EXPLANATION OF THE PRECEDING ACCOUNT.

In this account the days are reckoned from 30th June, 1887, the date of the last balance, forwards, to each of the days on which the amounts become due (that balance having no Interest to be calculated upon it), and each Principal is, as before, multiplied by its respective number of days to create an Interest Number.

In this account one sum on the Cr. side is due on 16th February, or before the day of the last balance; the days for this item are therefore calculated backwards from 30th June to 16th February, and this alone forms what is called a red number to be added to the opposite side, to make it due, like the preceding balance of £118 15s. 3d., on the 30th of June, having also like it no interest or rather discount to be calculated in advance.

When these entries of the Interest Numbers have been finished, the balance of the Cash columns is taken and multiplied by the number of the days from the day when the account commences to the day on which it is made up, and the product or interest number is added to the OPPOSITE side. (In this account the amount of the Dr. side being the greater of the two sides, the product or Interest Number is added to the Cr. side.) With this correction the balance of the Interest numbers is then taken and entered, and the amount it gives of Interest is extended in the Cash column upon the same side of the account, and not on the opposite side.

To explain the reason that this method should produce the same effect as the preceding plan, we must observe, that by reckoning the days forward, as in this account, from 30th June, and applying the number of these days to the respective sums, we, in fact, reckon the Discount on each, and render them due on the day the account commences; then, when we strike a balance of the sums, exclusive of the Discount, and calculate the Interest for the days between the two periods of settlement, we add the result to the opposite side. Being interest, its nature is opposite to that of Discount; this correction thus settles the difference between the two methods, and the balance of the Interest is found as before, but, for the reason above given, it is entered upon the opposite side of the account.

The chief advantage of this method is, that the Numbers in the Discount Columns can at once be filled in; but this, by using an adjusting entry if required, may also be done with the former method, and the red numbers may in like manner be avoided, by making up the account to the last day in it, as in the following example.

It is proper further to remark, that from the practice of reckoning 10s. and above as another pound, and rejecting less sums in the calculation of the Interest, and also from the balance being taken independent of these adjustments, a little variation will sometimes arise between the results of the two methods; but if the balance be reckoned from the difference in the amounts of the pounds employed, both will agree.

EXAMPLE 4.-(Repeated by another Method as to Time.)

Account with Interest at 4 per Cent. per Annum from 30th June to 30th

Dr.

September, 1887.

Cr.

* This account is, at first, made up to the 31st December, which happens to be the last day on either side, and then, to correct or adjust it to the 30th September (92 days earlier), the Interest is allowed for the difference of time, upon this excess of the Dr. side.

+ The Balance of Numbers, 97,891 divided (for four per cent.) by 9125, makes £10 14s. 7d. Interest,

INTEREST IN BANKING ACCOUNTS.

In Banking Accounts in which interest is charged upon the debits, and allowed upon the credits, and in which variations almost daily occur in the balances, instead of either of the preceding methods, the following method is now generally adopted in London Banks, by which the labour of calculating the Interest on Country Banking accounts is much lessened.

The balances of the daily receipts and payments, or the balances of the debit and credit of the Ledger account, being entered in Dr. and Cr. columns for each month, the total amounts of the columns are taken : then if the same rate of Interest is allowed as is charged, the balance of the amounts is found, and the Interest is calculated upon it for one day at the given rate per cent.; but if, as is more usual, the rates charged and allowed are different, then the Interest is calculated for one day upon the separate amounts of both the debits and credits, and each amount of Interest, or the balance, is carried to the general account.

It is to be observed that, when any day occurs without having any sum charged (as for Sundays and Bank Holidays), the preceding day's balance must be repeated for that day, and the same must continue to be done, until a fresh entry is made in the account.

Banking accounts of this nature are usually made up every six months, to the last day of June and of December, and the Interest, by being charged to the general account, is then made part of the Principal. For the sake of convenience, however, we have taken the account as only for three months, or as if opened on Tuesday, 1st April, 1890.

The Sundays in the following account are marked by an asterisk in the table of the balances; and the balance of the preceding Saturday is entered to each Sunday as the balance for another day :

which for one day at 5% is £21 2s. 10d.

Total Cr. £12,968+ £13,461 + £25,877 = £52,306,

which for one day at 3° is £4 6s.