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Elementary Banking | by John Franklin Ebersole



With the idea of providing a practical and logical course of study for these newcomers in the banking profession, as well as a foundation for the Institute Standard courses of study, a text-book covering the elements of banking and law seemed to be desirable. J. F. Ebersole of the University of Minnesota, who had been teaching an elementary banking course in Minneapolis Chapter, was selected to prepare such a book, based on the lectures given in Minneapolis Chapter. That book has been a distinct success. The present text entitled "Elementary Banking" is based on the book just referred to. However, the original text literature has been completely revised and brought to date, in some cases being rewritten and rearranged, and, in addition, four chapters on bank bookkeeping and accounting have been added.

TitleElementary Banking
AuthorJohn Franklin Ebersole
PublisherAmerican Institute of Banking
Year1922
Copyright1922, American Institute of Banking
AmazonElementary Banking
-Preface
The Institute course of study in Elementary Banking, was originally adopted in 1918. Many experienced bank clerks had left their institutions and entered either the military or naval service. Their pl...
-Institute Platform
Resolution adopted at the New Orleans Convention of the American Institute of Banking, October 9, 1919: Ours is an educational association organized for the benefit of the banking fraternity of the c...
-Chapter I. Elementary Essentials
The beginner in a bank usually discovers that he does not have at his command a sufficient knowledge of commercial documents and banking practice. Later on, also, he often realizes that he did not sta...
-What Is A Bank?
A bank may be defined as a credit institution. It is an institution which studies, deals in and guarantees credit. While the bank receives and pays out large sums of money in the form of deposits, suc...
-The Functions Of Banking
The most important functions of banking may be classified as follows: (1) to assemble capital and make it effective; (2) to receive deposits and make collections; (3) to check out and transfer funds; ...
-Types Of Banking
According to their functions, banks may be classified into four chief types, namely, commercial, savings, trust, and investment. The deposits of commercial banks are received largely from individuals,...
-Kinds Of Banks
The kind of bank which will be formed in any community is largely determined by the needs of that community. Under the general types just discussed we find the following classifications: National, Sta...
-Instruments Of Banking
The principal instruments of banking are (1) money and currency, (2) checks, (3) bills of exchange or drafts, (4) acceptances, (5) promissory notes. A check may be defined as a written order on a ba...
-Bank Organization
Banking laws in the United States, both National and State, have become crystallized into concrete form, and in the organization of any banking corporation certain legal requirements are prescribed by...
-Bank Administration
Banks are governed by boards of directors elected by the stockholders. By law, the directors are primarily responsible for the administration of the bank. Bank officers are chosen by the directors and...
-Routine Work
The banker who begins at the bottom - and that is where every banker should begin, whether his social position is at the beginning or the end of an ancestral line - should systematize routine work int...
-Bank Organization Chart
Stockholders who own the bank Executive Divisions Of Work Elect Loan and Discount Department Credit Department Auditor Analysis Department New Business Department ...
-Messengers And Other Bank Men
This book will refer to the beginner as a messenger. All bank employees are not messengers, but the duties and responsibilities of the messenger are such that all bank men will do well to study the ...
-How May A Messenger Influence Business Men?
Messengers have an important influence on the ideas of business men concerning particular banks. Many people judge a bank by its messengers because they see the messengers often and may never actually...
-How May Bank Messengers Secure Personal Advancement?
Employees who are working for banks are being watched every day to see if they are going to develop into men of character and capacity. Every day's task is made the basis for judging the individual. E...
-Special Instructions For Messengers And Collectors
(1) The head messenger will make a daily schedule for reporting each morning for work, lunch hour, etc. When the messengers are not out on trips they will be assigned to other work. Messengers must re...
-Honesty As An Asset
The most important quality that lies at the very foundation of all business, and more especially of the banking business, is honesty. If a man is not honest, first of all with himself and next with th...
-Team Play
Team play is very important in the banking business. Unless each member of the team does his duty the whole team cannot win the game. Failure on the part of one employee to do his duty in the bank may...
-System In Education
Self-education without guidance is an interesting thing to read about in the biographies of Benjamin Franklin and Abraham Lincoln, but average persons are not equal to it. As Ben Jonson put it, Very ...
-Development Of Individual Capacity
Every bank man should make a thorough study of his own department. He should endeavor to find ways for improving the work that is being done within his own department. Those who can suggest improvemen...
-Chapter II. Bank Departments And Operations. Duties And Responsibilities
Subject to governmental authority - National or State, according to its charter - the management of any bank is vested in its board of directors. Such directors are elected by the stockholders. The di...
-Receiving Teller's Department
A bank teller is a senior clerk who deals with the bank's customers - chiefly depositors - in daily transactions across the counter. In very small banks one man will act both as receiving teller and p...
-Transit Department
Out-of-town cash checks go to the transit department, where they are assorted as to place payable and forwarded for collection and returns, probably through the Federal Reserve bank if the bank in q...
-Receiving Teller's Settlement
The receiving teller's settlement is very simple. He begins the day without any funds. As deposits come in he lists them as to totals on a scratcher, writing the name of the depositor opposite the amo...
-"Batch" Or "Block" System
The general adoption of the run, batch, split proof, or block system has been a tremendous time-saver in the accounting done by the receiving teller, and this plan is now in operation in all m...
-Paying Teller's Department
The paying teller is not necessarily the cashier, although the public sometimes thinks that he is. While the cashier in a small bank is generally paying teller, this is never true in a larger bank. Th...
-Note Teller's Department
Drafts on individuals must be presented to the drawee, either for payment or acceptance, and notes must be at the place where they were made payable on the day they are due. Banks undertake to collect...
-Collection Department
A subdivision of the note teller's department is the collection department, although some banks are organized with the latter as a subdivision of the transit department. The collection teller, as the ...
-Loan Or Discount Department
Loans and discounts are handled by an officer in small banks, but in larger institutions a separate department has charge of the records and the mechanical details of the work. The discount teller giv...
-Credit Department
In the large banks it would be impractical, if not impossible, for the cashier, in addition to his other duties, to keep track of every local borrower and the bank may employ a credit man, who speci...
-Basic Books
The books used by a bank are of various kinds and their purpose is indicated by name. (1) A ledger is a book used to keep a record of balances. To post means to enter in the proper columns either...
-General Ledger Department
The general ledger bookkeeper is the bookkeeper of the bank. It may be said that all other books and records are a part of the general ledger. Every transaction of whatever nature gravitates to this l...
-Country Bank Department
The general bookkeeper often has charge of the accounts with other banks. These are kept just as the individual accounts are and are subject to the same kinds of debits and credits. In addition to the...
-Individual Ledger Department
The individual ledgers are the books upon which the detail records of the deposits are kept. Such records consist of either debits or credits and the balance. Modern ledgers allow three columns to eac...
-Chapter III. Deposits And Checks. What Is A Deposit?
A deposit is the right to receive money from a bank. Or it is the obligation of a bank to pay money. Deposit Books And Duplicate Slips. - When a customer opens an account with a bank he is given a d...
-Deposit Tickets
Deposit tickets are the slips depositors are required to make out showing the respective amounts of bills, coin, checks, etc., that are deposited. They should always be made out by the depositor, and ...
