UC-NRLF 
 
 $B ESQ EM7 
 
 BANK DEPARTMENT SERIES --II 
 
 Accrued Interest Receivable 
 and Payable 
 
 By HOWARD M. JEFFERSON 
 
 The Bankers Publishing Co., New York 
 
GIFT OF 
 
Digitized by the Internet Archive 
 
 in 2007 with funding from 
 
 Microsoft Corporation 
 
 http://www.archive.org/details/accruedinterestrOOjeffrich 
 
Accrued Interest Receiv- 
 able and Payable 
 
 An Accurate Daily Statement 
 
 BY 
 
 HOWARD M. JEFFERSON 
 
 Auditor, Federal Reserve Bank of New York 
 
 New York 
 
 Bankers Publishing Company 
 
 1918 
 
•: • 
 
 
 Copjrright 1918 
 The Bankers Publishing Company 
 
 
 • • •' 
 
 • • • • 
 
 • • • • «• • 
 
 * • • 
 
 i 
 
CONTENTS 
 
 Page 
 
 Preface 3 
 
 Introduction 9 
 
 Interest Accrued Receivable 17 
 
 Unearned Discount 43 
 
 Expenses ... 57 
 
 The Daily Statement 73 
 
 Appendix 83 
 
 How to Calculate Interest Accrued and Un- 
 earned Discount: 
 
 Interest 83 
 
 Discount 89 
 
 415514 
 
PREFACE 
 
PREFACE 
 
 r^ ONSIDERABLE discussion has 
 ^^ followed the appearance of the 
 memorandum on the call of the Comp- 
 troller of the Currency of December 20, 
 1917. The memorandum reads as follows : 
 
 As it has been the custom of many nation- 
 al banks to credit discounts as collected di- 
 rectly to profits, and to credit profits with 
 accruing interest only after collection, it has 
 been thought proper to give the banks a rea- 
 soiiable time to make the adjustments which 
 will be required in order to report accurately 
 Items 21 (Interest earned but not collected) 
 and 26 (Interest and Discount collected or 
 credited in advance of maturity and not 
 earned) . 
 
 Therefore, national banks may exercise 
 their discretion on this call as to including 
 these Items 21 and 26 in this Report of 
 Condition. Banks will, however, be required 
 
 c»] 
 
: i PREFACE 
 
 to report these items correctly later on, when 
 they shall have had a reasonable opportunity 
 to adjust their books to show these items 
 accurately, and shall have received more ex- 
 plicit directions to this end. 
 
 The practice of accruing interest daily 
 and of crediting discount only as earned 
 is not new nor is there anything compli- 
 cated in the process. The really startling 
 fact, to the student of accounting, is that 
 banks ever should have followed the prac- 
 tice of crediting income as received instead 
 of as earned. 
 
 The installation of a system of daily 
 accruals of earnings should appeal 
 strongly, but why stop there? Interest 
 payable is of the same genus as interest 
 receivable. If the latter accrues daily so 
 does the former. The debit accounts for 
 rent, taxes, salaries and other expense 
 items have a way of increasing from day 
 to day. 
 
 In the pages which follow, the author 
 
 [4] 
 
PREFACE 
 
 describes in detail, with proved figures, a 
 system of accruing all earnings and all 
 expenses. The material may appear in- 
 tricate to the casual reader, but it will 
 undoubtedly be appreciated by the prac- 
 tical man who is called upon to put the 
 system or any part of it into operation. 
 The journal entries should be clear to 
 any one familiar with a journal and a 
 ledger. For those who are not, the terms 
 
 Unearned Discount ,. .$100.00 
 
 to 
 
 Discount Earned $100.00 
 
 placed in this position are intended to 
 convey the idea that the account "Un- 
 earned Discount" is to be debited $100.00 
 and the account "Discount Earned" is to 
 be credited with a like amount. 
 
 The number of tickets suggested should 
 
 not stand in the way of the installation 
 
 of the system. These may be printed so 
 
 all that needs to be done each day is to 
 
 [5] 
 
PREFACE 
 
 fill in the amounts of the various entries, 
 date the tickets and send them through. 
 It is generally recognized that errors are 
 avoided in both preparing and recording 
 constantly recurring entries if they are 
 printed. 
 
