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of money on which interest accrues or is reckoned. Income: the amount of money coming to a person or corporation within a specified time or regularly, whether as payment for services, interest, or profit from investment; revenue. For the purposes of this volume these definitions, unless materially modified, will prove to be unsatisfactory; for to the wise investor interest will very often accrue on money which is income as well as on that which is principal, and no careful person will be willing to regard all kinds of profit from investment as income. Definitions which will be found much more serviceable to investors are these : All money which is regularly received either for the use of property or as compensation for services is income; all other property is principal. Thus rents, interest, dividends, royalties, annuities, salary, wages, commissions, professional fees, regular returns from business, are to be regarded as income; while capital, gifts, legacies, devises, unusual profits from investments, and savings from income are to be accounted as principal.

In general it may be said that that which is purchased with principal is still principal in another form, and similarly that which is purchased with income continues to be income. Whatever is of a permanent nature may be considered as principal, while perishable objects which must be consumed and replaced are to be regarded as income. The houses in which we live are parts of our principals because they were purchased with parts of our principals and are of a permanent nature; but the furniture which is in the houses may well be regarded as income, because it will eventually become antiquated and worn out and will have to be replaced.

Since regularity or uniformity of income, at least so far as the possibility of decrease is concerned, is a consideration of so great importance, an excellent guide to the distinction between principal and income will be this very quality of regularity. If, therefore, a profit is received which is unusual, occasional, or which the possessor cannot reasonably expect to receive regularly, it must be regarded as a part of the principal. If we purchase a house for five thousand dollars and sell it for six thousand, the profit of one thousand dollars, as well

as the original purchase price, is principal. If we buy Government bonds and sell them at a profit of five hundred dollars, this profit is principal, not income. If we find fifty dollars in the street, it should become a part of our ever-growing principal, because we cannot depend upon finding that amount regularly each year. If we buy a horse and carriage for our own use they should be purchased with income, and they will remain income for this reason and also because they are not of a permanent nature; but if we sell them at a profit the profit becomes principal because we cannot expect regularly to repeat the operation.

The suggestions which have been made for the distinguishing between principal and income appear to be in all respects sufficient. The necessity that such distinctions shall generally favor the principal is, however, so important, that to the suggestions which have already been offered may be added another to the effect that whenever serious difficulties in making the distinction shall arise, and investors shall find themselves in quandaries, the most advantageous solution of the problem will be that which will place the doubtful items to the credit of the principals.

The cautious suggestions and principles which are contained in this chapter may be thought by some to have been carried too far-so far as to encourage that unreasonable degree of economy which approaches niggardliness. This is by no means the intention of the author; no more should the explanations produce such an effect. But whether they have been carried to extremes or not, considerations precisely similar to them have largely been the means of building up the legitimate, healthy fortunes of this and of all other lands, and, further, they have been, and must be, the principal means of preserving fortunes when once fortunes have been acquired.

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CHAPTER II

BANKS THE BANK-ACCOUNT

N institution almost indispensable to the business woman is the bank. As will be seen in the following pages, the bank-account permits the business woman to pay her bills with checks drawn at the proper times, payable to the proper parties, and for the exact amounts, thus avoiding the dangerous necessity of keeping on hand considerable amounts of cash or the necessity of running continually to the savings bank or other place of deposit, the often serious inconvenience of counting money correctly, difficulties in detecting counterfeit money, and the unpleasant possibility of contracting disease from the handling of paper money. The bank-account also furnishes a convenient and reasonably safe means of sending from place to place money by messenger or through the mails, for properly drawn checks cannot be collected without proper indorsements or forgeries of the same. It provides also, by the returned vouchers with the proper indorsements upon them, perfect receipts for the amounts which have been paid by the checks. It affords a comparatively safe means of carrying about upon the person, if necessary, the equivalent of large sums of money; a simple means of collecting the various checks, drafts, coupons, etc., which may be received; and, in the check-book, a valuable reminder of future obligations, a perfect account of receipts and disbursements, and a valuable record of past transactions.

Banks are not to be confounded with savings banks. They are entirely different institutions, founded under different

laws, for different purposes, and with entirely different methods of business. Banks are established for the convenience of depositors, generally pay no interest on deposits, and allow their depositors to draw money by means of checks at any times and to any amounts which are within the balances of the depositors; while savings banks exist for the purpose of encouraging the saving of money, pay interest on all deposits, have no such things as checks, and pay money to depositors only upon the presentation of pass-books. The distinction will appear more clearly from the following chapter, which is devoted to the subject of savings banks.

There are three general kinds of banks, not differing materially in their manners of doing business with depositors, but differing considerably in other important respects; they are National banks, State banks, and private or individual banks. National banks are organized under the laws of the United States Government, and are authorized to issue the bank-notes which constitute a large part of the ordinary paper money in circulation among the people. Bank-notes are, in fact, promissory notes by which the National banks promise to pay to the bearers on demand the amounts of the notes in coin or in other standard money, and they are made good at all times by Government bonds which are required by law to be deposited, by the National banks, with the United States Treasurer. State banks and private or individual banks conduct business under the laws of the States in which they are located, and have no authority to issue bank-notes which pass, as the National bank-notes, currently as money. Private or individual banks are, as the name indicates, owned and controlled by individuals or business firms, and are conducted generally (except for certain restrictions and requirements of the laws) in the same manner as are ordinary business corporations.

The selection of a bank with which to transact the business of the bank-account, is a matter of great importance, inasmuch as some banks are, as far as we can judge at least, in sound and substantial financial conditions, while others are in danger of suspension and failure at each financial crisis

and in times of continued depression in business. Unfortunately no regular method for ascertaining satisfactorily the financial conditions of banks can be set forth, since evidently the actual financial conditions of the banks depend upon transactions of which the public is and must remain for the most part ignorant. It is for this reason that suspensions and failures of banks usually come without warning of any kind to the depositors. The suggestions which will be given here for the discrimination between and the selection of banks will, however, in the majority of cases prove to be valuable and sufficient.

In the first place, other things being equal, National banks may be chosen in preference to State banks, and State banks in preference to private banks. Indeed, the adoption of the general rule to avoid private banks altogether whenever such avoidance is at all practicable may be recommended without hesitation. The following facts will be recognized as excellent reasons for the suggested preference of National banks and the avoidance of private banks: National banks are required by the statutes of the United States to make regular reports of their financial conditions to the comptroller of currency; they are subject to thorough inspections by competent persons who are appointed by the comptroller of currency, whenever such proceedings may be deemed necessary; they are required by law to have larger capitals than are required of State banks by the laws of some of the States; they are forbidden to certify checks in excess of deposits; and wilful misapplication of funds and making false entries in the books of the banks are crimes which are punishable by the United States authorities. State banks are amenable generally only to the laws of the States in which they conduct business. In general they are under a more or less careful supervision of the State authorities; they are required to make reports of their conditions to the proper State officers or departments; their stockholders are liable to a greater or less extent (commonly to the amount of the par values of their shares) for the debts and losses of the banks; and the directors are punishable for certain illegal mismanagement of the affairs of the

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