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Under this method the manufacturing department shows a profit of £2640. In arriving at this profit, it has been assumed that the trade price of the goods manufactured is £21,840, that is, if the manufacturer had had to buy his goods ready-made they would have cost him that amount. In order therefore to ascertain whether it pays him to manufacture his own goods, an account such as the Manufacturing Account shown above should be prepared. The Trading Account having been charged with the trade price of the goods manufactured, it follows that, in order to ascertain his profit on trading, the stock of manufactured goods must also be valued at trade price and incorporated in this account, the result being a profit on trading of £1810.

It will therefore be seen that the gross profit for the year has been £4450, consisting of Profit on manufacturing goods .

£2640 0 0 Gross profit on trading

1810

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As to how the manufacturer ascertains the trade price of the goods manufactured, this may be by various ways. He may be in a position to actually know the current market value of his productions, or he may have to estimate their value by adding a certain percentage to cost as the recognised percentage earned in the trade.

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Under the second method no account is taken of the trade price at all and the goods are valued at cost throughout. The trading department, as it were, agrees to take the goods from the manufacturing department at their actual cost, so that no profit or loss is shown on the manufacture. The stock of manufactured goods is valued at cost in the Trading Account, as the goods manufactured are also charged at cost. By this treatment a profit on the trading of £5800 is arrived at, an excess of £1350 over the total gross profit shown by the first method. The difference in the valuation of the stock accounts for this.

The first method is the preferable one, as it is certainly valuable to know whether, and by how much, each department of the business justifies its continuance, and also the inclusion in the Balance Sheet of the stock on hand at the trade price instead of the cost price is preferable, if the latter differs widely from the former, as showing the value of the stock in the ordinary market; but in connection with the first method, care should certainly be taken that the stock is not unduly appreciated. In fact, when this method is adopted it might be advisable, with the view of absolutely preventing any undue appreciation of the stock, to treat the manufacturing and trading business as one concern, and to have a reserve in the Balance Sheet of the excess of the stock as valued at trade prices over its actual cost value. Where the trade price is less than cost, the cost price will be

. ignored and the trade price will appear in the Balance Sheet. This would prevent any risk of interfering with the recognised principles of the valuation of stock as given in the article on Stocktaking.

In the second class of manufacturer mentioned, where a certain article is manufactured and sold together with other articles bought ready made, the manufacturer will in this case, as in the first, wish to ascertain what profit or loss is being made on the manufacture of that special article apart from the profit or loss made on his general trading. To enable him to attain this, the Invoice Book will require to have columns for the purchase of raw materials as distinct from the purchase of manufactured goods, and the Manufacturing Account would be similar to that shown under the first method given above, the Trading Account being charged with the trade price of the goods manufactured, together with the purchases of manufactured goods. The stock of goods manufactured by the trader himself would, if a Manufacturing Account was to be prepared, require to be valued at trade price and incorporated in the Trading Account, where the stock of the goods bought ready made would also appear, and which, of course, would be valued at cost price. Unless the sales of the trader's own goods were kept distinct from the sales of the ready-made goods, the profit on the sale of each could not be arrived at, and even if these were kept separate, the allocation of the expenses between the two classes of goods would have to be made at the end of the year. It is therefore sufficient in such cases if the profit or loss on manufacture can be distinguished from the profit on the whole trading. Where the sales of the trader's own goods have been kept quite distinct from the other sales, the expenses of distributing the goods would require very careful apportionment before the profit or loss on the trading in the two classes of goods could be ascertained. For example, most of the advertising would in all probability consist of advertising the special article manufactured by himself, and items such as that would require special attention.

Adverting to the third class of manufacturers, it will be at once observed that a manufacturer in this case will desire to know the profit or loss he is making on each department, and for that purpose the Invoice Book and Day Book will require to be ruled with columns for each department, together with columns for goods not produced by the manufacturer himself. The wages and expenses of production will require to be allocated between the

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different departments, as also the indirect expenses of production. These latter expenses will be apportioned according to the volume of business done, that is, according to the sales of the department, and by means of trading accounts for each department the profit or loss on each will be ascertained. As in the first two cases, if it is desired to find the profit or loss on the manufacture, Manufacturing Accounts for each department will require to be made out and credited with the trade price of the goods manufactured, the Trading Accounts of the various departments being debited.