-Statement Of Account
This is a duplicate of the ledger account prepared daily and completed on the last day of the month, or at some other regular time as may be determined by arrangement with the depositor. The depositor...
-Receiving Teller And Depositors
In small banks where the amount of business done does not justify a separate note teller and collection clerk, the receiving teller receives and accounts for all the funds that come into the bank. In ...
-Note Teller And Mail Teller
The note teller also receives and accounts for certain funds for the bank. The proceeds of city collections usually come into the hands of the note teller. (City collections are checks and drafts draw...
-Joint And Alternate Deposits
Another classification of deposits is into joint and alternate. Deposits made in two names connected by the word and are called joint deposits; those connected by the word or are called alt...
-Trust Deposits
Deposits made in the name of one person, as trustee for another are known as trust deposits. This form of deposit is sometimes made in order to (1) arrange for the disposition of an estate after d...
-What Is A Check?
A check is a written order on a bank for money. It should, of course, be drawn only by someone who has a deposit with the bank or the right to draw on it. As in a bill, the parties to a check are the ...
-Proper Drawing Of Checks
There are certain simple rules which, if observed in drawing checks, will greatly lessen the danger of fraud, particularly in the raising of checks. The writing in the body of the check should agree e...
-Rights Of Check Holders
When the depositor has funds on hand to meet a check the bank is required to pay it, for there is a contract obligation on it to do so, and it is liable for any damages the drawer may suffer if the ch...
-Paying Checks
How are checks paid? In two ways: (a) by handing cash to the payee or holder (part of the duties of the paying teller), or (b) by receiving it on deposit for the credit of another. This second method ...
-Overdrafts
The paying teller must be sure before cashing a check that the depositor (who is the drawer) has sufficient money in the bank to pay it. Otherwise, theoretically at least, the bank should not pay it. ...
-Stop-Payment Orders
The maker of a check has the legal right, in most States, to stop payment on the check at any time before it is actually paid. So if he notifies the bank not to pay the check when it is presented, the...
-Certified Checks
It has been stated that one of the ways in which checks differ from bills is that they are not presented for acceptance. This is substantially true, but the holder of a check may occasionally present ...
-Cashier's Checks
Cashier's checks or treasurer's checks are orders drawn by the cashier or treasurer of a bank upon the bank itself and are liabilities of the bank. They are payable on demand. A bank draft is an ord...
-Indorsement
Since checks are a form of bill of exchange, the general rules regarding indorsements are the same. It should be borne in mind that checks indorsed in blank (the holder's name, and nothing else, being...
-Presentment Of Checks
As previously stated, bills of exchange must be presented within a reasonable time after their issue or the drawer and indorsers will be discharged. The drawer of a check remains liable indefinitely, ...
-Certificates Of Deposit
A has $1,000 in X Bank. He does not wish to draw checks against this amount. So he asks for a certificate of deposit from the bank. This is practically a receipt stating that A has deposited in thi...
-Bank Ethics
In the business of banking magnetic personality means much, but it does not mean everything. There may be too much glad hand and too little straight eye and perpendicular conscience. Palaver and enter...
-Chapter IV. Promissory Notes And Discount. What Is A Promissory Note?
A promissory note is a promise made in writing by one party, called the maker, to pay a sum of money on demand or at a fixed or determinable future time, to another party, called the payee, or to his ...
-Uses Of Promissory Notes
Suppose A buys from B $1,000 worth of merchandise. If he is not able to pay in cash, or does not wish to do so, he may give B his promissory note. This is but a promise to pay B either on demand or at...
-Date Of Maturity
Formerly three days of grace were allowed to all persons obliged to pay notes - that is, three days beyond the time when one would expect them to become due. This has been abolished now in all or ne...
-Place Of Payment
Presentment for payment must always be made at the place named in the note (the same rule applies to bills). Suppose the note reads payable at the Italian-American Bank- then it must be presented fo...
-Partial Payments
The holder of an instrument has a right to payment in full when a note becomes due. But he may, if he wishes, let the maker pay in installments when he cannot pay the full amount. Care must be taken i...
-Negotiation
The essential characteristic of promissory notes is the same as that of bills - the fact that they can be passed from one person to another. This negotiation is effected either (1) by merely handing i...
-Joint Makers
Suppose A purchases goods from B and wishes to give the latter his promissory note. B will not accept A's note unless A gets some one to sign with him to insure payment of the note when it becomes due...
-Money - Legal Tender
Notes and bills must be paid in money; that is, in legal tender. The efficient bank representative must know the rule concerning legal tender as applied to money in the United States. Let us conside...
-Interest
Interest is compensation paid for the use of money - money borrowed either directly or on an account due or for other obligations. Notes are either interest bearing or non-interest bearing, as the not...
-Collateral With Notes
The maker of a note, in order to get money on it, often gives certain security which is known as collateral and is designed to insure the payee against the maker's inability to pay on maturity. Thus...
-Collateral Note Form
The ordinary collateral note is, in form, the usual promissory note, with the rate of interest given, together with substantially the following language: The undersigned has deposited with said bank ...
-Collateral Note With Waiver Of Rights
The form of this note is the same as a promissory note, with substantially the following language added: The undersigned having deposited as collateral security for the payment of this and any other ...
-Chattel Mortgages
A chattel mortgage is an instrument in writing which states that the mortgagor (the person borrowing the money) has sold to the mortgagee (the person loaning the money) certain specified articles of p...
-Chattel Mortgages On Cattle
A chattel mortgage on cattle states that the mortgagor, for the purpose of securing payment of his certain promissory note payable to the..............Bank (giving date, amount and due date of note), ...
-Handling Collateral Loans
The rate on call loans in New York City ranges ordinarily from 1% upward, depending upon the amount of money held by the banks and their willingness to accept offered collateral. Collateral loans di...
-Accommodation Notes
An accommodation note is one which is signed as maker or indorser by some party who has received nothing for signing his name to it. He lends his name to the maker to enable the latter to get his cons...
-Bank Discount
Suppose A wishes to borrow $1,000 from his bank. He gives his promissory note for the amount, due in sixty days. Instead of collecting interest when the note becomes due the bank will deduct the inter...
-Discount Records
The discount clerk records the note or notes in a Discount Register by consecutive numbers under the date when discounted, with all details as to indorsements, interest, amount and maturity. He then...
-Chapter V. Drafts And Acceptances. What Is A Draft?
A draft is a written order drawn by one party called the drawer on another party called the drawee for the payment of money to a third party called the payee, the amount to be paid from funds which ...
-Kinds Of Drafts
We have seen that there are three parties to a bill. A party may make a bill payable to himself and thus, while there will technically be three persons involved, there will actually be but two people ...
-Uses Of Drafts In Commerce
Drafts are much used by business men to collect accounts. For instance, A, living in Minneapolis, owes B, a dealer in Chicago, $500 for goods purchased. If A does not send the money after a certain ti...
-What Drafts Must Contain To Be Negotiable
Not all orders are negotiable - i. e., capable of passing from one person to another. A simple order, pay to X, would not be negotiable, for such an order must be paid to X and to X alone. It is sel...
