rjnfUflwii-MiB UC-NRLF SB 102 1NOBIMII (MMfflOM ACCDllNI M) BANKING M3&RB i !■ ■' !■ ■■ ! .!.. ' ■ .. ; L..„. ;;::;! ....... 7 .U.I!-: ■ Wf THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA HENRY RAND HATFIELD MEMORIAL COLLECTION PRESENTED BY FRIENDS IN THE ACCOUNTING PROFESSION J& ■^V^ Digitized by the Internet Archive in 2007 with funding from Microsoft Corporation http://www.archive.org/details/accountingbusineOOmoorrich ACCOUNTING AND BUSINESS PEACTICE CORPORATION ACCOUNTING AND BANKING BY JOHN H. MOORE Commercial Department, Boston High Schools GEORGE W. MINER Commercial Department, Westfield (Mass.) High School BOSTON, U.S.A. GINN & COMPANY, PUBLISHERS 1903 Copyright, 1902, 1903, by JOHN H. MOORE AND GEORGE W. MINER ALL RIGHTS RESERVED C7 MS-7 PEEFATOEY NOTE Owing to the demand for a text on corporation accounting and banking, that part of Accounting and Business Practice presenting these subjects has been arranged as a separate book. The plan of this part of the Complete Course is shown in the table of contents. With the belief that the practical character of the contents of this new volume will promptly appeal to progressive schools and teachers the work is respectfully submitted. in M513283 CONTENTS PAGE Corporations and Kindred Organizations 253 Combinations of Capital 253 Organization of Corporations 254 Books Peculiar to Corporations ........ 256 Opening Entries in Corporation Accounting ...... 258 The Voucher System of Accounting 266 Set IX. Manufacturing 271 Banks and Banking 293 Utility of Banks 293 National Banks 294 Powers of and Restrictions on National Banks . . . . . 298 National Bank Officers and Clerks 299 Opening Entries of a National Bank . . . . . . . 300 Trust Companies 302 State Banks 303 Private Banks 304 Set X. Bank Accounting 306 Work of the Discount Clerk 307 Work of the Collection Clerk 313 Work of the Receiving Teller 319 Work of the Paying Teller 323 Work of the Note Teller . 329 Work of the Correspondence Clerk 332 Work of the Individual Bookkeeper 338 Work of the General Bookkeeper 342 The Clearing House 374 Letters of Credit ' . .383 Appendix 387 Forms of Legal Documents . 387 Commercial Terms denned 394 Abbreviations 396 Index 399 IV CORPORATIONS AND KINDRED ORGANIZATIONS COMBINATIONS OF CAPITAL Commercial interests of the present day require such large invest- ments as to make combinations of capital a necessity. Neither the individual nor the ordinary partnership can command sufficient funds to carry on the manufacturing or transportation enterprises of to-day. The result is that corporations and kindred organizations have been formed generally throughout the country. The Partnership. — A partnership ordinarily represents but a limited amount of capital, is formed by agreement, and may be dissolved by the action of any one partner. Each partner, except in the case of a limited partnership, is also liable for all of the debts of the business. The Joint-Stock Company. — A joint-stock company is in reality a partnership, the affairs of the business being conducted by officers chosen by the stockholders. A larger number of investors may associate themselves under a joint-stock company agreement than can work together effectually as partners, and the action of one stockholder cannot dissolve a joint-stock company. In general the liability of the stockholders is the same as that of partners in a copartnership. Note. — The statutes of most of the states provide for limited joint-stock com- panies, thereby limiting each stockholder's liability to the amount of stock owned. A limited joint-stock company may be known by the manner in which its name is written or printed ; for instance, Walter Baker Company, Limited. The Corporation. — A corporation is said to be an artificial person. It is composed of a number of persons but is endowed with the power to act as one individual. It is ordinarily organized under a general statute of any given state, but it may be organized under a special charter granted by the legislature. The liability of each stockholder is generally limited to the amount of stock owned. A corporation affords an opportunity for many persons of small means to unite in carrying on large enterprises under efficient management. The Trust. — Joint-stock companies and corporations are often merged into larger combinations of capital known as trusts, the object being to secure greater increase of capital, to lessen competi- tion, expenses, cost of production, and to control more effectually market prices. t 253 254 ACCOUNTING AND BUSINESS PRACTICE ORGANIZATION OF CORPORATIONS Some details of the organization of corporations will be of interest to the student. The laws of the various states are very different regarding the organization of corporations. Persons who desire to form a corpora- tion should employ an attorney to conduct every step in organizing, thus insuring a compliance with the requirements of the statute of the state under whose laws the corporation is organized. How formed. — The following statements apply to the formation of corporations in the Commonwealth of Massachusetts : 1. The Commissioner of Corporations is the state official who con- siders applications for incorporation. 2. For the purpose of manufacturing (with a few exceptions made by the statute), three or more persons may form a corporation, with a capital of not less than five thousand (5000) dollars. 3. An Agreement of Association must be submitted by the incorpo- rators, in writing, to the Commissioner of Corporations, setting forth the following : a. Their intention of forming a corporation. b. The corporate name assumed. c. The purpose for which the corporation is formed. d. The city or town in the Commonwealth where it is to be established or located. e. The amount of the capital stock. /. The par value and the number of shares of capital stock. 4. The certificate of incorporation issued by the secretary of the Commonwealth states the facts set forth in the Agreement of Association and empowers the corporation to do business. Fees. — Certain fees are required by the Commonwealth for filing and recording certificates. Powers. — The powers of corporations may be stated as follows : 1. To have succession. 2. To sue or to be sued under its corporate name. 3. To use a common seal. 4. To purchase, hold, and convey lands and chattels. 5. To elect officers and appoint agents. 6. To make by-laws. Board of Directors. — After incorporation a meeting of the subscribers is held to determine the number of directors and to elect the same. In ORGANIZATION OF CORPORATIONS 255 the election of the board of directors each stockholder is entitled to as many votes as he owns shares of stock. Officers and Management. — After the directors are chosen they elect from their number the necessary officers, except clerk and treasurer, who are elected by the stockholders. The by-laws must be adopted by the board of directors and submitted to the Commissioner of Corpora- tions. The general management of a corporation is entirely- in the hands of the board of directors. Capital Stock. — The capital stock of a corporation is the amount authorized by the charter, and represents the combined invested interests of all the stockholders. Classes of Stock. — The varying conditions and limitations under which stock is issued to the stockholders of a corporation give rise in many states to several distinct classes of stock, among the more impor- tant of which are common stock, preferred stock, and treasury stock. Common Stock is that stock which is ordinarily issued to the incorpora- tors upon the payment of their subscriptions. Preferred Stock is that stock upon which dividends are paid out of the accrued profits before any allowance is made for dividends on common stock. Treasury Stock is that stock not disposed of at the time of commencing business. This stock may be unsubscribed stock, or stock purchased from, or forfeited or donated by, the stockholders. Note. — Sometimes the number of shares of stock of a corporation is increased without a corresponding increase of the property owned. This act is known as watering stock. Stock is sometimes watered in the reorganization of a railroad or the consolidation of different railway lines by fictitiously increasing the value of the franchise or property. To water stock is always deceptive if not dishonest and is never, therefore, justifiable. If the capital stock of a concern is not com- mensurate with the demands of the enterprise, it can be increased in a legitimate manner. The term watered stock is said to be derived from the action of some farmers in giving their live stock a plentiful supply of water just before weighing them for market, as a means of increasing their weight. Payment of Capital Stock. — In Massachusetts the law requires that all the capital stock must be paid in in cash before the corporation can commence business. Real estate and other property may be used in payment for shares of stock, but only under the most exacting conditions. Certificates of Stock As soon as a subscription is paid a certificate is issued to the subscriber. Certificates of stock may be transferred 256 ACCOUNTING AND BUSINESS PRACTICE by a stockholder, by an instrument in writing signed by him, which shall be recorded by the clerk in a book to be kept for that purpose. Liabilities of Stockholders. — The liability of stockholders for the debts of a corporation differs widely under varying conditions. Ordi- narily a stockholder is liable for a sum equal to the par value of the stock that stands in his name. Reports. — Every corporation is required to file an annual report with the secretary of the Commonwealth setting forth the following : 1. The date of the meeting when the report was adopted. 2. The amount of the capital stock. 3. The amount paid in. 4. The name of each stockholder and the number of shares standing in his name. 5. The assets and liabilities of the corporation. The above certificate must be signed by the president and treasurer, and at least a majority of the directors. This report is required to be made under oath. Dividends. — A dividend is a pro rata division of the profits, or some portion thereof, among the stockholders of a corporation. Franchise is a particular privilege granted by a government to a cor- poration. The right to use the streets of a city for car lines, lighting appliances, water mains,, etc., is an illustration of a franchise commonly granted. AUXILIARY BOOKS PECULIAR TO CORPORATIONS The principal books of record in a corporation do not differ materially from those used in any other business. Several special books, however, are necessary to facilitate the issue and transfer of stock. Among these are tlie following. Minute Book. — This book contains a record of all the meetings of the stockholders or the board of directors, and is usually kept by the secretary of the corporation. Installment Scrip Book. — This is a book of blank receipts to be filled out and signed by the secretary and treasurer as the installments are paid. Upon payment of the last installment the scrip is exchanged for certificates of stock. Stock Transfer Book. — This book is used to record the transfer of stock and contains the permanent records, which are finally posted to the stock ledger. BOOKS PECULIAE TO CORPOKATIONS Form of Stock Transfer Book 257 No. of Certificates canceled No. of New Certificates issued /2 Shares canceled 10 New Shares issued 10 Ledger Tolio TRANSFERRED BY €.m.wu(icwui a. &. laeU- ifor Mue 0cceit>eb, J do hereby assign and transfer to Jem/ Shares of the Capital Stock of Che SSnion SSEijip Co., &pttitffff entasis. Wxxmii vvif hand and seal, this ty-tk day of fu&u,, f c /06 Sealed and delivered in the presence of £ ^ IfrULU k Ca fe a 3.0 &■ s ~ ^ * a ^T at to nal %J$anU 9?ay to the order of faqood, ZtcvifLo*, V &*. $/?2. 57 St ioo £Do//c Jn full for Voucher J/o. / 6$ fozA, L. L. 1i)-vvia,rws, President Bradley, Morgan & Co. received the remittance Feb. 7. The stub gives a complete history of everything connected with the voucher. Voucher Check. — Payment for the voucher illustrated on page 269 was made by check. Many houses print the voucher and voucher check as one blank (see above form) to insure an early return of the voucher. When this is done it is necessary that the voucher be returned with the check, through the bank, before payment can be received. Banks, how- THE VOUCHER SYSTEM OF ACCOUNTING 269 H M CD ci- c a g p p ► Freight and Cart Traveling Expen Printing and Ad\ Salaries Incidentals Fuel, Light, and H 9 B on CD anuiacturmg Whalebone Rawhide Reed and Rattan Thread Wood Butts Paints and Oils Leather and Clot B C5 2 ^ era 3- m CD p" CO erf- CD H CO 5" aq I* !•*> S* CO Oo g a- N P 0> e+ O v+ S3 ^^ & e CD 8 ~ & 1 CT GO o 30 CD P- h ^^ —1 gj & o cr ? r z • * - ^ ? | ^ gJ ^ ^ ^ ^ i 50 o CO 3 2. 3 >P ■^ ^ 1 ^ 0\ CD ^ -^ 3 r^ Ms Co ^k o ^ ^ fed X s >■ S O g ^ S3 z jo et- ^ a> ^ * ^ S 270 ACCOUNTING AND BUSINESS PRACTICE ever, object to the handling of this form of check,- and what is known as the voucher check is largely taking the place of the old form of attached voucher and check. The illustration following is suggestive of the usual form of a voucher check. */joston, **/TLass., &6. 6, /9- - Jfo. fJBf LLnlted States Whip s^ompanu %?ay to the orden of fdvcuH&tf,, Tilcyufcvyv c/hi> i &6v-& /i-wvicLv&cL ^cyiX/u-icyu/b — ~~ -~ V §#.~ fi/gy.¥° r / U IOO Jn full for Vouc/ien J/o. /2 ne * 30 days 2 /l0, net 60 days 730 VlO 2 /l0> ne * 30 days VlO. net 30 days Vio> net 30 days 2 /30> ne * 60 days Net 60 days 125 420 325 900 725 182 72 100 462 90 40 60 10 50 50 90 10 3314 90 SET IX — MANUFACTURING Cash Book 273 ACCOUNT EXPLANATION PURCHASE LEDGER TO BE DEBITED DISC. CR. NET CASH ACCTS. PAY. Feb. 3 3 Mdse. Whalebone Rawhide Trimmings Paints and Oils Agents' Salaries Insurance Finished stock bought Raw material bought Raw material bought Raw material bought Raw material bought Traveling exp. adv. 2% prm. on pol. No. 791 1200 400 750 120 150 120 75 90 7 Mason & Co. Inv. 2d, less 3% 7 20 232 80 240 12 Simpson & Smith Inv. 5th, less 3% 21 679 700 13 Labor Pay roll 430 16 Lapham & Snow Inv. 7th, less 3% 3 97 100 19 Bills Pay. Note charged at bank 240 19 Interest On above 2 40 21 C. B. Mayhew & Son Inv. 14th, less 1% 1 27 124 63 126 90 24 Osgood & Bedell Inv. 15th, less 2% 1 50 73 50 75 26 Expense Per petty cash book 10 90 27 Simpson & Smith Inv. 20th, less 3% 6 194 200 27 28 Expense Accts. Pay. Per petty cash book Total for month *144T 90 12 1441 40 39 97 1400 93 90 28 Mdse. Discounts Contra, on sales 14 6? 28 = Balance In bank = 5327 95 10296 07 Register DISTRIBUTION WHEN PAID DIS- COUNT WHALE- BONE RAW- HIDE WOOD BUTTS REEDS THREAD TRIM- MINGS PAINTS AND OILS HARD- WARE LEATHER AND CLOTH CASH 125 90 Feb. 8 2 52 123 38 420 40 725 325 60 182 50 72 50 100 900 Id 12 '22 14 15 8 3 14 41 26 50 7,'5 411 322 710 71 99 34 50 77 - (4) (3) (6) (3) (9) 462 (4) 90 (5) (7) (8) 420 4(1 725 325 60 182 50 72 50 462 90 125 BO 100 900 10 ~ 274 ACCOUNTING AND BUSINESS PRACTICE voucher system, however, is explained and illustrated in the preceding pages. To this explanatory statement both the teacher and the pupil should give careful attention. The books used in this set are the journal, cash book, petty cash book, invoice register, sales book, general ledger, sales ledger, and pur- chase ledger. With the exception of the cash book, the petty cash book, and the invoice register, the books are the same as used in the preceding sets of this book. Cash Book. — The cash book is provided with special columns for accounts receivable, accounts payable, and merchandise. These columns are similar to those of the cash books used in Sets VI and VII. In addi- tion to columns for net cash and discount a column is provided for accounts receivable and accounts payable. These columns record the amounts that are to be posted to the sales ledger and the purchase ledger respectively. The special column for merchandise on the left side is for recording cash sales. A reference to the model cash book, pages 272 and 273, will give the student a clear understanding of the plan of this book. Petty Cash Book. — This book is used for recording small receipts and expenditures of cash. The ruling of an ordinary journal page affords one form of petty cash book. All receipts are to be placed in the first money column and all payments in the second money column. Special columns may be used if desired. The form of the petty cash book is illustrated on page 279. Invoice Register. — The invoice register is not essentially different from the purchase book with which the student is already familiar. In a manufacturing business it is desirable that the cost of the various manufacturing products be kept in separate accounts in the ledger. This necessitates the addition of a number of special columns in the invoice register for the proper distribution of all raw material bought. When an invoice is received it is audited and entered in the invoice register. The first part of the record is the same as that of the ordinary purchase book. After this part of the record is completed, the amount of the purchase is carried to the proper distributing column. In this set the purchasers are credited weekly for the amount of the invoice, and at the end of the month Accounts Payable is credited for the total of the Amount column. Instead of debiting Merchandise, as is the case when the ordinary purchase book is used, each of the articles used in manufacturing should be debited separately under the names appearing at the heads of the several columns. Care should be taken to properly check all items posted. (See model on pages 272 and 273.) SET IX — MANUFACTURING 275 Memoranda of Transactions February 1 J. W. Melton, E. M. Williams, Geo. Inman, A. P. Zaner, and L. H. Messier, of Springfield, Mass., have decided to form a corporation under the title of the Union Whip Co., for the purpose of manufacturing whips. Certificates of incorporation have this day been filed with the proper state official. The capital stock is to be $25,000, divided into 250 shares of the par value of $100 each. Each one of the incor- porators has subscribed for 50 shares of stock. This corporation has been formed under the laws of the Common- wealth of Massachusetts. The stockholders above named are to con- stitute the board of directors for one year. The following officers have been elected: Geo. Inman, President; L. H. Messier, Secretary; J. W. Melton, Treasurer. The student has been chosen to act as bookkeeper for the corpora- tion, at a salary of $60 per month. To the Student. — The above memoranda is to be copied verbatim in the journal. As the laws of the Commonwealth of Massachusetts require that all capital stock must be paid in before commencing business, each stock- holder has paid the following : J. W. Melton, for 50 shares, $5000 ; E. M. Williams, for 50 shares, $5000 ; Geo. Inman, for 50 shares, $5000; A. P. Zaner, for 50 shares, $5000; L. H. Messier, for 50 shares, $5000. Make a proper entry in the cash book for the investment. The Springfield Whip Co. has decided to go out of business and the Union Whip Co. has taken a lease of their factory, all complete for manufacturing whips, for a term of three years, at a yearly rental of $1800, the rent to be paid monthly. Copy the above memorandum in your journal. Deposit in the Union Bank all the cash on hand except $50. Use a sheet of journal paper for recording all deposits made and all checks drawn. Use the first money column for recording deposits and the second money column for recording checks drawn. The $50 kept on hand is to be entered as a balance in the petty cash book. (See the first entry in the model petty cash book, page 279.) 276 ACCOUNTING AND BUSINESS PRACTICE February 3 The Springfield Whip Co. has on hand raw material amounting to $2000, and finished whips ready for the market amounting to $ 1500. The Union Whip Co. purchases the above items for cash. Give the Springfield Whip Co. a check for the sum of the two amounts named. Enter in the cash book as follows : debit Merchandise for the amount of the finished goods, and debit the following accounts for the raw material : Whalebone, $200 ; Rawhide, $200 ; Reeds, $1000 ; Thread, $250 ; Sundries, $40 ; Trimmings, $110 ; Paints and Oils, $100 ; Hard- ware, $50 ; Leather and Cloth, $50. S. B. Hardy and F. M. Kinney have been employed as traveling sales- men, each to receive a salary of $100 per month and traveling expenses. Place the above memorandum in the journal. Give each of the traveling salesmen a check for $150, and charge the amount to Agents' Salaries. Enter in the General column in the cash book. Mr. A. C. Parker, attorney, was the legal adviser of the company at the time of incorporation ; give him a check for $50 for his services. Charge Expense. The company has taken out an insurance policy with the Niagara Insurance Co. for $5000. Owing to the location of the factory and the combustible material used, the rate of insurance is $20 per thousand. Give the agent of the Niagara Insurance Co., Henry Lete, a check for the amount of the premium at the rate named. Charge to Insurance. February 5 Give Connor & Co. a check for $32.50 in payment of their bill for a set of office books. Charge Expense. Pay Tuller & Co. $7.85 in cash for office stationery. Enter this item in the petty cash book under Expense. Refer to the model on page 279. Note. — Items that are entered in the petty cash book are not entered in the regular cash book until the petty cash book is closed. This will be explained at the end of the week. Buy $2 worth of postage stamps and pay cash for them. Enter in the petty cash book. Pay Thos. Lottridge $2.80 in cash for carpenter work in repairing the office. Enter in the petty cash book. Sell Wm. Lane for cash 1 doz. whips, #287, $7.50. Enter the amount in the petty cash book, crediting Merchandise. SET IX — MANUFACTURING 277 February 6 The following goods have been received : Invoice of thread from Hasson & Son, Boston, Mass., dated Feb. 4. Terms: 1/10, net 30 days. Amount, $100. Invoice of trimmings from Fleming & Co., New York, dated Feb. 5. Terms: 2/10, net 30 days. Amount, $60. Invoice of reeds from Kellar &. Co., New York, dated Feb. 3. Terms : 1/10, net 30 days. Amount, $250. The above invoices are to be entered in the invoice register. By referring to the model on pages 272 and 273 the student will readily understand the entry required. Be sure that the amounts are extended into the proper columns. Note. — In recording invoices the date of the invoice should he used, and not the date under which the student is working. The following orders have been received and filled. Terms: 2/10, net 30 days, F.O.B., Springfield, Mass. F. R. Pickles, Reading: 6 doz. #30 12 doz. #37 5 doz. #60 8 doz. #102 10 doz. #200 D. D. Miller, Moberly: 12 doz. #279 10 doz. #428 15 doz. #1017 1 doz. #312 2 doz. #455 2 doz. #287 H. S. Blower, Palmer: i doz. #530 1 doz. #455 i doz. #617 i doz. #688 S. D. Merrill, Canton : 10 doz. #200 10 doz. #37 10 doz. #279 20 doz. #102 20 doz. #60 2 doz. #287 15 doz. #30 2 doz. #428 A. C. Cotton, Albany: i doz. #1079 i doz. #530 10 doz. #1017 1 doz. English Crops D. M. Heath, Worcester: 10 doz. #279 10 doz. #200 2 doz. #874 Enter the above orders in the sales book. 278 ACCOUNTING AND BUSINESS PRACTICE The names of the persons employed in the factory, and the weekly salary of each, are given below. Arthur Daley, foreman $18 W. P. Nye $14 David Brown, foreman 18 H. C. Wayne 9 John Sauter 14 Maurice Fox 12 Elmer Tierney 11 W. V. Young 13 Silas Willis 9 Daniel Gilbert 10 Theo. Nash 12 D. B. Hinman 11 Benj. Lever 15 Leon Craig 14 Wm. Kenney 13 F. M. Ward 10 Leslie Carton 10 T. B. Murray 15 0. H. Sidney 12 Jas. Brigham 9 Howard Goble 11 Alice Benton 7 Geo. Wirtz 9 Mary Anson 6 Wesley Kress 12 Susan Frye 8 Edward Short 13 Sarah Harum 8 Thos. Wallace 11 Ellen Steele 6 Jacob McVey 10 Jessie Day 9 Richard Evans 13 Ida Bowers 7 Isaac Shaw 15 Cora Kellar 7 Henry Utz 11 Ada Weet 8 Frank Boler 10 Edith Noyes 9 Draw a cash check for the total amount of the pay roll. The Pay Roll. — A form of pay roll is given below. These forms differ widely in different lines of business. Payments of employees are usually made by placing the amount to be paid in an envelope, and at the conclusion of the week this envelope is handed to the person whose name it bears. The total amount that has been placed in these envelopes is made up and drawn from the bank by a cash check. As no business forms are being used in this set the student will simply record the amount of the cash check in the main cash book, G-eneral column, under Labor. *Jime, neek ending^ 19 TOTAL TIME RATE PER DAY AMOUNT PAID $ CTS. RECEIVED PAYMENT SET IX — MANUFACTURING 279 Close the petty cash book in the manner indicated in the outline given below. Petty Cash Book Feb. 1 Balance Brought forward 50 5 • Expense Postage 2 5 V Expense Carpenter work 2 80 5 V Mdse. Cash sale 7 50 5 V Expense Office stationery 7 85 6 Balance Balance In safe Brought down "50 u 85 57 57 50 Feb. 8 44 85 After closing the petty cash book carry the sum of the three expense items to the main cash book. Record in the General column. Transfer the merchandise item to the left side of the main cash book. Check all items transferred. This finishes the work of closing and transfer- ring the items in the petty cash book. None of the other books are to be closed, but the amounts are to be posted to the different ledgers. Space in the Different Ledgers. — The first account to be opened in the general ledger is Capital Stock. Give this account six lines; on the same page give Merchandise twenty lines, and Expense the remainder of the space. Give all other accounts in the main ledger one-fifth of a page each. Give all accounts in the purchase ledger and sales ledger one-fifth of a page each. Posting. — Post all the items in the General column of the main cash book to the general ledger ; post all the items from the sales book to the sales ledger; post all the items in the Amount column of the invoice register to the purchase ledger, credit side. This concludes the work for one week. February 8 The following have been received: Invoice of paints and oils from Leland & Son, Boston, Mass., dated Feb. 6. Terms : 1/10, net 30 days. Amount, 154.20. Invoice of leather and cloth from Palmer and Brown, New York, dated Feb. 6. Terms : 1/10, net 30 days. Amount, 180.50. 