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of a credit slip like that shown in Fig. 32. The face amount of

the note is debited
to thfe Discount ac-
count in the general
ledger by means of
a charge slip like
that shown in Fig.
33, which carries a
full description of
the note. The note
is filed in the note
file under its due
date.



Hartford^ Conn.,



To-



-drawn by



-payable at



^Bank



of Hartfordy Cohh., for payment of $_



-after date



dated^



and indorsed by—



-having



^1. If a note is
not paid or other-
wise provided for at
maturity, it is pro-
tested by a notary
public or other
authorized public
officer for non-pay-
ment. Protest is a
legal procedure by
which the bank
makes formal de-
mand for payment
by means of a cer-
tificate of protest, shown in Fig. 34. This certificate is attached
to the note, and formal notice of the protest is sent to the maker
and each indorser of the note on a form like that shown in
Fig. 35.



bnn duly presented this day^ and payment being refused
upon presentation and demand made^ was protested by me
for non-payment, and you villbe looked to for payment of
the same.

Pieare forward enclosed notices, if any, to your indorser.
Respectfully yours,
CHARLES H. f^ILLIAMS,
Notary ^Public



Fig. 35



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§ 31 ACCOUNTING METHODS OF BANKS 29



TRANSACTIONS

32. The following transactions took place in the note
teller's department on Tuesday, September 8, 19 — :

Discounted today the note of J. H. Steele & Co., dated Sept. 8, 19 — ,
for 2 months, amount $200, indorsed by James Myers. Proceeds, $198,
credited to the account of J. H. Steele & Co.



PROOF-BOOK CliERK

33. The proof -book clerk ranks last among the book-
keepers of a bank and a step above the bank messenger, which
is the position usually filled by the beginner in the banking
business.

The proof book is a sheet ruled in columns for the record
of the cash transactions of all the tellers of the bank. It is a
general-balance book and serves as the bank's own clearing
house for the redistribution of the items handled each day. It
balances in itself and all other books are balanced from the
figures furnished by it. At intervals during the day, usually
hourly, the items of the various tellers are sent to the proof
book, where they are entered in columns showing the trans-
actions of each, as illustrated in Fig. 36, which shows how the
work of September 8 was handled by the proof-book clerk.

34. As the items are received by the proof-book clerk he
checks up each deposit ticket to see that all checks are properly
listed, that the footing is correct, and that each check is prop-
erly indorsed. If found to be correct, the cash amount is
entered in the column for the receiving teller, and the deposit
ticket is then placed on the credit side and the checks on the
debit side of the distributing case. At different times during
the day the proof-book clerk totals on an adding machine the
debit and credit items for the individual and general ledgers,
enters the amounts in the proper columns of the proof-book
sheet, and sends the items to the bookkeepers for entry in the
ledgers. Checks drawn on the bank at which they are paid
are entered on the proof-book sheet as individual ledger
charges, and those drawn on other banks are entered as general-



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30



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§31



ACCOUNTING METHODS OF BANKS



31



ledger charges. Paid checks drawn on other banks are entered
in the ledger against the banks on which drawn, and the
total for each is listed on the form shown in Fig. 37 for
clearing-house exchanges.



35. At the close of the
day's business the debit
and credit columns of the
proof -book sheet are
totaled, and each teller is
furnished with the total
of his day's transactions,
with which his account
should agree. After these
totals are proved to be
correct, the proof - book
clerk makes out a recap-
itulation as shown under
the head of Statement, as



HARITOID OEARING HOUSE ASSOOATION
EXCHANGE LIST






19




1




Hartford National Bank










Parmen and Mechanirs Bank










National Exchanee Bank










State Bank












'








Equitable National Bank










Total



















Fig. 37



shown on the left-hand division of Fig. 36, and as there is
always an equal debit and credit amount for each transaction,
the debit and credit totals of the proof book must agree.



INDrVTDUAL-IilSDGER BOOKKEISPBR

36. The individual-ledger bookkeeper ranks fifth in impor-
tance among the employes of a bank. He has charge of the
ledger in which the individual checking accounts are kept and
comes into personal contact with depositors when any question
regarding accounts arises. Entries in the ledger are made from
debit and credit memorandum slips, the forms of which have
already been shown, and the bookkeeper must always be on
the alert, because the bank is liable for the amount when an
item has been posted to the ledger. He must therefore scruti-
nize each check carefully to see that it is correctly drawn, that
it is properly signed, that it is not dated ahead, that there has
been no alteration or erasure, that it has been properly
indorsed, and that no stop-payment notice has been given.



