118 



GEOEGE HAGUE ON THE MORAL AND 



On this statement they propose to pay their creditors 6s. 8d. in the pound. An 

 apparent surplus of =£60,000 turns into an apparent deficiency of nearly i;70,000, not by any 

 change in the realities of the position, but by a change in the mode of estimating, which 

 change is due to the change in the state of mind of the persons making the statement, 

 which again was influenced by the different objects they had in view. 



11. It is by such considerations as this we can understand the discrepancy in the 

 figures of a great banking corporation when a balance sheet prepared by liquidators is 

 placed alongside a balance sheet of nearly the same date submitted by the oiiicials of the 

 bank itself. Let us place two such statements side by side. 



On the 31st December, ISST, the Universal Bank and Discount Companj^ with fifty 

 branches, makes out its balance sheet as follows : — 



Assets. 



Cash in the bank £ 850,000 



Cash in hands of banking agents 



and correspondents 125,000 



Clearances and exchanges 75,000 



Stocks and bonds 250,000 



Short loans on securilies 150,000 



Mercantile loans 2,3.50,000 



Do discounts 4,645,000 



Claims for acceptances 565,000 



Bank premises and other freehold 



property 150,000 



Total assets £9,160,000 



Liabilities. 



Notes in circulation £ 375,000 



Depositors 3,500,000 



Current accounts 2,750,000 



Banking correspondents 120,000 



Acceptances .565,000 



Total liabilities £7,310,000 



Surplus ,,. .. 1,850,000 



Being — 



Capital £1,500,000 



Reserve fund and profits 



carried forward 350,000 



£9,160,000 



This statement is signed by the chief accountant of the bank and certified as having 

 been truly extracted from the books. And so it was, and it was correct, so far as his 

 knowledge extended. 



The statement is presented to a board of directors, a majority of whom probably know 

 but little of the vast complication of accoiints which go to make up the small set of 

 figures above given. And the whole board meet a body of shareholders and present the 

 figures to them. 



But within a few months something happens ; confidence for some reason is weakened ; 

 deposits to a large amount are withdrawn. After a brief struggle the bank closes its 

 doors. Professional accountants now investigate, but their investigation deals far more 

 closely than the former one with the element of real value, or what is considered to be 

 such. The business of the parties who now have matters in hand is not only to bring 

 out a correct balance sheet, but a correct valuation. The moral and metaphysical element 

 before spoken of now operates differently. These men have a diflerent object. They are 

 in a different state of mind. They look from a different point of view, and they bring 

 out very difierent results. The figures representing most of the assets have iindergone 

 significant changes. 