280 ACCOUNTING AND BUSINESS PRACTICE Give the Springfield Whip Co. a check for one month's rent. For the amount consult the memoranda in the journal. Enter in the cash book under Fuel, Light, and Kent. Sell Geo. Provo 1 doz. #312, for cash. Enter in the petty cash book. February 10 Send each of the following persons a check in payment for invoice : Hasson & Son, for the invoice dated Feb. 4, less discount. Kellar & Co., for the invoice of Feb. 3, less discount. Enter each payment in the main cash book. A reference to the model cash book on page 273 will give the student all needed suggestions. Pay 50/ in cash for a telegram sent to S. B. Hardy, one of the traveling salesmen. Enter in the petty cash book. Checks have been received from the following parties : F. R. Pickles, for the invoice of the 6th, less discount. H. S. Blower, for the invoice of the 6th, less discount. A. C. Cotton, for the invoice of the 6th, less discount. Enter each amount in the main cash book. (See page 272.) The following orders have been received and filled. Terms: 2/10, net 30 days. E. T. Fuller, Leland: 12 doz. #30 24 doz. #37 10 doz. #60 16 doz. #102 20 doz. #200 10 doz. #428 C. C. Dewey, Bristol: 24 doz. #279 20 doz. #428 30 doz. #1017 2 doz. #312 4 doz. #455 4 doz. #287 Henry Lee, Norwich : 1 doz. #530 2 doz. #455 1 doz. #617 i doz. #688 February 12 The following orders have been received and filled. Terms: 2/10, net 30 days. A. B. Smith, Hartford: 20 doz. #200 20 doz. #37 15 doz. #279 35 doz. #102 25 doz. #60 4 doz. #287 30 doz. #30 10 doz. #428 SET IX — MAKUFACTURING 281 Geo. H. Sanford, Lynn : 1 doz. #1079 1 doz. #530 20 doz. #1017 2 doz. English Crops The terms on the following invoice are : subject to sight draft. F. M. Caswell, City : 25 doz. #279 20 doz. #200 4 doz. #874 February 13 Send Fleming & Co. a check in payment for the invoice dated Feb. 5, less discount. D. D. Miller sends his check in payment for the invoice dated Feb. 6, less discount. H. C. Wayne and T. B. Murray have been absent the past week on account of sickness. Deduct the amount of their salaries from the total pay roll of last week. Draw a cash check for the amount of the weekly pay roll. Deposit all the checks on hand ; collection, 85/. Debit Expense for all collection charges in this set. Close the petty cash book and carry the amounts to the main cash book. Post the week's work. The items in the Accounts Receivable column of the main cash book are to be posted to the sales ledger and the items in the Accounts Payable column are to be posted to the purchase ledger. Open new accounts with all new names that appear in the invoice regis- ter and sales book. February 15 Send each of the following a check in payment for invoice : Leland & Son, for the invoice of Feb. 6, less discount. Palmer & Brown, for the invoice of Feb. 6, less discount. Checks have been received from the following parties : S. D. Merrill, for the invoice of the 6th, less discount. D. M. Heath, for the invoice of the 6th, less discount. Pay cash for petty expense items, $ 2.50. The following orders have been received and filled. Terms : 2/10, net 30 days. F. R. Pickles, Reading: 8 doz. #1017 10 doz. #287 6 doz. #428 10 doz. #455 282 ACCOUNTING AND BUSINESS PRACTICE D. D. Miller, Moberly : 20 doz. #30 18 doz. #102 15 doz. #37 14 doz. #200 20 doz. #60 2 doz. #312 H. S. Blower, Palmer: 18 doz. #1017 20 doz. #200 10 doz. #428 12 doz. #37 6 doz. #279 5 doz. #287 February 16 The following have been received : Invoice of whalebone from Ran- dall & Co., New York, dated Feb. 13. Terms : net, 10 days. Amount, 8106.20. Invoice of rawhides from Stockwell & Co., Boston, Mass., dated Feb. 12. Terms: 2/10, net 30 days. Amount, $124.35. Invoice of wood butts from Eaton & Son, New York, dated Feb. 13. Terms: 1/10, net 30 days. Amount, $62.50. Advance the bookkeeper $20 in cash, to apply on his monthly salary. Enter in the petty cash book under Salaries. February 17 The following orders have been received and filled. Terms: 2/10, net 30 days. A. C. Cotton, Albany: 10 doz. #102 5 doz. #874 20 doz. #1017 3 doz. #287 4 doz. #455 20 doz. #60 D. M. Heath, Worcester: 22 doz. #30 5 doz. #287 18 doz. #60 4 doz. #874 12 doz. #1017 2 doz. #1079 Pay J. K. Hart $8.75 in cash, for plumbing and other repairs. Enter in the petty cash book under Expense. February 18 Give the Home Printing Co. a check for $43.65, in payment for a printing bill. Enter in the main cash book under Printing and Advertising. SET IX — MANUFACTURING 283 Checks have been received from the following parties : From E. T. Fuller, for the invoice of the 10th, less discount. From Henry Lee, for the invoice of the 10th, less discount. From C. C. Dewey, for the invoice of the 10th, less discount. From A. B. Smith, for the invoice of the 12th, less discount. Give Scott & Co. a check for 132.90, in payment of their bill for boxes, etc. Enter in the main cash book under Shipping. February 19 The following orders have been received and filled on regular terms. Horace M. Hatton, New York : 50 doz. #102 100 doz. #1017 20 doz. #312 100 doz. #30 40 doz. #200 50 doz. #37 D. K. Nelson, Boston: 20 doz. #428 15 doz. #312 10 doz. #455 40 doz. #102 12 doz. #287 50 doz. #60 A. C. Bruner, Providence : i doz. #688 4 doz. #874 2 doz. #1079 2 doz. #530 1 doz. #617 25 doz. #279 February 20 Buy of Eureka Coal Co. 15 tons of coal at $4.50 per ton. Give in payment a sight draft on F. M. Caswell for the amount. Enter in the main cash book as follows : on the right side Fuel, Light, and Rent, and extend into the General column; on the left side F. M. Caswell and extend into the Accounts Receivable and Net Cash columns. Note. — The above entry debits Expense and credits F. M. Caswell, which accom- plishes the same end as a journal entry. As there is no special column in the journal for accounts receivable, to avoid double posting the above transaction is recorded in the cash book. • The company have at the present time a surplus of cash, and at a meeting of the board of directors it was decided to purchase 100 shares of city waterworks bonds at $100 per share. As these bonds are sell- ing at par it represents a good investment. Give the city treasurer a check for the amount. Enter on the right side of the cash book, under Waterworks Bonds. 284 ACCOUNTING AND BUSINESS PRACTICE February 20 The following order has been received and filled. Terms: note at 30 days, with interest. W. G. Cooper, Westfield: 20 doz. #37 30 doz. #102 20doz. #60 20 doz. -#1017 Enter the above in the sales book in the regular way. Then record in the cash book as follows: on the right side Bills Receivable and extend into the General column ; on the left side W. G. Cooper and extend into the Accounts Receivable and Net Cash columns. (See note under transaction with the Eureka Coal Co.) Give a cash check for the weekly pay roll. All the help have been employed this week. Deposit all the checks on hand ; collection, §2. Close and post the petty cash book. Post the week's work. February 24 Checks have been received from the following parties : F. R. Pickles, for the invoice of the 15th, less discount. D. D. Miller, for the invoice of the 15th, less discount. H. S. Blower, for the invoice of the 15th, less discount. The following have been received: Invoice of thread from Hasson & Son, Boston, Mass., dated Feb. 23. Terms: 1/10, net 30 days. Amount, $200. Invoice of trimmings from Fleming & Co., New York, dated Feb. 23. Terms; 2/10, net 30 days. Amount, $75. Invoice of paints and oils, $75 ; hardware, $50, from Leland & Son, Boston, Mass., dated Feb. 23. Terms : 1/10, net 30 days. The sum of the two invoices should be extended into the Amount column in the invoice register, and the separate amounts extended to the proper distributing columns. Invoice of leather and cloth from Palmer & Brown, New York, dated Feb. 21. Term*: 1/10, net 30 days. Amount, $64,35. Invoice of reeds from Kellar & Co., New York, dated Feb. 20. Terms: 1/10, net 30 days. Amount, $1160. Invoice of wood butts from Eaton & Son, New York, dated Feb. 23. Terms: 1/10, net 30 days. Amount, $43.25. Invoice of whalebone from Randall & Co., New York, dated Feb. 20. Terms: 10 days. Amount, $145. SET IX — MANUFACTURING ' 285 Invoice of rawhides from Stockwell & Co., Boston, Mass., dated Feb. 21. Terms: 2/10, net 30 days. Amount, $165.40. February 25 The following orders have been received and filled. Terms : 2/10, net 30 days. C. C. Dewey, Boston: — : 50 doz. #102 30 doz. #30 40doz. #60 12 doz. #874 A. B. Smith, Hartford : 100 doz. #102 100 doz. #1017 50 doz. #200 10 doz. #874 25 doz. #279 20 doz. #428 Geo. H. Sanford, Lynn: 60 doz. #30 15 doz. #874 80 doz. #60 5 doz. #312 20 doz. #279 5 doz. #530 F. M. Caswell, City : 12 doz. #287 40 doz. #60 20 doz. #428 20 doz. #37 50 doz. #102 50 doz. #30 Henry Lee, Norwich : 70 doz. #30 100 doz. #1017 50 doz. #60 40 doz. #200 60 doz. #37 8 doz. #428 February 27 Received from C. C. Dewey a check in payment of the invoice of the 25th, less discount February 28 Checks have been issued in payment of the following : . Student, balance on salary $40 Chas. M. Bradburn, Superintendent 100 Enter the sum of the above items in the main cash book under Salaries. Checks have been sent to the following : S. B. Hardy, traveling salesman $100 F. M. Kinney, traveling salesman 100 286 ACCOUNTING AND BUSINESS PRACTICE Enter the sum of the foregoing items in the main cash book under Agents' Salaries. Issue a cash check for the full amount of the pay roll. Give the Metropolitan Carting Co. a check for $135, in payment for freight and cartage for the month. Enter in the main cash book under Freight and Cartage. Give the City Gas Co. 122.10 in cash, for bill to date. Enter in the petty cash book under Fuel, Light, and Rent. Deposit all checks on hand ; collection, $ 1.75. Close the petty cash book and carry the item to the main cash book. Post the week's work. Present your books to your teacher for inspection. If approved by him, proceed to close the books as follows : Close the main cash book. Consult the model cash book on pages 272 and 273. The discount columns are termed contra columns. The mean- ing is this : The discount on the left side of the cash book is a debit, but it is placed on the credit side of the cash book for convenience. By this Statement of Losses and Mdse. Finished goods 1200 Raw Material, classified : 1531 Whalebone Purchases 340 Whalebone Per inventory • 120 220 Rawhide Purchases 320 Rawhide Per inventory 120 200 Wood Butts Purchases 85 Wood Butts Per inventory 23 62 Reeds Purchases 1600 Reeds Per inventory 810 790 Thread Purchases 365 Thread Per inventory Pay roll 106 259 840 Labor Mdse. Disc. Allowed to others 32.40 Mdse. Disc. Allowed to us 5.80 26 60 Expense, classified: Expense Sundry items 74 50 Freight and Cartage Total for month 82 Printing and Advertising Total expended 39.50 Printing and Advertising Per inventory 9.25 30 25 Fuel, Light, and Rent Total outlay 210 Fuel, Light, and Rent Per inventory Profits for month 40 170 383 430 35 Net Gain 65 4385 SET IX — MANUFACTURING 287 arrangement the discount, net cash, and total of any invoice paid are shown together. The same explanation would apply to the Discount column on the right side of the cash book. This column represents a credit. The footing of the Discount column on the left side is carried to the summary on the right side. The footing of the column on the right side is car- ried to the summary on the left side. This places each footing in its proper place for posting. Close the sales book and make the following journal entry for the total footing: Accounts Receivable to Merchandise. Close the invoice register. Consult the model on pages 272 and 273. Post the summary of the cash book to the main ledger. From the invoice register post the footing of the Amount column to the credit of Accounts Payable in the main ledger, and debit the footing of each distributing column to its proper account in the general ledger. This completes the posting to the general ledger. As the sales book and Amount column of the invoice register have been posted to the sales ledger and purchase ledger respectively, and Gains, Feb. 28, 19— Mdse. Mdse. Total sales for month Finished goods, per inventory 3560 825 4385 288 ACCOUNTING AND BUSINESS PRACTICE the items from the Accounts Receivable and Accounts Payable columns of the main cash book have been posted at the end of each week, all posting is now completed. The student will now make a trial balance from the main ledger. Have the same approved by the teacher. Make an abstract of the pur- chase ledger and prove with the Accounts Payable in the general ledger. Make an abstract of the sales ledger and prove with the Accounts Receivable in the general ledger. Make a statement of losses and gains, referring to the model given on pages 286 and 287. Make a statement of resources and liabilities. The above statements are necessary in order that the board of directors may be informed regarding the condition of the business before declaring a dividend. The following outline will suggest the form of resource and liability statement to be used. The student will supply amounts from his own ledger. Resources Cash, on deposit Finished Goods, per inventory Raw Material, per inventory Incidentals, per inventory Accounts Receivable, due the business Waterworks Bonds, par value Bills Receivable, on hand Liabilities Capital Stock, par value Accounts Payable, due from the business Loss and Gain, per statement Closing Accounts relating to Merchandise Raw Material. — The classification of accounts with raw material has been explained and illustrated in connection with the invoice register on page 274. In closing the ledger these accounts are trans- ferred to the Merchandise account. If all raw material had been consumed, there would be no inventories on hand. Therefore all inventories in these accounts represent unconsumed raw material. In order that the Merchandise account may show just what it has cost, in raw material, to manufacture goods, these accounts are closed into the Merchandise account in the manner indicated on page 289. SET IX — MANUFACTURING 289 Labor. — The labor required for the production of finished goods also represents an element of cost in merchandise. Therefore this account is closed into the Merchandise account. Merchandise Feb. 3 C. B. 13 687 50 Feb. 16 C. B. 12 34 20 28 Whalebone 16 127 20 28 S. B. 14 1216 .40 28 Rawhide 14 62 90 28 Inventory 32 347 25 28 Labor 14 285 28 Expense 16 172 75 28 Gain Inventory 28 262 1597 50 85 1597 85 Mar. 1 347 25 Whalebone Feb. 4 28 1 C. B. LB. Inventory 13 14 100 142 50 Feb. 28 2S Inventory Mdse. 32 4 115 127 30 20 242 50 242 50 Mar. 115 30 Rawhide Feb. 2 28 C. B. LB. Inventory 13 14 110 125 40 Feb. 28 28 Inventory Mdse. 32 4 172 62 50 90 235 40 235 40 Mar. 1 172 50 Labor Feb. 6 28 C. B. C. B. 13 14 150 135 Feb. 28 Mdse. 4 285 285 285 The following are to be closed into the Merchandise account in the form and manner already explained. Inventories are placed opposite the accounts to which they belong. If no inventory is given, the full balance of the account is to be closed into the Merchandise account. Whalebone $135.80 Paints and Oils $66.70 Rawhide 148.75 Hardware 35. Wood Butts 28.60 Leather and Cloth 56.45 Reeds 1020. Sundries 18.50 Thread 110. Labor Trimmings 64.20 Mdse. Discounts 290 ACCOUNTING AND BUSINESS PRACTICE Do not close the Merchandise account at this point. Incidentals. — A third element in the manufacture of goods is inci- dental expenses. As a matter of fact, all expenses are incurred as a means of carrying on the manufacturing interests, and all money paid out for incidental expenses simply adds to the cost of goods. These incidental items are of importance in closing the books, as showing what relation they bear to the total cost. These accounts are closed into the Expense account as a means of knowing what the total inciden- tals represent, and then the Expense account is closed into the Merchan- dise account. The inventories represent material on hand belonging to the incidental accounts. The manner of closing is indicated below. Expense Feb. 2 5 20 28 28 C.B. C.B. C.B. Print, and Ad. Salaries 13 13 13 14 16 30 15 1 16 95 80 50 45 Feb. 28 Mdse. 4 172 75 28 Insurance 19 14 — = / 172 75 172 75 Printing and Advertising Feb. 20 C.B. Inventory- 13 36 45 45 Feb. 28 28 Inventory Expense 32 16 20 16 45 36 36 45 Mar. 1 20 Feb. 20 28 C.B. C.B. 13 13 10 85 Feb. 28 Expense 16 95 95 95 Insurance Feb. 6 Inventory 72 50 ~50~ Feb. 28 28 Inventory Expense 32 16 58 u 50 72 72 50 Mar. 1 58 50 SET IX — MANUFACTURING 291 The following accounts are to be closed into the Expense account as shown on page 290. Printing and Advertising $10.: Freight and Cartage Agents' Salaries Insurance 85. Fuel, Light, and Rent 50. Salaries Shipping 11. After the above accounts have been closed into the Expense account close the Expense account into the Merchandise account. Closing the Merchandise Account. — The merchandise inventory, repre- senting finished goods on hand, is 11285.46. Enter this inventory in the Merchandise account, find the gain, and close the account in the usual manner. Transfer the gain on merchandise to the Loss and Gain account. Closing the Loss and Gain Account. — In corporation accounting the closing of the Loss and Gain account is effected by a journal entry. The entry for closing the Loss and Gain account will be like the follow- ing, except the amounts. Loss and Gain $323.50 To Dividend account $300. To Undivided Profits 23.50 Dividends are usually declared in business quarterly, semiannually, or annually. In this set, in order that the student may have the work of closing the Loss and Gain account, a monthly dividend will be declared. At a meeting of the board of directors, a statement of the business having been presented, it was voted that a dividend of 2% on the capital stock be declared. The student will compute the amount of the dividend and then make a journal entry similar to the one just given. The net gain will be verified by your teacher. Open accounts with Dividends and Undivided Profits. Post the journal entry and close the Loss and Gain account. When the dividends are paid in cash the Dividend account will be closed. As the dividends have not yet been paid to the stockholders, that account will remain open. After completing the work of closing the books a trial balance of the ledger should be taken. 292 ACCOUNTING AND BUSINESS PRACTICE An Analysis of the Merchandise Account. — The student will now turn to his ledger and follow carefully the statements given below. Finished goods on hand Feb. 1 $1500. Finished goods on hand Feb. 28 1285.46 Finished goods included in sales 214.54 Total sales for the month $6801.50 Less finished goods sold 214.54 Sale of goods manufactured during the month 6586.96 The total cost of the manufactured goods included the following : Raw material $3131.75 Labor 1732. Incidentals 1166.10 Mdse. discount 40.38 Total cost 6070.23 Gain on merchandise 516.73 The above analysis shows that the raw material cost, in even numbers, 52%; labor, 28% ; incidentals, 20%. The above analysis is made possible because of the classification of the Merchandise account. In the above manner the manufacturer can determine whether any one division of manufacturing is costing too much, or whether the proportion of each is wisely distributed for the most economical production of his goods. By taking the total raw material consumed he can readily determine the per cent of cost of each kind of raw material. It is suggested that the student find out for himself just wbat per cent of the total amount of raw material consumed is represented in each of the raw material accounts. It is further suggested that the student analyze the Expense account, and learn just what per cent of the total incidental amount is repre- sented in each one of the classified expense accounts. Note. — The teacher can well afford to use a number of recitation periods in developing the work outlined above. THE BUSINESS OF BANKING 293 BANKS AND BANKING THE UTILITY OF BANKS A Bank, in its simplest form, is an institution provided for the safe-keeping of money; but the ordinary commercial bank of to-day is designed to render to the public many varied and important services. The general utility of commercial banks may be stated as follows : 1. They provide a place for the safe-keeping of money and secu- rities. 