This section is from the "Practical Banking" book, by Albert S. Bolles.
The primary vouchers of the deposit department, as already mentioned, are the deposit tickets and draft tickets, but it would be inconvenient, from the number of these, to file them with the general vouchers. Each teller's daily report is a substitute or grand voucher for those of the day in his department, and these might be filed in that relation; but as they are stated in the form of an account, they would have to be made in duplicate, and therefore, for convenience, the monthly return is required from each teller as to his deposits and as to his drafts.
The secretary makes up at the end of the month two combined vouchers from these monthly returns. He brings together the total amount, and he certifies to its agreement with the aggregate reports given independently from the bookkeeper's department, so that these two vouchers contain the ultimate condensation of the thousands of drafts and deposits which accrue each month. This might be called a cumulative voucher of the fourth degree. The primary voucher being that signed by the depositor, the secondary voucher being the teller's daily report, and the tertiary being the teller's monthly report. As corroborated by the accounting branch of the deposit department, it consists of even more steps.
The business of the bank has three different units of time—the day, the month, and the half-year—and each of these has its historical record, its counterbalancing proofs, and its final statement of results or balance sheet. The daily transactions are brought to a focus upon the page of the daily cash book, and are also repeated in various forms in special ledgers, namely, the deposit ledger, mortgage ledger, loan ledger, stocks ledger, real estate ledger, rent ledger. For information, there is also kept in the daily cash book, below the cash entries, a daily statement of profit and loss and a daily balance sheet, so that at the close of each day the exact status of the bank, as near as can be ascertained, is recorded.
An accurate account is kept, in this book only, of the interest, to the nearest fraction of a cent which is earned on each class of investment, and this is added to the accrued interest account daily, and also credited the income account. Similarly the accretion of rents and any other profits is recorded. On the other hand, the exact daily amount is apportioned for payment of salaries, of taxes, of dividend as estimated, of general expenses, and for the extinction of the premium on bonds as they approach maturity.
Each of these elements produces its effect on the profit and loss or surplus account, and equally on some branch of the resources or liabilities, actual or estimated, so that the business of the day results in a balance sheet, the cash transactions appearing above, being, of course, taken into consideration.
The balance of each department of the cash, and also of the cash as a whole, is also verified daily. The monthly work consists in the aggregation, by the means already explained, of all the events of the month into two sets of columns, which give the general condition. These totals, when posted to the general ledger, form the basis of its trial balance. The trial balance of the general ledger is not precisely identical with the balance sheet contained in the daily cash under the last day of the month, for this reason: The general ledger, in its current or normal state, is kept on the basis of cost. No profit or loss, by depreciation or appreciation, is recognized until realized by the actual disposition of the proceeds. Hence, the trial balance of the general ledger is a balance sheet on the cost basis, while the daily balance sheet is on the basis of present market values.
The secretary completes his monthly work by making up, from the figures thus obtained, the reports to be submitted to the next following meeting of the board of trustees. At the monthly meetings in June and December, being the last months of the half years, it is required by law that the dividends be fixed according to the profits earned. It is therefore necessary for an estimate of the earnings and expenditures of the half year to be submitted, as a basis of this dividend. This can very readily be done, as five-sixths, or nearly eleven-twelfths of the period have elapsed. At this meeting, therefore, the secretary submits such an estimate, showing, as its result, the rate of dividend which can be allowed, usually leaving a margin to be added to the surplus. The board then votes upon the dividend, and the secretary issues orders to the bookkeepers to make the calculations at the prescribed rate. At the same meeting the examining committee is appointed, and this is the first step in the preparation of the semi-annual official reports. It is necessary that every facility be provided for this committee to examine in detail, as far as advisable, the exact condition of the bank. The secretary prepares a balance sheet in blank, containing headings and spaces for all the departments, of resources, of liabilities, and the surplus, with their several values. He also prepares numerous blank schedules, each referring to one of these departments, and giving the individual units which make it up. Thus, under the head of stock investments, Schedule C, for instance, would be given the following information: Title of stock and by whom issued; rate of interest; year of maturity; amount at par; cost; present market rate; present market value; interest paid to what date; amount of interest earned but uncollected.