-A Bill Of Exchange Must Contain An Order
It must in imperative terms direct the drawee to pay to A the sum specified. There must be no qualifying statements. A request to pay, or an authority to collect money due, is not an order, though i...
-Indorsements
A draft may be transferred from one person to another by indorsement when it is made payable to order. When payable to bearer no indorsement is necessary except that it is customary for banks to induc...
-Different Kinds Of Indorsements
Indorsements may be special, in blank, restrictive, qualified or conditional. A special indorsement names the person to whom, or to whose order, the instrument is to be made payable; the ind...
-Indorsement "For Collection."
Sometimes a person holding a bill finds that it is necessary to send it for collection to some place where there is no bank. Then he must ask some one else to collect it for him. If he knows the perso...
-Acceptances
Until the drawee of a bill accepts it he is under no liability. Of course, the drawer might sue the drawee for not honoring (accepting) the bill, but the holder of the bill could not make the drawee p...
-Dishonoring A Draft
A person who refuses to pay or to accept a draft drawn on him is said to have dishonored it. The drawer, of course, must make good any drafts he has given to any one which have been dishonored. When...
-Protest Of Drafts
Protest is a declaration by a notary public in behalf of the holder of a bill that it has been dishonored and a protest that any loss arising shall be borne by the drawer or in-dorsers. In the case ...
-Chapter VI. Exchanges And Transfers. Clearings And Clearing Houses
In a small town having but one bank, all of the checks growing out of purely local business are drawn upon that institution. Let us suppose that A and B are both depositors in the same bank. A gives B...
-Settlement Of Balances
The exchanges having been made, the banks now prepare to settle the balances. There are various ways of doing this, depending upon the size of the city and the number of banks in the clearing house. I...
-Clearing Country Checks
The clearing principle as applied to check collection is not limited to the items payable in one city. Many clearing houses formerly had also a department for the clearing of country checks. Such coun...
-County Clearing House Associations
In addition to having clearing houses in our larger cities and towns, a number of very successful county associations have been organized. A county association takes in every bank in a certain county ...
-Clearing House Functions And Advantages
In addition to the clearing of city and country checks, principally the former, and the settlement of balances, which may be called the primary clearing house functions, there are others not quite so ...
-Special Clearing House Features
Clearing Houses we have said may be divided into two classes as to functions exercised, or to be more exact, they are divided as to the number of functions. All Clearing Houses make use of the clearin...
-Universal Numerical System
Checks often pass through many banks before they come to the bank on which they are drawn, and each bank has placed its indorsement on such checks. In each case the name of every bank was registered e...
-Travelers' Letters Of Credit
There are many ways in which the transfer of money funds may be effected between distant cities or between different persons. One of the more important methods used primarily by travelers are traveler...
-Commercial Letter Of Credit
The commercial letter of credit (as distinguished from the traveler's letter) is used to pay for merchandise purchased from exporters in foreign countries. It authorizes an exporter to draw against th...
-Travelers' Checks
A modified form of the traveler's letter of credit is the traveler's check issued by the American Bankers Association and others. The A. B. A. checks are of convenient size and are fastened in a han...
-Travelers
Some people prefer to take bills of exchange with them when traveling in foreign countries. Or they may take ordinary drafts on some New York bank. They can get these cashed at any European bank by pa...
-United States Postal Service
A much larger volume of money transfers takes place within the United States than for travelers abroad and importers and exporters. In these domestic remittances the postal service of the United State...
-Post Office Money Orders
The method usually used by business men in paying accounts or debts in some other city is to send their creditor a bank draft. Or they might send a check or a promissory note. Other methods are, howev...
-Chapter VII. Bills Of Lading And Other Documents. Bills Of Lading
A bill of lading is an item-ized statement of goods shipped, and a contract to transport them safely and make proper delivery at some stated place. The possession of it gives the purchaser, or the per...
-What A Bill Of Lading Must Contain
Since order bills of lading are much used for collateral, banks should know when they are good. Every bill must contain the following essentials: (1) the date of its issue; (2) the name of the person ...
-Acceptance And Carrier's Lien
If the shipper receives the bill and makes no objection at the time to its terms, then neither he nor any other person can afterwards deny that he is bound by the lawful terms of the bill. The carrier...
-Bills Of Lading As Collateral For Loans
Suppose A wishes to borrow $1,000 from some bank. He gives the bank his promissory note and also an indorsed order bill of lading for certain goods. If A is unable to pay the note when it is due the b...
-Bills Of Lading With Draft Attached
Suppose A, of Chicago, receives an order for a bill of goods amounting to $1,000 from B, of Minneapolis. A does not wish to ship the goods without being assured that payment will be promptly made (per...
-Duplicate Negotiable Bills
When more than one negotiable bill is issued for the same goods to be transported to any place in the United States on the continent of North America, except Alaska, the word duplicate or some other...
-Sending Goods By Express
In another chapter we learn how coin and bullion are often sent by express. The same rules apply to shipments of other articles by express. Shippers should always address packages clearly and also put...
-Invoices
When goods are sent C. O. D. by express the sender makes out a bill containing a description of the goods. Such an itemized statement is also made out whenever goods are sold, and a copy is given to t...
-Statements Of Account
Banks periodically render statements of account to their depositors. Business men and firms also make out statements of account, which are sent to their debtors. They show all the debits and credits o...
-Cash Discount
Goods are generally sold on credit. The sellers usually allow the deduction of a certain percentage of the total if the bills are paid before they are due. Thus, if the whole amount is due in sixty da...
-Trade Discount
Manufacturers and dealers often allow to their best customers, and those buying in large quantities, what is known as trade discount. This means that a discount is allowed from the amount of the bill...
-Credit Memorandums
Sometimes rebates or deductions are allowed to purchasers. This may be done because the goods are not satisfactory and are returned, or the price is higher than the purchaser had expected, or for some...
-Orders For Goods
These are very similar to drafts. They are orders by one party to another party to give the party holding the order the goods mentioned. Thus, A orders B to give C goods from B's store to the value of...
-Receipts
When one person receives money from another it is customary to give a receipt or voucher, showing the amount, the purpose for which the money was paid, the date, the name of the person paying the mone...
-Elevator Receipts
All receipts are not made for money received. They may be for goods received. Thus, elevator receipts show that grain is held in storage at an elevator. They are similar to warehouse receipts, which a...
-Warehouse Receipts
A warehouse receipt is for goods classified and placed in a warehouse, Receipt For Part Payment On Note (The Amount Paid Should Also Be Indorsed on the Back of the Note.) Winona, Minn., May 15, 192...
-Use Of Warehouse Receipts
Suppose A, a farmer, deposits certain grain in a warehouse (usually, however, the man who purchases the grain from the farmer will be the one to do this). He secures a receipt and is entitled to the p...
-Obligations And Rights Of Warehousemen
A holder in good faith of a warehouse receipt is entitled to rely on the statements it contains. So warehousemen should be careful not to issue receipts except for goods actually delivered to them, no...
-Bonds
Bonds are certificates of indebtedness, really promissory notes, of a corporation, under the terms of which the owner is entitled to the payment of the principal, when due, and interest at a fixed rat...
