Reserve is calculated on net deposits, that is, deposits that have been collected. Referring to the outline of the bank statement again, we understand that if a check for $1,000.00 payable in Chicago is deposited in a Boston bank, the deposits of the Boston institution have apparently increased $1,000.00 and the item, "due from banks," on the other side, has increased the same amount. The $1,000.00 is really not a part of the deposits because it is not yet collected, and good banking does not permit a depositor to draw against uncollected funds. Therefore, in estimating reserve, we subtract from the gross deposits all the items on the resource side representing unpaid checks. We except "due from reserve agents," because such amounts are collected funds subject to the draft of the bank. A certain percentage of the net deposits must be kept as a reserve, part of which must be in cash and another part may be with a reserve agent, but the full amount must be carried or the bank may not make any new loans or declare a dividend until the reserve is restored. The percentage varies depending upon the kind and location of the bank. One of the functions of the Federal reserve banks is to carry the reserves of the national and other member banks, or that part of the reserves which banks may keep on deposit outside their own vaults. The importance of this provision of the Act is indicated by the fact that it is entitled the Reserve Act. Under it the reserves of all the member banks are concentrated in the Federal reserve bank of the district. The combined reserves of which the deposits of the reserve banks consist, are thus available for the relief of any member needing additional cash. The member borrows money from the reserve bank by re-discounting its commercial loans, which increases the amount "due from the Federal reserve bank" by the amount re-discounted.

Typical Receiving Teller's Settlement

Individual deposits............................................

$152,136.07

Deposits from other banks ............................................................................

89,422.12

Receipts from note teller......................................

1,234.16

Receipts from paying teller ..........................................................................

972.17

Receipts from exchange teller (drafts sold)......................

2,500.00

Total receipts................................

$246,264.52

Checks charged to individual ledgers ...........................................................

$98,422.10

Drafts charged to general ledger ..................................................................

10,102.50

Out-of-town checks to transit department ....................................................

47,203.10

Exchanges from clearing house.................................

50,522.25

$206,249.95

Cash to Paying Teller:

Gold.........................................

$10,122.00

Legal tenders.................................

3,225.00

40,014.57

National bank notes............................

5,000.00

Gold certificates...............................

3,700.00

Silver certificates..............................

12,522.00

Silver dollars..................................

5,221.00

Fractional.....................................

224.57

$246,264.52

Typical Paying Teller's Settlement

From yesterday's settlement:

(Itemized as to denominations)

Vault cash .................................................................

$58,222.00

Paying teller's cash.............................

41,922.16

Cash from receiving teller.......................

40,014.57

Cash from note teller...........................

12,103.10

Exchanges from clearing house...................

72,103.15

Total receipts......................

$224,364.98

Charged to ledger, A to K...........................

$44,622.10

Charged to ledger, L to Z............................

31,203.15

Charged to general ledger (bank accounts, etc.)........

20,403.16

Checks to receiving teller............................

4,322.79

100,551.20

Cash balance.......................

$123,813.78

Vault Cash........................................

$64,500.00

(Changes in this item during the day might be noted on a separate sheet.)

Gold.............................................

$10,500.00

Legal tenders.....................................

24,250.00

National bank notes ...............................................................

7,550.00

Gold certificates .....................................................................

5,000.00

Silver certificates ...................................................................

4,772.00

Silver dollars .........................................................................

6,278.00

Fractional.........................................

963.78

To next settlement..................

$123,813.78