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The advisability, owing to the system of treating discount in vogue at Lloyd's, of forming a Discount Reserve Account, except in cases where the Brokers' Accounts are kept on the net principle, has already been indicated. The usual method of working such an account would be to debit thereto the amount of discount allowed during the year, and, after bringing forward a credit balance calculated on the amount of the book debts outstanding at the end of the period, to write off the difference to Profit and Loss. This system, however, is not usually adopted by underwriters owing to the labour involved in calculating the actual amount of discount to be reserved on each broker's balance, which, as before stated, has absolutely no relation to the amount of such balance. A simpler and more convenient method is to credit the account with 10 per cent. of the total premiums for the current year, and then debit the actual discounts from the monthly totals in the Cash Book. The balance will then be carried forward, and should be sufficient to cover all the outstanding discounts. It may be found necessary, however, to credit the account with an additional 1 per cent. every few years, owing to the fact that the brokers, who themselves keep their books net, invariably take off the 10 per cent. discount from each individual premium, and, moreover, take advantage of all fractional differences. Consequently, in a large account, the difference between the 10 per cent. discount on the individual amounts and on the total may be considerable.

The Charges Account will contain all those office expenses— such as Rent, Salaries, Subscription to Lloyd's, &c.—as shall have been agreed between the "names" and their agent to be debited. The agent's fixed salary receivable from each name will also be charged in this account.

The agent's Personal Account will be credited with the percentage of the profit made by each name to which he may

be entitled, being debited, of course, with the cash received by him when he draws in respect thereof.

The Reserve and Underwriting Accounts will be discussed in the succeeding chapter.

'Investment Ledger.—

The necessity for the accumulation of investments will be discussed in the next chapter, and the following remarks will be confined to the book containing a record of them. As the amount of investments in an account of any magnitude will be very considerable, and the dealings therein frequent, it is advisable that a separate Investment Ledger be kept for each name. Each investment will have a separate account, which will be provided with two columns on each side, the first being for Income and the second for Principal. The dividends received will be posted from the Cash Book to the credit Income column, and at the end of each year the total thereof will be transferred to the Dividend Account in the Private Ledger, the balances on the Principal column being brought down after the adjustment of profit or loss on realisation. The adoption of an Income column in each account, instead of posting all the dividends to one total account as received, is advocated, in order that a complete history of each investment may be recorded. A form of this Ledger will be found on the adjacent page.

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The Underwriting Accounts.—

THE necessity of keeping the Underwriting Accounts-which correspond to Profit and Loss Accounts in other businessesreferring to the period open, separate and distinct from one another, in order that the final result of each year's operations may be accurately ascertained, has already been shown. Accordingly if the period is taken as as three years—and this has been found by experience to be usually sufficient— there will at any given time be three Underwriting Accounts respectively open in the books; and in the pro formâ accounts that will be found appended this will be seen to be the case, the example there given being intended to show the position of affairs at the end of the year 1902.

Turning first to the 1902 account, which only records transactions relating to the year current, it has obviously no starting balance equivalent to those the earlier accounts will show, being in the first stage of its existence. The second stage

thereof will be reached at the end of 1903, when it will present a simiar appearance to our pro formâ 1901 account, now shown as at the end of 1902. The third and last stage will be reached at the end of 1904, which will correspond to the position the 1900 account is now shown at, the final balances then being transferred in a similar manner.

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