-Chapter VIII. Federal Reserve Bank. Banking Before The Establishment Of The Federal Reserve System
The National Bank Act of February 25, 1863 (amended many times), controlled our National banking system until November 16, 1914, when the Federal Reserve banks were opened. This Act of 1863 provided t...
-Characteristics Of The Banking System Of The United States On June 30, 1914
Under the operation of the National Bank Act of 1863, the United States had developed a very large number of small independent banks by 1914 which were scattered throughout the country. There were onl...
-Need For Banking Reform In The United States
The National Bank Act proved inadequate to meet modern needs. There was a lack of elasticity in the currency of the country - that is, the periodical demands for money and currency coming from the gre...
-The Federal Reserve System Established
The Federal Reserve Act was passed by Congress and approved December 23, 1913. The Federal Reserve banks were opened for business on November 16, 1914. The continental United States, excluding Alaska,...
-The Federal Reserve Board
The operations of the Federal Reserve System are under the supervision of the Federal Reserve Board which is composed of the Secretary of the Treasury and the Comptroller of the Currency, who are ex-o...
-How Federal Reserve Banks Are Controlled
The control of each Reserve bank is vested in a board of directors composed of nine members. This board is divided into three classes, of three members each, designated as classes A, B, and C. The cla...
-Who Owns The Federal Reserve Banks?
They are owned by all the National banks in the continental United States, which are required by the Federal Reserve Act to subscribe to the stock, and by an increasing number of State banks and trust...
-Reserve Of The Federal Reserve Banks
Federal Reserve banks are required to hold as reserves against deposits 35% in gold or lawful money, and against Federal Reserve notes in circulation, 40% in gold. Reserve Requirements Of The Member ...
-National Bank Notes
A bank note is a non-interest bearing obligation of a bank. It is payable on demand to the bearer in lawful money. Only Federal Reserve and National banks now issue them. The Federal Reserve Act of 19...
-Note Issues Provided For By The Federal Reserve Act
The note issues provided for by the Act of 1913 are of two kinds: (1) Federal Reserve Notes: These are obligations of the United States loaned to the Federal Reserve banks and secured 100% by gold or...
-Loans By The Reserve Banks
The Federal Reserve banks may use their funds (1) in lending to member banks and in buying bills, notes, revenue bonds and warrants due within six months in anticipation of taxes or assured revenues b...
-Rediscounting
Rediscounting occurs when a bank finds itself in need of funds, and takes some of the paper that it has discounted for customers to some other bank and discounts it; that is, rediscounts it. Of cour...
-Other Provisions
National banks having a capital and surplus of $1,000,000 or more are permitted to establish foreign branches and also may invest an amount not exceeding 10% of their paid-in capital and surplus in th...
-Exchange Or Collection
In order to provide an efficient and effective clearing and collection system, the Federal Reserve Act provides that any Federal Reserve bank may receive from any of its member banks, and from the Un...
-Gold Settlement Fund
The Federal Reserve Board, under authority conferred by the Federal Reserve Act, has established a plan of clearing and settlement of balances through a central fund in the hands of the Federal Reserv...
-Chapter IX. Elements Of Contracts. Definition Of Contract
A contract is an agreement containing a promise that is enforceable in law. Agreement shows that there must be at least two parties, one of whom has made an offer which the other has accepted. It mu...
-Importance Of Study Of Contracts
Practically every commercial transaction we can engage in rests on an agreement between parties. Arrangements for credit; promises to perform future acts; indorsements on bills and notes; agreements t...
-Express Versus Implied Contracts
Contracts are either express or implied. Where there is an actual promise, either in writing or words, the contract is express. When the obligation is determined by considering the conduct of the ...
-Formal Versus Informal Contracts
Contracts may also be either formal or informal. Formal contracts are those under seal or record - that is, acknowledgments of debt entered on the records of a court, and contracts in writing and ...
-Void Versus Voidable Contracts
There is an important distinction between voidand voidable contracts. Confusion sometimes arises from the failure to understand the difference. A contract is void when the law declares it to be so...
-Essentials Of Contracts
We shall next consider the various elements necessary to make a contract enforceable in court, either by the compelling of specific performance or the payment of damages for non-performance. The contr...
-Effect Of Illegality
Where one provision in a contract is void for illegality (and is not the contract's main or essential feature) but can be clearly separated from the other parts relied on, such other parts are not aff...
-Competent Parties
Not only must there be a legal object to a contract, but there must be competent parties. Competent persons are those who have the power and capacity to enter into the formation of valid contracts. Co...
-Offer And Acceptance
Offer and acceptance are neccessary to create a binding obligation between parties. An offer is a proposition to enter into a contract; an acceptance is a proper manifestation by the party to ...
-Offer
The offer must have been communicated to the offeree, the manner of communication being immaterial, because it is impossible for a person to assent to something of which he did not know. In a New York...
-Acceptance
The acceptance of an offer must be unqualified - in accord with the exact terms of the offer. If A says to B: I will sell my farm for $10,000, and B says: I will consider your offer, but I offer yo...
-Reality Of Consent
There must be a real understanding between the parties as to the contract they have entered into. Both must have had the same thing in mind. Although there have been offer and acceptance, the consent ...
-Consideration
When we say there must be consideration in a contract we mean that neither party has a right to get anything from the other unless he has given or promised something in return. Various definitions o...
-Contracts That Must Be In Writing
Some contracts are required by law to be in writing. The Statute of Frauds, enacted in 1676, was the first great law to say what contracts should be in writing. It has been passed by the legislatures ...
-Interpretation Of Contracts
A contract is an agreement. Judges try to discover the real meaning of the parties to contracts. Every word or phrase used in a contract is important, since it is difficult to prove by other evidence ...
-Relation Of Third Parties
No one can be made liable on a contract who is not a party to it. A and B have no power to make a private agreement which can compel C to do something. Suppose A and B had agreed that B was to do some...
-Discharge Of Contracts
Contracts may be discharged (obligations destroyed) by acts of the parties. Both parties may agree to abandon a contract they have made. Or if one party fails to do his part the other is not compelled...
-Chapter X. Special Problems In Law. Relation Of Agent And Principal
One man may employ another to mow his lawn, but there are no relations here that inevitably seem to affect the rights of other parties. But when one man employs some one else to represent him in deali...
-How Agency Is Created And Terminated
In general any person who can make a contract can appoint an agent. Some persons who cannot make contracts themselves may be agents, at least so far as binding the principal and a third party is conce...
-Liabilities Or Duties Of The Principal
A principal is under certain obligations to his agent and to third parties. He is under obligation to pay the agent his compensation. The amount of the compensation or salary may be stated in the cont...
-Liabilities Or Duties Of The Agent
An agent also owes duties to his principal and to third parties. He must use the utmost care in protecting his principal's interests. He must not make any secret profits himself and any contracts he m...
-Power Of Attorney
A power of attorney is a written or printed paper by which one person gives authority to another person to act for him; it must state the extent of the authority given and specify just what power the ...
-Partnership
A partnership is a relation growing out of a contract, in which two or more persons agree to do business as a firm. The losses and profits must be shared between them (this is usually the test as to w...
-Powers Of A Partner
(1) He can purchase any goods dealt in by the firm or usually employed in such a business (but not other goods; a partnership in the hardware business would not have any implied power to buy groceries...