A manufacturer coming under the fourth class who makes goods “ to order” will, in addition to arriving at his profit or loss by means of a Trading Account, be desirous of ascertaining his profit or loss on each separate contract. Reference is made to“ Cost Accounts suitable to Jobbing Tradesmen,” vol. ii. p. 252; “ Cost Records or Factory Accounting," vol. ii. p. 260; and “Factory Organisation and Costing Arrangements,” vol. ii. p. 464. Under one or other of these articles will be found systems suitable to such manufacturers.

The accounts of manufacturers coming under the last group present no special feature. In such cases, however, the manufacturer will be desirous

, of finding the cost per ton or unit of the goods manufactured, and perhaps also the cost of the various processes. This subject has also been dealt with under “ Cost Records or Factory Accounting” already referred to.

The Account Books required by a manufacturer are Cash Book, Day Book, Invoice Book, Returns Books, Bills Books, Ledgers, Petty Cash Book, Wages Book, and certain subsidiary books, the form and nature of which depend on the particular circumstances of each case. Reference is made to the article on "Book-keeping," vol. i. p. 406.

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. Margin.-The term margin is used to denote the proportion of the market value of property or securities upon which loans have been granted, which the lender regards as representing the value which he will not advance, but which he will look upon as necessary to protect him from any risk of loss through depreciation in the value of the securities. In the case of heritable property the recognised margin is about one-third. Thus the owner of heritable property worth £3000 can always borrow upon it, at the very keenest rates, the sum of £2000. The margin is usually considered as a percentage of the market value of securities. The margin in consols is about 5 per cent. Thus, if consols are at £100 in the market, the holder of £1000 of consols would receive a loan from the bank on the security of them of £950 at the lowest rate of interest. The margin in other stocks subject to fluctuation may be 10, 15, or even 20 per cent. Banks sometimes grant loans to customers on the security of stocks, on the condition that the customer agrees to maintain an average margin of 10 per cent, and not to overdraw his account beyond this. By this means any one who has a small amount of capital is enabled with the help of a bank to control a large amount of securities. When the rate of interest is very low the temptations to hold stocks by this method are considerable, but the effect of doing so is still further to raise prices and make the rate of interest still lower.

Marginal Credits.-A marginal credit is a form of bill issued by a Bank to its customers for the purpose of placing funds abroad. For the prevention of fraud, it is usual to print on these documents the amounts for which they are granted when the sums are large. When a marginal bill is applied for, it is necessary to give the name and address of the purchaser, the name of the person who is to draw the bill, the date on or before which

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it is to be drawn, and the currency at which it is to be drawn. The counterfoil (or margin) of the marginal bill contains the authority signed for and on behalf of the Bank, to the person named to issue a draft or bill on the Bank (a form of which is annexed) for a certain sum named, which is payable in London. When sold abroad, the buyer gets both the bill and the relative credit, and, when accepting, the acceptor retains the authorising credit, the holder thereafter relying solely upon the bill. There is no stamp duty when the credit is issued, but of course the bill when negotiated in this country is liable to the usual duty. These marginal bills or credits are either secured by a special deposit of the amount or by the lodgment of other security. In the latter case, interest is charged as well as commission up to the date of payment. Should any bills be returned unused, it is usual for the Bank to charge only half rates of commission. The credits are not available for longer than six months before the relative bills are drawn, and the bills themselves must also be drawn at a currency not exceeding six months' sight.

