The number and character of the books of a bank which make up the general set varies according to the volume of business transacted. The routine practiced is also dependent upon the extent of the transactions. For the purpose of illustration, we shall give in these pages a description of the books and routine best adapted to the needs of a bank of a moderate type.

Commencing with the organization of the Lunar National Bank, we will follow the transactions of a period sufficient to embrace a history of the general routine. The preliminaries for organizing a banking corporation have been fully described under Chapter V. We will presume, therefore, that all the preliminary arrangements have been perfected. The bank is organized with a capital of $250,000. This amount is paid in by the shareholders. For the original entries of what has transpired, we look to the minutes of the shareholders' meetings and the book of stock subscriptions.

The opening entry in the books of account is made in the general journal, a book with the ordinary journal rulings. The account representing the certificates of stock is debited, and the account of capital stock credited for the amount of the bank's capital. Before any of the certificates have been issued to subscribers, they (the certificates) form the only resources of the corporation. They are the assets against the liability of the corporation for the amount of its capital stock. As the stock is subscribed for, the certificates go out, and the corporation holds the stockholders individually and collectively for the amounts thus issued. This operation is recorded by charging in the books to the account of "Stockholders" the amount subscribed for, and crediting the account of stock certificates. When the shareholders pay in their subscriptions, the general account of "Cash" is debited, and the account of stockholders credited with the payment. Thus far the records of these transactions are the same in all joint-stock companies.

In the General Ledger the account of "Stockholders" represents these several accounts collectively. A book called a "Stock Ledger" is kept for the purpose of keeping the accounts of these persons separately. The Stock Ledger is an auxiliary to the general set.

The capital having been fully paid in, a purchase is made of $220,000 in United States bonds, on which a premium is paid of $30,000. The bonds are deposited with the Treasurer of the United States at Washington, and in return the bank receives its National bank notes to the amount of $198,000, less $9,900, the five-percent, fund for the redemption of circulation by the United States Treasurer.

The premium on bonds, ten-per-cent. fund to secure circulation, and five-per-cent. fund to secure redemption, together may be treated under one general title, they forming a reserve growing out of the bank's circulation. The title we have chosen is "Circulation Reserve." This is not arbitrary. The account represents an asset which, in the example used here, is $61,900. The premium paid in on the bonds forms nearly one-half of this reserve. But so long as the present rate of interest holds, this resource is as substantial as so much money locked up where it cannot be used until the bank withdraws its circulation. The three items which, combined, make the reserve fund, or circulating reserve, could, if it were desired, be treated each under an independent title. It would, however, only encumber the books and serve no practical purpose in the end.

The first three entries in the journal could, in a case of the kind used as an illustration, be condensed under one journal entry. But, suppose, instead of all the stock being subscribed for at once, only a part had been taken. Then, too, presuming that the amount subscribed for had been only paid in part. It will be seen that each of the entries given would have been necessary for recording the operations, step by step as they transpired.