What are the essential books usually maintained by a bank?

The accounts of English banks are generally kept on the double entry system already explained, the only one which affords u material and steady control against many possible mistakes and fraudulent entries.

A banker’s accounts, however, although framed on the same principle as a merchant’s, cannot be laid down in the same form, considering the great difference in the transactions of the two branches of trade.

A banker has merely to deal with money or what is considered as the equivalent of money, and to this, his sole article of trade, his business, and therefore his accounts, must, of course, exclusively relate.

Books Used.-

Bankers, like merchants, not being all devoted to the same particular branch or branches of the trade, are obliged to adopt special books, so as to record their transactions in the simplest and most suitable form, and to connect their recording entries in such a way as will more likely afford them the means of controlling accounts at any time. It is, therefore, almost impossible that exactly the same set of books should be adopted by all of them.

There are some records, however, which are common to most bank counting-houses, with the exception of banks of issue, the latter being bound, of course, to keep special registers of their notes, and sets of accounts quite out of the province of ordinary bank book-keeping.

The books generally used are the waste book (divided into received waste book and paid waste book, being provisional records of all moneys received and paid), the day book, the general ledger, the cash book, the current account ledger, the deposit account ledger, the bill books.

Following the particular method of book-keeping already mentioned, whereby transactions are initially recorded, according to their nature, in separate books, then journalized and posted in bulk under their proper heads of account; most banking establishments keep the day book and the general ledger as check-summaries of the cash, deposit, bill and current account looks ; the importance of such summaries being all the greater for that very reason, as it is by their means that the real position of every account towards the house, and thus the financial position of the house itself, can be ascertained.

The Day Book.-

The day book is, like the mer­chant’s journal, a chronological record of every day’s transactions, grouped, however, under the respective heads of account to which they relate: current accounts, deposit receipts, bills discounted, interest paid on deposit receipts, etc.

This form of entry is the most suitable for posting, while it affords a correct view of the daily transactions of each branch of the business. The day book is also intended as a most effective check on the correctness of cash entries.

To this effect it is kept as a collective account of all persons and concerns towards cash, so that its debtor side is charged with the sums for which cash was credited, and it is credited with those wherewith cash is charged.

Summing up the figures of the two sides of the book, then adding to the Cr. side the cash in hand_y with which business was commenced in the morning, and to the Dr. side the cash in hand at the close of the day’s transactions, the two columns must agree, pro­vided the cash entries have been correctly made. This book is sometimes divided into paid day book and received day book.

The General Ledger.-

The general ledger contains the separate details of each account mentioned in the day book, such as: current accounts, bills discounted agents’ account, bills unpaid, interest account, deposit account, lodgments, investments, expenditure, cash with branches, proprietor’s account, etc.

This book is, therefore, a complete record of all the sums paid or received by the house for any particular concern, the account whereof is thus always regularly posted up.

The entries are posted daily the day book and the amounts registered neither the debit or in the credit money column, as corresponding to the Dr. or Cr. entry in the day book.

The general ledger is usually balanced weekly, the operation being done by comprising the Cr. and Dr. Totals of each amount, and caring the difference to the Dr. or to the Cr. side of a special column, under the head of balance.

With the figures of such balances a weekly balance- sheet is usually drawn up. The amount of cash in hand being added to the debit balances the total certain to agree ” if the postings were Correctly made,” with the sum of the credit balances, including the capital of the bank, which must figure on the credit side of the capital account in the ledger.

The exactness of the postings is also ascertained by closing each separate book, and comparing its balance with the balance of the respective bulk account in the ledger.

The Cash Book.-

The cash book is destined, of course, to record all cash transactions, that is all the sums received or paid by the bank.

In order to simplify their counts, most banks treat also as cash entries, and Pass through the cash books, some kinds of transactions called transfers, wherein no actual money is either Paid or received, thus making the cash book the true standing-point of bank book-keeping.

The cash book is balanced every evening at the close of business, by adding the amount of money received during the day, ” specie, notes, bills securities, etc.,” to the sum left the day before and deducting from the total the amount of money Paid during the day. The rest must agree with the sum actually remaining in the bank at the close of the day’s work, which will represent the cash in hand, wherewith the house is to begin its business on the morrow.

Current Accounts.-

The current account ledger con­tains the individual current account of the banker’s customers, agents or correspondents, the bulk amount of whose transactions is recorded in the general ledger under the heads of: current accounts, and agents’ ac­counts.

The book is intended to show at any time each customer’s position towards the bank, and must, therefore, be posted every day.

The form of a bank current account is not always exactly the same. When the bank allows no interest on a customer’s credit balance, the sole columns for the Dr. and Cr. entries are required in his account; but when interest is allowed, two more columns are neces­sary on either side; the one for the number of days for which interest is to be calculated, the other for the amount of interest allowed or charged in a certain period.

In some cases, especially for cash credit accounts, that is, when the customer is allowed to overdraw, the rate of interest charged for money advanced is higher, of course, than the rate allowed for credit balances; the account must, therefore, bear in two separate columns the credit and debit interest, calculated according to the different rates.

The calculation of interest on interest – bearing accounts is usually made, by means of interest tables, either at a fixed rate, or on the current fluctuating market rate; counting from the day of the payment or receipt of money, down to the day when the account is balanced and rendered, which is done at fixed periods – generally half-yearly – according to the custom of the bank.

It is to be remarked that no interest is usually charged on less than ten shillings, while fractions above ten shillings are treated as a whole pound.

The credit or debit interest is generally added to the amount of the corresponding side of account, and carried over to the new account.