2. They afford a business man an opportunity to borrow money to carry on his enterprises while his capital is locked up in merchandise or in the hands of his debtors. The credit of many mercantile houses is worth as much to them as the capital they possess. 3. They save the transmission of money from one part of the world to another, thus avoiding great risks and keeping money in more active circulation. Settlements are effected by issuing to customers a. Bankers' drafts. b. Bills of exchange. c. Letters of credit. 4. They facilitate the payment of bills by permitting money deposited to be withdrawn upon a simple order called a check. This check when issued serves the business man in various ways, which may be specified as follows : a. It saves time in paying large sums. To count the money would be a long process. b. It obviates the risk that attends the handling of money. c. It constitutes a record of expenditures and furnishes the business man convenient data from which to make entries in his books. d. When the check is canceled it serves the purpose of a receipt. 5. By issuing letters of credit they afford people who travel a means of securing money in distant parts without the risk attending the carry- ing of real money. 6. They afford excellent facilities for the collection of negotiable paper, — bills, notes, bonds, coupons, etc. 7. They are often a source of useful business information pertaining to investments and other matters. 294 ACCOUNTING AND BUSINESS PRACTICE 8. They are a means of organizing capital. 9. They tend to encourage thrift, honesty, and punctuality. Sources of a Bank's Profits. — The principal sources of a bank's profits may be specified as follows : 1. Money earned for discounting business paper and from lending money on good security. The available funds of a bank for lending purposes accrue from a. Amounts paid in by stockholders. b. Amounts deposited by individuals, corporations, bankers, etc. c. Accumulated surplus. 2. Charges for collecting notes, drafts, etc. 3. Interest upon bonds deposited with the United States Treasurer to secure circulation, if it be a national bank. 4. Fees for issuing drafts, bills of exchange, etc. 5. Profit on circulation, if it be a national bank. Sources of a Bank's Expenses. — The principal sources of a. bank's expenses may be specified as follows : 1. Interest on special deposits. 2. Fees for collecting foreign paper. 3. Taxes. 4. Salaries and various other office expenses. Kinds of Banks. — Banks may be classified as follows: 1. National. 2. State. 3. Private. NATIONAL BANKS Distinguishing Features. — Some of the distinguishing features of a national bank may be stated as follows : 1. It is organized under the National Bank Act. Note. — Authentic information with reference to the organization of national banks may be obtained upon application to the Comptroller of Currency, Wash- ington, D.C., for a copy of each of the following pamphlets: "National Bank Act" and "Instructions Relative to the Organization and Management of National Banks." These pamphlets contain valuable suggestions for all interested in the business of banking. 2. It is always an incorporated institution. 3. It has general authority to issue circulating notes as well as to conduct an ordinary banking business. 4. It is under the direction of the Comptroller of Currency, Washing- ton, D.C. NATIONAL BANKS 295 5. Its general methods of conducting business are consistent with those of every other national bank in the United States. 6. Its stockholders are liable for twice the amount of their subscrip- tion; that is, in case a bank fails and is in need of funds to meet its liabilities, a stockholder who owns 85000 worth of stock is liable to the Comptroller to the amount of 85000 in cash in addition to the loss of his stock. 7. A definite proportion of its stock must be invested in United States bonds. 8. It must have at all times on hand an available lawful money reserve. This amount ranges from 15% to 25% of its deposits, depending upon the city in which the bank is located. 9. It must form a surplus fund. Before making a dividend it must carry to its surplus fund one-tenth of its net profits since the last pre- ceding dividend, until the fund shall amount to at least 25% of the capital stock, thereby establishing a reserve fund from which losses may be met. Organization of a National Bank. — The successive steps required to organize a national bank, together with the prescribed forms of articles of association and by-laws, are given in the pamphlets referred to on page 294. A summary of the necessary steps may be given as follows : 1. There must be at least five persons. Corporations, etc., cannot become organizers of a national bank. 2. No national bank can be organized with a capital smaller than $25,000. The minimum capital stock with which a national bank may organize varies with the size of the town or city ; as : a. Minimum capital for banks organized in towns with a population of not over 3000, $25,000. b. For towns with a population of not more than 6000, $50,000. c. For towns or cities with a population of more than 6000 and less than 50,000, $100,000. d. For towns or cities with a population of 50,000 or more, $200,000. 3. A paper is prepared, which it is expected people will sign, stating the amount of capital it is desired to raise and the number and value of the shares. This paper is circulated until the requisite amount is subscribed. 4. A name must be selected. This may be anything that does not conflict with a name already in use in that particular town or city. 296 ACCOUNTING AND BUSINESS PRACTICE 5. Written application is made to the Comptroller of Currency at Washington, giving: a. The name and location of the proposed bank. b. The amount of the capital stock. c. The names of at least five persons who are to be stockholders. 6. If the application receives the Comptroller's approval, the sub- scribers unite in Articles of Association. 7. Having executed the articles of association, the stockholders then execute a paper entitled Organization Certificate. This certificate defi- nitely specifies : a. The name and location of the association. b. The capital stock. c. The names and residences of the stockholders and the number of shares held by each. d. A general statement as to why the certificate is made. 8. The Organization Certificate is then signed, acknowledged, and filed with the Comptroller. 9. The stockholders meet and elect directors. To be eligible as a director a stockholder must a. Be a citizen of the United States. b. Own at least $1000 of the capital stock of the bank. c. Three-fourths of the directors must have resided in the state in which the association is located for a year or more preceding their elec- tion ; they must also continue to reside there while they remain in office. 10. The directors then proceed to elect a president, vice president, cashier, etc., and call in at least 50 °J of the capital stock. Note. — Fifty per cent of the capital stock of a bank must be paid in before the Comptroller will give it authority to commence business, and the remainder must be paid in in five equal monthly installments. Thus the entire capital stock must be paid in within six months from the time the bank is authorized to commence business. In the majority of cases, however, stockholders contribute the entire amount of their capital at the outset of the bank's history. In many cases a surplus fund is created by the payment of an additional sum, this surplus fund serving to enhance the bank's credit and stability. 11. Another certificate is then made and sworn to by a majority of the directors. This paper certifies the following : a. The amount of paid in capital. b. The name, residence, and number of shares of each stockholder. c. That the bank has complied with the various requirements of the National Bank Act. NATIONAL BANKS 297 12. A portion of the capital stock must then be invested in United States bonds and deposited with the Treasurer of the United States. This amount varies ; as : a, It cannot be less than one-fourth of the capital stock if the capital stock is 1150,000 or less. b. If the capital stock is more than 1150,000, 150,000 in bonds must be deposited. 13. After the Comptroller has given authority for the bank to do business, a code of by-laws is adopted for the government of the bank. 14. If the Comptroller is assured that all the requirements of the law have been executed, he will give to the bank a certificate stating that it is authorized to commence business. This certificate must be published in the town or city in which the bank is located, for sixty days or more after it is issued. Circulating Notes of a National Bank. — Whether a bank avails itself or not of the privilege of taking out circulating notes, the law requires the above-mentioned deposit of United States bonds. Having complied with the law in depositing bonds, a national bank is entitled to receive its circulating notes, equal in value to the par value of the bonds deposited, unless the bonds should be below par, in which case it may receive circulating notes for only the market value of the bonds. A national bank is not required to take out circulating notes ; but having invested a part of its capital in the above manner, it is usually desirous of utilizing its credit by getting as many notes as the law per- mits. The profits on these circulating notes, in most cases, are not large, varying from 1% to 2% on the capital employed. Tax on Circulation. — A national bank is required to pay to the Treas- urer of the United States a tax of £% each half year upon the average amount of notes in circulation, secured by 2% gold bonds. Circulating notes secured by all other classes of bonds are subject to a semiannual tax of \°f . Interest on United States Bonds. — The Comptroller authorizes the payment of interest on the bonds deposited to the bank depositing them. From this income to the bank no deduction is made for taxation, since United States bonds are exempt from taxation. Redemption Fund with the United States Treasurer. — National banks are required to keep at all times on deposit with the Treasurer of the United States 5% of their circulation. This fund is to be held and 298 ACCOUNTING AND BUSINESS PRACTICE used by the Treasurer for the redemption of worn, mutilated, or defaced national bank notes that may be received from time to time and redeemed in sums of $1000 or any multiple thereof. CORPORATE POWERS OF AND RESTRICTIONS ON NATIONAL BANKS The Powers possessed by national banking associations may be enu- merated as follows : 1. To adopt and use a corporate seal. 2. To have succession for twenty years, unless sooner voluntarily dissolved or their franchises become forfeited by some violation of law. 3. To sue and to be sued. 4. To elect and appoint directors, and by the directors to appoint a president, cashier, etc. 5. To adopt necessary by-laws not inconsistent with law. 6. To make contracts. 7. To exercise by their board of directors such incidental powers as may be necessary to carry on the general business of banking ; such as discounting paper, receiving deposits, loaning money on personal secu- rity, buying and selling exchange, etc., obtaining and issuing circulating notes. The Principal Restrictions placed upon national banking associations may be enumerated as follows : 1. National banks cannot hold real estate except on the following conditions : a. Such as may be needed for their immediate accommodation in the transaction of business. b. Such as may be mortgaged or conveyed to them in good faith by way of security for debts previously contracted. c. Such as they shall purchase at sales under judgments, etc., held by the association. Possession of real estate under mortgage, or title and possession of any real estate purchased to secure debts due to national banks, cannot be held for a longer period than five years. 2. No increase or reduction of the capital stock of national banks can be made without the approval of the Comptroller. No increase is valid until the full capital stock has been paid. 3. They are prohibited from loaning a person or a firm an amount exceeding one-tenth part of their capital. This restraint is to prevent excessive loans, which always impair the general usefulness of a bank. NATIONAL BAKE OFFICERS AND CLERKS 299 4. They cannot use their own circulating notes to pay for or increase their capital stock. 5. They are expressly prohibited from certifying a check in excess of a depositor's account. NATIONAL BANK OFFICERS AND CLERKS Officers. — The officers of a national bank are chosen by the board of directors to superintend and direct its affairs. These are usually : President. Vice President. Cashier. Assistant Cashier. Clerks and Employees. — Among the clerks and employees of a bank are: receiving teller, paying teller, note teller, general bookkeeper, individual bookkeeper, discount clerk, collection clerk, correspondence clerk, runner, porter, watchman, and such other assistants as the char- acter and extent of the business may create a necessity for. The Bank of England employs about one thousand clerks. The President is the official head of the bank. The bank is dependent upon him for its standing, and it is therefore highly important that he be a man of the strictest honor and integrity, with a very considerable knowledge of men and financial affairs. He should, by considerate action, an accurate knowledge of character, a keen interest in the movements of trade, have under his command all the forces that tend to enhance his bank's interests. His most important duties may be specified as follows : 1. To preside at all the meetings of the board of directors. 2. To furnish such information concerning the bank's transactions as may be desired by the directors. 3. To adopt a policy which will govern the bank in its operations. 4. To be influential in securing depositors. 5. To sign circulating notes and certificates of stock. 6. To be alert in watching the loans of the bank to see that they do not go beyond safe limits. The Vice President, in the absence of the president, takes his place and performs the duties of the office. In some of the larger banks of the country this officer shares the responsibility of the president and aids in extending the efficiency of the bank's service. The Cashier ranks next to the president and vice president, and has certain duties to perform. These duties are mentioned in the law under 300 ACCOUNTING AND BUSINESS PRACTICE which the bank exists. His most important duties may be stated in a general way as follows : 1. He acts as secretary of the board of directors and keeps a record of all business transacted at their meetings. 2. He supervises various departments of work and sometimes employs clerks and prescribes their duties. 3. He conducts the correspondence of the bank. 4. He signs certificates of stock and circulating notes. 5. He pays out the bank's funds and borrows money in the name of the bank. 6. He indorses all paper that is sent away for collection. 7. He signs the checks of the bank and draws drafts on correspondents. 8. He may indorse the bank's paper for the purpose of securing loans. 9. He should aim to build up the business of the bank and commend it to public favor. The Assistant Cashier is employed only in the larger banking institu- tions of the country. His official signature is recognized in everything the same as the cashier's, except in the bank's reports to the Comp- troller of Currency. He assists in performing any of the duties ordi- narily devolving upon the cashier. PROPOSITIONS ILLUSTRATING THE OPENING ENTRIES OF A NATIONAL BANK 1. (a) A national bank is organized with a capital stock of $300,000. (b) The capital stock is fully paid in. (c) Also a surplus fund of $50,000 is created and paid, (d) United States bonds with a par value of $100,000 are purchased for $101,500 cash, (e) Circulating notes to the extent of $100,000 are received from the Comptroller of Currency and duly signed. (/) $5000 is forwarded to the Treasurer of the United States, as provided by banking laws, to redeem worn-out and mutilated circulating notes, (g) Disbursements ordered by the board of directors amount to $2900. Required the necessary opening entries. Give them in ordinary journal form. To the Student. — The above proposition gives a statement of the usual transactions resulting from the organization of a national bank. If you have the successive steps of organization well in mind you are now ready to study the follow- ing entries. To show the various debits and credits, the entries are all given in journal form. After a careful study of the entries for proposition No. 1, take a sheet of journal paper and make the entries for proposition No. 2. NECESSARY ENTRIES 301 Necessary Entries (a) Subscription To Capital Stock $300000 $300000 Cash To Subscription Cash To Surplus Fund Premium on U.S. Bonds U.S. Bonds to secure Circulation To Cash w Cash To Circulation (/) Redemption Fund with U.S. Treasurer To Cash w Expense To Cash 300000 50000 1500 100000 100000 5000 2900 300000 50000 101500 100000 • 5000 2900 2. (a) A national bank is organized with a capital stock of $200,000. (b) The first installment of 50% of the capital stock is duly paid. (c) United States bonds with a par value of $75,000 are purchased for $76,000 cash, (d) Circulating notes are received from the Comptroller of Currency for $75,000 and duly signed by the president and cashier. (e) One of the stockholders makes a further payment of $20,000 to apply on the capital stock. (/) The necessary 5% redemption fund is forwarded to the Treasurer of the United States to redeem worn and mutilated circulating notes, (g) Disbursements ordered by the board of directors amount to $3100. Required the necessary opening entries. Make them in ordinary journal form. To the Teacher. — The teacher will find it a most helpful exercise to require the students to analyze fully each of the entries called for in the foregoing propo- sitions. This will, at the outset, firmly fix in mind the fundamental principles in the organization of a national bank. 302 ACCOUNTING AND BUSINESS PEACTICE TRUST COMPANIES Organization. — Trust companies are in reality banking institutions organized under and subject to the laws of the different states. The Business of Trust Companies ranks among the important activities of commerce. Since trust companies are state institutions, their man- agement and scope vary in the different states. In general the business of trust companies may be stated as follows : 1. They receive money on deposit, subject to checks, the same as national banks. 2. They allow interest on special deposits, usually on amounts above a specified sum. 3. They make loans in the same careful, conservative way that is so characteristic of national banks. 4. Where they have superseded state banks they undertake the collection of commercial paper. 5. They are usually connected with the clearing house, either directly or through some convenient national bank. 6. They receive on deposit money, government securities, stocks, bonds, coin, jewelry, valuable papers and documents, evidences of debt, etc., upon such terms and conditions as may be agreed upon. 7. They collect and disburse the interest or income, if any, upon property received on deposit and at maturity collect and disburse the principal of such property as produces interest or income. 8. They act as trustees for widows and children. 9. They act as agents in transferring stocks and bonds. 10. They act as agents for. the care and management of invested property. 11. They may be appointed by probate courts as receivers, executors, administrators, etc. 12. They are usually authorized to receive and hold moneys and property in trust and on deposit from courts of law and equity, executors, assignees, guardians, and trustees upon such terms and agreements as may be decided upon. Note. — In Massachusetts and some of the other states trust companies are required to maintain a reserve fund similar to the reserve fund of national banks, and to annually set aside 10% of their net earnings as a surplus or guaranty fund until such fund amounts to 25% of their capital stock. The liability of the stock- holders is also the same as that of the stockholders of a national bank. STATE BANKS 303 STATE BANKS Organization. — State banks are organized under and subject to the regulations and restrictions of the banking department of the particular state in which they are located. The preliminary steps necessary in the organization of a state bank are quite similar to those already out- lined for national banks. State and National Banks compared. — State and national banks may be compared as follows : 1. Their management is similar. 2. Their scope is nearly the same. 3. They are equally careful and conservative in the matter of making loans. 4. In many cases the protection afforded the creditors of state and national banks is equally strong. State and National Banks contrasted. — State and national banks may be contrasted as follows : 1. National banks are organized under and subject to national law and authority. State banks are purely state institutions, organized under and subject to state law and authority. 2. National banks issue circulating notes, while state banks do not. Note. — Prior to July 1, 1866, state banks issued circulating notes. On that date an amendment to the National Bank Act imposed a tax of 10% on these notes. This tax proved too high to allow any profit to the state banks, and the circulating notes were withdrawn. 3. National banks are subject to a more critical examination than state banks. 4. National banks are required to make fuller returns to United States officials than state banks are required to make to state officials. 5. National banks are required to invest a portion of their capital in United States bonds. State banks are not. 6. On the whole the numerous requirements of the National Bank Act strengthen public confidence in national banks and make them more popular institutions than state banks. Note. — In Massachusetts and a few other states there are no state banks, loan and trust companies having superseded them. Authentic information respecting the organization of state banks and trust companies may be obtained by addressing the proper Secretary of State. 