the profits that have been made during the year upon Government Stock, Exchequer Bills, &c. and is debited with the several items of expenditure. The Profit and Loss account may be subdivided into several accounts, as "Interest received on Bills Discounted"— "Commission Received"-" Interest paid on Deposit Receipts"- Charge for Agency," &c. &c. When it is not thus divided, a complete abstract of the account should be made out at the end of the year. 66 "GENERAL ACCOUNT OF CASH." The introduction of this account makes the General-Ledger a perfect check upon the other books. For by this means the total of all the balances of the debit side of the General-Ledger are equal to the total of all the balances of the credit side. To the debit of this account is passed every day the total amount of the credit side of the Day-Book; and the account is credited for the amount of the debit side of the Day-Book: consequently, the balance of this account will be always on the debit side, and will be equal to the difference between the sum of all the other debit balances, and the sum of the credit balances; that is, it will shew the amount of cash in the bank. The General-Ledger is always kept on the progressive plan;* so that the balance of any account can be seen upon inspection; and its progress from any past period can be distinctly and readily traced. VII. PERIODICAL BALANCES. DAILY BALANCE. It is well known that bankers try their balance at the close of their business every night, with a view of correcting any errors that may have occurred during the day. The process is very easy. If to the amount of the Cash-Book last night we add the amount of the cash received to-day, and deduct the amount of the cash we have paid, the re * See page 23. mainder will be the amount of the Cash-Book to-night. If on trial we find this is not the case, there must be some error. Suppose for instance the Cash-Book last night amounted to £100,000, and we have received £40,000 and paid £50,000 to-day, then will the Cash-Book tonight amount to £90,000. The trial stands thus, Cash-Book last Night. £100,000 || Paid-Day Book Received-Day-Book.. 40,000 Cash-Book to-night. £140,000 £50,000 90,000 £140,000 The daily balance therefore is nothing more than the balance of the Day-Book; and the only books employed are the Day-Book and the Cash-Book: but as these books when finally closed include the amount of several other books, the trial is usually made (for the purpose of avoiding alterations) on a half sheet of paper, called the trial paper, previous to those entries being made, and then the amounts of these several books are stated separately in the following manner. Dr. BANKING HOUSE. Amount of Cash-Book last night Do. of Discount-Journal...... Amount of Paid-Day-Book Cr. The balance of the clearing* is always to the credit of the house; for if the clearing "takes out," then the bank notes paid away at the Clearing-house are entered in continuation of the clearing out; so that in this case the balance is usually thrown a small sum on the other side. When the clearing is finally closed, the notes forming this balance are entered in continuation of the clearing-in, and subsequently in the Cash-Book. * For an account of the books in the clearing department, see the section on banking exchanges. The notes entered in the clearing out, are of course not entered in the Cash-Book. WEEKLY BALANCES.-The daily balance checks the Waste-Books, the Discount-Register, the Journals, the Day-Books, the Lists, and the Money-books. If any errors occur in any of these books throughout the day the balance will be wrong; but the daily balance does not check the Current-Account-Ledger, though this is the most important book of all. The Ledger is therefore "marked off" every morning against the Day-Book, the Bill-Journal, and the Clearing-in-Book: but this is not a sufficient check. Hence the balances of all the accounts in the Current-Account-Ledger should be taken off weekly in a book called the Current-Account Balance-Book, and added together, and the amount made to agree with the balance of "current accounts" in the General-Ledger. This is usually done by the London bankers quarterly or half-yearly; and when the Ledger is kept on the progressive plan, it may be done weekly without much trouble. The "Current-AccountBalance-Book" should be ruled so that the names of the parties having accounts may be placed under one another at the left-hand, and all the rest of the lefthand page and the whole of the right-hand page divided into double cash columns: one column for the balances of the accounts when in cash, and the other for the balances overdrawn. On this plan it will not be necessary to write the names more than once in seven weeks. In the same way the balances of the Discount-Ledger should be taken off weekly in the "Discount-BalanceBook." The balances of the General-Ledger are also taken off weekly in the "General-Balance-Book" in the way I have already described. HALF-YEARLY-BALANCE. The weekly balancing of the Ledger does not preclude the necessity for a half-yearly balance. The usual days for balancing are the last days of June and December. Some banks however, balance on the last Saturday in June and December, and others on the 30th of June and on Christmas-eve. On the balancing day the following operations are passed through the books.-1. The current accounts will be debited for any interest or commission that may be due from the party to the bank.-2. The Current-Account-Ledger will be balanced, and the balance will be brought down as the commencement of the transactions of the ensuing half-year.-3. The customers' books must be balanced, and made to agree with the Current-Account-Ledger. -4. The interest due upon the outstanding deposit receipts must be calculated, and the sums added together.-5. The General-Ledger must be balanced, and at the December balance the amount standing to the debit of the several classes of expenditure must be passed to the credit of those accounts, and to the debit of profit and loss account, and the several sums of profit that have been realized upon Government Stock, India Bonds, &c. are transferred to the credit of profit and loss account. For each half-year a book must be provided to be called the Half-Yearly-Balance-Book. This book will contain the following entries: I. A balance-sheet shewing the balances of the respective accounts in the General-Ledger in the same way as the weekly balance-sheet.-2. A debtor and creditor balance-sheet, shewing the exact condition of the bank.-3. An abstract of the profit and loss account.-4. A list of all the balances of the current accounts.-5. A list of all the outstanding deposit receipts, and the interest due upon each.-6. Á list of all discounted bills current, i. e. bills not yet due.-7. A list of all deposited bills current.-8. A list of all other securities, distinguishing those that belong to the bank from those that are lodged by its customers. |