the basis of the former dividend,
viz., 26s. per share, and that was accordingly the rate of dividend
expected at the date of sale.
Similarly, if trust funds which are liferented be invested
in stocks or shares between dividends, a part of the price
paid is for the accrued dividend to date of purchase. When
the first dividend is received by the trustees, they are not
entitled to treat the whole of it as revenue, but must carry to
capital a proportion corresponding to the period of earning
which had run prior to the date of purchase.
APPORTIONMENT OF HALFYEARLY OK QUARTERLY COUPONS.
The question whether any particular halfyearly or quarterly
sum to be apportioned is to be treated as accruing from day
to day over the period covered by the halfyear or quarter, or
as a portion of the larger sum due for the whole year, very
frequently arises, and although it is difficult to gather a
definite rule, either from the decisions in Court or from
general practice, the principles determining the proper treatment
of each case are easily explained. As an example, take
the case of a debenture, dated 15th May, and with interest
payable at Martinmas and Whitsunday. The liferenter of it
dies on 13th August after its date. The halfyear consists
of 180 days, and the period 15th May to 13th August (90
days) is half of it. Are the liferenter's representatives entitled
to half of the interest for the halfyear, or to ggg of a whole
year's interest, which is a less sum ? There can be no doubt
that they are entitled in equity only to the less sum, being
the proportion of the year's interest equal to 90 days, for it is
seen that if the liferenter's representatives get ^ of a year's
interest they draw 1^ days interest too much, and the fiar
would only obtain ^ of a year's interest for the remaining
APPORTIONMENT OP HALFYEARLY OR QUARTERLY COUPONS. 73
half of the period to Martinmas, and g of a year's interest for
the 185 days from Martinmas to Whitsunday, or ;  of a year's
interest for 275 days, that is, 1^ days interest too little.
If the investment be £1,000 at 5 per cent., then the liferenter's
representatives ought to receive 90 days interest at
5 per cent, £12, 6s. 7d., not £12, 10s. as would be given by
the method of settlement by counting 90 days, as the half of
the Whitsunday to Martinmas halfyear.
The fact is that £25, 6s. lOd., and not £25, is the interest
from 11th November to 15th May, and that sum, with £12,
6s. 7d. for each of the two quarters from 15th May to 13th
August and to 11th November, gives the £50 for the year.
But how stands the case if the debenture expire at Martinmas,
having been current for a few years from a previous Martinmas?
Then the liferenter had received only £25 for the halfyear
from Martinmas to Whitsunday (185 days) instead of £25,
6s. lOd., and it would be unfair to settle with the representatives
by giving them either £12, 6s. 7d., the 90 days interest
from Whitsunday to 13th August, or £12, 10s., being half of
the current halfyear's interest, in respect that 90 days is the
exact half of the Whitsunday to Martinmas halfyear. What
the liferenter is entitled to is the balance of 6s. lOd. unpaid of the
185 days interest and £12, 6s. 7d. interest for 90 days, making,
with the £25, £37, 13s. 5d., being the interest for 275 days
from Martinmas up to 13th August, and leaving £12, 6s. 7d.
over of the year's interest to pay to the fiar, being exactly
the 90 days interest from 13th August to Martinmas. This
method ought to be followed in all cases of interest payable
periodically at a certain rate per cent, per annum, but where
the income is of the nature of profits earned over a particular
period, then the period must stand by itself to be apportioned
as if the earning had taken place by equal daily increment
over that period.
Another practical illustration of the principle contended for
may be useful:—
74 THE ACCOUNTANT'S HANDBOOK.
On 13th August 1889 a sum of £1000 was lent to company
A at 5 per cent, for the period to Whitsunday 1899, and a
similar sum to company B for the period to Martinmas 1899.
Both companies were to issue debentures with interestcoupons
payable at Martinmas and Whitsunday. Company A ought
to make the first coupon for £12, 13s. 5d. (a halfyear's
interest less 90 days, that is for 92^ days), the other 19
coupons being each for £25. In this way the company pays
92^11821 = 275 days interest for the period from 13th Aug.