304 ACCOUNTING AND BUSINESS PEACTICE PRIVATE BANKS Organization. — Private banks are organized in the same manner as ordinary partnerships. They may belong to an individual or a firm. Functions. — The business of private banks varies in different locali- ties. In many cases they possess the principal functions of national banks ; in other cases their attention is directed only to special features of banking, such as the buying and selling of foreign exchange, stocks and bonds, etc. Protection to Creditors. — In a few states private banks are restricted in their operations by statute, in which case they are subject to the inspection of state officials ; but usually their operations are regulated and restricted only by the common laws of business. Thus it will be seen that their safety is dependent upon the integrity and financial responsibility of the individuals conducting them. Note. — Private bankers are quite numerous in nearly all large cities, their capital stock aggregating, in some instances, more than the capital stock of national banks. Some private bankers make a specialty of loaning their capital for the promotion of business enterprises, taking for security the stocks and bonds of the enterprise pro- moted. These stocks and bonds are disposed of to customers, usually at a good profit. REVIEW QUESTIONS 1. State the principal functions of a commercial bank. 2. Briefly outline the principal advantages of making payments by the ordinary bank check. 3. A busi- ness man is about to pay a bill of $49.75. He finds that there is over $200 in currency in his safe. He has a good-sized bank account. Which would be the more business-like way of paying his bill, by check or in currency ? Why ? 4. Name the principal sources of a bank's profits. 5. From what do the available funds of a bank for lending purposes accrue? 6. State the principal sources of a bank's expenses. 7. Name the three general classes of banking institutions. 8. Name the chief distinguishing features of a national bank. 9. Why are the underlying principles of the national banking system practically uniform ? 10. State the indi- vidual liability of the stockholders of a national bank. Illustrate. 11. What lawful money must the national banks in your city have at all times on hand? 12. Define the following: (a) surplus fund; (b) United States bonds; (c) incor- porated institution; (d) National Banking Act. 13. How many persons are required to form a national bank ? 14. Could the number be made up wholly or in part of fictitious persons, as corporations, etc. ? 15. What is the minimum capital under which a bank may organize in your city ? 16. State the law with reference to the minimum capital required to organize a national bank. 17. A national bank is being organized in your city. There are already a number of national REVIEW QUESTIONS 305 banks doing business there. Could the new bank adopt the name First National Bank ? There is no other bank of that name in your city. Give reasons for your answer. 18. What per cent of the capital stock of a national bank must be paid in before the bank can be authorized to commence business? 19. State the necessary qualifications for a bank director. 20. What is generally the par value of a share of national bank stock ? 1 21. Suppose a national bank is formed with a fully paid in capital of $300,000. Another national bank is formed at the same time with a capital stock of $200,000, and a surplus fund of $100,000, both amounts fully paid in. Which bank in your judgment is the stronger institution? Why? 22. What proportion of the capital stock of a national bank must be invested in United States bonds ? 23. Why is there no tax levied on United States bonds ? 24. Define the following : (a) circulating notes; (b) redemption fund with the United States Treasurer. 25. Is a bank bound to take out circulating notes ? 26. Do almost all national banks carry circulating notes? Why? 27. What per cent of the bonds deposited may the circulating notes be? 28. What is the market value of United States 2% gold bonds at the present time? 29. Are circulating notes a source of profit to national banks? 30. What is the yearly tax on national bank notes? 31. Are the United States bonds deposited with the United States Treasurer a source of income to the bank depositing them? Explain. 32. For what is Redemption Fund with the United States Treasurer created? How is the amount of it determined? 33. A fire occurs in A's warehouse. In the office of this warehouse $500 in national bank bills are burned to ashes. Has anybody gained by this destruction of bank notes? Explain. 34. State the principal corporate powers of national banks. 35. Under what con- ditions may a national bank hold real estate ? 36. How can a national bank increase or diminish its capital ? 37. Why are national banks prohibited from using their own circulating notes to pay for their capital stock ? 38. By whom are the officers of a national bank chosen ? 39. Name the usual officers of a national bank. 40. Name the usual clerks employed in the average national bank. 41. Why should the presi- dent of a bank be a man of extended experience and superior ability? 42. State the principal duties of the average bank president. 43. Where there is a vice president in a bank what are his duties ? 44. State the most important duties of the cashier of a national bank. 45. When there is an assistant cashier what are his duties? 46. Give the initial opening entry for a national bank. 47. Give the entry for the payment of the capital stock. 48. Give the entry for the purchase of United States bonds at a premium. 49. Give the entry for taking out circulating notes. 50. Give the entry for the funds remitted to the Treasurer of the United States to redeem worn and mutilated circulating notes. 1 The National Banking Act now requires the shares of stock to have a par value of $100, in harmony with the usual practice of joint-stock companies throughout the country. Some of the state banks, however, were originally organized with shares having a par value of $50. Where these banks were later changed into national banking associations they were given the privilege of forming with shares of a par value of $50. This may account for the fact that some national banks have shares whose par value is less than $100. 306 ACCOUNTING AND BUSINESS PRACTICE SET X — BANK ACCOUNTING Object. — This set is designed to illustrate in as brief a way as pos- sible the practical workings of an ordinary national bank. In order to get at the work directly the various books are opened from statements showing the condition of a bank that is in operation. To open a bank and gradually bring it to a well-organized and paying institution would be a long, unnecessary process. In order to illustrate the closing entries in bank accounting, state- ments are made and dividends declared March 3. Books used. — The books illustrated in this set are : general balance ledger, individual ledger, discount register, discount tickler, collection register, collection tickler, draft register, remittance register, certified check book, general cash book, and paying and receiving tellers' check sheets. For greater clearness and more satisfactory results in the schoolroom the various uses of these books, and the ordinary routine of entries resulting from the transactions recorded in them, are illustrated and explained in connection with the various departments of bank routine which make up the set. Auxiliary Books. — The auxiliary books and records necessary in the organization of a national bank are essentially the same as those of any other joint-stock company or corporation. These books may be briefly referred to as follows : 1. Subscription Book, made up of a record of the names of the persons subscribing for stock and the number of shares wanted. 2. Stock Certificate Book, containing the receipts showing the number of shares delivered to each stockholder. 3. Installment Book, in which are written the names of the stock- holders and the amount paid by each. 4. Transfer Book, in which is written a history of the certificates canceled and of the new ones issued. 5. Stock Ledger, showing the amount of capital stock and the balance to the credit of each stockholder. 6. Minute Book, in which are recorded the proceedings of the board of directors. 7. Dividend Book, in which are recorded the names of the stock- holders, the number of shares owned, the amount of their dividends at various dividend periods, and receipts for the payment of dividends. SET X— BANK ACCOUNTING 307 Classified Work. — The work of the set is so classified that the student is made to see the principal duties devolving upon the various officers and clerks in the daily routine of recording the transactions of the bank. This classification gives the student practice in the performance of the chief duties of : 1. Paying teller. 5. Collection clerk. 2. Receiving teller. 6. Correspondence clerk. 3. Note teller. 7. Individual bookkeeper. 4. Discount clerk. 8. General bookkeeper. 9. Cashier. General Directions and Suggestions. — In this set Commercial National Bank is the name under which the banking association is incorporated. The location is Boston, Mass. The student is about to familiarize himself with the details of an ordinary national banking institution, and he will be carefully instructed as to the duties of the various officers and clerks by : 1. Being allowed to examine carefully the present condition of the books used. 2. Being specifically instructed as to the powers, responsibilities, and general duties of the various officers and clerks. 3. Being allowed to make further entries in the various books during the progress of each day's business. WORK OF THE DISCOUNT CLERK The records of the discount clerk are to be examined first. These records are found principally in the discount register and discount tickler. The Discount Register contains a full record of all paper accepted for discount. It is the bill book of the bank and gives, in addition to the information ordinarily contained in a common bill book, the amount of discount and collection and exchange charged, the proceeds of the paper, etc. The illustration on pages 308 and 309 is self-explanatory. It shows a day's records, with the necessary check marks, etc. No record is made in the discount register at the maturity of paper; therefore it will not be necessary for the student to enter the discounted paper on hand in the discount register. The Discount Tickler contains a classified record, with reference to maturity, of all the paper entered in the discount register. These records are made to "tickle," or remind, the discount clerk to have paper presented for payment at the proper time. 308 ACCOUNTING AND BUSINESS PRACTICE Discount DATE DIS- COUNTED FOR WHOM DISCOUNTED MAKER OR PAYER INDORSER WHERE PAYABLE NUM- BER DATE OF PAPER 19— June 20 20 20 20 20 D. E. Avery Powers & Sprague E. V. Buckley & Son J. H. Crandall Dodge Bros. Wilson & Son C. Reardon & Co. W. 0. Radclitte Frey & Mason Rogers, Peet & Co. Cook Bros. Bates Bros. Alliance Nat'l, City Farmers Bank, Chicago First Nat'l, Syracuse Our Bank Traders Nat'l, Phila. 230 231 232 233 234 19_ Apr. May Apr. June 20 1 1 15 15 As soon as paper is accepted for discount it is entered in the discount register, the due date is written across its face in red ink, and it is recorded in the discount tickler under the proper number and date. After these records have been completed the notes are carefully checked back from the tickler. The tickler is generally ruled in sections for each day in the year. At the top of each section is printed the day and date. The Remarks column is used for noting irregularities in payment, etc. Discount Monday, NO. PAYER WHERE PAYABLE TO WHOM SENT 800 C. W. Hall & Co. Our Bank 821 Morton & Davis First National Bank, Buffalo Traders National, Buffalo 827 C. W. Carey Allston & Co., Bankers, City Tuesday, 782 Raymond Bros. Union Trust Co., City 790 Stickney, Poor & Co. National City Bank, Brooklyn Chemical National Bank, NY. 765 F. E. Sherman Our Bank 778 De Young Bros. Citizens Bank, Troy Farmers Bank, Albany Paper to be entered in the Discount Tickler. — The following dis- counted paper is now in the possession of the bank and is shown by the uncanceled records in the discount tickler. Take your discount tic- kler and enter this paper, being guided by the accompanying model. SET X — BANK ACCOUNTING 309 Register TIME WHEN DUE TERM OF DIS- COUNT RATE OF DIS- COUNT AMOUNT OF PAPER INTEREST AND DISCOUNT COLLECTION AND EXCHANGE PROCEEDS TO BE CREDITED TIC- KLER CK. REMARKS 3 mo. 3 mo. 90 da. 90 da. 30 da. 19_ July Aug. June July 30 1 30 14 15 30 da. 42 da. 10 da. 24 da. 25 da. 6% 6% 6% 2000 1500 900 6000 3000 10 10 1 24 12 50 50 50 1 3 88 75 1990 1487 898 5976 2983 62 50 75 V Issued Cashier's Ck. V' 13400 58 50 5 63 13335 87 Write dates in the discount tickler as follows : March 1, 2, 3, 4, 5, 6, 9, 11, 12, 16, 25, 26, 29, 31, and April 1. Do not show any totals at this time, as the entries in the general debit and credit books will not be made until the general bookkeeper's work is given. Note. — In this work all paper maturing on Sundays or legal holidays should be entered in the ticklers under the date of the first business day following. The statutes of the different states, however, are not uniform on this point. Feb. 15, 19 Tickler BY WHOM DISCOUNTED AMOUNT TO BE COLLECTED CK. REMARKS Decker Bros. D. E. Avery E. L. Howard 7500 1500 9000 • V Cash Charged to Traders, Buffalo Certified, Allston & Co., Bankers 18000 Feb. 16, 19 W. I. Pratt 2500 V Protested. Fees, $1.75. Charged to Pratt J. 0. Baker 3000 V Charged to C. N. B., New York Powers & Sprague 4500 V Charged to F. E. Sherman 2000 V Charged to Farmers, Albany 12000 V 'Paper maturing Monday, March 1 No. 889. Note of W. I. Pratt, at 30 days from Jan. 30, discounted for Decker Bros., payable at our bank, for $2750. 310 ACCOUNTING AND BUSINESS PRACTICE No. 866. Note of B. M. Vosburg & Co., at two months from Jan. 1, discounted for Mace, Gilmore & Co., payable at Traders National Bank, Buffalo, for $7500. Sent to Traders National Bank. No. 842. Note of Gregory Mfg. Co., at three months from Dec. 1 last, discounted for Spencer, Mead & Co., payable at Third National Bank, Buffalo, for $5000. Sent to Traders National Bank, Buffalo. No. 893. Note of Dillon Bros., at 30 days from Jan. 30, discounted for D. B. Roberts, payable at Merchants National Bank, City, for 17550. No. 901. Note of D. S. Davenport, at 10 days from Feb. 19, dis- counted for E. L. Howard, payable at Eliot National Bank, City, for 19500. Paper maturing Tuesday, March 2 No. 902. Note of Novelty Mfg. Co., at 10 days from Feb. 20, dis- counted for Fernald, Son & Co., payable at Alliance National Bank, Springfield, Mass., for $ 18,500. Sent to Alliance National Bank. No. 869. Note of F. M. Elery & Son, at two months from Jan. 2, discounted for Thomas Bennett & Co., payable at Union Bank, Worces- ter, for $32,400. Sent to Alliance National Bank, Springfield. No. 868. Note of Daniels Novelty Co., at 60 days from Jan. 1, discounted for Mace, Gilmore & Co., payable at our bank, for 133,210. No. 895. Note of Powers & Lawler, at 15 days from Feb. 15, dis- counted for W. I. Pratt, payable at Farmers Bank, Albany, for $28,890. Sent to Farmers National Bank, Albany. No. 867. Note of Baush & Lomb, at 60 days from Jan. 1, discounted for C. E. Selover & Co., indorsed by Anderson & Page, payable at our bank, for $16,500. Paper maturing Wednesday, March 3 No. 897. Note of I. M. Lyons, at 15 days from Feb. 16, discounted for D. E. Avery, payable at our bank, for $29,900. No. 882. Note of Kennedy Soap Co., at 20 days from Feb. 11, discounted for J. H. Crandall, payable at Union Trust Co., City, for $24,750. No. 883. Note of Cobb, Bates & Co., at 20 days from Feb. 11, discounted for Burgess & Co., indorsed by Ginn & Co., payable at Colonial National Bank, City, for $12,250. No. 875. Note of Cobb & Co., at 30 days from Feb. 1, discounted for George D. Hatch & Co., payable at Shoe and Leather Bank, City, for $25,625. SET X — BANK ACCOUNTING 311 Paper maturing Thursday, March 4 No. 884. Note of W. E. Denman, at 20 days from Feb. 12, dis- counted for C. E. Denison, payable at Chemical National Bank, New York, for $37,000. Sent to Chemical National Bank. No. 906. Note of David W. Parker, at 15 days from Fdb. 17, dis- counted for C. E. Denison, payable at our bank, for 130,000. No. 907. Note of Marsh & Grant, at 15 days from Feb. 17, dis- counted for Thomas Bennett & Co., payable at our bank, for $17,295. No. 876. Note of G. S. Murray, at 30 days from Feb. 2, discounted for Decker Bros., payable at Chemical National Bank, New York, for $12,460. Sent to Chemical National Bank. No. 857. Note 'of Fred M. Everitt & Co., at 60 days from Jan. 3, discounted for Femald, Son & Co., payable at Farmers Bank, Albany, for $16,792. Sent to Farmers Bank. Paper maturing Friday, March 5 No. 908. Note of Stanley Carriage Co., at 10 days from Feb. 23, discounted for J. H. Crandall, payable at Union Trust Co., City, for $23,680. Paper maturing Saturday, March 6 No. 910. Note of Jamison, Baker & Co., at 10 days from Feb. 24, discounted for Freeman, Austin & Co., payable at Park Square National Bank, City, for $31,720. No. 890. Note of Fowler Mfg. Co., at 30 days from Feb. 4, dis- counted for C. E. Selover & Co., payable at Chemical National Bank, New York, for $31,750. Sent to Chemical National Bank. Paper maturing Tuesday, March 9 No. 844. Note of C. B. Conroy & Co., at three months from Dec. 9 last, discounted for Lane, Rowell & Co., payable at our bank, for $25,750. Paper maturing Friday, March 12 No. 847. Note of D. D. Eldred, at three months from Dec. 12 last, discounted for F. E. Sherman, payable at our bank, for $15,950.50. Present the discount tickler to your teacher for approval. The Duties of the Discount Clerk may be specified as follows : 1. He takes charge of the bills receivable accepted for discount. 2. He keeps the records of the loaning department of the bank. 312 ACCOUNTING AND BUSINESS PRACTICE Transactions for the Discount Clerk, March 1 The following paper has been offered and accepted for discount to-day. As discount clerk make the proper records in the discount register. Examine the model for discount register given on pages 308 and 309. Consult your teacher when in doubt on any point. In the following memoranda of transactions, where the paper contains no other indorsement than that of the holder, the indorser is not stated, and the column Indorser in the discount register may be left blank. Unless otherwise stated, discount is computed at 6% per annum. No. 920. Note of Wells, Osborn & Co., at 30 days from March 1, discounted for Mace, Gilmore & Co., payable at Old Colony National Bank, City, for $2960. Discount, $14.80. Proceeds credited. No. 921. Note of Baker & Small, at 30 days from Feb. 23, indorsed by King & Chappell, discounted for Decker Bros., payable at First National Bank, Worcester, for $7500. Discount, $30. Collection and exchange, $7.50. Proceeds credited. No. 922. Note of Wyckoff & Co., at 30 days from March 1, dis- counted for W. I. Pratt, payable at Old Colony National Bank, City, for $1500. Discount, $7.50. Proceeds credited. No. 923. Note of C. A. Seaver & Co., at 15 days from March 1, indorsed by Boswell, Mason & Co., discounted for Wyckoff, Seamans & Benedict, payable at our bank, for $10,000. Discount, $25. Proceeds credited. No. 924. Note of F. E. Harris, at 10 days from March 1, discounted for J. H. Crandall, payable at Farmers Bank, Albany, for $9000. Dis- count, $15. Collection and exchange, $9.50. Collection WHEN LEFT NO. PAYER INDORSER WHERE PAYABLE Feb. 16 610 C W. Young Union Trust Co., City 16 611 E. O. Frey & Co. Traders Nat'l, Buffalo 16 612 Geo. A. Ward Wood & Garson Park Nat'l, Providence 16 613 F. E. Brown Scranton & Co. Our Bank 16 614 Mason, Quigley & Co. Our Bank 16 615 Reardon & Ellis Howland & Haviland Alliance Nat'l, Springfield 16 616 Novelty Mfg. Co. Our Bank 16 617 Ellis Soap Co. Robert Simpson Monroe Bank, City 17 618 C. H. Bryant Our Bank SET X— BANK ACCOUNTING 313 As discount clerk the student should now proceed as follows : 1. Rule and foot the discount register. Examine the model given. 2. Prove the footings. The total of the Proceeds column plus the total of the Discount and Collection and Exchange columns should equal the total of the Amount column. 3. Post the entries from the discount register to the discount tickler. Leave the columns WJiere Sent and Remarks in the discount tickler blank for the time being. These will be filled out later as the work progresses. Submit the discount register and discount tickler to your teacher for approval. The Auxiliary Books kept by the discount clerk are of significant importance in a bank, but they are so simple in character and so self- explanatory that it is thought best not to attempt to use them in these records. They are : 1. The Offering Book, containing information with reference to the parties applying for loans. 2. The Discount Ledger, containing a record of the amount of paper discounted for each customer. 