J. MACBETH FORBES.

Marine Insurance.-Origin of.—Eminent writers on the law of insurance have sometimes ventured the conjecture that insurance was known to the Romans, and possibly even to the Greeks. Mr. Duer prefaces his valuable treatise on this subject by an elaborate argument in favour of this hypothesis. But the whole argument amounts to this: First, their commerce was so extensive, and the perils of their navigation so great, as almost to require, and therefore to imply, the practice of insurance. Secondly, the emperors, who imported large cargoes of corn from Africa and elsewhere, to feed and quiet the hungry and tumultuous multitude that filled their great city, probably bore the loss when the cargoes, by reason of wreck or piracy, failed to arrive. Thirdly, the contracts of bottomry and respondentia were well known, in frequent_use, and guided by full and minute legal provisions, under the titles “ De nautico foenore” and “ De usuris.The decisive argument against any existence of insurance in those ages is to be found in the fact that the Roman law, which, in its systematic completeness, neglected none of the affairs or transactions of life, is perfectly silent in reference to insurance. We have said that contracts of bottomry and respondentia were carefully and minutely regulated. It was of the essence of those contracts that, if money was borrowed on the security of ships or cargoes, the lender was permitted to require, and the borrower permitted to contract for, a far larger interest than would otherwise be allowed, provided it was a part of the contract that, if the ship or cargo was lost by a peril of the sea, the lender should make no demand on the borrower for any part of the debt, principal, or interest. Here the lender takes upon himself the risk of the loss of the property, and is paid for this risk by the increased interest. It is so far of the nature of insurance. It would seem impossible that contracts of this kind should be recognised as frequent in practice, and regulated by careful provisions of law, and yet that the contract of direct insurance should also exist in practice, and be wholly passed over and ignored by the law. It is equally impossible to believe that such a practice as that of marine insurance should ever exist, and pass wholly away, not only out of use, but out of knowledge. But there are no traces of it in the centuries of the decline and destruction of the Roman Empire until we come far down in mediæval ages. It is generally supposed to have been invented in Italy about the thirteenth century, and was introduced into England by the Lombards. It has certainly been connected with Lombard Street and the Royal Exchange for three centuries and more; according to Malynes (writing in 1622), in every policy made at Antwerp, and in the Low Countries down to that date, there was a clause that “this policy of insurance shall be of as much force and effect as the surest hitherto made in Lombard Street or in the Royal Exchange, or elsewhere in London.” The statute 43 Eliz. c. 12 (1601) speaks of its having been, time out of mind, an usage among merchants, both of this realm and foreign countries, when they make any great adventure (especially into remote parts) to give some consideration of money to other persons to have from them assurance made of their goods and merchandises, ships, and things adventured (or some part thereof), at such rates and in such sort as the parties' assurers and the parties assured can agree, which course of dealing is commonly called a policy of insurance. There is no record of any trial affecting questions of marine insurance earlier than the end of the sixteenth century, and the report of this first action, which occurred in the thirty-first year of the reign of Queen Elizabeth, shows that at this period the judges were unacquainted with even the nature of insurance contracts. Whether it was owing to this judicial ignorance, or to other causes, actions continued very rare for more than half a century afterwards, the total number from the reign of Queen Elizabeth till the year 1756, when Lord Mansfield became Lord Chief-Justice, not exceeding threescore so far as reported. It was mainly this eminent judge who, after devoting himself assiduously and earnestly to the principles of the subject, and their application in other countries, laid in numerous decisions the basis of what came to serve, in default of an actual codex, as a law system of marine insurance. In marine insurance, as in other branches of the law-merchant, the usage and practice of mercantile men is allowed to govern very largely the meaning of the contract, provided they do not run counter to legal principles.

Nature of Contract.—Marine insurance is a contract whereby one party, for an agreed consideration, undertakes to indemnify the other against loss arising from certain perils or sea-risks, to which his ship, merchandise, or other interest in a maritime adventure may be exposed during a certain voyage or a certain period of time. The very essence of the contract of marine insurance is that it is a contract of indemnity; its sole and exclusive object is to procure for the assured indemnity, in the strictest sense of that word, for any losses he may sustain through the agency of those sea-risks against the effect of which the underwriter by the terms of his policy stands pledged to protect him. Hence an interest in the subject of insurance is of the very essence of the right to recover upon the contract. In the absence of such an interest the plaintiff is not damnified, although there may have been a total loss of the thing insured.

Explanation of Terms. The party interested in the property or thing insured is called the insured, or assured. The property or thing itself is called the subject of insurance. The title or interest which the assured has in the subject of insurance is called his insurable interest. The party undertaking to indemnify the assured against loss is called the insurer or underwriter. The consideration for which he so undertakes to indemnify him is called the premium. The instrument by which the contract of indemnity is effected is called the policy. That which is insured against is loss arising from marine casualties. These casualties are in technical language called sometimes the perils insured against and sometimes the risks covered by the policy, expressions which mean one and the same thing, and are employed to signify those causes of loss against the effect of which the underwriter undertakes by his contract to indemnify the assured. The interest of the assured is technically said to be covered by the policy when the

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