-What Are The Rights Of Creditors Against A Partnership?
A partner is liable to creditors to the extent of his whole fortune. The creditor's action must be against all the partners, but if he recovers judgment he may collect the entire amount out of the ind...
-Dissolution Of Partnerships
A partnership may be dissolved for many reasons and in many ways. The partners may agree to end the partnership. If the partnership was created for the performance of some specific act or acts it wil...
-Joint-Stock Companies
A joint-stock company resembles a large partnership, in which the shares of the partners are represented by stock, just as in a corporation. It is like a partnership in that each member is liable, joi...
-Corporations
A corporation is a body which the law has artificially created. It has rights and duties entirely distinct from any or all of the persons who may own shares in it. There are special rules for banking,...
-Corporation Stock And Dividends
A corporation's stock is represented by certificates. These certificates are often pledged as collateral for loans. Stock is either preferred or common. The preference is usually one as to dividen...
-Management Of Corporations
The business affairs of a corporation are managed by a board of directors, not fewer than three, each of whom must be a stockholder. They are elected by the stockholders and their terms, etc., are pre...
-Corporation Stockholders
Unlike partnerships and joint-stock companies, the members of a corporation (its stockholders) are not liable individually for the debts of the firm; but they are liable to the corporation for any unp...
-How Corporations Are Dissolved
A corporation is dissolved by the expiration of the time for which it was chartered. It may be dissolved by a decree of the court for various causes, including the following: Non-use of its franchise;...
-Bills Of Sale
A bill of sale is a paper which conveys an interest or right in personal property from one party to another. No special form is necessary; the only thing necessary is to show that one party has intend...
-Leases
A lease is a contract giving the possession of real estate to one party, but keeping the ownership in the original owner. It is really a contract whereby one party becomes the tenant and the other the...
-Mortgages
A mortgage may be defined as an estate created by a conveyance, absolute in form, but intended to secure the performance of some act, such as the payment of money or the like, by the grantor or some o...
-Guaranty And Suretyship
A contract of suretyship is an agreement in which one person agrees to answer for the debt, default, or miscarriage of another. A contract of guaranty is a promise to pay such debt, etc., if the party...
-Fidelity Bonds
Persons holding positions of trust or responsibility are frequently required to give a bond (usually executed by a person or persons financially responsible or by a company making a business of fideli...
-Insurance Policies
Insurance is a system of distributing the losses of a few persons among a large number of persons. Thus, 5,000 persons might take out insurance policies, each paying $100 a year, making a total income...
-Chapter XI. Bank Statements. Purpose Of Study
This chapter and those which follow are offered with the idea of presenting to the beginning student a simple, practical study of the basic principles of bank bookkeeping. Their purpose is to impress ...
-What Is Bank Bookkeeping?
Bank bookkeeping is a process of recording and classifying the transactions of a bank. It should not be confused with the law of banking, nor with bank statistics, bank arithmetic or auditing; further...
-An Account Defined
An account is such an arrangement of increase and decrease figures of an item of loss, of gain, or of property, or of a debt, as will show at any time the balance thereof. Each account has two sides, ...
-The Trial Balance
A trial balance is a statement in summary form of the debit and credit balances of the accounts on the general ledger. The following items in the trial balance of the Institute National Bank may be fo...
-Debits And Credits
The first principle in bank accounting, as in all other bookkeeping, is that for every debit there must be a credit and vice versa. In accordance with this fundamental theory the books must always be ...
-Control And Auxiliary Accounts
A control account is an account which controls others called auxiliary or subsidiary accounts. The important feature of this control is that the controlling account varies in balance as does the sum o...
-The Trial Balance Explained
The trial balance of a ledger is an arrangement in columnar form of the debit and credit balances of all accounts so as to show the grand total of each group. The trial balance shows whether the ledge...
-Debit Balances
In the following pages the accounts will be briefly explained without much reference to the bookkeeping involved, the aim being to set forth their character in as simple and direct a manner as possibl...
-Debit Balances. Part 2
National Bank Notes On Hand (15) As implied by its title, this item represents the amount of this bank's notes on hand and unissued. The amount of National bank notes outstanding at any time would be...
-Debit Balances. Part 3
Undivided Profits (27) Another capital liability is undivided profits which shows the more recently accumulated earnings of the bank. Periodically, usually on June 30 and December 31, banks close out...
-Profit And Loss Statement
The profit and loss statement may be defined as an arrangement of the profits or earnings made and of the losses and expenses incurred during a given period as shown by the profit and loss accounts, ...
-The Closing Of Accounts
By closing the accounts is meant the periodic transfer of losses and gains to the profit and loss or undivided profits account of the bank. All losses and expenses cause decreases, and all gains...
-The Profit And Loss Account Illustrated
After all of the above closing entries are posted, and this is done as at the close of business June 30, 1922, the profit and loss account appears as follows: Profit & Loss Debit Credit ...
-Statement Of Resources And Liabilities
This is really a statement of condition of the bank as of a given moment. It is an arrangement of all of those debit and credit balances which represent property owned, debits due the bank, or obligat...
-Chapter XII. Illustrative Entries. Illustrations Of Typical Transactions In Each Account
In this chapter typical transactions will be given for each account appearing in the trial balance which was explained and exhibited in a previous chapter. These transactions are indicative rather tha...
-Plan Of Illustrations,
The transactions in each account will be handled under the following plan: 1. The transaction will first be stated. 2. The general ledger entries will then be given. 3. Following that, the more sta...
-Trial Balance
The trial balance is again inserted here for the student's convenience: Debit Balances 1. Loans ................................................. $1,925,000 ...
-A Loan Made Transaction (1)
On June 30 the bank makes a loan to W. Byrnes on his ninety-day note, secured by Liberty Bond collateral. The general ledger entries are as follows: Debit: Loans (1).................... $1...
-Auxiliary Loan Records
The following are the more important auxiliary loan records affected by the making of a loan. No attempt is made to suggest the most desirable size, shape, or arrangement of these records. The only pu...
-Proof Of Loans
In good banking practice the loan accounts should be proved frequently by determining the fact of agreement between the balances on the loan ledger and the balance of the loan account on the general l...
-Discounting A Bill (2)
On June 30, C. E. Adams tenders for discount the ninety-day note of J. M. Barber, dated May 31. The amount of the note is $1,800. The general ledger entries would be as follows: Debit: Bills Di...
-A Discount Paid Transaction (2)
The general ledger entries covering the payment of the Barber note, just mentioned, maturing on August 29, would be as follows: Debit: Due to Depositors (37)...... $1,800 or ...
-Past Due Paper Transaction (3)
Assume that owing to a delay in the mails H. A. Burt failed to place us in funds to cover his unsecured loan maturing on June 30, the amount of the loan being $2,000 and the interest $50. The general ...
-Payment Of Past Due Paper (3)
It should be remembered that this account would not be used for any loans or discounted bills which are known to be uncollectible. Assume for purposes of illustration that the item mentioned in the pr...
-The Purchase Of United States Government Securities (4)
Assume that on June 30 we buy 100 Liberty Bonds at 3 1/2%, due 1932 at $99.50, that the accrued interest thereon is $20 and that the commission is $5. These figures on interest and commission are base...