3. The Customers'' Bill Book, containing a detailed statement of the various papers offered for discount by the customers of the bank. WORK OF THE COLLECTION CLERK The records of the collection clerk are now to be examined. They are found principally in the collection register and collection tickler. The Collection Register contains a record of all commercial paper received by the bank for collection. Many banks keep two collection Register • DATE OF DRAFT OR NOTE TIME WHEN DUE FOR WHOM COLLECTED AMOUNT TO BE COLLECTED CK REMARKS Feb. 9 2 mo. April 9 Fields Milling Co. 1660 n/ 2 3 mo. May 2 Cbarles J. Kennedy 2500 v' 2 60 da. April 3 E. V. Buckley & Son 10000 y/ Jan. 29 3 mo. 29 Wyckoff , Seamans & Benedict 75 20 V 1G 4 mo. May 16 F. E. Sherman 1150 22 • 21 4 mo. 21 Freeman, Austin & Co. 95 GO V Feb. 2 GO da. April 3 C. E. Denison 1250 V 3 30 da. Marcb 5 D. E. Avery 9500 V 7 2 mo. April 7 Alliance Bank, Springfield 215 90 V 314 ACCOUNTING AND BUSINESS PRACTICE registers, one for city collections and one for collections payable out of town. The paper entered in the collection register is generally num- bered consecutively. The foregoing model is self-explanatory. The column Indorser need not be filled out except when there is an indorser other than the owner of the paper. If any time paper is interest-bearing, the amount of the interest should be added to the face of the paper before it is recorded in the collection register. Since no record is needed in the collection register at the maturity of paper, it will not be necessary for the student to enter the collection paper on hand in the collection register. The Collection Tickler. — As soon as paper is properly recorded in the collection register it is classified in the collection tickler under its date of maturity. The object of the collection tickler is to remind the bank clerks of the maturity of paper received for collection. The following collection paper is now in the possession of the bank and is shown by the uncanceled records in the collection tickler. Record it in your collection tickler. Collection Monday, NO. PAYER WHERE PAYABLE TO WHOM SENT 590 592 593 595 596 Q. W. Gray L. O. Sweetland N. P. Pond D. E. Anderson & Co. Frey, Miller & Co. Our Bank Alliance Nat'l, Springfield Traders Nat'l, Buffalo Union Trust Co., City Park Nat'l, City Alliance Nat'l, Springfield Fourth Nat'l, Buffalo Tuesday, 572 D. O. Dale & Co. First Nat'l, Albany Farmers Bank, Albany 581 Covey & Dudley Co. Traders Nat'l, Albany Farmers Bank, Albany 598 Paine Cutlery Co. Union Bank, Worcester Alliance Nat'l, Springfield 601 F. C. Howland Our Bank 602 C. E. Reardon Suffolk Nat'l, City 606 Sampson & Newell Mechanics Nat'l, Springfield Alliance Nat'l, Springfield Write dates in the collection tickler as follows : Feb. 25, 26, March 1, 2, 3, 4, 5, 6, 9, 10, 18, 27, 31, April 1 and 2. Write March 3 twice. SET X — BANK ACCOUNTING 315 Collections maturing Thursday, Feb. 25 No. 650. Note signed by Wentworth & Son, dated Nov. 25 last, at three months, indorsed by J. K. Miner, payable at Albany, N.Y., for 1725. Sent to Farmers Bank. To be collected for E. V. Buckley & Son. No. 702. Note signed by Daly Bros., dated Dec. 25, at two months, payable at Albany, N.Y., for $1200. Sent to Farmers Bank. To be collected for J. O. Baker. No. 723. Draft dated Jan. 25, at one month from date, on F. W. Edwards & Son, payable at Fourth National Bank, Brooklyn, for 11005.25. Sent to Chemical National Bank, New York. To be col- lected for Powers & Sprague. Collections maturing Friday, Feb. 26 No. 726. Note signed by E. B. Munroe, dated Jan. 27, at 30 days, payable at Providence, for 14900. Sent to Chase National Bank, Provi- dence. To be collected for Decker Bros. Tickler Feb. 15, 19- FOR WHOM COLLECTED AM0UNTT0BE COLLECTED WHEN AND HOW DISPOSED OF Spencer, Mead & Co. Mace, Gilmore & Co. W. I. Pratt Alliance Nat'l, Springfield Chase Nat'l, Providence 9000 752 1750 7200 1625 50 90 Paid, 2/15. Chgd. Alliance Nat'l, 2/19. Our coll., 750; bank's coll., $1 Chgd. Fourth Nat'l, 2/20. Our coll., $1.75; bank's coll., $2.25 Certified, 2/15, Union Trust Co. Our coll., $7.20 Certified, 2/15, P. N. B. Our coll., $1.65 Feb. 16, 19 W. I. Pratt 2100 Chgd. Farmers Bank, 2/22. Our coll., $2.10; bank's coll., $4 D. E. Avery 1650 Chgd. Farmers Bank, 2/22. Our coll., $1.65; bank's coll., $3 C. E. Denison 562 90 Chgd. Alliance Nat'l, 2/21. Our coll., 500; bank's coll., $1 Ninth Nat'l, Hartford 1725 90 Paid, 2/16. Our coll., $2 Chase Nat'l, Providence 2100 Certified, 2/16, S. B. Our coll., $2.75 C. E. Selover & Co. 7500 Chgd. Alliance Nat'l. Our coll., $7.50; bank's coll., $12 No. 742. Draft dated Jan. 26, at one month from date, on B. W. Mills, payable at Providence, for $5200. Sent to Chase National Bank, Providence. To be collected for Wyckoff, Seamans & Benedict. 316 ACCOUNTING AND BUSINESS PRACTICE No. 743. Note signed by Samuel Powell & Co., dated Dec. 28 last, at 60 days, payable at Bank of Commerce, Baltimore, for 11250. Sent to Bank of Commerce, Baltimore. To be collected for Freeman, Austin &Co. Collections maturing Monday, March 1 No. 744. Note signed by E. O. Hamilton, payable 60 days after Dec. 31 last, at our bank, for $1650.25. To be collected for Freeman, Austin & Co. No. 752. Note signed by J. H. Moore, payable 30 days after Jan. 30, at Springfield, Mass., for $722.50. Sent to Alliance National Bank, Springfield. To be collected for Traders National Bank, Buffalo. No. 755. Draft dated Feb. 1, at one month from date, on E. L. Howard, payable at our bank, for $5000. To be collected for Wyckofr", Seamans & Benedict. Collections maturing Tuesday, March 2 No. 757. Note signed by W. E. Patten, payable 30 days after Jan. 31, at Buffalo, for $1750. Sent to Traders National Bank. To be collected for Alliance National Bank, Springfield. No. 756. Note signed by Charles H. Thurber & Co., payable 20 days after Feb. 10, at Union Trust Co., City, for $79.23. To be collected for Farmers Bank, Albany. No. 760. Note of G. A. Churchill, payable 30 days after Jan. 31, at Poughkeepsie, N.Y., for $73.92. Sent to Chemical National Bank. To be collected for Chase National Bank, Providence. Collections maturing Wednesday, March 3 No. 764. Note signed by J. M. Goulding, payable 30 days after Feb. 1, at Springfield, for $125.72. Sent to Alliance National Bank, Springfield. To be collected for Chase National Bank, Providence. No. 765. Draft dated Feb. 3, at one month from date, on Rogers & Williams, indorsed by Wilder & Fields, payable at our bank, for $652.01. To be collected for Mace, Gilmore & Co. Collections maturing Thursday, March 4 No. 766. Draft dated Jan. 4, at two months from date, on R. B. Elder, payable at Bunker Hill National Bank, City, for $700. To be collected for C. E. Selover & Co. No. 767. Note signed by S. C. Williams, indorsed by DeWitt & Bliss, payable 60 days after Jan. 3, at Rochester, N.Y., for $1600. Sent to SET X — BANK ACCOUNTING 317 Traders National Bank, Buffalo. To be collected for C. E. Selover & Co. Collections maturing Friday, March 5 No. 770. Note signed by F. W. Humphrey, payable 30 days after Feb. 3, at our bank, for 8325. To be collected for Wilder & Fields. No. 771. Note signed by J. Kennard, payable 30 days after Feb. 3, at Bunker Hill National Bank, for $ 3000. To be collected for Traders National Bank, Buffalo. No. 774. Note signed by James H. Beatty, payable 60 days after Jan. 4, at Union Trust Co., City, for |2500. To be collected for Chemical National Bank, New York. Collections maturing Saturday, March 6 No. 778. Note signed by John Wanamaker, indorsed by Wilder & Fields, payable 60 days after Jan. 5, at Union Trust Co., City, for $ 1200. To be collected for Farmers National Bank, Albany. No. 779. Note signed by Cloud & King, indorsed by Elder & Samp- son, payable 60 days after Jan. 5, at Union Trust Co., City, for $1000.50. To be collected for Chase National Bank, Providence. The Duties of the Collection Clerk may be specified as follows : 1. He takes charge of paper received by the bank for collection. 2. He makes the proper entries for collection paper in the original books of record. Rates of Collection. — The collections made by a bank constitute an important part of its business. Formerly this feature of banking was very profitable, the lowest charge in many banks for collecting paper payable out of town being l%, while a charge of three or four times this was not unusual. Now these charges vary, ranging from T ^% to \ °] ; but the rates are by no means uniform. They depend upon a number of things, among which may be mentioned the following : 1. Trade movements; e.g., during the late fall months New York is sending a great many checks to states in the Mississippi Valley in payment for shipments of wheat; hence the states in this section are anxious at such times to get collection items from New York and near-by cities, to reduce their balances with New York banks, and they make collections with little or no charge. Later on the condi- tions are practically reversed, and the collection rate in the Middle West for items from New York and adjoining cities runs as high as \%. 318 ACCOUNTING AND BUSINESS PEACTICE 2. Various arrangements of banks with one another ; e.g., some collect- ing banks agree to make remittances regularly at par, the use of the money so collected being considered as an offset to the trouble of col- lecting ; other banks sometimes agree to remit at stated intervals at a stipulated rate per cent for collecting, etc. 3. Arbitrary rates in vogue in some banks. 4. A charge, by some banks, on time paper, but no charge on cash paper. 5. The size of a depositor's bank balance. The heaviest depositor usually gets the lowest collection rate. 6. On the whole, the rates of collection are more uniform in the Eastern and Middle States. Transactions for the Collection Clerk, March 1 As collection clerk, make the proper records in the collection regis- ter for the following paper received for collection to-day. Examine the model given for this book on pages 312 and 313. No. 800. Note signed by Clarke & Coffin, dated Jan. 31, at 30 days, indorsed by Ellis, Shannon & Co., payable at our bank, for $7200. To be collected for Janis, Cooper & Tremper. No. 801. Note signed by Henry Green, payable in two months from Jan. 4, at Park Square National Bank, City, for $4000. To be collected for Charles J. Kennedy. No. 802. Note signed by Ellis Peterson, payable in 60 days from Jan. 4, at Union Trust Co., City, for 12000. To be collected for Charles J. Kennedy. No. 803. Draft dated Jan. 3, at 60 days from date, on James Briggs, payable at Central Bank, City, for $905.42. To be collected for Fields Milling Co. No. 804. Note signed by W. B. Anderson, payable in 60 days from Jan. 5, at First National Bank, Worcester, for $162.90. To be collected for Ninth National Bank, Hartford, Conn. No. 805. Draft dated Jan. 4, at 60 days from date, on McMenimen Bros., payable at First National Bank, Worcester, for $1262.90. To be collected for Ninth National Bank, Hartford, Conn. Post the collection register to the collection tickler. Leave the Where Sent and Remarks columns blank for the time being. Submit your collection register and collection tickler to your teacher for approval before proceeding further. SET X — BANK ACCOUNTING 319 WORK OF THE RECEIVING TELLER The records of the receiving teller in this set are to be found on the receiving teller's daily check sheets. The following is the form of check sheet and proof to be used in this work. Receiving Teller's Daily Check Sheet and Proof Monday, April 2, 19 — CK. V ACCOUNT CURRENCY # CLEARING HOUSE X OUT-OF- TOWN B OUR BANK CITY OFFICE COLLEC- TION AND EXCHANGE AMOUNT CREDITED Decker Bros. 1120 1200 50 192 10 600 3112 60 y/ Mace, Gilmore & Co. 250 190 54 200 09 750 50 60 75 1493 M V Spencer, Mead & Co. 60 300 3000 1500 500 100 65 1 50 5523 50 V D. B. Roberts 1500 1500 V E. L. Howard 900 98 899 10 V W. I. Pratt 620 50 7200 2500 10370 V C E. Selover & Co. 1642 18 1642 50 V Coll. and Exch. Paid in cash 1 65 1 65 V Fields Milling Co. 690 140 750 1580 y/ Cashier's Check 9200 9200 12321 86 11954 59 4792 50 3092 70 3165 4 80 35321 84 Recapitulation and Proof Bills 501 65 Deposits 35321 64 Coin 5820 Collection and Exchange 4 80 Clearing House 11954 59 Out-of-Town 4792 50 Our Bank 3092 70 City Office 3165 Paying Teller (Special) 6000 35326 44 35326 44 320 ACCOUNTING AND BUSINESS PRACTICE Receiving Tellers Daily Check Sheet and Proof. — A great variety of forms of this sheet is used by banks. In some cases the sheet exhibits only the total of the deposit tickets and the aggregate receipts of the day. In other cases it is in the form of a cash book, the receipts in currency, clearings, collection and exchange, out-of-town items, etc., being separated by the use of special columns. The kind of record required would always depend upon the routine of the bank's business. The Duties of the Receiving Teller may be specified as follows : 1. He receives the deposits of customers. 2. He writes certificates of deposit and cashier's checks. 3. He enters deposits in the customers' pass books. 4. He classifies the items received for deposit. Certificates of Deposit. — Certificates of deposit are receipts issued by a bank to persons making temporary deposits. They are negotiable and pass everywhere as cash. They are taken from a book resembling the ordinary check book, a stub showing the number, date, amount, payee, etc., being retained by the bank. The person to whom a certificate is issued is required to write his name on the stub of the certificate of deposit book in order that the proper comparisons may be made when the certificate is presented for payment. These certificates may bear interest or not, depending on the circumstances. xJ/ie >J\[atlonal ^Jjank of Commerce CLt6-&ht c/. Ho/My\syi has deposited in this *Jjank o4vyi& flfi^yvclv&cl ^t^ctu-icyiiA, ^~~^~~~~ — ^^~ — £Dollars ZiTayahle to the order* of Avnui&l 7 ~~~^~— on the return of this (Certificate properly indorsed Cashier Cashier's Checks. — Cashier's checks are quite similar to the ordinary checks of customers, except that they are signed by the cashier of the bank on whom they are drawn. They are sometimes used instead of bank drafts and in paying the proceeds of paper discounted, but are SET X — BANK ACCOUNTING 321 more frequently employed in paying the general expenses of the bank, except small incidental items, which are usually paid by means of charge tickets signed by the cashier. 1 <3 SSoston, ^Alass., <&& 12, 79 Yo. 720 *J/ie ^Afattona/ ^Jjank of a,CLas(yuA,u, Gashien Nature of Deposits. — As deposits come in from customers they may consist of any one, or all, of the following items : 1. Currency. 2. Orders payable through the clearing-house association. 3. Orders payable out of town. 4. Orders payable by our bank. 5. Orders payable by bankers in our city not members of the clearing-house association. Classifying Items on the Deposit Ticket. — As a deposit comes in, the receiving teller places the deposit ticket before him and pro- ceeds to count the coin and bills. If they are found to agree with the amounts on the ticket, a check mark ( V) is placed at the left of the items listed. Each check, draft, or other bankable instrument is then carefully examined to see if it is properly indorsed. If this paper is approved, it is next checked off and classified on the deposit ticket as follows : 1. If payable by a bank which is a member of the clearing-house association, the clearing-house number of that bank is written at the left of the item. 2. If payable by an out-of-town bank,, a cross ( X ) is written at the left of the item. Note. — Sometimes deposit tickets are provided with a separate column for items payable out of town. In such cases the out-of-town items are sufficiently classified when the deposit ticket comes in to the receiving teller. 322 ACCOUNTING AND BUSINESS PRACTICE 3. If payable by a city bank not a member of the clearing-house association the letter O is written at the left of the items. Note. — O is intended to signify Office, a term meaning that the paper is payable at some banking or business office in the city instead of through the clearing-house association. These items are sent by runners and payment received in cash or by an acceptance payable at a clearing-house bank. If the paper is accepted instead of paid, it is returned and entered with the exchanges for the clearing-house associa- tion for the following day. 4. If payable by our bank, the letter B is written to the left of the items. DEPOSITED IN THE JVational (^ity djank 3Sy dr&i- !5, 19- Dollars Cents Specie . . . . . . . V y-oo Bills . . . . . . . V 700 Check . . . . . . #oV 2V-0 C/Cf € / 200 50 *!2 / y-oo X 500 JS 700 5 /*/ H Transactions for the Receiving Teller, March 1 Take the blank for receiving teller's daily check sheets and enter the following deposits. Study very carefully the form given on page 319, and if you do not understand any point, consult your teacher. The nature of the deposit in the following transactions is indicated by the characters just explained. SET X — BANK ACCOUNTING 323 Decker Bros., s/ 1600, B $1500, B $720.50. Mace,Gilmore & Co., n/ 1720, V $400,# 61 $1290, #4 $1500, #31 $650. Spencer, Mead & Co., B $1250.20, B $340.20, x $1340.20, x $1343.46, X $342.90 ; less collection, $2.75. D. B. Roberts, V$120, V $60, #32 $950.60, O $1625, B $72.60. Fernald, Son & Co., V $725, B $650.60, O $900, X $1750 ; less col- lection, $1.75. W. I. Pratt, V $120, B $1625, X $1900; less collection, $1.90. F. E. Sherman, O $156.90, B $1750, #15 $165.90, V $7200. C. E. Denison, X $1590.60, V $2500, B $200, #12 $1560; less col- lection, $1.50. Thomas Bennett & Co., V $400, B $262.90, B $40.50, B $200, # 60 $4126.20, # 11 $2142.10, # 5 $1462.90, # 3 $2460.10, X $1325.62, X $1462.91, X $142.10; collection, $2.25, paid in cash. Note. — When the collection charges on any paper deposited are paid in cash the amount is not deducted from the deposit slip. On the receiving teller's sheet the items of deposit and collection charges are entered as usual, and, in addition, the amount of the collection charges is written in the Currency column. E.L.Howard, V $1450, B $1242.10, X $1121.40, X $24.16, X $142.60; less collection, $1.25. Charles J. Kennedy, V $350, #17 $1210, #27 $1620.40. E. V. Buckley & Son, X $621.40, X $340, X $4000; less collec- tion, $1. Foot the columns of the receiving teller's daily check sheet. The sum of the first five columns should equal the sum of the last two. Make out the Recapitulation and Proof blank. Bills on hand, $10,760 ; coin, $987.25. You have given to the paying teller during the day $2900. The remaining items of the proof are taken from the receiving teller's daily check sheet footings. The debit and credit sides of your proof should balance. Submit the receiving teller's work to your teacher for approval. WORK OF THE PAYING TELLER The records of the paying teller in this set are to be found on the paying teller's daily check sheets. Paying Tellers Daily Check Sheet and Proof. — A great variety of forms of this sheet is used by banks. The nature of the records in this department would depend upon the general routine and volume of the work of any particular bank. The sheet on pages 324 and 325, with 324 ACCOUNTING AND BUSINESS PRACTICE Paying Teller's Daily PAYMENTS Fields Milling Co. Charles J. Kennedy C. E. Selover & Co. C. E. Denison (N. Y. D.) D. E. Avery (N. Y. D.) J. H. Crandall W. I. Pratt Bunker Hill Traders Park Square Traders, Buffalo Alliance, Springfield Farmers, Albany Mechanics Powers Coal bill Carpenter work B OUR BANK 200 13000 560 1001 238 # CLEARING HOUSE 10160 300 560 40 15961 50 11020 40 10892 80 350 X OUT-OF-TOWN 1346 7645 1900 O CITY OFFICE 200 150 Recapitulation RECEIPTS 1 . Cash from yesterday 90150 50 8. Meceiving Teller 9200 50 3. Note Teller 11420 4. Receiving Teller (Special) 14000 5. Collection and Exchange S.°°, 12."" 15 (i. New York Drafts 2100 7. Balance from Clearing House 7120 50 134006 50 SET X — BANK ACCOUNTING 325 Check Sheet and Proof Saturday, April 7, 19 RECEIPTS SALE OF NEW YORK DRAFTS SOLD FOR CASH J. M. Cox & Co. R. Bable & Co. SOLD FOR CHECK C. E. Denison D. E. Avery Ralance from yesterday's proof Receiving Teller, from yesterday Note Teller, from yesterday Receiving Teller (Special) it r$ t( lialance from Clearing Hottse 500 800 560 240 2100 50 00 SUNDRY RECEIPTS 90150 9200 11420 9000 5000 7120 131891 50 SUNDRY COLL. & EXCH. 12 00 and Proof PAYMENTS 1. Checks on our Rank 15961 50 2. Clearing -Mouse Checks 11020 40 3. Out-of-town Checks 10892 80 4. City Office Items 350 1*. Sundry Rarpense 15 0. Ralance to Clearing House 7 . Cash on hand 95766 80 134006 50 326 ACCOUNTING AND BUSINESS PRACTICE slight modifications, is representative of the paying teller's records in many large banks of the country. As will be readily seen, all money paid out or received by the paying teller at the time of such disbursement or receipt is entered on this daily check sheet. Recapitulation and Proof. — At the close of each day's business the paying teller prepares the proof, showing the character and condition of the cash on hand, and the receipts and disbursements during the day. The items of this proof may be explained as follows : Receipts 1. Balance on hand from the previous day's proof. 2. Bills and coin received from the receiving teller at the close of the previous day's business. 3. Bills and coin received from the note teller at the close of the previous day's business. 4. Cash transferred from the receiving teller during the day. 5. Receipts for collection and exchange. 6. Receipts for the sale of drafts. 7. Balance (if any) paid by the clearing house. The clearing-house balance may appear on either side of the paying teller's proof sheet. If the amount of the checks, drafts, etc., taken to the clearing house is greater than the amount of checks received there, the clearing house pays the settling bank the difference, and the amount is counted among the receipts on the paying teller's proof. If the amount of the checks received at the clearing house is greater than the amount of checks brought, the bank settling pays the clearing house the difference, and this amount is counted among the payments on the paying teller's proof. Payments The items on this side are self-explanatory, since they are merely the footings of the payments on the check sheet summarized. The cash on hand is the total bills and coin in the possession of the paying teller at the close of the day's business. These bills and coin are generally classified as follows: 1. National bank notes. 5. Silver certificates. 2. Gold coin. 6. Legal-tender notes. 3. Gold certificates. 7. Subsidiary silver coin. 4. Silver dollars. 8. Minor coin. SET X — BANK ACCOUNTING 327 The Duties of the Paying Teller may be specified as follows : 1. He is the custodian of the cash, and the general disbursing officer of the bank. 2. He cashes checks presented by customers and others. 3. He certifies the checks of customers. 4. He may sell bank drafts. The paying teller's position is charged with more responsibility than that of any other person in the bank, except the officers. He must be- a man of the strictest integrity, possessed of tact, and thoroughly con- versant with the laws governing bank checks and drafts. His most responsible duty is to see that no money is paid out improperly. Among the many things that he should have in mind when checks are presented the most important may be stated as follows: 1. Signatures of customers. 2. New signatures, powers of attorney, notices stopping payments of checks, etc. 3. Definite knowledge of the parties presenting vouchers. 4. Average balances of customers, so that overdrafts may be prevented. When checks, etc. are received the paying teller should note : 1. That they are properly dated. 2. That they are indorsed. 3. That the amounts written in words agree with the amounts written in figures. Form of Certified Check sfe oston, ^iasi, ., $J500. 3)oiL ars s The Certified Check Book. — The paying teller preserves a record of all checks certified, in a book kept especially for this purpose. From 328 ACCOUNTING AND BUSINESS PRACTICE this book the customer is charged in the individual ledger and Certified Checks credited. The following is the usual form of this book. Certified Check Book DATE CERTIFIED DRAWER OF CHECK FOR WHOM CERTIFIED CK. V • AMOUNT OF CHECK WHEN PAID AMOUNT PAID 19— Feb. 15 15 15 D. B. Roberts Thos. Bennett & Co. Spencer, Mead & Co. W. I. Pratt J. 0. Baker Decker Bros. F. E. Sherman D. B. Roberts M. D. Borrows W. W. Bennett W. I. Pratt Elwood & Sperry Reardon & Smith F. E. Sherman 5000 1750 2000 19— Feb. Feb. 18 17 19 18 23 5000 1750 1500 2000 1500 8750 Feb. 16 16 16 16 s/ V V V 1500 2000 7249 1500 20 12249 20 Transactions for the Paying Teller, March 1 Take the blank for paying teller's daily check sheets and enter the following transactions. Study very carefully the form given on pages 324 and 325. Consult your teacher if you need to. 1. Checks on our bank paid to-day are as follows : Charles J. Kennedy (New York draft), $420.75; F. E. Sherman, 11200; Powers & Sprague, 11000; Lane, Rowell & Co., $300; Wyckoff, Seamans & Benedict, $450 ; Janis, Cooper & Tremper, $1500; Fields Milling Co., $500; J. O. Baker, $1049.75 ; W. I. Pratt, $725. 