1889 to Whitsunday 1890, which is correct. Company B
ought to make the first coupon for £12, 6s. 7d., and the 20
coupons for the ten complete years for £25 each.
APPORTIONMENT OF EENTS.
The Apportionment Acts modify the old Scotch legal rules
for division of rents between heir and executor or liferenter
and fiar. The general principle now applicable is, that rents
are held as accruing from day to day over the period of the
occupation in respect of which they are payable. The only
difficulty is to determine the period of occupation for which
the rent is paid. Eents payable for a term, antecedent to the
proprietor's or ancestor's death, fall into his executry estate,
and further, the executors are entitled to a proportion of the
rents of the current term, from its commencement to the date
of death. The executor, in short, takes what the proprietor
would have received had he drawn the rents daily for the
occupation down to the day of his death. By the old rule of
law, the rent of pastoral or grazing farms was payable
halfyearly in advance—the entry being usually Whitsunday,
and the first halfyear's rent being payable at Whitsunday,
the term of entry, and the second at Martinmas for the first
year's possession. And, notwithstanding the Apportionment
Acts, where rents have been contracted for in advance, a
liferenter has no claim upon the executors for repayment out
APPOETIONMENT OF RENTS. 75
of the advance rent of the proportion for the period subsequent
to the date of death. Where, however, as is
customary in leases, the terms of payment of the rent of
grass farms with Whitsunday entry are Martinmas and
Whitsunday after entry, such rents ought, notwithstanding
the old rule of law, to be deemed accruing from day to day
from the term of entry, and be apportionable accordingly.
Prof. Eankine {Leases, pp. 311 and 312), following the case
of Campbell v. Campbell, 18th July 1849, 11 D. 1426, takes
a contrary view, but that case was decided under the 1834
Act, which is less wide than that of 1870.
Case I.—Proprietor A. died 1st February, possessed of
pastoral farm.
Tenant's entry Whitsunday, rents payable halfyearly.
First payment at Martinmas after entry.
A.'s executors would be entitled only to a proportion payable
at Whitsunday after his death, corresponding to the
period from the preceding Martinmas to 1st February, the date
of death.
Case II.—Proprietor B. died 1st February, possessed of
pastoral farms.
Tenant's entry Whitsunday, rents payable halfyearly.
First payment at Whitsunday, the term of entry.
B. having during his life at Martinmas received (or become
entitled by law or by the lease to receive) the balance or
second half of the year's rent current at his death, there is no
claim on his estate for repayment of a proportion of the rent.
Nor could B.'s executor make any claim to an apportionment of
the rent payable at Whitsunday after his death, because that rent
was for the possession commencing at that date. The case of
Lord Herries v. Maxwell's curator, 6th February 1873, 11 M.
396, appears somewhat opposed to this view, but that was
the case of an arable farm with entry at Whitsunday and
separation of crop, and rent payable at Martinmas and
Whitsunday after entry. The owner died 18th July 1872,
76 THE ACCOUNTANT'S HANDBOOK.
having already become entitled to the whole year's rent from
Whitsunday 1871 to Whitsunday 1872, and for crop 1872,
and yet the Court held his executor entitled to a share of the
next Martinmas rent (which was declared by the lease to be
for the halfyear preceding) corresponding to the period from
Whitsunday to 18th July 1872.
By the third section of the Apportionment Act, the apportioned
part of a rent became payable ' when the entire portion
' of which such apportioned part shall form part, shall become
' due and payable, and not before.' 'This by implication
excludes from apportionment rents already received by the
proprietor.
There is an exception to this, however, in the case of parties
like heirs of entail, who are not entitled to alter the terms of
rent payment to their own aggrandisement, but are bound to
manage the estate secundum bonum et êequum.
In the case of arable farms, the crop is the dominant
feature, and the variation in the harvesttime from year to
year, and in different places has given rise to the adoption of
a generally accepted rule, that Martinmas is the close of the
cropyear.
