37. Overdrafts

It is the custom to deduct overdrafts on the individual ledger from the gross credits and show net deposits only on the general statement. It is not practical to carry an account to represent daily overdrafts, although the statement demanded by the Comptroller of the Currency requires overdrafts to be shown.

38. Trust Company Accounting

An address delivered at the convention of the American Bankers' Association in October, 1901, by Mr. Arthur Heurtley on "Trust Company Forms" is the best short discussion the writer has seen on this subject and is quoted in part, as follows:

There is no particular mystery about accounts or bookkeeping generally. Given a good practical system of accounting with simple forms handled by clerks of reasonable intelligence, whose work is carefully watched by the officers, and whose efforts to improve the forms they use are met by proper encouragement, the result will be very satisfactory. Perhaps it will be of interest if I attempt to briefly discuss the principal forms to be used by a trust company.

The first book required is a register of trusts. When a trust is accepted by the company it should be entered upon this book, which should show the name of the trust, the filing number given it, the date of acceptance, source of appointment, the total VI - 3 amount of the estate or trust fund, the attorneys connected with the trust, etc., also the date it is finally closed. In short, the register should give a brief history of the trust, and it is of great utility as a book of ready reference. This book should have an index. At this point I desire to say, that in my opinion the plan of giving every trust a number by which it is known all through the records is a good one. It renders the correct filing of papers, etc., much more certain, and from practical experience I can safely recommend it. All papers referring to the trust should be filed under the number assigned it, and all securities belonging to the trust, and filed in the cash vault, should be placed under a similar number.

Next to the register of trusts comes the cash book, the general journal and the general ledger. The entries should be made first in these books, then from the same tickets the proper entries should be made in the trust journal and posted in the trust ledger. It is from the trust ledger that all statements of account should be made, and the pages should be so ruled and arranged that the stenographer can take the book and copy the entries as made, the result being an account in proper form for filing in court or to send to the beneficiaries in the trust estate.

A stock and bond ledger should be kept, in which all the stocks and bonds owned by the company, or held by it in any trust capacity, should be entered, showing the amount of each kind of security in the possession of the company. This book is not only an additional check upon the trust and general ledger entries referring to stocks and bonds, but it is also a ready reference book to turn to in case an officer of the company desires at any time to know the amount of any particular security under the control of the company.

One of the important books that should be kept is a register of securities containing not only bonds and stocks, but notes as well, with full data regarding each class of security. The securities held by each trust should be entered by themselves. The book should provide for a record of interest or dividend payments, so that from time to time when the book is examined the information as to such payments can be readily obtained.

A daily balance sheet should be kept, in which all the totals should be brought together for the information of the officers; also a tickler showing the due dates of notes, etc., to be collected from time to time.

A daily memorandum tickler is also a useful book to have, in which should be entered sundry memoranda relating to the various trusts that might otherwise be forgotten at the time when most needed.

The real estate loan records should be very complete, as these books are being constantly referred to, and entries when made should be carefully checked by another clerk than the one making them. This rule should apply to all books kept by the company. Full and complete records should be kept of all matters relating to rentals collected, insurance, etc., also of any securities that are past due or of doubtful value.

The expense account should be abstracted in a book kept for that purpose, and carefully compared and checked with the general ledger. It is also advisable to keep for future reference, in a book prepared for that purpose, memoranda of all conversations had with prospective clients. All tickets from which the original entries are made should be clear and concise in form, giving in themselves all the information necessary from which to make perfect entries on the books.

I have not attempted to deal with the many special forms of books and blanks relating to bond trusteeships or to the registration and transfer of stocks. The large majority of trust companies handle very little of this class of business, as it naturally goes to larger financial centers. But I have endeavored to treat of those forms which would prove useful to almost every company in the country doing a trust business.

I am aware that the loose leaf system of bookkeeping is receiving much attention in these days. And I am prepared to admit that there are many minor books in which it can be used to advantage. But I have had, and still have, a prejudice against its use for books of original entry, as it is not a difficult matter to take out a leaf from a book made on this principle, while it is almost impossible to detach a leaf from a book properly made and bound in the regular manner. The book of trust company forms referred to a short time since contains the ideas of the committee upon the subject.

In closing let me suggest that it would be well for every trust company to have one man in their service whose duty it shall be not only to keep books in touch with its system of accounting, but constantly to endeavor to improve and simplify its forms. Again I repeat, make the forms as simple as is consistent with full and complete entries. See that every account on the general ledger is checked by entries made on another book or other books. For example, the stock and bond account in the general ledger should agree with the balance sheet of the stock and bond ledger, and also with the totals of stocks and bonds shown in the register of securities. Then the officers of the company will seldom be troubled over their system of accounting. The business is eminently one of details, which demand constant watchfulness and attention, and the system that renders this work easy to the officers and employees is the one to follow.