-The Proof Of The Bond Account
The money amount of the balance column of the bond ledger, which is reduced from time to time by sales and, as will be shown, by applications from undivided profits in consequence of depreciating valu...
-A Sale Of United States Government Securities (4)
In most all respects such a transaction would involve entries just the opposite of those described under a transaction of purchase. Assume that we sold on June 30 fifty Liberty 31/2's due 1932 at $100...
-A Transaction Showing The United States Government Securities Deposited To Secure Circulation (5)
The Treasurer issues lists of the Government securities which are eligible for this purpose. Assume that $200,000 bonds have been sent to the Treasurer as security for circulation. The general ledger ...
-A Withdrawal Of Securities Deposited To Secure Circulation (5)
All that need be said here is that the entries in the general ledger and auxiliary books would be just the reverse of those explained under the previous transaction. Of course, if the circulation is d...
-Transactions In Securities Other Than U. S. Bonds (7)
A purchase of other bonds would be recorded exactly as was explained for a purchase of U. S. Government securities, except that the debit side for the entry on the general ledger would be slightly dif...
-Other Bonds Pledged To Secure U. S. Deposits (8)
As was explained, the municipal bonds of States, counties, and smaller divisions are eligible as security for such deposits. The bookkeeping process for these pledges is exactly as has been previously...
-Acquisition Of Federal Reserve Bank Stock (9)
By law, member banks of the Federal Reserve System are required to subscribe 6% of their paid-up capital and surplus in stock of the Federal Reserve bank of the home district. Fifty per cent of the su...
-Transactions Which Increase Reserve At The Federal Reserve Bank (10)
These are numerous and sometimes rather complicated. The bookkeeping for rediscounts and Federal Reserve bank advances will be explained in a subsequent chapter. However, a few of the day to day trans...
-Transactions Which Decrease The Reserve At The Federal Reserve Bank (10)
These likewise are numerous, but some of the recurring ones are as follows: 1. An excess of Incoming Clearings - The receipt back from the clearing house of a larger amount than is sent would cause a...
-Cash (11)
The cash account is explained in some detail elsewhere in this book. It should be borne in mind that while cash is debited and credited like any other account in these illustrations, the recording of ...
-Checks On Clearing House Banks (12)
Assuming that $24,000 clearing house checks have been taken in by the receiving teller, the entries on the general ledger reflecting these items will be as follows: Debit: Checks on Clearing Ho...
-Checks On Non-Member Clearing House Banks (13)
As an illustration of the manner in which this account is handled: Assume that at the close of the day the bank held $14,000 of these checks, taken usually through the receiving teller. The entries to...
-Cash Items (14)
As explained, these are largely checks for which credit of some kind has been given, but which are held over because they are slightly irregular. These items are liquidated or turned over each day....
-National Bank Notes On Hand (15)
A transaction showing the increase of National bank notes on hand is illustrated as follows: After the deposit of $200,000 of Liberty Bonds, for instance, the Comptroller of the Currency sends the equ...
-Accounts Receivable Transactions (16)
Assume the bank pays $1.50 registered and insured mail charges for a customer and awaits his remittance to cover. The general ledger entries at the time the payment is made by the bank should be: ...
-Internal Revenue Stamps (17)
To illustrate a transaction showing the purchase of these stamps, which are used largely for time paper where the customer has not attached the stamps required, assume the bank purchases $500 worth of...
-Transactions In The Account Due From Tenth National Bank, New York (18)
As has been said, this asset represents funds of the bank on deposit with a New York correspondent. Let us illustrate by a transaction which increases that balance. Suppose this bank (meaning the bank...
-A Decrease In Account With Correspondent
A transaction showing a decrease in the balance carried in the New York bank might be as follows: A customer comes in and buys New York exchange for $5,000 in the form of a check drawn on the Tenth Na...
-Entries In The 5% Redemption Fund (19)
This was explained as the 5% deposit placed with the Treasurer of the United States for the purpose of redeeming circulating notes which are shipped to him from time to time. The entries in this accou...
-Due From Federal Reserve Bank-Collection Account (20)
A transaction in this account was explained in connection with account No. 10, reserve at Federal Reserve bank. As has been said, the collection account is an offset to credits made in depositors' acc...
-Due From Other Banks -Collection Account (21)
This account is handled almost exactly like the Reserve bank - collection account just explained, excepting that it is concerned with items which are sent to other than Federal Reserve banks for colle...
-Expense (22)
A general list of expenses has already been given. While taxes are frequently set up as a separate account, assume that in this bank they are handled through expense, and that the sum of $3,000 is pai...
-Interest Paid On Deposits (23)
Charges to this account reflect the amount of credit given customers for interest on their deposits. Suppose that for the month ending June 30 interest on depositors' accounts amounted to $1,000. The ...
-Banking House And Lot (24)
There are, of course, many ways of acquiring real estate, but the detail of that cannot be dealt with here. To illustrate one way: suppose the bank buys outright its banking house and lot for $50,000,...
-The Issuance Of Capital Stock (25)
National and State laws vary as to the proportion of capital stock which must be paid in before commercial banks may open their doors for business. All require that part be paid in before opening. The...
-Surplus Transactions (26)
Surplus is acquired for the most part by the setting aside of profits for very unusual contingencies. Assume the bank earned $20,000 during the six months ending June 30, and that the stockholders dec...
-Domestic Exchange (28)
Exchange is a charge made to cover the costs of collecting an item, including in that the interest delay in realizing cash on an out-of-town item for which immediate credit has been given. Assume a cu...
-Commissions Collected (29)
The items that would be placed in this account would depend upon the accounts of the bank. They might include service charges made in connection with the sale of bonds for a customer's account, or sim...
-Interest On Loans (30)
Interest on loans is collected at various periods and under various arrangements in accordance with the agreement reached with the customer. Assume that a time loan for $5,000 at 6% is paid at maturi...
-Discount (31)
Discount is interest taken in advance. An illustration has been given of discounts collected in connection with the process of discounting a bill, but take as another the following: Webb & Company dis...
-Interest On Investments (32)
Assume the bank clips and collects its six months' coupons on an investment of $10,000 American Telephone & Telegraph Consolidated 5's. The entries on receipt of the funds for the coupons are as follo...
-Bond Profits (33)
Assume the bank sold its $10,000 American Telephone & Telegraphs at 98, having purchased them at 95. The general ledger entries showing the profit made, irrespective of accrued interest, are as follow...
-Reserve For Taxes (34)
Ignoring rates of taxation, assume that the bank estimates that its taxes will be $2,400 for the ensuing year. At that rate it is advisable to set up each month a charge of $200 making for the year an...
-Reserve For Depreciation On Building (35)
Substantially everything depreciates, and buildings are no exception, the rates varying according to the construction from 2% to 25% a year. Assume that this bank building costing $36,-000 will have a...
-Due To Depositors (37)
As illustrations have been given of this account throughout this chapter thus far, no entries are considered necessary here. Emphasis, however, is again placed on the point that each time the account ...
-Certified Checks Outstanding (38)
A certified check is an item which the bank has guaranteed to pay by virtue of deducting, at the time of presentation of the check for certification, the amount of the check from the depositor's accou...
