Check Figures in Posting.—The use of the check figures 9 and 11 in the verification of the arithmetic processes of addition, subtraction, multiplication, and division was referred to earlier. Other odd numbers, such as 13, 17, and 19, are less frequently employed. The number 11 gives perhaps the most satisfactory results from the standpoints of ease of application and accuracy of results. Its use in the verification of postings is somewhat as follows:
An additional column similar to the folio column should be provided in all the books for the check numbers. As an amount is posted to the ledger the bookkeeper should determine the check number from the item as it is written in the ledger—not from the journal item—and enter it in the check column in both ledger and journal. When postings from the journal are complete, the journal is totaled and the check figure for its sum found. If this agrees with the sum of the check figure column in the journal, posting is presumably correct. If the two items do not agree, the check number for each amount in the journal debit column should be proved. Inasmuch as the check number used was obtained from the ledger amount, a wrong check number for the journal amount would indicate a wrong posting which should now be turned to and corrected.
The check numbers in the ledger accounts are used only for verifying account totals and balances and may even be carried into the trial balance for proving it. Practice in the use of any check number soon develops accuracy and speed and makes the method easy of application and commendable wherever the work must be proved day by day as completed.
Errors in Columnar Books and Controlling Accounts.—These are frequent sources of trouble unless handled with care. In the chapter on columnar books, it was laid down as a basic principle that all items appearing in the general amount column should be entered in some analysis column, i.e., analysis columns should be provided for distribution of all items. This makes proof of distribution possible and establishes formal equilibrium of the book so that errors in posting are not so likely to occur.
Care must be exercised in posting the discount columns of the cash book to the proper sides of the respective accounts.
In the use of controlling accounts, where a special column is not provided, as for Accounts Receivable on the credit side of the cash book, posting of the item should be made both to the individual account and also to the controlling account.
Trial Balance Adjustment Account.—Where error creeps into the ledger and seems impossible of detection at a monthly trial balance period, the device of forcing a balance is sometimes used by setting up an account called “Trial Balance Adjustment,” “Error in Trial Balance,” or some other similar title. To this is charged or credited the amount of the difference in the trial balance. It is a temporary makeshift, a method of holding the item in suspense until the error is located. Needless to say, the inclusion of such an account does not improve the appearance of a trial balance, but may be countenanced as a temporary expedient.
CHAPTER LII
SOME APPLICATIONS OF INTEREST
AND PROPORTION
The Nature of Interest.—Interest may be defined as the charge made for the use of money. Sprague defines it as the increase in principal due to the lapse of time. The ethics of the practice of charging interest was questioned by the ancient world and not fully conceded as right until modern times. Various economic theories have been evolved to explain the true character of interest. Whatever they may be, interest as a commercial phenomenon is thoroughly established and countenanced by the law, although in many states an exorbitant interest charge is declared to be usury.
Commercial Interest.—Commercial interest, so-called, usually contains an element in addition to the time-charge for the use of money. That element may be: (1) in the nature of a premium for insurance against the risk of losing the money loaned; or (2) where capital in some fixed form is loaned, in the nature of an allowance or additional charge to cover the shrinkage in the asset loaned due to wear and tear.