Accounts: Their Construction and Interpretation for Business Men and Students of Affairs

By William Morse Cole | Go to book overview

CHAPTER SIXTEEN
SOME GENERAL PRINCIPLES ILLUSTRATED IN BANK ACCOUNTING

IN some respects bank accounting is peculiarly simple, for everything handled has a definite stated value in dollars and cents. In most respects it is useless to try to keep track upon the books of the specific article traded in, for identification of bills and coin is unnecessary. Of notes, drafts, bonds, stocks, etc., however, it is always desirable to keep a complete record. The bookkeeping with regard to notes and drafts is explained in Appendix A, II; and the record of stocks and bonds may be best shown in connection with trust accounting. For the ordinary transactions of banking, the chief accounting peculiarity, aside from the mere mechanical details of keeping the books, is the form of the balance sheet, which depends upon several things of a technical nature.

For instance, the national banking law requires that each bank shall conform to certain regulations for its membership in the national banking system, shall maintain security for its bank notes issued, and shall keep a specified reserve for deposits. The published balance sheet should give the necessary information concerning the fulfillment of these requirements.

On the debit side of a bank balance sheet the first item is usually Loans, or Bills Discounted. These are often divided into several classes, according to the sort of transaction,--for instance, commercial paper, time loans on collateral, etc. The second item, or group of items, is usually United States Bonds. Since all national banks must hold a certain amount of such bonds, the amount varying with the amount of capital stock, this item must be stated by itself. If bank notes are issued they must be secured by government bonds on deposit at Washington, and hence the amount of such bonds must be stated by itself for comparison with the notes outstanding. If the bank is a depositary of government funds, it must have on deposit in Washington government bonds for security; and therefore these bonds must be stated by themselves for comparison

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