-Cashier's Checks Outstanding (39)
Cashier's checks are issued by the bank for various payments. Among these are payments to customers of the proceeds of loans and discounts, payments made for the purchase of securities, and for variou...
-Demand Certificates Of Deposit (40)
A certificate of deposit is a form issued by the bank on which it certifies that it has received from the depositor mentioned a certain sum, which is payable on demand with interest at a certain rate....
-Dividends Payable (41)
Various titles are used for the account showing dividends which have been declared by the board of directors payable to the stockholders of the bank, but the foregoing title is considered a good one....
-Time Deposits (43)
Time deposit transactions are simple. Assume that a firm leaves $15,000 with the bank under time deposit arrangement and that the bank agrees to pay interest on it at 3%, crediting interest every thir...
-Postal Savings Deposits (44)
Previously these were explained as deposits of the trustees of the Postal Savings System, and as has been previously stated, collateral is pledged to secure their repayment. The general ledger entries...
-Overs And Shorts (45)
This account is variously named in different banks. Some would call it shortage and overage of cash, but the term overs and shorts is considered a good title because in larger banks it embraces much...
-Cash Bookkeeping
Cash bookkeeping in banks differs from that of commercial and industrial enterprises where cash is debited for receipts and credited for all dispositions. In banking an arithmetical process is used. I...
-Receiving Teller's Cash Transactions
The receiving teller, as implied by his title, receives cash and cash items for credit to depositors' accounts. The cash items handled by the receiving tellers will be dealt with further on in this ch...
-Paying Teller's Operations
The paying teller implies a bank where the paying operation is a function of a separate individual or department from that of receiving. Assume then that the paying teller, who is the bank's cash cust...
-Miscellaneous Cash-Handling Departments
The note teller and the foreign and trust departments in the larger banks frequently accumulate cash above any fund that they may currently keep, and these accumulations would, of course, have to be t...
-The Proof Of The Day's Cash
Having shown the total receipts, and the total payments of cash, if we add the amount on hand at the opening of business to the receipts, and deduct the payments, the result will be the amount on hand...
-Banks With Receiving And Paying Functions Combined
Many small banks, and some large, combine the activities of the receiving and paying tellers in one cage or in one department, but the principle already illustrated is not affected thereby. Any cash r...
-Proof Of Transactions
Aside from the proofs of ledgers concerning which more will be said later, there are, depending upon the size of the bank, many departmental, sectional and block proofs that must be made in the course...
-Division Or Department Proofs
Banks with ten or more employees are usually divided into two or more departments, each of which puts through figures to cover the day's work. Further, where there are two or more departments the work...
-Other Department Proofs,
Each department or division operates a proof similar to the one shown in the last paragraph, so that the mail and transit departments, which would receive the $5,000 and $4,000 worth of checks respect...
-The Closing Cash Figure On The Proof
Early in this chapter it was stated that bank cash bookkeeping was different from that of commercial or industrial enterprises where debits and credits to cash are handled like those for any other acc...
-Chapter XIII. Bank Ledgers And Department Bookkeeping. Definition And Form Of A Depositors' Ledger
In this ledger are usually kept the accounts of all of the depositors of the bank. In commercial banks only demand deposits are kept in this record, such time deposits as are carried being kept in the...
-Debit And Credit Posting Mediums
Debits to accounts appearing in the demand deposit ledger would consist of checks, drafts drawn against the depositor and payable by his bank, and debit tickets of all kinds covering among other thing...
-Proofs With The General Ledger
As at the close of business each day, each depositor's ledger or individual ledger should prove with the general ledger. In order that differences may be more readily disclosed, each ledger clerk usua...
-Interest Hold-Outs
It is customary among banks which pay interest on demand deposits to pay interest on only what is called the cash balance of a customer's account. This can best be explained by illustration. If a cust...
-Statements Of Account Or Accounts Current
It is the custom in commercial banking to render statements of account monthly, or more frequently, depending upon the wishes of the customer. A statement of account is usually a simple continuous and...
-The Duties Of A Deposit Ledger Clerk
They cannot all be itemized, but the more important ones are usually as follows: 1. To post debits and credits; 2. To watch checks for irregularities (in larger banks this is done by a separate depa...
-The General Ledger Explained
The general ledger entries have been explained in detail in a preceding chapter so that little need be said here as to entries. The forms for general ledgers vary greatly in different banks, depending...
-Posting Mediums
The size of the bank and the system used would determine the character of the posting mediums. Years ago journal sheets were made up, offsetting debits and credits appearing on them. These were sent t...
-Daily Trial Balance Or Statement Of Condition
The trial balance has been exhibited in a previous chapter. It is simply a list on the one side (left) of debit balances, and on the other (right) of credit balances, the left being called assets and ...
-Separate Reports Made By General Bookkeeper
The general bookkeeper's functions are highly important and varied. In addition to posting and proving his ledger and taking off the daily trial balance, he must determine the adequacy of the bank's r...
-Special Reports Continued
The internal reports required by bookkeepers for the benefit of officers and directors vary with the bank, but a very important daily report would be that made for the benefit of loaning officers, sho...
-Reports To Comptroller And State Superintendent
National banks are required to render on call five statements of condition during the year to the Comptroller of the Currency. State banks are required in most States to render similar quarterly repor...
-Contingent Accounts
A contingent liability is a liability of a secondary nature which becomes actual usually on the occurrence of some act or on the default of another. To illustrate: If a bank rediscounts paper with the...
-Definition Of Collection Items
A cardinal distinction in banking is that between so-called cash items and collection items. Cash items are those for which immediate book credit is given to the depositing customers before the act of...
-Collection Registers
Until recently, and to a considerable extent at present, it was customary in banks to record all collections in bound registers in the exact order in which they arrived, numbers being assigned in sequ...
-Collection Tickets
Of late, manifold tickets have become popular, especially for collections, both incoming and outgoing. By manifold tickets is meant a set of from several to fifteen copies made in one writing, the var...
-Reconciliation Of Accounts
Banks having accounts with other banks find it necessary to make frequent reconciliations; that is, they must check the figures of their correspondent's account, as shown in the statement, with their ...
-Development Of The Reconcilement Form
In the illustration just given, items B and C were omitted for simplicity's sake, but a little application of the same line of thought will prove the original equation given, namely, that A plus B min...
-Borrowings From Federal Reserve Bank
Various collateral is used by member banks in their borrowings from the Federal Reserve bank. These borrowings are of two kinds, those classified by member banks as bills payable and those called redi...
-Rediscounts With Federal Reserve Bank
Paper rediscounted at the Federal Reserve bank should not be assumed to be only that discounted by the member bank; in fact, in the past the banks have regularly used Liberty Loans for rediscount purp...
-Trust Department Bookkeeping
Of late many commercial banks, especially National, have established trust departments. Through their trust departments banks frequently act as stock registrars so as to insure that when stock is tran...
-Custody Department Bookkeeping
Most banks maintain some form of customers' securities service for the purpose of safekeeping any securities that customers may feel inclined to leave with them, not as collateral, but simply as depos...
-Registers For Customers' Securities
All customers' securities received are usually registered on blotters or journals giving generally: Date Security numbers Par value Description From whom received For whose account Disposition....
