BANK DRAFTS

Business men usually keep an account with a bank and make a large proportion of their payments by check. However, they find it necessary sometimes to make payment to persons or firms who do not care to give credit for private checks, and then some other form of transfer must be used. A very common and convenient form of remittance is by means of a check of one bank upon another. This is called a Bank Draft.

Suppose that C. C. Canan, Boston, Mass., wishes to buy a bill of goods of Jordan, Marsh & Co., New York, amounting to $400.60. If his financial standing is unknown to Jordan, Marsh & Co., he should not send his personal check. He therefore draws the following check and exchanges it at his bank for a New York draft.

Check to pay for Bank Draft

Boston, Mass.,. July 16, 19— No. 365 Graders National Bank

Pay to the order of NY. draft (400 ) Exch (504) $ 40.1="0 Four Hundred One "/e

ed One The Canan

Dollars

The check is drawn for 50¢ more than the face of the draft, and this charge is called Exchange. Some banks do not make any charge to regular customers. For this check the Traders National Bank will issue the following draft:

A bank draft is usually drawn payable to the order of the purchaser, who indorses it to the person or the firm to whom it is to be sent, as shown herewith.

In this way the name of the sender appears on the draft and he is identified as such, and the draft, when canceled, is filed and serves as a receipt.

The one who purchases a bank draft may require the name of the one to whom it is to be sent to appear as the payee.

In opening letters that contain drafts, if the name of the sender does not appear on the draft, care must be taken to keep the draft and the letter together. If his name is on the draft, it may be identified without the letter.

The Entries. The sending of this draft constitutes a cash payment by C. C. Canan to Jordan, Marsh & Co., and he makes the following entry on the right side of his cashbook:

July & Jordan Marsh Ca Ift for Inv. Mdsu

Expense

Exchange on above.

Upon the receipt of the draft Jordan, Marsh & Co. will make this cashbook entry on the left side:

July | Cobbanan Sftfor lux this da|oo|c|| |

Inv.

When Jordan, Marsh & Co. make their deposit for the day they will include the draft received from Canan, such drafts being treated as checks.

EXERCISE 52

FOR ORAL WORK

1. Receive from Henry Belmont a bank draft to apply on account, $750. Give your entry; give his entry. No exchange charged.

2. Receive from Green & Co. a bank draft to apply on account, $328.40. Give your entry; give their entry. No exchange charged.

3. Buy of your local bank by check, Henry C. Lucas, Cashier, a draft on the Chemical National Bank, of New York, No. 6846, payable to your order, for $250. Send it to Louis I. Brace in payment of your note due to-day. Give your entry; give his entry. In whose favor should this draft be drawn? Indicate the proper indorsement. No exchange charged.

4. Buy of the First National Bank, of your city, Thomas E. Gross, Cashier, a draft on the Second National Bank, of New York, No. 2378, payable to your order, for $32.50. Indorse it and send it to the Jones Manufacturing Company for a set of office books, to be used in your office. Give your entry; give their entry. No exchange charged.

As a review, write the check and the draft called for in No. 3, and the draft called for in No. 4.

SUGGESTIONS FOR BUSINESS CORRESPONDENCE

When ordering goods it is a common practice in business to keep a duplicate of the order, and as these orders are generally made by letter, a copy of the letter is a convenient and exact record for the office file. When a bill of the goods is received, if any question arises regarding the original letter, this duplicate is available for reference.

As business correspondence is closely allied to business practice, and is commonly taught in connection with it, the script letter on page 126 is given as a suggestion to the student and to the instructor.

It is not unusual for the instructor in correspondence to select some of the orders of purchase and sale in the bookkeeping text, and ask the student to write the required letters for these orders. This plan correlates the work in correspondence very closely with the work in bookkeeping, and affords an unusual variety of material for practice in the writing of this kind of letters.

PART II. INTERMEDIATE WORK

COMMERCIAL DRAFTS

EXERCISE 53

A WRITTEN REVIEW OF SIGHT DRAFTS

On pages 116 to 122 the discussion of the Sight Draft showed that it is an important factor in business. A review of these pages is suggested, and then the following exercises may be worked out.

1. You owed Samuel T. Porter $325 on account, and on May 6 you drew a sight draft on Warren & Son, St. Louis, Mo., in favor of Porter, for the amount named.

a. Make your entry, and the necessary explanations. A script model is given on page 121.

2. On May 10 you drew a sight draft on Patterson & Co., Atlanta, Ga., for an invoice dated May 1, for $165.20, in favor of yourself, and left it at your bank for collection.

a. Write the draft.

b. Show the necessary indorsement.

c. Make the entry for each person when the draft is collected.

3. On May 15 you sold an invoice of merchandise to Geo. H. Powell, Cleveland, Ohio, amounting to $125.50, subject to a sight draft in 10 da. On May 24 you drew a sight draft on Geo. H. Powell in favor of W. R. Haynes, Cleveland, Ohio, for the amount of the invoice, and remitted the draft to Haynes.

a. Trace the course for this draft until it is paid.

b. Write the draft.

c. Make your entry.

d. Make the entry for each of the other persons.

4. On May 20 you bought an invoice of goods of Thos. H. Head, Omaha, Nebr., amounting to $450, subject to a sight draft in 10 da. On May 31, A. A. Lewis, of your city, presented a sight draft drawn