Case III.—Arable Farm. Entry to houses and grass at
Whitsunday 1888, and to arable land at separation of crop,
1888. Eent payable at Martinmas 1889 and Whitsunday
1890, for crop and year 1889. Proprietor died 31st December
1888. His representatives would receive at Martinmas 1889
out of the halfyear's rent then payable, the proportion
effeiring to the 50 days from 11th November to 31st December.
In dealing with arable farms, the preparatory period from the
Whitsunday of entry to the houses to Martinmas or separation
of crop, when the tenant gets entry to the arable land goes
for nothing, and the rent is held to accrue by equal daily
increment from Martinmas to Martinmas, and is apportionable
accordingly. The term of payment does not affect the
question except in cases where under the lease the rent had
APPORTIONMENT OF RENTS. 77
been paid in advance, in which case the executor of a
deceased proprietor cannot be called upon to repay a proportion
of such rents received in advance.
The legal authorities are at one in holding that a possession
must be regarded as either pastoral or arable. There is no such
thing recognised as a mixed holding. It is not easy, however,
to reconcile with equity the ignoring of the possession of
houses and grass from Whitsunday to Martinmas after entry
in apportioning the rents of arable farms.
It is the practice in rent calculations to reckon Whitsunday
as 15th May, and Martinmas as 11th November, these being
the legal terms. But it is open to grave doubt whether for
purposes of the Apportionment Act the removal terms 28th
May and 28th November ought not to be taken. To take an
extreme case, the proprietor of a shop rated at £500, died on
1st June. He had occupied the premises himself up to 28th
May, the removal term, and had then given place to a tenant
under a lease, who had contracted to pay a halfyear's rent on
11th November and a halfyear's rent on 15th May following.
By the usual rule, this proprietor's executor would receive a
proportion of the Martinmas rent equal to the period from
15th May to 1st June, although the proprietor had himself
enjoyed the beneficial occupation from 15th May to 28th May.
It would appear more equitable to make the calculation over
the period of actual possession.
Prof. Eankine, in a note on page 311 of his book on
Leases, states that as house rents are legally payable at Whitsunday
of entry, and Martinmas thereafter for the year from
Wliitsunday to Whitsunday, the executors of an owner
dying between Whitsunday and Martinmas would be entitled
to the first halfyear's rent, and in addition to an apportioned
part of the second halfyear's rent. Until this extreme view
is confirmed by the Courts, accountants will doubtless apportion
the rent according to the period of possession (vide opinion
of Lord Deas, Weir's Executors v. Durham, l7th March 1870,
78 THE ACCOUNTANT'S HANDBOOK.
8 M. 729). By the Act, rents ' shall, like interest on money lent,
' be considered as accruing from day to day, and shall be appor
' tionable in respect of time accordingly.' Interest on money
lent implies that the use of the capital precedes the payment of
interest. Eents are by the Act then to be considered as accruing
like interest, which is impossible if, at the same time, a rent
payable at Martinmas for the occupation of premises for the
halfyear from the pr ceding Whitsunday is to be considered
as legally due at said preceding Whitsunday. That is to say
there was no period over which it accrued at all. The Apportionment
Act is equitable in its results, when the broad
principle of apportionment, according to time of enjoyment, or
earning which is clearlj^, laid down in the interpretation clause
is adhered to. The case of Blaikie v. Farquharson, 18th July
1849 (11 D. 1456), and Lord FuUerton's opinion in the case
of Campbell, 18th July 1849 (11 D. 1453), are instructive, for
chey explode the idea that the Apportionment Acts were
passed for the benefit of executors. These Acts were passed to
make the law equitable to both heir and executor.
APPORTIONMENT OF BURDENS.
The 1834 Act provides that ' all just allowances and de
' ductions in respect of charges on such rents, annuities,
' pensions, dividends,' &c., shall be made in the apportionment.
The 4th section of the 1870 Act, in providing for the
recovering of the apportioned part, directs that ' proportionate
' parts of all just allowances' be deducted.
The rule is to calculate all taxes, interest, annuities, &c.,
as accruing from day to day over the period in respect of
which they are declared or expressed to be made, and to charge
the proportion prior to the date of death to executry.
