It is well known that bankers try their balance at the close of their business every night, with a view of correcting any errors that may have occurred during the day. The process is very easy. If to the amount of the Cash-Book last night, we add the amount of the cash received to-day, and deduct the amount of the cash we have paid, the remainder will be the amount of the Cash-Book to-night. If, on trial, we find this is not the case, there must be some error. Suppose, for instance, the Cash-Book last night amounted to £100,000, and we have received ,£40,000 and paid £50,000 to-day, then will the Cash-Book to-night amount to £90,000. The trial stands thus:-
Cash-Book last night .
Paid-Day-Book . . .
Cash-Book to-night . .
The daily balance, therefore, is nothing more than the balance of the Day-Book; and the only books employed are the Pay-Book and the Cash-Book. But as these books, when finally closed, include the amount of several other books, the trial is usually made (for the purpose of avoiding alterations) on a half-sheet of paper, called the trial paper, previous to those entries being made, and then the amounts of these several books are stated separately, in the following manner:-
Amount of Cash-Book last night......
Amount of Paid-Day-Book
Ditto of Clearing-in-Book
[This is usually called the Rest.]
Ditto of Balance of the
Ditto of Received-Day-
Do. of Cash-Book to-night
Do. of Balance of Money-
Ditto of Bill-Journal .
Do. of Discount-Journal
Do. of Discount-Register
The balance of the clearing is always to the credit of the house; for, if the clearing "takes out," then the bank notes paid away at the Clearing-house are entered in continuation of the clearing-out; so that, in this case, the balance is usually thrown a small sum on the other side. When the clearing is finally closed, the notes forming this balance are entered in continuation of the clearing-in, and subsequently in the Cash-Book. The notes entered in the clearing-out are, of course, not entered in the Cash-Book.
The daily balance checks the Waste-Books, the Discount-Register, the Journals, the Day-Books, the Lists, and the Money-Books. If any errors occur in any of these books throughout the day the balance will be wrong But the daily balance does not check the Current-Account-Ledger, though this is the most important book of all. The Ledger is therefore "marked off" every morning against the Day-Book, the Bill-Journal, and the Clearing-in-Book : but this is not a sufficient check. Hence the balances of all the accounts in the Current-Account-Ledger should be taken off weekly in a book called the Current-Account-Balance-Book, and added together, and the amount made to agree with the balance of "current accounts" in the General-Ledger. This is usually done by the London bankers quarterly or half-yearly. When the Ledger is kept on the progressive plan, it may be done weekly without much trouble. The "Current-Account-Balance-Book" should be ruled so that the names of the parties having accounts may be placed under one another at the left hand, and all the rest of the left-hand page, and the whole of the right-hand page, divided into double cash columns-one column for the balances of the accounts when in cash, and the other for the balances overdrawn. On this plan it will not be necessary to write the names more than once in seven weeks.
In the same way the balances of the Discount-Ledger should be taken off weekly in the "Discount-Balance-Book." The balances of the General-Ledger are also taken off weekly in the "General-Balance-Book" in the way I have already described.
The weekly balancing of the Ledger does not preclude the necessity for a half-yearly balance. The usual days for balancing are the last days of June and December. Some banks, however, balance on the last Saturday in June and December, and others on the 30th of June and on Christmas-eve. On the balancing day the following operations are passed through the books :--1. The current accounts will be debited for any interest or commission that may be due from the party to the bank. - 2. The Current-Account-Ledger will be balanced, and the balance will be brought down as the commencement of the transactions of the ensuing half-year. - 3. The customers' books must be balanced, and made to agree with the Current-Account-Ledger. - 4. The interest due upon the outstanding deposit receipts must be calculated, and the sums added together. - 5. The General-Ledger must be balanced, and at the December balance the amount standing to the debit of the several classes of expenditure must be passed to the credit of those accounts, and to the debit of profit and loss account, and the several sums of profit that have been realized upon Government Stock, India bonds, etc, are transferred to the credit of profit and loss account.
For each half-year a book must be provided to be called the Half-Yearly-Balance-Book. This Book will contain the following entries :-
1. A balance-sheet showing the balances of the respective accounts in the General-Ledger in the same way as the weekly balance-sheet. - 2. A debtor and creditor balance-sheet, showing the exact condition of the bank. - 3. An abstract of the profit and loss account. - 4. A list of all the balances of the current accounts. - 5. A list of all the outstanding deposit receipts, and the interest due upon each. - 6. A list of all discounted bills, current, i.e.. bills not yet due. - 7. A list of all deposited bills current. - 8. A list of all other securities, distinguishing those that belong to the bank from those that are lodged by its customers.
The debtor and creditor balance-sheet will contain the same amounts as the balance-sheet of the General-Ledger (see page 68), but differently arranged. They may be disposed according to the form exhibited on the next page.
The abstract of the profit and loss account may be made out in the following form :-
Abstract of Profit and Loss Account, from Jan. 1 to Dec. 31.
To Bank Premises .
By Interest on Bills discounted . . .
Furniture . . .
By Interest on Loans
Salaries . . .
By Commission on
Stationery. . .
Incidental Expenses . . .
By Profit on Exchequer Bills, etc.
Total Expenses . .
Loss on bad Bills.
Balance in favour of the Bank . . .
At the end of the year the final balance of the profit and loss account is transferred to other accounts according to the purposes to which it is to be applied. If intended to be held as a "surplus fund," it is transferred to that account. If intended to be divided among the proprietors, it is transferred to a "dividend account," which is raised for that purpose. If the balance of the profit and loss ac-