While there are several bookkeeping systems employed by banks, they are all alike in principle and vary only because the business of the customers warrants different labor-saving methods on the part of the bank. For example, active commercial accounts require considerable posting of checks and deposit tickets daily and the balances are constantly changing. Savings banks, on the other hand, deal with a class of people who make deposits only at irregular intervals and withdrawals are also infrequent. We will discuss the methods usually employed in a commercial bank using the three-column, loose-leaf ledger.

The individual ledgers are the books upon which the detail records of the deposits are kept. Such records consist of either debits or credits and the balance. Modern ledgers allow three columns to each account, one for debits, one for credits and one for the balance, although many banks still use the two-column ledger, the credits being posted beneath the balance which is extended in red ink. Bound ledgers are gradually giving way to loose sheets or cards, each account having a separate leaf or card. This plan is much more convenient since closed or "dead" accounts can be eliminated and inactive accounts can be kept separate from those that are active. It is also easier to make alphabetical splits in the ledgers when an increase of work makes it necessary.

The bookkeeper receives checks from both the paying and receiving tellers, although in some very large banks they come to him from the check teller who assorts the checks as to the ledgers and examines the signatures and the endorsements. Sometimes the bookkeeper is held responsible for the payment of a check bearing a forged or incorrect signature or endorsement, but usually his liability in this direction is limited to "stop-payments." A good bookkeeper, however, whether he is specifically charged with this duty or not, is always on guard against irregularities. Checks come in "courses" from the tellers, that is, at certain times during the day, after exchanges are received from the clearing house, or the morning mail is opened and at other fixed periods, batches of checks come into the bookkeeper's hands. He assorts them alphabetically and enters them upon a journal which is usually a loose sheet that fits into an adding machine. A total of the checks of each depositor is struck and these totals are then posted in the debit columns against the proper accounts. There are ledgers in use which have an extra column for detail checks, so that no journal is necessary. As the bookkeeper posts, he watches the balances to see that the accounts are not overdrawn. He must be extremely careful not to post checks to the wrong account. This is very apt to happen if the bookkeeper is careless, because nearly all banks have accounts of similar, and sometimes identical names. If a check drawn by John A. Smith is refused as not good because the account has been apparently overdrawn by certain checks that should have been charged to John E. Smith, the bank is not only apt to lose a good account, but may even be liable to John A. Smith for whatever damage his credit has suffered.

Alternating with the posting of debits, the bookkeeper posts the credits or deposit tickets which also run in "courses." In making credit entries as much care must be observed as in posting debits and for the same reasons. In addition to the deposit ticket entries there may be other kinds of credits. If the depositor has received a loan, the bookkeeper receives advice of the amount from the loan clerk and opposite the amount in the credit column he may place a mark, "L" meaning loan, "N" meaning note, or "D" meaning discount. If a collection item has been paid, the credit will be marked "C." These marks are merely an abbreviated method of identifying entries, of assistance in the process of examining the accounts of the bank.

At the end of the day the bookkeeper puts all his checks together in alphabetical order and arranges the deposit tickets similarly. Most banks are now using the "statement system" of balancing pass-books. This work is done by a separate clerk or subdivision of the bookkeeping department. Each depositor has a separate sheet or statement on which are entered the daily transactions. This is sometimes called the "skeleton ledger," because its chief purpose is to show the daily balance of each account rather than the detail. Since all the checks and deposit tickets are posted the following day, and hence are available for posting without any delay, the statement clerk is able to handle many more accounts than the bookkeeper whose work comes to him in relays. After the checks and tickets are entered on the statement, they are filed away, the deposit tickets remaining in possession of the bank and the checks being handed to the depositor at the end of the month. Time was when the checks were also retained (as they still are in some foreign banks), but the custom has grown in this country to regard the endorsement on a check as a receipt in payment of a debt. The completed monthly statements, showing the balance of each depositor, are compared with the ledger balances to prove the correctness of the amounts and they are then given to the depositors. Under the pass-book settlement system, the deposit entries in the book are added to the last settlement balance, the checks are listed on an adding machine and the total is deducted, showing the new balance which must agree with the ledger balance.

Probably the first thing the bookkeeper will do in the morning is to make up a list of balances of all the important accounts. This is usually a pencil memorandum and is handed to the paying teller or an officer for their information and guidance. Another duty to be performed at odd moments during the day is keeping the record of interest bearing balances. Banks differ as to the method of calculating the net balance upon which interest is allowed. The usual, and incidentally, the soundest method is to deduct from the balance the amount of checks presented against it that day and the amount of uncollected checks represented by deposits of out-of-town items deposited during the preceding days. The length of time such deductions cover is governed by the distance and time taken in collecting them. Interest is then allowed on the net balance since this represents the true balance of the depositor available for loans. The principle is the same as that underlying the calculation of reserve.

Individual Bookkeeper's Settlement

Few modern banks - if we except the mutual savings banks - use the "trial balance" system of settlement for the individual ledgers. Settlement is made daily. The bookkeeper begins the day with a total of all the balances as they were at the close of the preceding day's business.

After he has finished the day's postings, he makes his proof by adding all the credits to this balance total and then subtracts the debits or total of checks as shown on his journals. The sum of the new balances which he gets by running his accounts on an adding machine must equal the figures shown on his calculation.

As an illustration of the way in which the figures of one clerk serve as a check on the figures of another, the bookkeeper's proof furnishes a good example. The totals of checks charged against the various accounts are taken from the bookkeeper's journal and these totals must agree with the figures the tellers use in their own settlements. This is also true of the total of deposits, etc.