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B2



ACCOUNTING METHODS OF BANKS



§31



37- What is known as the Boston ledgrer is the form of
ledger in general use for individual accounts. This ledger is
arranged in six divisions across each two facing pages, thus
providing for recording a week's transactions. Each of the six
divisions is ruled into four columns headed Checks in Detail,
Debit, Credit, and Balance, as illustrated in Fig. 38, which
shows one of the six divisions and a part of another. In this
ledger the names of depositors are generally printed in alpha-
betical order when the ledger is made, enough pages without
printed names being added to take care of new accounts. All
checks drawn against an account are entered separately in the



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column under the heading Checks in Detail and at the close of
business the total for each account is entered in the Debit
column. All of the columns are then footed, and if no mis-
take has been made the total of the Checks-in-Detail column
will agree with the total of the Debit column. All pages are
footed in the same way, after which the debit footings are
combined and carried to the individual-ledger account in the
general ledger and the credit footings are treated in the same
way.

After a trial balance has been taken, at the close of the day's
business or the next morning, the balance for each account is



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34 ACCOUNTING METHODS OF BANKS §31

filled in and. the Balance column proved for each page. This
is done by adding the day's credits to the previous balance,
deducting the day's debits, and carrying the amount obtained
to the next Balance column. The total of the balance column
is proved in the same way from the totals of the Credit and
Debit" columns. If an account is found to be overdrawn, the
entry in the Balance column is made in red ink, the amount
being deducted from, instead of added to, the total of the
column.

38. Many of the larger banks use what is known as the
postingr-macliine system, which is a system involving the
use of a loose-leaf ledger instead of the Boston ledger, one
sheet being used for each account carried. The entries to an
account are made by the posting machine, which is operated by
the bookkeeper either by hand or by electric power. The form
of the loose-leaf ledger is shown in Fig. 39. When an account
is opened, the name and address of the depositor is typewritten
at the top of the sheet, which is then put in the posting machine
by means of which the entries are made.

As items are received from the proof-book clerk, the
deposits, or credits, and checks, or debits, are listed separately
on plain sheets, from Which they are posted to the account
sheets, the totals of which should agree with the proof-book
balance. Deposits are entered on the account sheet in the
column headed Deposits, and the paid checks in the column
headed Checks in Detail, as shown in the illustration. Fig. 39,
and the date must show for each day's transactions for any
account. The new balance is found in the same way as for
the Boston ledger by adding on the machine the day's deposits
to the previpus day's balance and deducting the amount of the
paid checks.

39. The correctness of the balances of the accounts is
proved by taking off a statement of all the accounts on which
there were transactions during the day. The columns are
totaled and the lesser of the balances is subtracted from the
greater. If the total of the new Balance column is greater than
that of the old, the correctness of the balances is shown by



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§31



ACCOUNTING METHODS OF BANKS



35



the fact that the amount by which the deposits exceed the
withdrawals is exactly equal to the difference between the old
and new Balance columns; if the total of the new Balance
column is less than that of the old, the difference between



Equitably Natinttal Sank



HARTPORO. Conn..



According to our books your account appears ovtrdruwn
We there/ore request that you examine your pass



book and advise us if we are correct Ify<m find that we are correct, please
deposit funds to cover, as it is contrary to the policy cf this bank to carry
overdrafts.

RespectfuUy,



Fig, AO

the totals of the old and new Balance columns is exactly
equal to the amounts by which the withdrawals exceed the
deposits.

By this system statements of accounts are made once a
month or oftener if requested, and are receipted for by cus-




FiG. 41

tomers. This system obviates the necessity of balancing pass
books, which are considered merely as receipt books for
deposits.

^ 40. The duties of the individual-ledger bookkeeper include
the notification of depositors when their accounts have been



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36 ACCOUNTING METHODS OF BANKS § 31

overdrawn and the balancing of pass books of customers of
the bank. The form used for notifying customers of over-
drafts is illustrated in Fig. 40, and a balanced pass book is
illustrated in Fig. 41.

