Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-08-08
BY I. A. FLEMING.

BY I. A. FLEMING.
Bankers will tell you, over and over
again, that there is no way in which
the accounts of bank may be kept
which will prove a check to the crook
provided one breaks loose in your in
stitution. Time and again it has been
tried and each time the losses reach
into the thousands, still increasing
and actual safety can be found only
in the bonding company and liberal
blanket bond. Therein is safety.
Be that as 1t may. Some of our
banks have installed the system of the
daily audit and have backed up the
scheme as crook-proof plan that will
return to the bank it's full modicum
of interest daily and various other
profits that accrue to a bank from
the conduct of it's business.
Time alone will tell whether it is
guaranteed moth proof or not.
An exact duplicate of TIE note
teller's sheet is obtained through a
carbon copy of the same on a sheet of
paper with mucilaged back, and this
goes at once to the auditor or his as
sistant who in turn makes every
entry thereon, of all other income &C.
cruing to the bank that day, collateral,
time notes. from investments, sale of
exchange, liquidation of bonds and the
entire sheet proven and balanced with
each day, so that there is at the close
of every day, a complete audit of the
bank up to the closing Of the previous
day.
Daily profit is shown, profit for the
day, the month and the year.
Not being an expert accountant 1t
is necessary to use the technical Ian
guage Of one that is in describing the
system referred to.
This follows:
Plan of Accrual Accounting.
ut is obvious that when the gen
eral books of a bank are operated on
strictly cash basis, any system or
method Of accruing income and eX-
pense must of necessity be treated IN
the form of q memorandum only.
I'm the accrual of income and eX-
pense, the form or treatment employed
in the keeping Of records should be or
such type that will readily adapt it.
self to the form that is maintained for
the keeping of records on cash basis;
especially is this desirable in the
preparation of financial statements
L
comparative purposes only; they lndl-
cate the accrual position on one side
and the$cash position on the other
The accrual of income contemplates
that part which is derived chiefly
from interest received on loans, dlS-
counts and investments, although IN
a large bank, there are many other
sources of income, some of which,
such as profits on securities, COM
missions, fees, etc, are not or Such q
stable character to permit an accu-
rate accrual. In such instances, a
provision for plus and minus ADJUST
ments is imperative.
"A brief illustration of the accrual
of income from interest on loans and
discounts is presented in the follow
ing:
THE form used in the loans and
discount department for both the Sc
cured and unsecured time loans and
demand loans should give information
that is pertinent to the loan through
out it's life. In the case of time loans.
the register should bear the date of
paper, the period Of time, the name OF
the borrower. the name OF the payer,
the name of the indorser or collateral.
the note number, maturity date and
provision for the classification. the
nated), the earnings, and the interest
receivable at maturity.
This form should be transcribed
in ink as the permanent record of the
loan and discount department, and at
the same time a carbon impression IS
made, such carbon being surrendered
to the auditor. The carbon is perfO-
rated so that for the auditors record,
which is verified before filed, the daily
earnings and the interest receivable
is subject to rate proof. This proof Is
made on each individual item as well
as on the total Of all loans on which
a rate proof is made for each class of
item of the same rate. The carbon
COPY for the auditor is gummed on
the back so that when the entire
sheet is split according to the ma
turity date hereof, each item may be
filed in the auditors register accord
ing to maturity irrespective of the
date made.
THE demand loans, however, hav-
ing no maturity are, after being veri-
fed by the auditor. filed in the audi
tors register according to the date
made.
ION the demand loan sheet, provi-
sion is made for payments. Because
Of the character of such loans. a
"a ticklerpayment sheet for time
loans, which is prepared usually
many days before the date of ma
turity, provides for the name of the
payer, the note number and the claS-
sification of the loan as to secured or
unsecured. the rate, the interest re-
ceivable, the date paid, and opposite
each item the record Of payment Sec
ton, which provides for the past due
feature. Occasionally a note when
paid in advance from out of town, for
instance. includes interest to matur-
ity, which will be in excess by a. small
sum of the amount that actually has
been earned, and if the difference is
not so great as to justify a. rebate the
payment section Of the ticker sheet
provides for such adjustment which
becomes necessary between the
amount received and the amount
earned This feature of adjustment
is likewise reflected when the item is
paid by a remittance from out of
town after having gone past due one
or two days and will not justify the
bank to demand interest with only a
few cents involved.
MANY advantages and benefits may
be derived from the application of an
accrudl syS.eHi' ~ il<'~o peeH louIu
from experience to be invaluable in
the collection of data, for the gather
ing of information and in providing
for protection against the chances
for discrepancies and in the possible
detection of errors or frauds. 1t
demonstrates that all interest due is
collected or accounted for and
credited to the income account of the
bank.
with the desire of the present-day
banker to offer the best facilities to
the public, the method herein de-
scrihed deserves the careful conSid
Grafton of any banker, irrespective of
the size of his institution, although it
is more vital to the larger city banks.