2. Checks on clearing-house banks paid to-day are as follows : Bunker Hill National Bank, $920; Suffolk National Bank, $750 ; Colo- nial National Bank, $609.05 ; Shoe and Leather Bank, $500 ; Third National Bank, $400 ; Metropolitan National Bank, $725 ; Eliot National Bank, $1250.40 ;. Citizens National Bank, $4120.40; Park Square National Bank, $2140.50; New England National Bank, $1440.50. 3. Checks on out-of-town banks paid to-day are as follows : Manufacturers and Traders Bank, Philadelphia, $700.50; collection, 75/. Bank of Commerce, Baltimore, $1300; collection, $1.25. Fourth National Bank, Hartford, $3250 ; collection, $3. Farmers Bank, Albany, $1500; collection, $1.50. 4. Checks on banks in our city not members of the clearing house, paid to-day, are as follows: Union Trust Co., $300; Powers Bank, $572.50. SET X — BANK ACCOUNTING 329 Sold the following drafts on Chemical National Bank, New York. 1. Sold for cash : Frey & Thomas Co., $1500; exchange, $1.50. David Gray, $500; exchange, 50/. Charles M. Miner, $750 ; exchange, 75/. 2. Sold for check : Charles J. Kennedy, $420.50; exchange, 25/. Enter the above on the paying teller's daily check sheet. Open the certified check book. There is but one unpaid check, as follows: check of Wyckoff, Seamans & Benedict, dated Feb. 23, certified for Elliot Mfg. Co., $17,500. Draw a double red line immediately under this amount, so that it will not be counted when the certified checks for to-day are footed. Certify the following checks: J. H. Crandall, $1200; C. E. Denison, $500; W. I. Pratt, $600. Enter the above in the certified check book. Pay cashier's charge ticket for 2 tons of coal, $9.50. The items for the Sundry Receipts column are as follows : Bills and coin from yesterday's proof, $206,710.81; bills and coin received from the receiving teller at the close of yesterday's business, $15,280.45; bills and coin received from the receiving teller during the day, $2900; bills and coin received from the note teller at the close ot yesterday's business, $5504.40; received from the clearing house for to-day's exchanges, $31,863.11. Add the columns of the paying teller's daily check sheet. Make out the Recapitulation and Proof blank. A careful count of the cash now on hand under various heads (subdivisions of bills and coin only) shows an amount of $237,804.92. Foot the certified check book. Submit your paying teller's records to your teacher for approval. Note. — The paying teller makes out his proof before the cash from the receiv- ing teller and note teller has been turned over to him. After the receiving teller and note teller respectively make their proofs they turn over the balance of cash in their hands to the paying teller. These amounts appear on the paying teller's proof on the day following. WORK OF THE NOTE TELLER The Duties of the note teller are difficult to define, since there is a wide difference among banks as to the work assigned to this clerk. In nearly all banks, however, he is required to present for payment such notes, acceptances, coupons, etc., as are due and payable in the city, 330 ACCOUNTING- AND BUSINESS PRACTICE and to collect the city office items turned over to him at the close of each day by the receiving teller, paying teller, and correspondence clerk. The Runners of the bank are generally under the supervision of the note teller. These runners are assigned a definite route, which they cover daily, and present for payment or acceptance such paper as may be allotted to them. They keep a route book, in which is recorded a full description of such paper. The Note Teller's Records. — As a rule the charge and credit tickets, letters, or other memoranda which affect the general ledger, the credit tickets for the proceeds of bills discounted, and collection items for the individual ledger pass through the note teller's hands before reaching the general and individual bookkeepers. To make this work as simple as consistent with approved banking practice, we have deviated from this plan to the extent of deferring these items until the enumeration of the memoranda for the general and individual bookkeepers' transac- tions is given on subsequent pages. The note teller's daily check sheets and proofs will therefore be omitted. The sagacious student, however, would soon perceive the offices and possibilities of these sheets in banks making use of them. Charging Notes to Out-of-Town Banks. — Notes and drafts discounted, payable out of town, are usually sent away for collection about ten days before they are due. At the maturity of these notes and drafts they are charged to the banks to which they are remitted, without waiting for letters advising collection. Each morning the discount clerk takes the bills discounted, payable in the city and falling due on that particular day, from the note file and compares them with the items listed on the discount tickler, after which they are handed to the note teller for collection. As the paper is disposed of a record is made in the Remarks column of the discount tickler. Make the proper records in the discount tickler for the paper disposed of to-day. In the Remarks column write : For No. 889, Charged to Pratt. For No. 866, Charged to Traders National. For No. 842, Charged to Traders National. For No. 893, Certified, M. N. B. For No. 901, Certified, E. N. B. Note. — Nos. 86G and 842 will be charged to the Banks specified at their face. It is customary with banks not to make any record of collection and exchange on such items until the bank to which the notes were remitted sends notice of collection. SET X — BANK ACCOUNTING 331 Rule and foot the discount tickler. (See model, pages 308 and 309.) Each morning the collection clerk proceeds, in much the same manner as the discount clerk, to turn over to the note teller the collections payable in the city and falling due on any particular day. As this paper is disposed of a record is made in the Remarks column of the collection tickler. Make records in the collection tickler for the paper disposed of to-day. In the Remarks column write : For No. 744, Paid, 3/1. For No. 755, Paid, 3/1. Collections are not charged to the banks to which they are sent until a report of collection has been received. Farmers Bank, Albany, reports that collections 650 and 702 have been paid and placed to the credit of your account. In the Remarks column of the collection tickler write : For No. 650, Charged Farmers Bank, 3/1. Bank's collection, $1.75; our collection, 75ff. For No. 702, Charged Farmers Bank, 3/1. Bank's collection, $130; our collection, $3. Form of Letter advising of Collections Credited John O. Norris, President Robert Hall, Vice President L. H. Pierson, Cashier National Exchange Bank Albany, N.Y., &&L 12, 19 MR. (Uka^s. ZV\ ff-OsVYvLLtcyri, Cashier DEAR SIR, — We credit your account this day for the proceeds of collections as stated below. Respectfully yours, • L. /{. ^L&x&cyyi, Cashier YOUR NO. PAYER AMOUNT CHARGES PROCEEDS 720 7/6 7/0 €. €. miiu 70-. €. 3v&y &. €. IScyyuL 800 qoo 760 600 2 2 / / 60 60 26 7JrLanufacturers and i/raders ^Jjank Philadelphia, 9?a., &e6-. 27, 79— <^TLr. €. &~ 3 > a,'La&, (Cashier &o-yn,'V r v£A,@AAA / L c4'utuyyvat fdcwiJo JSooXxyyi, ?VIcl&qs. SDear Sir, SPlease find herewith for CREDIT to our account the items listed 6elou>. DATE DRAWEE ITEMS AMOUNT CHARGED $e&. 23 25 "U&KAs J3a/yik/ did, tilolowy emotional 750 600 2, 19— Ghange @AwwUa,l cfiat'l Bowk, cA.lf #750 7500 7^5 50 8. d. JSwiaM, ^Discount Glerk On a line with the last item entered extend the balances for all the accounts in the remittance register. Note particularly the two columns for balance. The debit balances are written on the left and the credit balances on the right in red ink. (See model, pages 332 and 333.) Present your remittance register to your teacher for approval. WORK OF THE INDIVIDUAL BOOKKEEPER The work of this clerk is to be found in the individual ledger. The Individual Ledger contains all the accounts with depositors. It is a book of original entry for the various cash transactions which affect these accounts, the entries being made directly from the deposit tickets, checks, charge and credit tickets, etc. The names of the depositors should be written in alphabetical order. Many large banks have a line of depositors that they can count upon as regular and permanent, and in such cases have the names of these depositors printed in the individual ledger when the book is made, a few blank lines being left after each letter for any additional accounts which it may be found necessary to open from time to time. At the close of each day's business the columns of this book are footed and proved. The totals of the Deposits and the Total Checks columns are transferred daily to the debit and credit sides of the general SET X — BANK ACCOUNTING 339 cash book, crediting and debiting Deposits. The total of the Balance column shows the total amount on hand to the credit of depositors and should at all times agree with the balance of the account with deposits in the general balance ledger. Individual Ledger MONDAY, FEB. 15, 19_ TUESDAY, FEB. 16, 19_ NAME BALANCE CHECKS IN DETAIL TOTAL CHECKS DEPOSITS BALANCE CHECKS IN DETAIL TOTAL CHECKS DEPOSITS BALANCE Andrews, E. B. Bennett, D. W. Comer, Geo. A. Ernst Mfg. Co. Freeman & Co. Goodwin & Co. Jennings, C W. Moore, Geo. R. Bowel 1 & Lane Smith & Seamans Wilson, D. 0. Certificates of Deposit Certified Checks Cashier's Acct. 11258 12301 GG19 18044 4812 1219 921G 7216 621 7360 G510 750 2400 88332 20 85 99 54 80 80 40 25 50 90 50 33 42 19 110 100 500 400 4500 10 238 628 750 100 900 50 150 962 1250 300 500 700 12211 16 20 38 07 76 49 70 to 88 171 1000 450C 877 750 1000 200 2212 1500 12211 74 07 96 10 150 1200 2400 175 01900 500 C500 2500 175 D1119 1460 1400 1750 1000 1500 90 40 30 11236 12501 9019 13720 6334 1219 84G6 9216 596 7728 7910 2500 1900 1500 93850 41! 85 99 37 05 60 40 25 50 20 50 _77 600 1400 16 249 750 278 721 4000 258 42 125 720 90 225 75 90 124 1125 42 321 250 292 500 400 500 250 13450 40 89 20 10 90 80 11 80 40 80 80 so 60 10 01 2000 1016 1000 425S 887 390 1340 615 1192 500 250 • 13450 40 80 71 10 01 2016 1750 2129 2887 2340 C1000 D1200 C192 40 40 71 50 58 92 10 9236 13501 97C9 11590 8334 829 9466 11417 IS 6728 7910 2000 1650 1500 46 85 99 97 85 m 90 75 50 20 50 Total Balances 17730 • 13517 93936 87 Total Overdrafts 18 50 Net Balances 93918 37 The accounts in the individual ledger for the last business day show the following balances. Decker Bros., $12,486.18 ; Mace, Gilmore & Co., $19,874.15 ; Spencer, Mead & Co., $28,652.90; D. B. Roberts, $752.91; E. L. Howard, $11,216.94; Fernald, Son & Co., $21,724.92; Thomas Bennett & Co., $12,172.41; W. I. Pratt, $7296.84; D. E. Avery, $15,162.40; 340 ACCOUNTING AND BUSINESS PRACTICE J. H. Crandall, 174,652.40 ; C. E. Denison, 116,240.90 ; Freeman, Austin & Co., 111,200.50; C. E. Selover & Co., #19,200 ; Lane, Rowell & Co., 137,500.06 ; F. E. Sherman, $12,172.45 ; Wyckoff, Seamans & Benedict, 177,314.31; E.V. Buckley & Son, #24,214.93; J. O. Baker, $51,342.40 ; Powers & Sprague, $15,294.63 ; Janis, Cooper & Tremper, $37,582.69 ; Charles J. Kennedy, $45,272.75 ; Fields Milling Co., $14,352.90 ; Certi- fied Checks, $17,500 ; Certificates of Deposit, $5000 ; Cashier's Checks, $2000 ; Total, $590,180.57. Open the above accounts in the individual ledger in alphabetical order, one account to a line, after which present your ledger to your teacher for approval. The Individual Bookkeeper's Duties may be briefly referred to as follows: 1. He takes charge of the bank's accounts with depositors. 2. He meets depositors and answers questions with reference to their accounts. 3. He writes up the depositors' pass books. In large city banks there are frequently many thousand accounts witli depositors, and the individual ledger is necessarily subdivided, a section of accounts being given to each of the several individual bookkeepers employed. Note The student should remember that the assignment of work to the various clerks of a bank would necessarily differ with different banking institutions. In the smaller banks one clerk would fill offices that in larger banks would be assigned to several clerks, while in the largest banks of the country the work of many of the departments would be subdivided among different clerks. Transactions for the Individual Bookkeeper, March 1 The individual ledger being a book of original entry, the bookkeeper in charge of this department usually makes the entries directly from the deposit slips, checks, charge and credit tickets, etc., passed on to him by the receiving teller, paying teller, note teller, and correspondence clerk. The deposits from customers for to-day may be found in the Amount Credited column of the receiving teller's daily check sheet. Enter these deposits in the Deposits column of the individual ledger. Place a check mark by the side of the customer's account on the receiving teller's sheet. The note teller has turned over credit tickets for the proceeds of the following paper collected for customers to-day : Nos. 650, 702, 744,- and 755. Enter the proceeds of these collections in the Deposits column of the individual ledger. The amounts are shown by the records, in the SET X — BANK ACCOUNTING 341 collection tickler. Be sure to deduct all collection charges. Check the items transferred. Straight deposits require no explanation in the individual ledger, but discounts and collections are generally designated by writing D and C respectively before the amounts. (See model individual ledger, page 339.) (^ommerciul ^national ^Jjank Credit 6Boston, ^Mass., c&£. *#> 79— NUMBER OF COLLECTION ACCOUNT TO BE CREDITED PROCEEDS 720 l(\/ll, of&aAiuMtQ/ V^ B&rb&clueZ , 11 .» 14 70 • Coll. and Exch. C. T., L«, 2.<*>, l.eo 4 75 3 3 3 Deposits I. L. Coll. and Exch. Total for day Out-of-Town Banks Total for day 35 178240 106 17950 SB 35 96 208568 106 17950 90 70 = 371509 20 columns, one for collection and exchange, one for receipts from banks, one for sundry receipts, and one for totals. The right side is pro- vided with three columns, one for cash remittances to banks, one for sundry payments, and one for totals. The difference between the sides of this book should at all times show the balance of cash on hand. The General Bookkeeper in a large bank occupies a position of special responsibility. He is the chief accountant of the bank, all the work in each of the several departments coming under his general supervision. Upon him devolves the work of classifying the general results of the bank and the rendering of statements required by the board of directors and by the regulations of the bank. He usually has personal charge of the general cash book and the general balance ledger. Transactions for the General Bookkeeper, March 1 The general balance ledger exhibited the following balances at the close of Saturday, Feb. 27. SET X — BANK ACCOUNTING 345 Cash Book Feb. 15, 19 F ACCOUNT AND EXPLANATION OUT-OF- TOWN BANKS GENERAL TOTALS 3 Bills Discounted Disc. R. 12500 • Alliance Nat'l Bank, Springfield 7500 V Chemical Nat'l Bank, N.Y., 7240.™ 2500.°o 9740 50 V Farmers Bank, Albany 7240 11 >/ Chase Nat'l Bank, Providence, 120.a>, 400. 00 520 50 V Ninth Nat'l Bank, Hartford 162 40 V Traders Nat'l Bank, Buffalo, 2500. 00 , 320.*° 2820 m 3 3 Deposits I. L. Out-of-Town Banks Total for day f Paying Teller's Currency 166901. 42 152240 27983 95 91 192724 27983 91 88 Balance < Clearing-House Checks on hand 11240 J 2 178784 84 \^ Cash Items {City and Foreign) on hand 642. 20 = —^^^ 371509 20 Credit Balances Capital Stock $400000. Circulation 200000. Collection and Exchange 21275.10 Deposits 690180.57 Interest and Discount 16240.10 Surplus Fund 100000. Undivided Profits 5728.14 Loss and Gain Protest Fees Debit Balances Cash $238995.66 Bills Discounted 496722.50 Protested Paper Out-of-Town Banks 273795.30 Due from U.S. Treasurer 2000. U.S. Bonds to secure Circulation 200000. Salaries 4750. Stocks and Bonds 62500. Real Estate 27500. Redemption Fund with the U.S. Treasurer 10000. Furniture and Fixtures 12625.50 Premium on U. S. Bonds 4000. Expense 214.95 Taxes 320. 346 ACCOUNTING AND BUSINESS PRACTICE Enter the above balances in the general balance ledger. Write the credit balances in red ink and the debit balances in black ink. When the accounts are properly opened ascertain if the footings of the debits and credits are equal. Present your work to your teacher for approval. Write the balance of cash on hand, $238,995.66, in the general cash book. (See model, pages 344 and 345.) In practice the general bookkeeper would have before him charge and credit tickets, letters, etc., from which to make entries in the general cash book. These entries are generally made when the day's trans- actions have been completed. Then all the tickets can be assorted so that they may be recorded conveniently. The debits and credits for the general cash book March 1 are as follows : 1. From the discount register debit Bills Discounted for the total of the Amount of Paper column, and credit Collection and Exchange for the total of the Collection and Exchange column, and Interest and Dis- count for the total of the Interest and Discount column. Properly check these totals in the discount register. 2. From the discount tickler credit Bills Discounted for the total of the Amount to be Collected column. Properly check the item transferred. 3. From the remittance register credit the several banks for the amounts in the Credits column, and debit them for the amounts in the Charges column. Properly check the items transferred. If there is more than one item in the debit or the credit column, short extend the amounts in the general cash book. 4. From the individual ledger credit Deposits for the total of the Deposits column, and debit Deposits for the total of the Total Checks column. Properly check. 5. From the collection tickler credit Collection and Exchange for our collection charges on Nos. 650 and 702. 6. From the receiving teller's daily check sheet credit Collection and Exchange for the total of the Collection and Exchange column. Properly check. 7. From the paying teller's daily check sheet debit Expense for the total of the Expense column, and credit Collection and Exchange for the totals of the Sundry Collection and Exchange and Exchange columns. Properly check. Prove the cash. The amount of bills and coin on hand is $258,884.32. Clearing-house items on hand amount to $26,205. Cash items (city and foreign) on hand amount to $11,623. SET X — BANK ACCOUNTING 347 Rule and foot the general cash book. Proceed carefully and make absolutely no errors. Study the model given on pages 344 and 345. Before bringing down your balance for Tuesday, March 2, present your general cash book to your teacher for approval and suggestions. Post the general cash book to the general balance ledger. Post only the totals of the Collection and Exchange and Out-of-Town Banks columns. Debit Cash in the general balance ledger for the total receipts, and credit it for the total payments for the day. Foot the Debit and Credit columns of the general balance ledger. If correct, they should agree. Determine the new balances in the general balance ledger. Foot these new balances. If correct, the red and black ink totals should agree. Compare your balance ledger with the model given on page 343, and see if anything remains to be done. If not, present all your books to your teacher for criticism. Transactions for the Discount Clerk, March 2 The following paper has been offered and accepted for discount. Make proper records for it in the discount register. Deduct the dis- count for the time notes have to run. No. 925. Note of Boyd Bros., at 60 days from Jan. 31, discounted for F. E. Sherman, payable at Manufacturers and Traders Bank, Phila- delphia, for $17,250. Collection and exchange, 117.50. Proceeds credited. No. 926. Note of Peterson Bros. & Co., at three months from Jan. 1, discounted for D. B. Roberts, payable at Fourth National Bank, Chicago, for $11,390. Collection and exchange, 111.50. Pro- ceeds credited. No. 927. Note of C. P. Jameson, at 15 days from March 1, indorsed by Janis, Cooper & Tremper, discounted for D. E. Avery, payable at our bank, for $9275.80. Proceeds credited. No. 928. Note of A. P. Little & Co., at 30 days from Feb. 23, indorsed by Merrill & Co., discounted for Fields Milling Co., payable at First National Bank, Worcester, for $6290. Collection and exchange, $6.30. Proceeds credited. No. 929. Note of W. I. Pratt, at 30 days from March 2, payable at Merchants Bank, Torrington, Conn., indorsed by Wells, Osborn & Co., discounted for Charles J. Kennedy, for $12,795. Collection and exchange, $12.75. Proceeds credited. 348 ACCOUNTING AND BUSINESS PRACTICE No. 930. Note of Powers and Sprague, at 30 days from Feb. 24, discounted for Thomas Bennett & Co., payable at our bank, for $3275. Proceeds credited. No. 931. Note of W. V. Brown, at 30 days from Feb. 27, discounted for Spencer, Mead & Co., payable at our bank, for $1500. Proceeds credited. Rule and foot the discount register. Prove the footings as explained at the close of discount clerk's work March 1. Post the entries from the discount register to the discount tickler. Follow instructions to the discount clerk March 1. Be sure to properly check all items transferred. Transactions for the Collection Clerk, March 2 The following is a list of paper received for collection to-day. Enter it in the collection register. No. 806. Note signed by D. Appleton & Co., dated Feb. 8, at 30 days, indorsed by C. W. Ellis, payable at our bank, for $7200. To be collected for Ninth National Bank, Hartford. No. 807. Note signed by Scott & Lucas, payable two months from Jan. 4, at Park Square National Bank, City, for $5162.50. To be col- lected for Fourth National Bank, Chicago. No. 808. Note signed by Fanning & Cook, payable in 60 days from Jan. 4, at Union Trust Co., City, for $2750. To be collected for Bank of Commerce, Baltimore. No. 809. Draft dated Jan. 8, at 60 days from date, on Trenholm Bros., payable at Briggs Bank, Westfield, for $2152.90. To be collected for Farmers Bank, Albany. No. 810. Draft dated Jan. 8, at 60 days from date, on W. S. Stanton, Springfield, for $1500. To be collected for Fourth National Bank, Chicago. No. 811. Sight draft dated March 2, on Taylor Bros., City, in favor of Powers & Sprague, payable at our bank, for $1950. To be collected for Powers & Sprague. No. 812. Sight draft dated March 2, on William Sloan & Son, Pough- keepsie, in favor of Lane, Rowell & Co., for $2750. To be collected for Lane, Rowell & Co. No. 813. Sight draft dated March 3, drawn on E. C. Baldwin, Spring- field, in favor of E. L. Howard, for $1357.60. To be collected for E. L. Howard. SET X — BANK ACCOUNTING 349 No. 814. Note of David Wells, at 30 days from Feb. 16, with interest at 6%, payable at our bank, for 1750. To be collected for J. H. Crandall. Compute the interest on the $750 for 30 days. Add this interest to the face of the note and write the total in the Amount column of the collection register. This should be done with all interest-bearing paper. No. 815. Note of L. F. Chappell, payable at Fourth National Bank, Chicago, at three months from Jan. 1, for $1250. -To be collected for Thomas Bennett & Co. No. 816. Note of W. B. Burdick, at two months from Jan. 27, with interest, payable at Merchants Bank, St. Louis, Mo., for $2790. To be collected for Thomas Bennett & Co. No. 817. Sight draft dated March 2, on Bradley & Co., Buffalo, N.Y., for $290.50. To be collected for Thomas Bennett & Co. No. 818. Sight draft dated March 1, on Winslow & Co., Rochester, N.Y., for $375.62. To be collected for Decker Bros. Post the collection register to the collection tickler. (See instructions to collection clerk, March 1.) TRANSACTIONS FOR THE RECEIVING TELLER, MARCH 2 The following are the regular deposits for to-day. Enter them on the receiving teller's daily check sheet. Wyckoff, Seamans & Benedict, V $1600, V $562, B $2500, B $750, B $12,200. Spencer, Mead & Co., V $1740, V $190, #61 $400, #4 $800, #16 $1290. D. E. Avery, B $14,270, B $640.70, x $1162.95, x $1436.52, X $1349.20; less collection, $4.15. J. O. Baker, V $11,400, V $45, B $1600, B $9250, B $5450, x $1400; less collection, $1.40. Thomas Bennett & Co., V $240, V $60, #7 $1950, #9 $2325, #15 $1600, O $400. J. H. Crandall, X $2400, X $1500 ; less collection, $4. Decker Bros., V $3700, B $5210, O $900, x $4500, less collec- tion, $4.50. Freeman, Austin & Co., #21 $2145, #27 $1360. E. L. Howard, V $2400, B $3262.90, B $3040.50, B $6200. Janis, Cooper & Tremper, $1500, B $1100, B $2400, #3 $1140.60, #27 $11,000. 