7. Circulation Records

An important duty of the chief accountant is to watch the circulation closely and see that an overissue does not occur. Reports are received daily from the larger branches as to the amount of notes on hand, and weekly from the smaller branches, and from these the exact position of the note issue is determined.

Altho a bank, under ordinary circumstances, can issue notes only to the amount of its paid-up capital, the invariable practice is to carry a large supply of circulation in the tills of the branches thruout the country so as to be ready to meet, without delay, the requirements for circulation at any point. A bank, for instance, with a paid-up capital of $3,000,000 would probably have at least $5,000,000 at the credit of bank note account in the head office general ledger.

Part of this amount would be represented by notes on hand in the head office, part by notes in the branch tills, and the balance would represent the amount of circulation outstanding.

At credit bank note account. . . .

$5,000,000

Less:

Unsigned notes...........

$500,000

Soiled and mutilated notes awaiting destruction.....

400,000

Notes held in the tills of the branches................

1,400,000

$2,300,000

2,300,000

Total amount of outstanding circulation in the hands of the public........

$2,700,000

This leaves a margin of $300,000 unissued, the difference between authorized and actual circulation.

Changes in bank note account are infrequent and occur only when notes received from the engraver are credited, or when a debit entry is made of the amount of mutilated bills destroyed by the directors.

Soiled and mutilated notes are counted and burned by the directors whenever a sufficient quantity has accumulated. A special furnace is used for this purpose, and as soon as the bills are counted they are placed in the furnace by the directors, where they are rapidly consumed. A statement showing the amount and denomination of the notes destroyed is then signed by the directors to be attached to the monthly circulation return.

In the note circulation register, a complete record of the various issues is kept, as well as of all the denominations of the notes themselves.

8. Returns To Head Office

Every branch sends to the head office a number of statements and returns. These statements go under different names in the various banks tho they vary but little in their intention and in the information conveyed. It is most important that all returns should be carefully prepared and legibly written by the branch. An error in any one of them is serious; it involves the head office in a great deal of unnecessary work in locating the difference and, obviously, is a serious reflection on the ability of the officers whose signatures attest the correctness of the figures. The principal statements are as follows:

9. Branch Clearings Statement (Daily)

The branch clearing statement is forwarded to the head office as soon as the cash book for the previous business day has been checked. It is signed by the cash-book clerk and checked in every particular by the accountant, who also signs in attestation of its correctness.

10. Financial Statement

This is forwarded daily by the larger, and weekly by the smaller branches. It is practically a balance sheet of the branch general ledger, either in exact figures or approximately in even thousands. It is important that this statement should be despatched promptly, as the data are necessary to the chief accountant in arriving at the amount of circulation outstanding and the general movements of the bank's assets and liabilities. A complete balance sheet is rendered on the last day of the month.

11. Discount Report

In some banks this is sent in daily, and in some weekly. If sent in daily, it generally takes the form of a carbon copy of the discount register, with the manager's comments or explanations of the different transactions. If a weekly statement, only transactions above a certain amount are reported. The limit varies with the importance of the branch. All overdrafts, no matter how small, are reported with explanations. All liability accounts in the branch which are out of order in any way, either by the expiration of the credit or for other reasons, are listed in each report until they have been adjusted to conform to head office requirements.

12. Cash Item Account

This return is made up at least once a month and gives the outstanding sight drafts and other cash items with the date of origin and domicile. A special report should be given on any item which appears to be too long outstanding, thus anticipating inquiries from the head office.

13. Balance Sheet

This is made up to the close of business on the last day of the month, and mailed to the head office not later than the following business day. It is an exact statement of the general ledger of the branch, and is used by the head office in compiling the general statement of the bank, or monthly return to the government, as it is generally called

14. Overdue Bills

This statement is required at least once a month, and gives a list of all overdue loans and discounts. It should be the ambition of every manager to keep this list down to a low point, if not entirely to eliminate it. Any name which appears frequently in this list should be avoided; it shows a lack of business honor, or something worse.

15. Monthly Liability Return

This return gives a list of all the liability accounts on the books of the branch over a certain amount with all necessary particulars regarding security, etc. Some banks require the monthly liability return to contain the name of, and amount, no matter how small, due by every obligant.

16. Sundry Returns

Statements of the expense account of each branch, accompanied by the relative vouchers, are sent every month to the head office. The closing of the books at the end of the bank's fiscal year calls for a number of returns for statistical and other purposes, such as the profit and loss statement, the report on bank premises, the bad and doubtful debts return, and the like. In addition to these, special reports on various subjects may be called for from time to time by the head office.

17. Weekly Report On Business

In discussing the Canadian banking system, frequent reference is made to the very full knowledge possessed by the general managers as to the condition and requirements of the country as a whole. This information is acquired thru two separate channels: the weekly financial statement and the weekly report on business. The weekly financial statement from the different branches shows the fluctuation of the circulation, loans, deposits, etc., thruout the country, and forms an excellent financial barometer of business conditions. The information in these statements is supplemented by weekly or fortnightly letters from the branch managers which, as a rule, cover the ground most thoroly, and give a variety of interesting and useful facts. Among other things with which the letter deals may be mentioned the following:

(a) Particulars as to prices and movements of staple commodities such as grain, flour, cattle, dairy produce, lumber, etc.;

(b) Acreage, condition and prospects of crops, etc;

(c) Farm sales and other real estate transactions:

(d) The conditions of trade locally, scarcity or otherwise of money, general financial and commercial news;

(e) Business failures or indications of beginnings of unsoundness in local firms, whether customers or not;

(f) Local rates for money, domestic and foreign exchange, etc.

It is easily seen that no press association or mercantile agency could possibly give the intimate information as to the country's condition thus afforded the general managers thru the branches. By means of information thus regularly afforded, Canadian banks are able to see the coming financial clouds six months or even a year before they appear on the commercial horizon, and thus not only to take the necessary steps to prepare themselves for trouble, but also, in the annual reports of the bank, to warn their customers and the public generally of the approaching storm.

18. Records Of Routine Work

At the end of each month there is forwarded to the head office a certificate signed by the manager and accountant, which certifies to the following:

That all the general statements and work of the office have been completed and verified for the month;

That all the overdrafts shown in the deposit ledger during the month were authorized by the manager;

That the liabilities of customers as shown in the liability ledger are correct;

That all interest computations in the discount and ledger departments have been independently verified by a second and competent officer;

That all insurance held is in force;

That the time-lock is running correctly and the combination locks are in satisfactory condition;

That the cash items account was drawn off, and that all outstanding items are satisfactory;

That the current deposit ledger, savings bank, and liability ledger balances were drawn off and found to be correct;

That the notes, bills, and collaterals were inventoried and balanced;

That the collection register has been regularly checked, and that there were no unsatisfactory outstanding items;

That goods pledged or warehoused have been examined and found correct;

That the draft account has been balanced.

The dates on which these several balances were arrived at are given, as well as the initials of the officer who made the check.

It is essential that a complete record of daily routine work, etc., should be maintained, and some banks require monthly reports from their branches giving the initials of the officers who fulfill the various duties each day. Even if this report is not required by the head office it is advisable to keep a systematic record in the office.

Review

What accounts are kept at the head office of a bank?

Who keeps the circulation records of the bank?

Who makes up the branch clearing statement? How often is it sent to the head office?

Thru what channels does the general manager get complete information about the branches?

How is the routine work reported to the head office?