This section is from the "Practical Banking" book, by Albert S. Bolles.
To find the total drafts of six months, add together the drafts of January, February, March, April, May, and June successively, and similarly with the deposits. Now, this gives us a test of the second and fourth columns of our final equation. If, at last, we find that the error is in one of these, we first go back, comparing the tickets with our transcription of them. If this fails to discover the error, it may be necessary to reassort the delinquent tickets, either draft or deposit, by months, and ascertain in which month the error occurs. Having located it in the month, it may be necessary to reassort that month by days, and locate it by the tickets. But ultimately we must find it. The process is absolutely exhaustive.
The second question propounded by the bank department as to the balance is, what is the amount of the discrepancy? One of the New York banks constantly reports at present, "Old discrepancy prior to April 13, 1874, $2,386.08." For some years this has not varied. The following is its history: Up to the date mentioned there had been no accurate balances of the depositors' ledgers. While the bank was small, the importance of searching out and correcting the minute errors which then existed was not understood. The first trial balance taken was about $50 out of the way. The accounts were only a few hundred in number. It would have been an easy matter to analyze the work up to that point and to have discovered the error, but it was thought near enough. These two words, "near enough," are the most dangerous that can be used in book-keeping, for an error which is apparently near enough may be the resultant of opposing errors each of large extent, and one of which will threaten danger. Presumably, the labor of finding this first difference was postponed until a more convenient season. As the work increased, this search, which was the business of nobody in particular, became less and less likely to be effected, and the next year rolled around, and it came time for another trial balance. Now the number of depositors had largely increased, and it was said, "Never mind the old error; it will probably turn up this time." Nobody knows whether it turned up or not, because the error this time was over $100 on the opposite side, so out of the mud we had got into the quicksand. Each year the same trial at a balance was made, and with the same lack of success, ending with the same motto which was at first inscribed on our banner, "Near Enough." Near enough one time meant $6,000 until a few months later it was found that a little error of $13,000 in a semi-annual dividend had been made, which brought the "near enough" to $7,000 the other way. Some radical spirit among the book-keepers became dissatisfied with this erroneous discrepancy, and began to think that it was better to undertake a great deal more labor, and to know at least that the current work of the bank was proceeding correctly; so, on the 13th of April, 1874, they divided the ledgers among themselves, and commenced, in an imperfect way, to keep each ledger in balance as an independent equation, and to actually search out all the errors in each ledger. It is true this was somewhat like the proverbial needle and haystack, but the difference was that the haystack was very much smaller. Gradually the system has been improved in simplicity and effectiveness until the present time, and the old discrepancy of $2,386.08 is the relic of the old errors. This may some time all be found, but the probabilities are that it will not. The present Secretary began, a few years ago, a process of bridging over the period of chaos by beginning to do what was not done twenty years ago, namely, to take an accurate trial balance of the work at the end of each half-year. Three of the years have thus been completed, but the process of going through the remaining fourteen years involves colossal labor. Possibly it may at some time be thought worth while to employ a special corps of clerks to do this. As an illustration of how deceptive the "near enough" principle is, it may be mentioned that at one time our discrepancy was only $700—apparently. The discrepancy account had, by successive finds, worked down to this point, when, by pure accident, it was discovered that the amount in the general ledger, which had been considered as the standard, or norm, was itself $ 10,000 away from the truth by a single error. This startling discovery was enough to unsettle the minds of the most fanatical adherent of the "near enough" theory. A search was made through the mouldering pass-books, thousands and thousands of which, having been closed and surrendered, were lying in numerical order in the cellar. Luckily they had been preserved. By comparing them with the ledger it was found that about $8,000 of principal stood open on the ledgers of the bank, when, in reality, the accounts had been entirely closed. A dishonest employee might, by discovering these and compromising with the depositor, have abstracted a large amount, especially as the accrued interest on the same amounted to over $6,000. At one stroke, by the closing of these accounts, there was a gain to the surplus of the bank of more than $ 14,000, and the effect upon the discrepancy account was to bring it to 2,300 and odd dollars. Very little has been found since that time, but it is considered a matter of duty to report the amount every six months to the bank department. It has often been suggested, Why not close this account into profit and loss? The answer is that an error might be discovered the very next day, which would require its reopening, and that it is better to leave the account open forever if necessary, or until the last cent of discrepancy of those fourteen years has been discovered. This story of error has been related, because history has so often repeated itself on this point. The writer has been surprised to find how many large institutions have had almost the identical experience, and the old, old story of beginning business with a small force, and with a system which was not expansive, and which was soon outgrown. The Bowery Savings Bank, which is the largest in America, perhaps in the world, only sub-divided its work and took a new departure with a large discrepancy within five years; and at this moment the Bleecker Street Savings Bank is still operating, on its initial or fundamental balance, for a new system; a balance taken in the air, so to speak, as a point of departure. A clerk in an old Savings bank in Salem, Mass., was relating to the writer only a few weeks ago the history of the bookkeeping of his bank, which was almost word for word like the one given above, even to the disinterring of the old pass-books from the cellar, with this further incident that in the Salem case the pass-books were unclassified and lay in mouldy heaps. This embellishment was lacking in the case cited above.