350 ACCOUNTING AND BUSINESS PRACTICE Charles J. Kennedy, #17 $2410, x/ $4000, x $1621.40; less collec- tion, $1.65. Mace, Gilmore & Co., O $1100, B $6270, x $1125.60, #25 $1460, #31 $1652; less collection, $1.25. Foot the columns of the receiving teller's daily check sheet. Make out Recapitulation and Proof blank. Balance on hand: coin, $712; bills, $18,000. You have given to the paying teller during the day $8725. The debit and credit sides of your proof should always balance if the work is correct. Transactions for the Paying Teller, March 2 The following are lists of checks paid by the paying teller to-day. Enter them on the paying teller's daily check sheet. 1. Checks on Our bank : Wyckoff, Seamans & Benedict (New York draft), $14,260 ; Spencer, Mead & Co. (New York draft), $4500 ; F. E. Sherman (New York draft), $3762.50 ; D. B. Roberts (New York draft), $1000 ; Powers & Sprague, $7265; W. 1. Pratt, $1217.50 ; Mace, Gilmore & Co., $8290 ; Charles J. Kennedy, $400; E. L. Howard, $350; Freeman, Austin & Co., $2790 ; Fields Milling Co. (New York draft), $1400. 2. Checks on clearing-house banks : Bunker Hill National Bank, $1940 ; Suffolk National Bank, $1875 Colonial National Bank, $2750.06; Shoe & Leather Bank, $2500 Third National Bank, $400; Metropolitan National Bank, $1700 Park Square National Bank, $3400.60 ; Citizens National Bank, $6250.50; Eliot National Bank, $4000; New England National Bank, $3257. 3. Checks on out-of-town banks : Traders National Bank, Buffalo, $17,500, $750, and $1600; collec- tion, $19.85. Bank of Commerce, Baltimore, $400, $1450, and $1725 ; collection, $3.60. Manufacturers and Traders Bank, Philadelphia, $8500; collection, $8. Fourth National Bank, Chicago, $4685; col- lection, $4.75. Chase National Bank, Providence, $4500.50; collec- tion, $4.50. Ninth National Bank, Hartford, $3250; collection, $3.25. Chemical National Bank, New York, $1100, $2500, $1650, $9250; collection, $14.50. Eliot National Bank, Springfield, $4792.50 ; collec- tion, $4.60. 4. Checks on banks in our city not members of the clearing house : Powers Bank, $172.50; Union Trust Co., $150. SET X — BANK ACCOUNTING 351 Sold the following drafts on Chemical National Bank, New York. 1. Sold for check: Wyckoff, Seamans & Benedict, $14,260; exchange, 114.25. Spencer, Mead & Co., $4500 ; exchange, 14.50. D. B. Roberts, 11000 ; exchange, 81. Fields Milling Co., $1400; exchange, $1.40. F. E. Sherman, $3762.50; exchange, $3.75. Note. — The exchange items on the above drafts were, in this instance, paid in cash. The record on the paying teller's sheet will be identically the same as where these items are covered by check. By referring to the checks covering these drafts on the left side of the sheet it will be seen that the amounts entered are for the face of the drafts only. 2. Sold for cash : A. L. Hopkins, $2000; exchange, $1. T. V. Smith, $1500; exchange, 75/. Certified the following checks. Enter them in the certified check book. Lane, Rowell & Co., $11,250 ; Charles J. Kennedy, $7295 ; Decker Bros., $1254 ; J. O. Baker, $9265. Pay cashier's charge tickets for the following items : Postage, $12.50 ; stationery, etc., $25.90 ; blank books, $142.60. The items for the Sundry Receipts column are as follows : Bills and coin from yesterday's proof, $237,804.92; bills and coin received from the receiving teller at the close of yesterday's business, $11,747.25; bills and coin received from the receiving teller during the day, $8725; bills and coin received from the note teller at the close of yesterday's business, $9332.15; received from the clearing house for to-day's exchanges, $28,349.17. Add the columns of the paying teller's daily check sheet. Make out Recapitulation and Proof blank. A careful count of" the cash now on hand under various heads (subdivisions of bills and coin only) shows an amount of $187,006.03. Foot the certified check book. Transactions fok the Note Teller, March 2 Make the proper records in the discount tickler for the paper disposed of to-day. In the Remarks column write : For No. 902, Charged Alliance National Bank. For No. 869, Charged Alliance National Bank. For No. 868, Paid, 3/2. For No. 895, Charged Farmers Bank. For No. 867, Paid, 352 ACCOUNTING AND BUSINESS PRACTICE Rule and foot the discount tickler. Advices have been received that the following collections have been paid. Make records in the collection tickler for these collections. In the Remarks column write : For No. 723, Charged to Chemical National Bank. Bank's col- lection, $1; our collection, $1.10. For No. 726, Charged to Chase National Bank. Bank's collection, $4; our collection, $5. For No. 742, Charged to Chase National Bank. Bank's collection, $5; our collection, $5.20. For No. 743, Charged to Bank of Commerce, Baltimore. Bank's collection, $1; our collection, $1.25. Collections Nos. 756, 800, and 811 have been paid. In the Remarks column of the collection tickler write : For No. 756, Paid, For No. 800, Paid, For No. 811, Paid, Transactions for the Correspondence Clerk, March 2 This morning's mail contained the following remittances from the banks named, for credit. Enter in the remittance register. Traders National Bank, Buffalo $9273.40 Bank of Commerce, Baltimore 4213.93 Manufacturers and Traders Bank, Philadelphia 5272.50 Fourth National Bank, Chicago 6395.40 Ninth National Bank, Hartford 5427.30 Chase National Bank, Providence 8216.50 Farmers Bank, Albany 5324.80 Alliance National Bank, Springfield 4152.70 The following are the drafts drawn on Chemical National Bank, New York, as per stubs in the draft book. No. 434, $14,260; No. 435, $4500; No. 436, $3762.50; No. 437, $1500; No. 438, $1000; No. 439, $2000; No. 440, $1400. Enter these drafts in the draft register. Credit Chemical National Bank in the remittance register for the total. We have this day made the following remittances to out-of-town banks for collection. In the To Whom Sent column of the collection tickler write the name of the bank to which the paper is sent. No other record SET X — BANK ACCOUNTING 353 is needed at this time. Nos. 804, 805, 809, 810, 813, sent to Alliance National Bank, Springfield; No. 812 sent to Farmers Bank, Albany; Nos. 815 and 816 sent to Fourth National Bank, Chicago; Nos. 817 and 818 sent to Traders National Bank, Buffalo. Form of Letter to accompany Paper remitted for Collection and Credit C. H. THURBER, PRESIDENT J. W. MACE, VICE PRESIDENT CHAS. W. HAMILTON, CASHIER MERCHANTS NATIONAL BANK Boston, Mass., &6. d, I9_ €. W>. gea/wdy, Esq., Cashier ^&&Ji mount remitted 7 72 771* 78 Very respectfully yours, @,ki,, (Bashier The note teller has also advised you that the following collections have been paid and the proceeds credited to the banks named. Proceeds of No. 752, credited to Traders National Bank, Buffalo, $721 ; proceeds of No. 757, credited to Alliance National Bank, Spring- field, $1746.25 ; proceeds of No. 819, credited to Traders National Bank, Buffalo, $12,252.75 ; proceeds of No. 820, credited to Manufacturers and Traders Bank, Philadelphia, $5717.85 ; proceeds of No. 822, credited to Chase National Bank, Providence, $3717.75; proceeds of No. 823, credited to Farmers Bank, Albany, $2127.59. SET X — BANK ACCOUNTING 367 The note teller advises that collection No. 821 has been protested and the protest fees, $3.25, charged to Ninth National Bank, Hartford. Extend the balances in the remittance register. Transactions for the Individual Bookkeeper, March 3 Enter the deposits from customers in the individual ledger from the receiving teller's daily check sheet. The note teller has turned over credit tickets for the proceeds of collection paper, collected for depositors to-day as follows: Nos. 765, 828, and 829. Enter the proceeds of these collections in the individual ledger. Credit tickets have also been received from the note teller for paper discounted for customers to-day. Enter these notes to the credit of depositors directly from the discount register. The total of checks certified to-day, as reported by the paying teller, is $7100. Enter this amount to the credit of Certified Checks. Checks of depositors have been received by the paying teller and turned over to the individual bookkeeper, as shown on the paying teller's daily check sheet. Enter these items in the individual ledger. Charge tickets have been received from the paying teller on account of certified checks. Refer to the certified check book for these amounts, and enter them in the individual ledger. Checks of depositors have been received by the receiving teller, entered on his sheet, and turned over to the individual bookkeeper. A list of these, with the names of the drawers, is given below. Enter the items in the individual ledger. Spencer, Mead & Co., 11900 ; Wyckoff, Seamans & Benedict, $5273.50, $1950, $14,360; E. V. Buckley & Son, $1400, $1200; C. E. Selover & Co., $1700 ; Fernald, Son & Co., $1340 ; Powers & Sprague, $500; Decker Bros., $11,290; F. E. Sherman, $6000. Checks of depositors have come in from the clearing house as follows : Wyckoff, Seamans & Benedict, $17,700; Spencer, Mead & Co., $15,000, $1800; F. E. Sherman, $960.50; C. E. Selover & Co., $300; D. B. Roberts, $750; Powers & Sprague, $1200; Janis, Cooper & Tremper, $2400 ; Mace, Gilmore & Co., $1500 ; Lane, Rowell & Co., $1250; D. E. Avery, $900; J. O. Baker, $1700; Thomas Bennett & Co., $3100 ; E. V. Buckley & Son, $9150.60 ; J. H. Crandall, $45,120 ; Decker Bros., $15,200; C. E. Denison, $25,300; Fernald, Son & Co., $1300; Fields Milling Co., $10,500. 368 ACCOUNTING AND BUSINESS PRACTICE The correspondence clerk has turned over depositors' checks received from out-of-town banks. Wyckoff, Seamans & Benedict, 1625.80, 12000 ; Charles J. Kennedy, $150.20, 12500 ; W. I. Pratt, $2500. Extend the balances of customers' accounts in the individual ledger. Foot and prove the individual ledger. Transactions for the General Bookkeeper, March 3 Make the records in the general cash book for the following. 1. Items from the discount register. 2. Items from the discount tickler. 3. Items from the remittance register. 4. Items from the individual ledger. 5. From the collection tickler credit Collection and Exchange for our collection charges on the following collections: Nos. 752, 757, 819, 820, 822, and 823. 6. From the receiving teller's daily check sheet credit Collection and Exchange for the collection and exchange items listed there. 7. From the paying teller's daily check sheet debit Expense for the total expense items, and credit Collection and Exchange for the totals of the Exchange and Sundry Collection and Exchange columns. 8. From the collection tickler credit Protest Fees for $3.25, the notary's charges for protesting collection No. 821. 9. From the discount tickler debit Protested Paper for discount No. 897, $29,900. Note. — Nearly all national banks have some bank official qualified as a notary public. In the majority of cases this official receives all protest fees which are paid to the bank for protesting paper. He is usually a person of high standing in the bank, such as cashier, discount clerk, etc. When these fees go to an official of the bank they are charged to Protest Fees in the general balance ledger. At the end of any given period the notary may draw such fees by check. No protest fees are entered on discount No. 897 at this time. They are not recorded until collected, unless they are charged to an out-of-town bank. Rule and foot the general cash book. Post the general cash book to the general balance ledger. Extend the new balances in the general balance ledger. Prove the general balance ledger. Submit your book to your teacher for approval. SET X — BANK ACCOUNTING 369 Closing the Banking Set Inventories, March 3, 19 Keal Estate : Banking house and lot $27000 Furniture and Fixtures : Estimated value $12500 United States Bonds : At cost $200000 Stocks and Bonds : Present value $63750 Interest and Discount : Accrued on United States bonds $650 Trial Balance. — No trial balance is necessary in this set, as the general balance ledger is in itself a trial balance of the general ledger accounts of the bank. Dividends. — It is customary for national banks to declare dividends semiannually and close their books. Before any dividend can be declared every national bank must carry at least one-tenth part of its net profits for the half-year immediately preceding to its surplus fund, until the same shall amount to 20% of its capital stock. After the surplus fund has been deducted the directors may declare a dividend of so much of the profits remaining as they deem expedient. Statement of Resources and Liabilities. — A statement of resources and liabilities is usually made out daily in all large national banks. Such a statement gives the condition of all the general ledger accounts of the bank, together with a detailed exhibit of the cash account. All items of information entered on this statement are properly classified, thus furnishing data for the computation of the bank's reserve, and for the necessary reports to the Comptroller of Currency. The National Bank Act also requires that every national bank shall make to the Comptroller of the Currency not less than five reports during each year. These reports must be made in accordance with a prescribed form and be published in a newspaper where the bank is established. They exhibit in detail the resources and liabilities of the bank, the amount of each dividend, and the net earnings in excess thereof. In this set you will make but one general statement of resources and liabilities. Carefully study the form given on pages 370 and 371, and then proceed to make your statement of resources and liabilities. 370 ACCOUNTING AND BUSINESS PRACTICE Statement of (Commercial >*national cBank, Cash Resources Bills and Coin Exchanges for Clearing House Cash Items (City and Foreign) Bills Receivable Bills Discounted Protested Paper Stocks and Bonds U.S. Bonds with U.S. Treasurer (per inventory) Premium on U.S. Bonds Other Stocks and Bonds (per inventory) Properties Real Estate (per inventory) Fixtures (per inventory) Out-of-Town Banks, Dr. Due from Reserve Agents United States Treasurer 5% Redemption Fund Due from U. S. Treasurer Overdrafts Statement of 243700 55166 6240 405750 7200 150000 6000 103500 17500 5200 7500 1000 40 305107 412950 259500 22700 22940 100000 8500 620 1132318 72 32 10 00 40 (Commercial ^National 35ank, Losses Current Expenses Salaries, due and paid Taxes, due and paid Incidental Expenses, total paid Depreciation Furniture and Fixtures Real Estate Dividends, 4% of Capital Stock Surplus Fund, 10% of Net Gain Undivided Profits, balance of Net Gain 4500 960 240 93 5700 650 16000 2415 5735 93 150 500 02 14 30501 09 SET X — BANK ACCOUNTING 371 Resources and Liabilities ^Boston, >stiass., March. 3, 19 Liabilities Capital Stock Surplus Fund Undivided Profits Circulation Out-of-Town Banks, Cr. Deposits Cashier's Checks Certificates of Deposit Certified Checks Individual Deposits Protest Fees Undivided Profits (Net Gain) Losses and Gains 1200 ^lationcil cSank LU LU No. 21. Boston Clearing House Credit National Exchange Bank $/,302,23t S* f. ft. BeAideA,, Settling Clerk How Non-Members clear. — Besides the regular members, there are a number of trust companies that make their clearings at the Boston 378 ACCOUNTING AND BUSINESS PRACTICE Clearing House through the agency of other banks which are members. These non-members keep adequate funds on deposit at their clearing bank, as a compensation for services rendered and as a guarantee against loss. They prepare their exchanges in practically the same manner as the regular members, but deliver their packages of items to their agents for deposit instead of to the clearing house for settlement. These agents classify and distribute the paper of the non-members just as they do the regular items received on deposit. The return exchanges for non-members at the clearing house are delivered to the clearing agents just as if they were payable by them. After these items are charged to the non-members by the clearing agents they are promptly transmitted by runners to the banks where they are to be paid. Procedure in making Clearings. — Each business day at ten o'clock the exchanges take place between the banks. About five minutes before the hour designated the clerks begin to arrive. These clerks are usually two in number, each bank sending to the clearing house a delivery clerk and a settling clerk. On his arrival at the clearing house the settling clerk leaves at the desk of the proof clerk, sitting in the manager's office, his credit ticket showing the amount of exchanges with which his bank is to be credited. The proof clerk immediately tran- scribes this amount under Banks Cr. on a blank called the Clearing- House Proof, as illustrated on page 379. The aggregate of the credit tickets presented to the proof clerk rep- resents the total exchanges sent in by the various banks, and is called Credit Exchanges. The desks in a clearing house are usually arranged in long rows, one desk being provided for each member. At one minute before ten o'clock the manager sounds a gong as a signal for the clerks to take their proper places. The settling clerks occupy their separate desks on the inside of the counter, while the delivery clerks form on the outside with their exchanges arranged for convenient distribution. Promptly at ten o'clock the manager again sounds the gong, and the delivery of the exchanges begins. Each delivery clerk advances, one desk at a time, with military precision. At each desk he hands over to the settling clerk the exchange package for that particular bank. At the same time, in an opening in the desk provided for that purpose, he deposits a check ticket, corresponding in amount to the amounts listed on the exchange slips. The settling clerk takes the amount on the exchange slips and enters it to the credit of the proper bank on his own state- ment. After the circuit has been completed each delivery clerk is at THE CLEAKIXG HOUSE 379 Boston Clearing House Proof Tuesday, May 20, 19 NO. BANKS BALANCES DUE TO CLEARING HOUSE EXCHANGES BANKS DR. BANKS CR. BALANCES DUE TO THE BANKS NO. 1 Massachusetts National 137116 61 691195 70 554079 09 1 2 National Union 37417 48 391522 85 354105 37 2 3 Old Boston National 86101 85 243422 29 157320 44 3 4 State National 454779 21 567671 69 112892 48 4 5 New England National 190038 36 240816 86 50778 50 5 12 Atlantic National 146654 11 227212 02 80557 91 12 13 Merchants National 132056 29 1351212 39 1219156 10 !3 15 National Hamilton 54170 54 395649 79 341479 25 15 17 Second National 613635 51 1104116 94 490481 43 17 18 Atlas National 102568 01 398617 81 296049 80 18 20 National Shawmut 335824 88 4109685 56 3773860 68 20 21 National Exchange 38771 98 938973 65 900201 67 21 22 Nat'l B'k of Commerce 908658 45 1174063 77 265405 32 22 24 Faneuil Hall National 23898 97 189501 57 165602 60 24 25 National Webster 54331 39 65216 89 10885 50 25 26 Eliot National 89495 03 1196253 14 1106758 11 26 28 Suffolk National 94489 10 690275 61 595786 51 28 31 Freemans National 111167 50 155111 74 43944 24 31 32 Boylston National 68422 21 81747 05 13324 84 32 37 Nat'l Bank Redemption 2409865 14 2416470 23 6605 09 37 39 First National 122675 28 539383 18 416707 90 39 41 Nat'l Bank of Republic 1086691 28 1279888 23 193196 95 41 43 Mt. Vernon National 11046 74 76455 77 65409 03 43 46 National Security 4121 63 74626 44 70504 81 46 49 Central National 68804 57 317969 52 249164 95 49 50 Colonial National 3338 12 262315 20 258977 08 50 51 Fourth National 371878 03 476835 03 104957 51 52 Metropolitan National 2830 85 78607 03 75776 18 52 53 Winthrop National 210240 230718 68 20478 68 53 55 Mechanics National 34286 67 108049 77 73763 10 55 56 Commercial National 14493 34 144410 69 129917 35 56 100 Boston Clearing House 1816532 10 1816532 10 1C0 Aggregates 1393507 94 20641021 25 20641021 as 1393507 94 380 ACCOUNTING AND BUSINESS PRACTICE the point from which he started, and the settling clerk has on his desk exchange packages received from each of the other banks. Being now at liberty, each delivery clerk gathers up the packages against his bank, usually called Debit Exchanges, and returns with them, while the settling clerks remain until the clearing-house proof has been made. After the amounts of all the exchange packages have been properly entered, the settling clerk proceeds to foot his statement and ascertain the amount his bank is to receive or pay. He then makes out a balance ticket, which is sent to the proof clerk's desk. This ticket shows the total exchanges brought to and received at the clearing house, together with the balance to be received or paid by his bank. Form of Balance Ticket H3 UJ u z < -J < CD No. I. Boston Clearing House &&. /6, 19_ Dr. Massachusetts National Bank, Am't Rec'd, %2V-5,/37. 32 Cr. " M " kKtiW\.%d02,2&.* Balance $~— — ~~~^~ — ~due Clearing House, $ Balance due the Massachusetts National Bank, $ 57,0<-]7.