41. The debit entries in the pass book are made by the
receiving teller as the deposits are made and the credit entries
are made by the bookkeeper when the pass book is presented.
The credit entries are the charges against the customer's
account since the pass book was last balanced and are made
directly from the paid checks or other memoranda. Usually,
when the credit items are numerous, only the total is entered
in the pass book with a notation of the number of vouchers, the
items being shown on an adding-machine list which accom-
panies the canceled vouchers.



TRANSACTIONS

42. The following debits and credits have been assembled

for entry on the individual ledger as a result of the trans-
actions in the different departments on Tuesday, Septem-
ber 8, 19—:

Deposit tickets from receiving teller:

Lucy B. Fostelle $ 132.00

W. H. Gillette & Co 2,705.34

James Myers 1,107.85

F. T. Peabody 2,608.16

Deposit ticket from note teller :

J. H. Steele & Co $ 198.00

Checks from paying and receiving tellers:

Lucy B. Fostelle $ 12.10

W. H. Gillette & Co 400.00

W. H. Gillette & Co : . . . . 167.40

W. H. Gillette & Co 500.00

James Myers IS8.8O

F. T. Peabody 30.00 '

T. H. Steele & Co 150.00



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§ 31 ACCOUNTING METHODS OF BANKS 37



GENBRAIi-IiEDGER BOOKKBEPBR

43. The general-ledger bookkeeper ranks fourth in impor-
tance among the employes of a bank. He has charge of the
general books, among which are the general ledger, cashier's-
check register, draft register, and certified-check register.

44. The greneral ledgrer contains all the general accounts
of the bank. It is similar in form to the individual ledger in
general use, differing mainly in the fact that the pages are ruled
in two divisions, the upper half for resource accounts and the
lower half for liability accounts, as shown in Fig. 42. At the
end of the day the new balances are carried forward and the
columns for each half of the page footed. The resource bal-
ances are found by adding the amount in the debit column to
the previous balance and then subtracting the credit amount.
The liability balances are found by adding the credit amount
and deducting the debit amount. Every 6 months or oftener
the income and expense accounts are closed and carried to the
profit-and-loss account.

This form of general ledger shows the daily condition of
every account, and it is the work of but a few moments for the
bookkeeper to make a transcript of the accounts when called
for by the officers of the bank.

45. The draft register is a Dook in which a record is
made of the drafts drawn on correspondent banks, a separate
account being kept for each. The form of the draft register
is illustrated in Fig. 43. As each draft is drawn an entry is
made to show the date, the draft number, in whose favor
it is drawn, the amount, the exchange charges, and the person
or purpose for which it was drawn. At the close of the day's
business the Amount column is totaled, the amount being
carried to the Day Total column, and a credit ticket is made
out for the account of the correspondent bank in the individual
ledger.

46. The casliier*s-clieck Tegitster^ which is illustrated
in Fig. 44, is a book in which all cashier's checks issued are



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EQUITABLE NATIONAL BANK
DRAFTS DRAWN ON EASTERN NATIONAL BANK, NEW YORK.




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ACCOUNTING METHODS OF BANKS



39



recorded. It shows the date of issue of each check, its num-
ber, the name of the payee, and the amount. At the close of
business each day the Amount column is footed and the total
entered in the Day Total column and a credit ticket is made
out to carry the amount to the Cashier's account in the indi-
vidual ledger. The last column is for the entry of the date on
which the check is paid.

47. The certified-eheek reg:ister, illustrated in Fig. 45,
is a book in which a record is made of all certified checks
issued. It has columns for the entry of the date, the name of
the drawer, the name of the person to whose order it is drawn.



THE EQUITABLE NATIONAL BANK

CASHIER'S CHECKS


DATE


NUMBER


PAYEE


AMOUNT


DAY TOTAL


WHEN PAId|


































































































































































































































































__











Fig. 44

the name of the person it was certified for, as well as the
amount, the day total, and the date paid. As each entry is
made, a debit ticket is made out to charge the amount to the
account of* the drawer. At the close of the day's business the
Account column is footed and the total carried to the Day total
column, after which a credit ticket is made out to carry the
total amount to the account of Certified Checks in the individual
ledger.