-Securities Ledgers
Many banks use very large ledgers with a page or more for each customer and with spaces on each ledger page for ten to fifteen securities. The vertical columns on such ledger pages are usually somethi...
-Cross Reference Cards
For dividend and coupon payable dates as well as for other cross reference purposes, a card index is usually kept of customers' securities, classified under customer's name and name of security. In ot...
-Deposit And Withdrawal Procedure
It is considered advisable to say something concerning withdrawal procedure in connection with safekeeping securities. In the larger banks, a consecutively numbered deposit form is used on which are r...
-Bookkeeping In Connection With Coupon Payment
Most country banks are concerned only indirectly with coupon payments. That is, the payment of coupons and maturing bonds is restricted chiefly to the large city banks, but all banks are concerned wit...
-Coupon Fund Account
On the general ledger of a bank there should be a coupon fund account representing the total of the funds received and on hand for coupon payment and bond redemption purposes. The grand total of the f...
-Foreign Department Bookkeeping
Foreign banking business is done for the most part through accounts carried with the banks abroad in their currencies. Of course, the foreign banks find need for accounts in dollars in America so that...
-Transactions In Foreign Currency
Assume that 400 of sterling currency is bought at the rate of $4.45, making a cost of $1,780. A similar auxiliary record would be kept for foreign currency excepting that there would be no value date...
-Transactions In Foreign Bills
Owing to the fluctuations of the foreign exchanges, foreign bills have been drawn of late for the most part in dollars. If an advance is made on a bill which is drawn in foreign currency, the customer...
-Acceptance Transactions
Acceptance credits are extended for both imports and exports, and also for domestic transactions. An acceptance letter of credit is an undertaking on the part of the bank to accept for financing purpo...
-Traders' Bookkeeping Records
In the more progressive banks it is customary to keep records classified first by currency, and under currency by date or month of delivery, showing the commitments of the bank in the purchase and sal...
-Other Foreign Department Accounts
It should not be assumed that when foreign exchange is purchased and sold it is always secured and disposed of for cash. It is the custom in the larger seaboard cities to pay for exchange on the steam...
-Alternative Method Of Keeping Foreign Accounts
In the larger banks foreign departments are operated on a branch bank basis. That is to say, a general ledger is kept within the foreign department which is balanced each day in the same way as the ge...
-Bookkeeping For Stationery And Supplies
Bookkeeping with respect to banking proper has been dealt with at some length, but it is felt that owing to their importance, something should be said of the records for stationery and supplies, espec...
-Card Records For Stationery And Supplies
A satisfactory card record is one showing for each item, in fact, in the larger banks for each order of each item, the following data: Name and description of item Price Date Purchased from Cost ...
-Other Supply Records
A sufficient number of copies of each purchase order issued should be made so that the accounting department may receive a copy, and that there may be a copy for the purchase order file, and in additi...
-Accounts Of Foreign Department Kept On The Branch Bank Basis
That the student may be more familiar with the accounts of a foreign department when it is conducted practically as a bank within a bank, the accounts which would appear in a moderate sized foreign de...
-Foreign Department Assets
U. S. Currency (1) Foreign departments, of course, require U. S. currency in their transactions for travelers' letter of credit purpopses and the like, throughout the day. The proof for this item in ...
-Foreign Department Liabilities
Dollar Ledger Accounts - Banks (1) As has been explained in discussing the assets this represents the gross amount of the dollar deposit balances carried here by foreign banks. Dollar Ledger Account...
-Foreign Department Contingent Liabilities
No mention was made in the foregoing statement of condition of the contingent liabilities of the foreign department. As was said, most foreign departments issue commercial letters of credit, both thos...
-Foreign Bills Discountable Abroad For The Bank's Indorsement
Certain time bills drawn in foreign currency are discountable in the larger centers abroad. If a bank's balances abroad are running low and the rates are favorable there, a bank is inclined have some ...
-Branch Banking
With the increase in popularity of branch banks, inter-branch bank bookkeeping has become more important. There is nothing very complicated about it. As was explained for the foreign department, when ...
-Reserve For Contingencies
In banking as in other businesses, but particularly in banking, it is obviously inadvisable to keep questionable loans or other assets on the books with figures in excess of what they are considered w...
-The Auxiliary Record For The Contingency Reserve
If a reserve for contingencies is established, it is well also to install an auxiliary record of it, showing under name of customer or debtor the amount written off, any expenses incurred in connectio...
-Chapter XIV. Accrued Items And The Audit. Accrued And Cash Bookkeeping Compared
Cash basis bookkeeping is that which records entries at the time funds are received or paid in connection with a given transaction. Accrued bookkeeping, on the other hand, is that process under which ...
-Accrued Expenses And Earnings
The following expenses are frequently accrued: Salaries, unless they are paid monthly or more often, rent, taxes, depreciation, books and stationery, and insurance. The control entries for the accrued...
-Accrued Interest On Loans Which Is Not Paid In Advance
A bank making up monthly earnings and expense statements would obviously not show the actual situation if interest on time loans were credited to the earnings account only on the maturity of the loan,...
-Interest Accrued On Loans On Which Interest Is Paid In Advance Including Discounts
A discount is simply a kind of loan on which interest has been taken in advance. In most banks the distinction between discounts and loans is purely arbitrary, as interest is taken on some loans in ad...
-Accruals With Respect To Interest Paid On Money Borrowed
Borrowings from Federal Reserve banks in the past have been of such short time character as to make unnecessary the daily accrual of interest charges thereon. That is, payments for interest were made ...
-Interest Accrued On Investments
In principle, interest should be accrued on the bank's investments as well as on its loans, but in practice it is not usually done, because the interest payable dates on the bank's investments are gen...
-Interest On Time Deposits
Time deposits and time certificates of deposit should likewise be handled on an accrued interest basis, especially if they are considerable in amount. No new principle will be encountered in accruing ...
-Audits. The Comptroller
Very little can properly be said of the functions of the comptroller. It suffices to say that he is the chief of accounts and accounting in the bank. This involves the development and continuous impro...
-The Auditor
In the larger banks this important official's functions are highly varied. His work is by no means confined to analysis. His major responsibility is that of seeing that all transactions have been rout...
-Spot Audits Of Departments And Branches
The auditor and his assistants frequently make spot or unannounced examinations of the entire bank or of the various departments, and of the branches, if there are any. These examinations usually ...
-Importance Of Bookkeeping
These matters of audit and control, while strictly out of the province of bookkeeping as a recording process, are introduced to show the great importance of bookkeeping as an agency in proper bank ope...
-Interbranch Accounts
It will be noted that interbranch accounts are not shown in the foregoing statement. That is because the statement represents the consolidated accounts of the main office and all branches and division...
-Real And Nominal Accounts
Accounts are sometimes classified as either real or nominal. Real accounts are assets and liabilities, that is, those representing property owned and debts due to or by the bank. Nominal accounts are ...
-Liabilities Classified As To Real And Nominal
As was the case with the debit balances, there are some items among credits which are of a mixed character. Demand deposits, time deposits, other liabilities, and accrued liabilities are obviously rea...









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