This section is from the book "Elementary Banking", by John Franklin Ebersole. Also available from Amazon: Elementary Banking.
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 head of the department may be known, is charged with the collection of notes and drafts payable out of town and perhaps in the city, too. These items cannot be listed with checks and cash items, but are entered on separate sheets. The same methods of bookkeeping and collection apply as with out-of-town cash items, except that credits and debits are made only upon receipt of advice that the items are paid. Checks and cash items, on the other hand, are credited to the depositors on the day of deposit, subject, of course, to final payment. That is, if the items are "not good" they will be returned and the account of the depositor will be charged. This plan is adopted for mutual convenience made necessary by the great numbers of checks that are deposited daily in every bank. If every separate item required a special advice of payment, and would be credited only upon receipt of such advice, banks would be compelled to increase the number of their clerks enormously. Out-of-town collections are governed by the same rules as city collections. The collection clerk or teller makes a register record of the name of the payer, the place payable, the indorser, and the amount, together with other instructions. Usually this record is entered on slips made with carbon copies, and the slips are filed in drawers or cases until advice is received. If the bank is notified by its bank correspondent that an item has been paid, the slip is taken out and marked "Paid." It is then handed to the bookkeepers. Using the slip as a debit or credit memorandum, the account of the depositor is credited and the account of the bank to which the item was sent is debited. The collection teller is responsible for the items entrusted to his care. He must see to it that notes reach the town where they are payable before maturity, that drafts are sent to responsible banks for collection, that all instructions sent with the items are fully obeyed and that correct and prompt advice of payment or dishonor is forwarded.