48. The general-ledger bookkeeper also handles a number
of forms, the most important of which is a remittance
sheet, illustrated in Fig. 46. This is a form used for listing
checks drawn on banks outside the limits of the local clearing



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40



ACCOUNTING METHODS OF BANKS



§31



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house and is sent with
the items to a correspon-
dent bank for credit. A
carbon copy of ^ the re-
mittance sheet is made
on an under sheet which
is wider than the top
sheet and contains an
extra column for noting
the name of the last in-
dorser for each item.
This is filed as the
bank's record. The sec-
ond column on the sheet
is for indicating whether
a check is to be pro-
tested if not paid. No
protest is indicated on
the remittance sheet by
anX.

49. As a rule, items
of $10 or under are not
protested. Items of
more than $10 are pro-
tested unless they are
stamped otherwise by the
bank or bear the author-
ity of a preceding in-
dorser for no protest.
The total amount listed
on the remittance sheet
is debited to the account
of the correspondent
bank in the individual
ledger by means of a
debit slip. When a
similar notice of remit-



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§31



ACCOUNTING METHODS OF BANKS



41



tance is received by the Equitable it sends an advice of credit,
the form of which is shown in Fig. 47. When items are
received from another bank and are not to be credited to an
account nor sent to a correspondent bank, the receiving bank



- Equitable National Bank

Hartford. Conn.. ■.


..._






/ enchu Jor credit ilcms as below.

Yours respKtfuUy.

J. E..ALLARO. Cashier

0* PM pn»*tt rtem* of $»0.00 of undef. o> thos. b-hr>z. o« «•<» or back.
th« •Omp Of •Jm.l.r .uthw-ty o( • pfee^l.ne mbOfMf.


ON WHOM OltAWN




AMOUNT 1






















. .








.



Fig. 46



remits the amount to the sending bank with a letter of advice
of the form shown in Fig. 48. The carbon copy of this letter



Equitable National Bank of Hartford, Conn.



Your Utter of the ^
CAM man



Hartford, Com.,,
. is rtcmed cotriedMnp

$



Riifnittanw an credited upon receipt aubdMCt to cotlectioa of the items..



Fig. 47

of advice, which has a column headed Remarks, is filed as the
bank's record.

When checks that are received from another bank are not
paid they are returned to the sending bank, together with a
letter of advice of the form shown in Fig. 22.



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42



ACCOUNTING METHODS OF BANKS § 31



THE CLEARING HOUSE



50. Orgranlzation. — A clearing house is an organization
formed by local banks in cities of any business importance for



Equitable National Bank



Hartford. Coim., -



tVe enclo$e herewith drqfi fi>r $

Total.

in payment of Hems metdtoned below.

Youn reMpeetfiilly,

/. £ ALLARD. Cuhk$



OR NUMBCfl



ON WHOM DRAWN



-Bank



EXCHANGE ITEMS $_



Fig. 48

the purpose of satisfactorily effecting the exchange of checks
between them and also of enabling them to take united action

on any matter affect-
ing their interests.
The organization is
composed of a rep-
resentative of each
member bank and
operates under a con-
stitution and by-laws.
Its officers are a presi-
dent, a vice-president,
a secretary, and a
manager, who are
chosen annually. The
manager has charge of the daily routine business of the clear-
ing house, and the association meets at the call of the president



EQUTTABLE NATIONAL BANK

HARTFORD, CONN.



-4t-



1



Fig. 49



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§ 31 ACCOUNTING METHODS OF BANKS 43

to pass on all questions affecting the policy of the organization.
The office of the clearing house is usually located in a central
bank building.

51. Preparation for Clearing:. — Each bank prepares
for clearing by first making a list of all checks for the clearing
house and then entering the total amount on the proof -book
sheet shown in Fig. 36. The checks are then assorted into
groups for the various members of the clearing house, after
which a list is made of the items for each and the totals ascer-
tained. These totals are then entered in the clearing-house
exchange list shown in Fig.. 37, and the column footed. The
total of the exchange list must agree with the amount entered
on the proof -book sheet as the total sent to the clearing house,
and when these amounts are found to agree, a duplicate adding-
machine list is maae of the items and the total for each bank
of the clearing house. The original copy is sent to the clearing
house with the checks and the carbon copy is kept as the bank's
record. The checks for each bank are then stamped with the
name and number of the sending bank as well as the date and
are enclosed in envelopes for the different banks together with
the list of items for each. The envelopes of each bank are
printed with the bank's name and number, as well as a space
for entering the name of the bank with which exchange is
made and also the amount of the exchange, as shown in Fig. 49.
The amount on the envelope for each bank must be the same
as the amount entered on the clearing-house exchange list



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