Annuities.—If an annuity be declared payable halfyearly
in advance, the executor of a proprietor, who had paid the
annuity for the halfyear current at the death, could not
APPORTIONMENT OF BURDENS. 79
recover the proportion efi'eiring to the period after the death
from the next heir. This was decided in Paul (or Hard) v.
Anstruther, 14th November 1862, 1 M. 14; Aff., 15th February
1864, 2 M., H.L. 1. This decision is consistent with
the Apportionment Act, and with equity, for a proprietor could
not recover from the annuitant's executor a proportion of the
annuity paid in the event of the annuitant's death between
terms.
In Paul's case, and also in Learmonth v. Sinclair's Trustees,
23rd January 1878, 5 E. 548, it was decided that the first payment
of an annuity payable halfyearly, beginning the first term's
payment at the first term after granter's death for the period
preceding, fell to be apportioned between the personal representatives
of the deceased heir of entail who granted the
annuity and the succeeding heir, in the same way as the rents
for the halfyear current at his death.
Interest.—It was also held in lastcited case that the payment
of interest on a bond, affecting the entailed estates for
the halfyear current, at the death of the heir in possession
fell to be apportioned in the same way.
RentCharge on Improvement loan.—In lastcited case it
was held that the payment of rentcharge (capital and interest),
for the halfyear in which the entailed proprietor died, fell to
be apportioned between his personal representatives and the
succeeding heir of entail, according to the number of d^ys he
had survived the previous halfyearly payment.
In the previous case of Maitland v. Maitland, 1st February
1877, 4 E. 422, an opinion had been expressed that, by a construction
of the Improvement Acts the instalments, both capital
and interest, fell to be paid by the heir in possession at the
date when each instalment fell due. Lord Gifford, however, in
Learmonth's case, 5 E. 554, stated that the question did not
really arise in Haitian d's case.
Pullic Burdens.—In Maitland's case it was decided that the
executors of a deceased proprietor of an entailed estate were
80 THE ACCOUNTANT'S HANDBOOK.
not liable for burdens effeiring to the possession after the
date of death: nor were they liable for any part of an assessment
imposed by consent of heritors after the date of death,
though it was required partly to meet debts incurred prior to
the date of death. Stipends are apportioned in a question
between deceased proprietor's executors and next heir; but not
in a question between the deceased incumbent's representatives
and the next incumbent. If the incumbent survive Whitsunday,
his executors draw the whole year's stipend, half as
stipend and half as ann. If he survive Michaelmas, they
draw the whole of that year's stipend, and, as ann, half of
that for the following year. (Latta v. Edinr. Eccles. Comrs.,
5 E. 266, 30th November 1877.) In Maitland's case, 4 E. 426,
it was held, ' as^to the stipend, the executrix drew onehalf of
' the rents for crop 1876, and must pay half the stipend.'
EXEMPTIONS UNDER THE APPOKTIONMENT ACT, 1870.
Sec. VI. ' Nothing in this Act contained shall render
' apportionable any annual sums made payable in policies of
' assurance of any description.'
Sec. VII. ' The provisions of this Act shall not extend to
' any case in which it is or shall be expressly stipulated that
' no apportionments shall take place.'
INSTALMENT LOANS, RENT ClIAKGES, ETC. 81
INSTALMENT LOANS, EENT CHAEGES, &c.
J. Low borrowed from the Edinburgh Mortgage Company
£1000, to be repaid by six halfyearly payments of £181, l i s.
The following state shows the extinction of the debt, and the
principal and interest in each payment:—
Sum borrowed, .
Halfyear's interest, .
1st halfyearly payment,
Halfyear's interest, .
2nd payment, .
Halfyear's interest, .
3rd payment,
Halfyear's interest, .
4th payment,
Halfyear's interest, .
5th payment.
Halfyear's interest, .
6th payment,
£1000
25
0 0
0 0
£1025
181
843
21
864
181
682
17
700
181
518
12
531
181
349
8
358
181
177
4
0
11
9
1
10
11
19
1
1
11
10
19
9
11
18
14
13
11
2
8
0
0
0
9
9
0
9
6
3
0
3
3
6
0
6
11
5
0
5
7
£181
181
11 0
11 0
Interest.
