CHAPTER XIV

THE BANK ACCOUNT

Modern business is carried on largely without the use of actual money. Not only has business become a credit business but payments are made by means of instruments of credit. A bank is a credit institution.

A large part of the payments made in the wholesale and jobbing trade are by means of orders on banks. A smaller per cent of payments in the retail trade are made in the same way.

An order on a bank is nothing more than a transfer of part of one person's credit at the bank to some one else. It is called a check.

Chas. Graham has an account at the bank. He owes James Paxton. He orders the bank in writing to pay the amount to James Paxton. By doing this the bank credit is transferred from Chas. Graham to James Paxton.

Advantages of a Bank Account. There are many advantages derived from having a commercial deposit in a bank, but the chief ones are as follows:

1. A bank account makes it possible for a business to keep its funds in a safe place and to draw them out at any time.

2. It enables a business to pay its bills by means of checks.
Checks are desirable for the following reasons:

a) Payment by check is a much safer method than payment in money. b) Canceled checks are returned to the depositor at the end of each month. They thus serve as receipts, as the name of the party to whom payment has been made must be indorsed on it before the check can be cashed.

c) Checks furnish the best data from which to make the entries and prove up the cash.

3. A bank is the best medium through which checks, notes, and drafts may be collected for a depositor.

4. A good bank account gives standing to a business that will assist very much in obtaining credit and in borrowing money.

How to Open a Bank Account. Many of the smaller banks will open commercial or checking accounts with any one that makes a reasonable deposit. But the larger banks insist on an introduction from some one

known to the bank. They also insist on an opening deposit of a certain sum and that the depositor maintain at all times that sum, or more, in his account. The details of opening an account are usually attended to by an assistant cashier of the bank.

Signature Card. After these formalities have been completed a signature card must be filled in. The depositor should sign his name on this card just as he expects to sign it on checks. The following is a common form of a signature card:

This signature card is a valuable card and is usually kept on file by the paying teller SO that he may consult it in cases of forgery or of doubtful signature.

How to Make a Deposit. On making a deposit, each depositor should make out a deposit ticket furnished by the bank. This ticket contains details of the deposit and a place for any charges on out

of-town checks deposited. A simple form to be used in the practice work is as shown on page 96.

Deposit Ticket. The papers deposited may be checks on the bank in which the deposit is made, checks on other banks of the same city or on banks of other cities, express money orders, postal money orders, or bank exchange. (Bank exchange, or a bank draft, is an order of one bank on a bank of New York, Chicago or some other large city. It is everywhere accepted as cash.) For the convenience of banks the deposit ticket is frequently printed so as best to give this information. These are in many different forms. A form used by many banks is as shown on

page 97.

The Pass Book. The deposit ticket, with the money and checks, is handed to the receiving teller. He counts the money and checks the correctness of the checks and of the total. He then enters the amount of the deposit in the pass book as shown on page 96.

DEPOSIT TICKET

This entry is a receipt for the

National Exchange Bank money and checks deposited and

OF MILWAUKEE

DEPOSITED FOR

should be examined by the depositor before leaving the bank. Should the depositor

his

Gorge & Williams pass book, he should make out

E.
Dec. 5.

19

NY draft Lissexchange

50 11780

two deposit tickets, one of which the receiving teller will stamp Duplicate, sign his name or initials, and return to the depositor. This duplicate should be taken to the bank when the next deposit is made and the deposit entered in the pass book.

The Check Book. A bank will pay out money from a deposi6875 tor's account only on a written 12530 order. A check is a written or

36der on a bank to pay a certain

15

sum of money to the order of a third person or to bearer.

Each bank furnishes its de

36670 positors with a book containing stubs, with checks attached

by a perforation, so that they can easily be torn out. This is called a check

book.

PASS BOOK ENTRY

Each depositor Dr 5 Deposit

should keep his account with the bank

in such a way that he

36670

The pur

may know at any time just how much he has on deposit. pose of the stub from which the check is detached is to show a detailed memorandum of the payment, and to keep the account with the bank. For a small business or for the private individual, the best method is to add the amount of each deposit made and to subtract the amount of each check drawn. This method is illustrated in the page of a two-on check book shown on pages 98 and 99. Another method of keeping the bank account, preferred by many accountants, is illustrated on page i of the appendix.

The back of preceding check stubs opposite should be used for details of deposits, collections, and charges, if the items are not great in number. The back of the check stub opposite to where the deposit is added should show the details of the deposit. (See illustration on page 100)

Things to be Observed in Writing Checks:

1.

2.

3.

4.

Always fill in the check stub first.

Do not leave blank spaces, but fill them in with a wavy line.

The amount should always be written close to the dollar sign.

If there are no cents in the amount, it should be shown by filling

in two ciphers.

5.

The amount in words should begin to the extreme left of the line. 6. The signature should always be the same.

7. No erasures or alterations should be permitted on checks. In a small business where the pro

prietor signs all checks, the Deposit. Jan. 1, 19-5000

best plan to follow is to destroy all imperfect checks and take one out of the back part of the check book and rewrite. This plan should be followed in your practice work.

In a business where the checks For tent of store to

are signed by an agent such as a bookkeeper, cashier, or treasurer, no imperfect or incorrect checks. should be destroyed.

They

should be marked or stamped Void and attached to the stub

Discount

Amount

4950

so as to show an auditor what Deposit. Jan: 10,19- 34575

became of that particular check number.

Indorsements. Checks may be indorsed in the same way as notes. The special indorsement is the one most commonly used. It should always be used if a check is to be sent through the mail. A blank indorsement may be used if the check is to be deposited at the bank at once, otherwise, a special indorsement is better.

529575

67277

Forward 462298

The Bank's Statement of Account. At the end of each month the bank returns to the depositor his canceled checks and a statement of his account for the month. This statement may be in any one of a number of forms. Some banks simply list the amounts on an adding machine slip and return this slip with the checks to the depositor. It shows the deposits, the checks, and the balance.

Other banks list the checks separately or the total checks returned on the right side of the pass book and balance it. This is called writing up the pass book but is used by the smaller banks only.

The most common practice among the larger banks is to give each depositor a monthly statement of his account either on a separate sheet or on the envelope in which the canceled checks are placed. The statement illustrated on page 101 is a common form.