Allowing Overdrafts

From time to time cheques will be presented for which there are not funds at credit. If paid, they create overdrafts, or increase the amount of overdrafts already existing. When a bank accepts or pays cheques of this kind it is making loans or advances to the customers who draw them. To grant loans or advances is a function belonging exclusively to the manager of the branch, and the ledger-keeper has no right to mark such cheques until he has been instructed specifically in each case by the manager. These instructions may be given verbally, but the approved practice is for the manager to initial each cheque that thus forces a loan from the bank.

Calling Off

After all the entries for the day have been posted, the work on the ledger is done, except if it be a balance day. Every morning, before the bank opens, the ledger is called off. It will be remembered that the cash book, after the manager had checked and initialled it, became established as an authoritative record. It is used to call off the ledger. The manager or accountant takes the ledger and requires an officer other than the ledger-keeper, usually the junior, to attend with the cash book.

The man with the cash book calls off each item in turn, first the folio, then the name of the account, and finally the amount, stating whether it is debit or credit. The senior officer turns to the respective accounts and initials each entry as it is called. As he proceeds he is watchful for peculiarities in the posting, and for anything that strikes him as queer. Whenever there is a discrepancy between the amount as posted and the entry in the cash book, the ledger-keeper is called, and, if the error be his, he is required to make the correction, the voucher for the amount in question being first examined.

The calling should result in all the deposits in each account entered the previous day being initialled by the senior. All the cheques that were entered need not necessarily be initialled, for some which were marked or certified may be outstanding. The object of the calling off is to establish the correctness of the ledger up-to-date, to guard both against mistakes and crooked entries by the ledger-keeper. It aids the latter to meet a risk connected with the position that has not yet been described.

Proving The Balance

This risk has to do with his accuracy. All sorts of people have accounts in the ledger. By means of their pass books and by direct interrogation they, through the day, become acquainted with their respective balances as shown by the bank's books. Should the ledger-keeper make a mistake and extend the balance of an unprincipled customer, practically devoid of means, so that it showed considerably larger than it should, on learning of the error the latter might take advantage of it to draw more than he was entitled.

An occasional proving of the balances of accounts of this kind furnishes a measure of protection. To prove the balance, the additions of the debit and credit columns are carried down to the last entry, the totals being put in lightly in pencil. The balance proves if it is exactly equal to the difference between the two totals.