£
25
21
17
12
89
19
14 11
Principal.
156
160
164
168
172
177
0 liooo
11
11
16
F
82 THE ACCOUNTANT'S HANDBOOK.
Turning up a book of Tables of Annuities certain, such
as those prepared by Mr Andrew Hugh Turubull, manager of
the Scottish Widows' Fund, you find that the interest paid on
the amount of the loan from time to time remaining due is
£5 per cent. If, then, you prepare a state in the form on page
81, adding each halfyear's interest and deducting the sum
paid, you will be able to ascertain how much of each payment
is interest and how much is principal, and so be able to make
the proper entries in your books.
J. Low would make the following entries in his books.
When he received the £1000 it would be entered in his Cash
Book, Dr. side. To Edinburgh Mortgage Company, Advance on
Property to be repaid by six halfyearly sums of £181, lis.
each, £1000; and this sum would be posted to the credit of
the Edinburgh Mortgage Company account for the loan,
opened in Low's ledger.
When the first payment became due he would, through his
journal, credit the Edinburgh Mortgage Company £25 of
interest on the loan and debit his interest account £25, and
when he paid the amount he would debit the Edinburgh
Mortgage Company by posting from the cash book £181, lis.,
being the first payment.
The same result would be obtained if J. Low could be
trusted to pay promptly the amounts as they became due
without making the Journal entry, if he split up the amounts
in the cash book thus :•—
By Edinburgh Mortgage Company, first repayment
of principal, . . . . £156 11 0
By Interest, on sum due to Edinburgh
Mortgage Company for halfyear, . . 25 0 0
The first entry posted to the debit of the Mortgage Company,
£156, lis., has the same effect as the Journal entry of interest
to the credit and the cashbook entry of the whole payment of
principal and interest to the debit, £181, lis.
The advantage of the Journal entry, made when the interest
INSTALMENT LOANS, KENT CHARGES, ETC. 83
is due, is to show by J. Low's books the state of the accounts,
though the sum be not paid when due.
In settling halfyearly or periodical payments of the nature
above described, such as rent charges, income tax must be
deducted from the interest at the rate of tax current during
the period over which the interest accrued.
There is another method of effecting the division of the
payments into repayment of principal and interest, which
may be exemplified by using the same case.
The first halfyearly payment
is, . . . £181 11 0
Less interest for a halfyear
on £1000, . . . 25 0 0
1st repayment of principal,
Add interest thereon, ,
2nd repayment, .
Add interest thereon,
3rd repayment, .
Add interest thereon,
4th repayment, .
Add interest thereon,
5th repayment, .
Add interest thereon,
156 11
3 18
160 9
4 0
164 9
4 2
168 11
4 4
172 16
4 6
0
3
3
3
6
3
9
4
1
4
6th repayment, . £177 2 5
Principal.
£ s. d.
156
160
164
168
172
177
£1000 0 0
Interest.
89
11
In analysing the former example, it was shown how the
transaction would be treated in J. Low's books, and it will
now be shown now the transaction is treated in the Company's
books.
84 THE ACCOUNTANTS HANDBOOK.
The amount advanced is entered in the cash book as paid
to J. Low, and is entered to the debit of his loan account in
the loan ledger. A current account, also in J. Low's name, is
opened in the loan ledger. At the end of the first halfyear
the current account is debited through the Journal with the
first payment £181, lis., and the Loan account is credited
with the repayment of principal £156, lis., and Interest on
Instalment Loans account, with the interest X25, as follows:—
Credit Interest on Instalment Loans, J.
Low, halfyear's interest on loan, £25 0 0
II J. Low, loan account, Loan Ledger,
Ist repayment of principal, . 156 11 0
Debit J. Low, current account, 1st payment,
£181 11 0
When J. Low pays the sum due, £181, lis., his current
account is credited through the cash book.
PEOrEETY AND INCOME TAX.
This tax is payable on the profits derived from property,
from trade, from investments, or from offices or employment.