° 9 f. /if. JSe/yicUv, Settling Clerk When the proof clerk receives the balance tickets from the several settling clerks he immediately transcribes the debit exchanges (the amount received by any bank) in the Banks Dr. column, and the dif- ference between the debit and credit exchanges in the Due Banks or the Due Clearing House column, as the case may be, on the clearing- house proof. The credit exchanges having been previously entered, the proof clerk now proceeds to complete his proof. As the total exchanges brought must be the same as the total exchanges taken away, the debit and credit columns of the proof should agree if the work is correct, as also the total due banks and the total due the clearing house. While the preparation of the proof is in progress the settling clerks are verifying their work by means of check tickets. If there are no THE CLEARING HOUSE 381 errors in the clearing-house proof the manager announces the fact and the settling clerks return to their banks. If there is an error, and this is not infrequently the case, the proof clerk announces the difference to the manager. The manager then announces the difference to the set- tling clerks, who proceed to search for it. When this announcement is made the settling clerks have usually completed a revision of their statements, and can many times locate discrepancies as soon as they are announced by the manager. Various methods are resorted to in locating differences. Usually the manager calls for an exchange of sheets to the right or to the left for an examination of footings, and in cases where an error in entry is apparent the amounts are called back. This revision is final, and if the additions are correct it must make the proof balance. The accompanying Clearing-House Proof and Settling Clerk's State- ment are actual forms used in transactions at the Boston Clearing House. Debtor and Creditor Banks. — Thus far no money has entered into the exchanges at the clearing house. The clearing, however, is not yet complete. If the total of the items brought to the clearing house by any particular bank is less than the total of the items brought by other banks against it, the bank owes the clearing house the difference between such totals. On the other hand, if the items brought to the clearing house by any bank are greater than the totals brought against it, that bank is entitled to receive from the clearing house the difference between such totals. To complete the clearing, therefore, it is necessary to make settlement for the debit and credit balances. Form of Manager's Receipt LU LU u LU No. 50. Boston Clearing House TnoAAh 3, 19 Received from COLONIAL NATIONAL BANK &w-&ntu-Q,eA}-£M, ofkoufacwicL cAC / ri& fi-iuyiciv&cL d'vxZu — Dollars in full for balance due the Clearing House. &. (Z. RucflL&Q,, Manager 382 ACCOUNTING AND BUSINESS PRACTICE At 12.15 p.m. each clay except Saturday, and then at 11.30 a.m., the debtor banks must pay to the manager at the clearing house the balances due from them respectively, either in coin or in such other currency as the laws of the United States shall require, or in such certificates as shall be authorized by the clearing-house association, excepting sums less than one thousand dollars, which may be paid in bills of the debtor banks. Receipts signed by the manager are given to the banks making the payments. (See page 381.) At 1.30 p.m. each day except Saturday, and then at 12 M., the creditor banks shall receive from the manager at the clearing house the balances due them respectively. Receipts signed by the cashiers of the creditor banks are given to the manager of the clearing house. Form of Cashier's Receipt National Security Bank izy-rfwv Boston, 7naA*A25,Y) Received from C. A. RUGGLES, Manager of the Boston Clearing House, by RokeAt W-. &ua,nt , Messenger of this Bank, ^w-ewXAf-^owb 3A(Ht&cwicl c/vx- /i-wvicl'b&cl vfi-ovCy — ———Dollars, being the amount gained by this Bank to-day at the Clearing House. 10*. CL. /'fi/yiAvuwi,, Cashier Should any bank not make payment as provided, the manager causes a new settlement to be made and new balances to be ascertained, by eliminating from the settling sheet of each and every bank all the amounts charged or credited thereon to the defaulting bank and also the debit and credit amounts on the settling sheet of the defaulting bank. The new balances as thus ascertained are the balances to be settled by the several banks. In case some of the banks have paid the balances first ascertained such banks are called upon to make an adjust- ment with the clearing-house manager. Immediately after the new settlements have been made each bank is called upon to deliver to the manager all the items which were received LETTERS OF CREDIT 383 from the defaulting bank, or in lieu thereof the money, which items or money the manager tenders to the defaulting bank and demands all the items received by the defaulting bank at the clearing house. The items received from the defaulting bank by the manager are then returned to the respective banks from which they originally came. Scale of Fines. — The following is the scale of fines prescribed by the Boston Clearing House. 1. For disorderly conduct of any clerk at the clearing house, or disregard of the manager's rules and instructions, for each offence $4 2. For any clerk failing to attend punctually at the hour for making exchanges 4 3. Debtor banks, failing to pay their balances before a quarter past twelve o'clock 3 4. Any error in the credit ticket (that is, the amount brought) 2 5. Errors in making the balance ticket (that is, the amount received) ! 2 6. Failing to deliver check tickets before twenty min- utes past ten o'clock 1 7. All other errors 2 LETTERS OF CREDIT Definition. — A letter of credit is an instrument issued by a banker, and addressed to his correspondents in specified places, by which a named person may draw funds in amounts to suit his convenience, upon his complying with certain requirements, such as identifying himself, etc., the total amount drawn not to exceed the amount limited by the letter of credit. To whom issued. — Letters of credit are usually issued for the use of travelers in foreign countries, to save the transmission of money from one part of the world to another, thus avoiding the risk necessarily incident to carrying real money about. How Funds are obtained. — When a letter of credit is issued to a traveler he is required to subscribe his name on the document in the banker's presence, as a means of identification later on. Other copies of the signature are sometimes left and forwarded to the leading foreign bankers drawn upon. When the traveler desires funds he will present 1 Thirty minutes is allowed for the morning settlement, and for each additional fifteen minutes' detention $2 is added to this sum. 384 ACCOUNTING AND BUSINESS PRACTICE his letter to the proper banker at the place where he may be staying. The letter itself always specifies the banks that will honor the draft. When the letter is presented to a foreign banker for payment, he draws a sight draft on the London banker specified, which draft the traveler is required to sign. If the signatures on the letter and the draft are identical, the amount desired is promptly paid and indorsed on the back of the letter. Payment is usually made upon the simple identification of comparison of signatures. The indorsements on the back of the letter show at all times the balance available for the traveler. The bank making the last payment retains the letter to send to the drawees in London. Brown Brothers & Co.'s Circular Letter of Credit No. 72/5 Boston, TJIclq^., TfiaA^k 6, 1906 Gentlemen : We leg to introduce to you $%. Qakn €.. c4ovu&, to whom you will please furnish such funds as he may require up to the | aggregate amount of Swe /'iwyvdh&d pounds sterling against demand I drafts on Messrs. Brown, Shipley $ Co., London, each draft to be * plainly marked as drawn under Brown Brothers $ Co.'s Letter | of Credit No. 7£/5. § We engage that such drafts shall meet with due honor in London, | if negotiated before the 6tk o*^ TflaA^k, 1907, and request you to § buy them at the rate at which you purchase demand drafts on London. 1 The amount of each draft must be inscribed on the back of this | letter, and to this we wish to call your special attention. This letter i itself should be canceled and attached to the final draft drawn. j> Please see to it that the drafts be signed in your presence and * carefully compare the signature with the one below. | We are, Gentlemen, •3 3 Your obedient servants, M To Messieurs The s i gna t U re of the bankers mentioned a j * a ' on the third page of i this letter of credit. LETTERS OF CREDIT 385 The Reverse or Back of the Letter of Credit Indorsements once made hereon, of payments, must be allowed to remain without alteration or erasure. Care should therefore be taken to under- stand exactly about payments desired, before inscribing amounts below. On the payment of any sum exhausting this credit, this letter must be sur- rendered by the holder and attached by the banker negotiating the draft to the said draft. DATE WHEN PAID BY WHOM PAID NAME OF TOWN AMOUNT STERLING WRITTEN IN WORDS AMOUNT IN FIGURES £ s. d. 1906 April 2 Union Bank London Seventy -five pounds 75 — — 20 Credit Lyonnais Paris Twenty-five pounds 25 — — May 5 Mendelssohn & Co. Berlin Ten pounds 10 — — 20 Anglo- Austrian Bank Vienna One hundred pounds 100 — — June 5 Banca Commerciale Italiana Rome One hundred pounds 100 — — July 25 Filiale der Dresdner Bank Hamhurg Ninety pounds 90 — — Aug. 15 Brown Brothers & Co. Boston One hundred pounds 100 — — 500 — Note. — On the pages following, in a regular letter of credit, are the names of towns and cities, and banks therein, any one of which will advance money upon the letter of credit. The list includes banks in all parts of the world. In what Funds usually drawn. — Letters of credit are usually drawn payable in pounds sterling ; but they are paid in the current money of the country in which they are negotiated. They pass everywhere as cash, since any banker in the world would usually be very willing to buy a reliable sterling draft on London. Thus with a letter of credit a traveler can make a trip around the world with no more real money on his person than is necessary to meet immediate local expenses. Commission Charges. — The cost to the purchaser for a letter of credit is usually about 1 % of the amount of issue, though no letter will be issued for less than $5. REVIEW QUESTIONS 1. Briefly outline the duties of the discount clerk. 2. When is collection and exchange charged on paper discounted? 3. When paper is accepted for discount, upon what book is it first entered? 4. Explain how to post the footings of the discount register. 5. Explain the purpose and use of the discount tickler. 6. What 386 ACCOUNTING AND BUSINESS PRACTICE is the law in your state with reference to notes, etc., falling due on Sunday or a legal holiday? 7. Briefly outline the duties of the collection clerk. 8. State the sources from which a bank receives paper for collection. 9. What kind of sight paper should not be entered in the collection register? Why? 10. Explain the purpose and use of the collection register ; the collection tickler. 11. Briefly outline the principal duties of the receiving teller. 12. In examining paper deposited, what are the things that should be particularly noted by the receiving teller? 13. Should paper payable to "bearer" be indorsed before deposited? Why? 14. Explain a method of classifying items on the deposit ticket. 15. On what class of checks does a bank charge collection ? 16. Explain the purpose and use of the receiving teller's daily check sheet. 17. Explain the manner of proving the receiv- ing teller's daily check sheet. 18. Briefly outline the principal duties of the paying teller. 19. When paper is presented for payment, what should the paying teller examine very critically? Why? 20. Should the amount expressed in figures on any given check differ from the amount expressed in writing, which amount would the paying teller be justified in paying? Why? 21. What is a certified check? 22. Do banks ever certify checks in excess of a depositor's account ? 23. In what particulars is a check stronger after certification than it was before? In what respects is it the same? 24. What is the purpose of a certified check book? 25. Why is a bank draft better than a check for making payments out of town ? Explain fully. 26. Explain fully the purpose and use of the paying teller's daily check sheet. 27. Explain the manner of proving the paying teller's daily check sheet. 28. Briefly outline the principal duties of the note teller. 29. When are bills discounted that have been sent away for collection charged to the banks to which they are sent? 30. For what purpose are notes, drafts, etc., certified? 31. In your state are notes, etc., made payable at a bank charged to the depositor's account at maturity, or is it usual for business men to pay this paper by check ? 32. When is a note or other negotiable paper protested ? 33. Explain the method of protesting paper. 34. What is a notice of protest? 35. To what officer are notary fees usually paid? 36. Briefly outline the principal duties of the corre- spondence clerk. 37. What is the purpose of the draft register ? How is it posted ? 38. What two books are combined in the remittance register. 39. Explain fully the purpose and use of the remittance register. 40. How is the remittance register posted? How proved? 41. Briefly outline the principal duties of the individual bookkeeper. 42. From what sources does the individual bookkeeper get his items for entry in the individual ledger ? 43. Explain the use of the individual ledger. 44. How is the individual ledger proved ? 45. Explain how an overdraft is treated in the individual ledger. 46. What books are generally kept by the general book- keeper? 47. Explain the use of the general balance ledger. 48. Name all the sources from which items are obtained for entry in the general cash book. 49. Define (a) letter of credit ; (b) clearing house ; (c) dividends ; (d) surplus fund. 50. Give a three-minute talk on clearing-house associations ; on letters of credit. APPENDIX FORMS OF LEGAL DOCUMENTS Form I — Letter of Remittance W. O. Weaver C. W. Frey W. D. Radcliffe Office of W. 0. Weaver & Qo. vVholesale c/rocers {Boston, ^Mass., t/eflt. tO, 19— RoeAeoZeA,, cA.Zf. 3 > l&a>a<& ivyvci A&v&waXA cu tA&w- V^oaJc clvcvit to-v o., 3eAywvLt uqa to i/n^ovm, you, tfvat oj> t/i>& ^yu&Qy£mt 'M&naaeAru&nt. yowiQs V-&1M t/uuiu, mcuvtin V WavcL APPENDIX — FORMS OF LEGAL DOCUMENTS 389 Form IV — Contract of Sale and Purchase ^noto all ffitn bp these presents that - /lf-u4 / ui / v&cL Dollars paid by A €. KKllu^i-yLQy V' &a., o^ tk& (HiXAfasvul &owuwuy7vuL&altk a^ov&QsCivcL, foaitL&& a^ th& &&&avi,cl jncixt, the receipt whereof is hereby acknowledged, do hereby grant, sell, transfer, and deliver unto the said ^cliLIs^ at tk& &&^cl / ^oaL, Lk& yooci liMslC, &liaZt&L&, m&i,@Acwu:(>tfr&, 6-Clffr / L&&&tv L a6-6& , aj&&yu/vit& i&&&t'V-cM>-C& / a/yvcC &IL atk&v aa>Qs&ta> o-l tk& tvwvu at (H. ZD-. W^yiLki^tcyyv wJvi&k oa^ cL&^vnlt&Lu q^&^{Ja,&cC an tk& a^k&cCwt& k&^,&uA^ta OM/nsoc&cL. vct Jb-. €.. lA^vlLuL'WbQs 2^ &a. k&v&6^u aav&& ta OAs&nAive, cmcL cla amAiAn>& tk& Cixib-vltZv&Qs oi tk& qavLcL liA/m, at &. Z0-. l&oiXJvimqtoi'V aa> ji&v Uv& Q&k&cUit& k&v&zimLa ounn&x^&oi. Co babe aitfc to Ijolto, all and singular the said goods and chattels to the said A €. ZO-Cllu^m^ V' &o. and tk&lv exec- utors, administrators, and assigns, to their own use arid behoof forever. And J hereby covenant with the grantee that J am, the lawful owner of the said goods and chattels; that they are free from all incumbrances ; that J have good right to sell the same as aforesaid ; and that J will toarrant antf fcefenU the same against the lawful claims and demands of all persons whomsoever. 3fn toitneeifi toljereof, we, the said @,. 1A)-. ll^oitkiAtyton, and A €,. W-illlanua, fy* @,a. /vav-& hereunto set oiaa, hand a, and seal a, this tw-&itty- / JCi*}t day of CUufuat in the year one thousand nine hundred and &Lx,. Signed, sealed, and delivered in the presence of f. in. m. II'Iovcjoai V €o., of the City of Boston, Hiam,., have made, constituted, and appointed , and by these Presents do make, constitute, and appoint, &kavle& TH. Raynvond, of the City of c4&wton, ?Haa^., oua, true and lawful Attorney, for ua> and in &ua> name, place, and stead to Vuwi&a&t (ywoAjvi&QsQ, and to oAxyn, and iyyidou^& any o^v alt of- tA& not&o,, @A&&£&, dvaftb, C&t£&v&, and alt otheAs vn^XAyu/yyvemt^ vn> WAXtvrvo v&^eAyo&d vw tA& &OUA&& of ov i&o/uvna fixyytv oicv (yw&wi&&&, giving and hereby granting unto auv said Attorney full power and authority to a£A)-&^ a/witt tk& fi,v&wuCo£& as freely, fully, and effectually as w-e, could do if personally present, with full power of substitution and revocation, hereby ratifying and confirming all that owl said Attorney or his substitute shall lawfully do or cause to be done by virtue hereof 3n Witnteti Wbtvtai, av-& have hereunto set mov hands and seals this flit&em-t/i day- of July in the year nineteen hundred aAid qaj?c. gWe* fit. RoAfmwui B - m M-yufan [sea,] Attorney's Signature Ro6-&tt /fall [seal] Commonwealth of Massachusetts ) ^ *%.-< u *** n » . - ■* *% * a * * j* t, [&• Boston, Maw,., HuOu /5, 1906 County of Suffolk ) ' / / Then personally appeared the above-named B. W-. 7flov(fan and Ro/yeAt //alt and acknowledged the foregoing instrument to be th&vv free act and deed. Before me, €. &. MM*, JBotarp public 392 ACCOUNTING AND BUSINESS PRACTICE Form VII — Certificate of Protest Comtnotttoealt!) of jtasarfmsetts J a*. County of Suffolk City of Boston On the t&nt/v day of £&®& 1&. CC. /lfimmam, jftotarp J)tiiiUc, duly admitted and sworn, and practicing in said Commonwealth, at the request of LeLyk fi 1 . JPv&uww, <£fiq., Cashier of the (&owvmeyi&Lal cAatiamal JSamk,, went with the original mote,, which is hereto annexed, the time therein lim- ited and grace having fully elapsed, and demanded payment thereof at the, Svc&eLoAxyx, cAatCamal Bank,, amd w-ao, an&w-eA.&d (>Af tJve c?ay,iAtcf &eHe\,, " ' cAo- IwrncU,." The mote, remaining unpaid, I duly and officially notified the vncLy\A,eAA, t/ve'b&o^ at the ^o-llau^-lm^ addie&Q,eas : Rotlv V 3aAf, t/20 W^aahbyicfLo-n, M., &ity, IS. Ifr. /if all V &*., cAe/wtom, 7?laM,., {postage prepaid) of said default requiring payment. Whtvtfovt, I, the said jftotarp, by request as aforesaid, have pro- tested and by these presents do solemnly protest, against the drawer of said mote, the indorser, and all others concerned therein, for exchange, re-exchange, and all costs, charges, damages, and interest, suffered and sustained, or to be suffered and sustained, by reason or in conse- quence of the non-payment thereof. 3fn STcfiStiinOUP H?()ete0f, / have hereunto set my hand, and affixed my Notarial Seal, the day and year first above written. Noting Non-Acceptance . . . Postage Protesting for Non-Payment , Dollar. $ Number. % Per cent. ii One and one-fourth. i» One and two-fourths. j3 One and three- fourths. INDEX Abbreviations 396 Abstracts Out-of-town banks' ledger . . 373 Purchase ledger 288 Sales ledger 288 Accounts, models for closing . 289, 290 Auxiliary books Customers' bill book .... 313 Discount ledger 313 Dividend book .... 257, 306 Installment book .... 256, 306 Minute book 256, 306 Offering book 313 Stock certificate book . 258, 259, 306 Stock ledger 258, 306 Stock transfer book . . . 256, 306 Subscription book . . . 257, 306 Balance ticket 380 Bank, definition of 293 Bank accounting, books for ... 306 Banks Expenses of 294 Kinds of 294 Profits of 294 Utility of 293 Cash book, model forms of . . 272, 273, 344, 345 Cashier's check 321 Cashier's receipt ....... 382 Certificate of deposit 320 Certificates of stock 255 Certified check 327 Certified check book 328 Charge ticket 338 Charging notes 330 Check ticket 377 Clearing house Definition of 374 Exchanges of 374 Officers of . 374 Origin of 374 Clearing-House proof 379 Collection charges 317 Collection clerk Duties of 317 Work for, 314-318, 348, 349, 359, 360 Collection register Description of .... 313, 314 Model form of .... 312, 313 Collection tickler Description of 314 Model form of 314, 315 Corporations Books peculiar to .... 256-259 Capital stock of 255 Compared with partnerships and joint-stock companies . . . 253 Corporations Definition of 253 Directors of --•'_, 254 Management of 255 Officers of 255 Organization of 254 Powers of ....... . 254 Reports of 256 Stockholders of ...... 256 Correspondence clerk Duties of 332 Work for, 333-338, 351-356, 363-367 Credit exchange 378 Credit ticket 341, 377 Debit exchange 380 Deposit ticket 322 Discount clerk Duties of 317 Work for, 308-313, 347, 348, 358, 359 Discount register Description of 307 Model form of 308, 309 Discount tickler Description of .... 307, 308 Model form of .... 308, 309 Dividends 256, 369, 372 Draft register 335 Exchange slip 375 Franchise 256 General balance ledger Description of 343 Model form of 343 General bookkeeper Duties of 344 Work for . . 344-347, 358, 368-373 Individual bookkeeper Duties of 340 Work for, 340-342, 357, 358, 367, 368 Individual ledger Description of 338, 339 Model form of 339 Invoice register Description of 274 Model form of .... 272, 273 Joint-stock companies 253 Letters Accompanying paper remitted for collection and credit . . . 353 Accompanying paper remitted for collection and returns . . 356 Advising that collections have been credited 331 Advising remittance of cash items for credit 334 Making remittance . . . 366, 387 Letters of credit Description of 383-385 399 t 400 ACCOUNTING AND BUSINESS PRACTICE Letters of credit Model form of .... 384, 885 Manager's receipt 381 Merchandise Analysis of 292 Classification of ... . 288, 289 National banks Capital stock of 295 Circulating notes of 297 Clerks of 299 Corporate powers of .... 298 Distinguishing features of . . . 294 Officers of 299 Organization of 295 Redemption fund of .... 297 Restrictions upon 299 Tax on circulation of ... . 297 Note teller Duties of 329 Work for, 330, 331, 351, 352, 362, 363 Opening entries For corporations 257 For national banks . . . 300, 301 Payroll 278 Paying teller Duties of 327 Work for, 328, 329, 350, 351, 361, 362 Paying teller's daily check sheet and proof Description of 323, 326 Model form of .... 324, 325 Petty cash book 279 Private banks Functions of 304 Organization of . . . . . . 304 Protection to creditors of . . . 304 Protest Certificate of 392 Fees 368 Protest Notice of 393 Protested paper 362, 368 Receiving teller Duties of 320 Work for, 322, 323, 349, 350, 360, 361 Receiving teller's daily check sheet and proof Description of 320 Model form of 319 Remittance register and out-of-town banks' ledger Description of 332, 333 Model form of .... 332, 333 Review questions 270, 304 Runners 330 Settling clerk's statement .... 376 Special agents 336 State banks Compared with national banks . 303 Contrasted with national banks . 303 Organization of 303 Statements, model forms of. 286, 287, 288, 370, 371 Stock Common 255 Preferred 255 Treasury 255 Watered 255 Surplus fund 369, 372 Trust companies Business of 302 Organization of 302 Trusts 353 Undivided profits 372 Voucher book 269 Voucher check 270 Voucher and check combined . . . 268 Voucher system of accounting . . . 266 M513283 Q r ?MS7 :•■•:. • - ■\l :';