Mortgages should invariably be shown as a liability, and the relative real estate as an asset. The equity alone should never be considered. The position of a mortgage in regard to taxes, interest and insurance will frequently warrant examination.
It is very important that all contingent liabilities should be given, such as trade paper discounted and paper indorsed or guaranteed. Such obligations, if not disclosed and allowed for, will always be a source of menace.
It is useful to know the amount and disposition of life insurance in force and, in the province of Quebec, the amount of the marriage contract is material information, as the latter ranks prior to an unsecured liability.
The information called for by the reverse side of the statement figure No. 38 (pages 232, 233) is self-explanatory, and is pertinent to the consideration of an application.
Every borrowing customer should provide, in his will, power to his executors to continue his business after his death until it can be profitably liquidated. If a firm, the partnership agreement should contain a similar provision; otherwise the business must be liquidated without the expenditure of further moneys. In many cases this would entail heavy loss and, if the bank were interested, the safety of its loans would be endangered.
Where a firm or corporation operates branch offices great care should be taken to see that no cross drawing or sales are allowed to swell the assets. Many losses have been made thru the careless scrutiny of branch operations, especially where a branch carries a deposit account at a local bank. Check kiting is one of the first symptoms of the disease; others quickly follow.