It is assessed for the year from 5th April to 5th April, and
varies according to the exigencies of the Exchequer. It has
been as high as Is. 4d. at the time of the Crimean War, and
as low as 2d. per £ in 1875 and 1876.
Incomes under £150 are exempt, and parties whose whole
income from every source is under £400, are allowed an
abatement of £120.
The tax is retained from interest (not casual) by the party
paying the interest, who must account for the tax to Government.
If tax be thus retained from, or be paid, in any way, by a party
who is entitled to exemption or abatement, a claim can be
made by him on the Inland Eevenue for recovery of the tax
at any time within three years of the close of the assessment
year in respect of which recovery is claimed, 23 Vict. c. 14, § 10.
TKOPEUTY AND INCOME TAX. 85
Printed forms to be used in making claims are supplied by the
Inland Eevenue. Taxpayers paying life assurance or deferred
annuity premiums on own or wife's life are entitled to abatement
in respect of premiums paid to an extent not exceeding onesixth
of their income, or to recover such tax by lodging a
claim for repayment when their whole income has been
charged with tax. The income of a married woman living
with her husband is his income in the sense of the statutes.
Merchants must pay tax upon their whole profits according
to the average of the last three years. They are not entitled
to deduct an annuity or interest paid on loans before ascertaining
profits. They must include such annuity or interest
in their profits, and pay tax accordingly, but they are entitled
to retain the tax from the persons to whom they pay the
annuity or interest.
In the case where a merchant has earned in any year less
profit than the average on which he was assessed, he may, at
the end of the year, prove this, and have a new three years'
average struck, including the unprofitable year in question.
He will only obtain return of tax upon the difference between
the three years' average before the year of assessment, and the
three years' average including the year of assessment. Wliere
a business has ceased during an assessment year, return of tax
can also be claimed. 5 and 6 Vict. c. 35, §§ 133 and 134;
28 Vict. c. 30, § 6.
Farmers are taxed on their profits, which are hfild, for
taxation purposes, to be onehalf the annual value or rent in
England, and onethird in Scotland. If their actual profits
fall short of this, farmers may claim abatement in proportion
to the deficiency. Practically, the tax is levied at reduced
rates. Schedule B., on the annual value.
Interest on heritable bonds or mortgages is also subject to
deduction of tax. For example :—A. owns a house assessed for
property tax at £100, and has a loan of £1000 over it at 4 per
cent., on which he pays £40 a year of interest to B. A. must
86 THE ACCOUNTANT'S HANDBOOK.
pay property tax on £100 to the Inland Eevenue, but he retains
from B. tax on £40 interest. The ultimate effect is that A.
pays tax on £60, the extent of his real interest, and B. pays
tax on £40, the income derived by him out of the subject of
assessment. Interest on bonds is usually paid at 15th May
(Whitsunday) and 11th November (Martinmas), and when
the tax is altered the alteration takes effect from 5th April.
It is proper, in calculating the tax in these cases, to divide
the interest into the portion prior to 5th April and the portion
thereafter accruing. As the two half years are unequal, it is
necessary to go back on the previous halfyear in the adjustment.
Tables published at each term are usually employed for the
purpose of the calculation. The approximate practical rule is
to take the tax for the whole period at the rate up to 5th
April and add or deduct gth of the difference in rate over
the whole year's interest. The number of days from 5th April
to 15 th May is 40, which is nearly oneninth of a year. As
I is rather more than ^^5, the error in the result is to overstate
the addition or deduction for the 40 days to the extent
of one penny for every £657 of yearly interest when the
difference of rate is one penny, and the year is not a leap year;
Id. on every £549 of interest when the year is a leap year.
Tax is deducted at the rate current when the interest falls due
on dividends and interest from public funds, or from foreign loans or
from foreign or colonial companies.
EXAMPLE I.
Deductions per £ of interest.
Year's interest to Whitsunday 1888, .£1.
Tax at rate to 5th April 1888, as for one year, . 7d.
40 days out of 366 at Id., . . . . i0928
689072
Halfyear's interest to Whitsunday 1888, £1.
Tax at rate to 5th April 1888, . . . . 7d.
40 days out of 366 at Id. less on