REPORT OF THE COMMISSIONER OF INSURANCE.


73S


City, attorney-in-fact for the Reciprocal Exchange and the Cas-
ualty Reciprocal Exchange. The accounting system employed
by Mr. Bruce Dobson is a modification of that originally used
by John R. Waters.
Since the liability of the subscribers is several and indi-
vidual, and not joint, it is necessary to open an individual. ac-
count with each. subscriber. This is done in the individual
ledger. Each subscriber is therein debited with the amount of
his deposit premiums and savings, and credited with his cash
payments on account and his pro rata share of the losses and
expenses. The balance always shows the standing of the sub-
scriber in the exchange and the amount required to liquidate
his account.
In addition to the individual or subscribers' ledger, there is
a controlling ledger which shows the financial standing of the
exchange as a whole. The sum of the items found in the inl-
dividual ledger serves as a check upon the items in the control-
ling ledger. In nearly all the exchanges the controlling ledger
is in such a condensed form and the material so illogically ar-
ranged as to make the auditing of the books and the compiling
of the financial statement along the lines outlined in the an-
nual statement blank very difficult. We suggest that the con-
trolling ledger contain at least the following accounts, and that
the material be arranged in the order suggested:
1. A  Premium  Deposit Account,+-showing the gross pre-
miums written and dividends applied to pay premiums, on the
credit side, and return premiums and rebates in reduction of
premiums, on the debit side.
2. An Interest Account-showing the interest received firoin
bonds and dividends on stock and interest from mortgage loans,
bank balances, and from other sources, on the credit side, and
interest paid for money loaned and for accrued interest on
bonds purchased, on the debit side.
3. A Rent Account-showing rents received, on the credit
side, and rents paid, on the debit side.
4. Loss Account-showing gross losses paid, on the debit side,
and salvages and discounts, on the credit side.
5. Reinsura'nce Account-showing the amount paid for re-
insurance, o11 the debit side, and the amount received.on rein-
smrance losses, on the credit side. NOTE.-Reinsurance pre-