 Given an accurate accrual of earnings 
 and expenses each day, the closing of 
 the books ^vill cause no heart rendings 
 because the accrued receivables turned 
 out so much less than it was assumed 
 they would be. The accrued payables 
 will not add their quota to the misery. 
 The "Calls" may be prepared with actual 
 figures instead of being estimated, and 
 with much saving of time and worry. 
 
 H. M.>. 
 
 [6] 
 
INTRODUCTION 
 
CHAPTER I. 
 
 INTRODUCTION 
 
 \ BANKER discounts a note for 
 ^^"^ $6,000 having thirty days to run, 
 at six per cent and passes the following 
 entries through his books: 
 
 Bills Discounted $6,000 
 
 to 
 
 Individtial Depofiits $5,970 
 
 Discount Received SO 
 
 On the same day he makes a time loan 
 of $6,000 for thirty days, interest pay- 
 able at maturity, also at the happy rate 
 of six per cent. His general bookkeeper 
 finds the following entries to be posted: 
 
 Time Loans $6,000 
 
 to 
 
 Individual Deposits $6,000 
 
 [9] 
 
ACCRUED INTEREST 
 
 Thirty days later the discounted note 
 matures and is automatically charged 
 against the borrower's account. The fol- 
 lowing entries are passed: 
 
 Individual Deposits $6,000 
 
 to 
 
 Bills Discounted $6,000 
 
 The other borrower calls with his check 
 for $6,030 and receives back his note and 
 the collateral, if he left any when the 
 loan was made. The banker passes the 
 following entries: 
 
 Cash (or Individual Deposits) , $6,080 
 to 
 
 Time Loans $6,000 
 
 Interest Received SO 
 
 Both transactions have been carried 
 through the books incorrectly. It is 
 generally considered that the two errors 
 make the matter right by the principle 
 of offset, but a few minutes study of the 
 
 [10] 
 
RECEIVABLE AND PAYABLE 
 
 figures shown in Figure 1 will demon- 
 strate conclusively that even the net fig- 
 ures are in balance but twice, once on the 
 fifteenth day and again on the thirtieth 
 day. And the latter happens to agree only 
 because the transactions are completed 
 simultaneously. If they had continued 
 three or four months the error would 
 have continued and the discrepancy on 
 each day except the one in the middle 
 would have been greater because the 
 amount of the profit is greater. The 
 table will also illustrate the discrepancies 
 in the case of the $6,000 discount and 
 loan above mentioned. 
 
 Suppose a few ciphers are added to the 
 $6,000 items used to increase the invested 
 assets to say $6,000,000, the error in the 
 first day's earnings will be $28,000. In- 
 crease the loans to $60,000,000 and the 
 error on the first day will be $280,000. If 
 there is such a wide divergence from the 
 true status when discounts and loans of 
 
COMPARATIVE STUDY OF DISCOUNT AND IN- 
 TEREST EARNED AND RECEIVED ON 
 NOTES OF $6000 EACH, RUNNING 
 THIRTY DAYS AT 6 PER CENT. 
 
 & 
 
 ill 
 
 II 
 II 
 
 iscount 
 eceipts In 
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 Interest 
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 •Over, t Short. 
 
 Figure 1. 
 
RECEIVABLE AND PAYABLE 
 
 exactly the same amounts and rates are 
 compared, what confidence can be placed 
 in figures so radically different as is ac- 
 tually the case in every bank and trust 
 company. 
 
 The method of determining the true 
 status of these earning accounts is so 
 extremely simple, so inexpensive to oper- 
 ate, and so satisfactory to every one who 
 watches the figures that every bank and 
 trust company in the countr^ should 
 establish the proper accounts without 
 delay. 
 
 Having established an accurate daily 
 accrual of earnings, we have only to ap- 
 portion expenses in a similar manner and 
 we have an absolute statement of condi- 
 tion each day. Moreover, with such ac- 
 curate figures, it follows as a natural 
 course, that the officers will require and 
 watch averages of these earnings and 
 expenses and thus have a still closer 
 finger on the pulse of the bank. 
 
 [13] 
 
INTEREST ACCRUED RECEIV- 
 ABLE 
 
CHAPTER II. 
 
 INTEREST ACCRUED RECEIV- 
 ABLE 
 
 TN order to start a record of interest 
 -*• earned it will be necessary to figure 
 the interest accrued receivable after the 
 close of business on a given day on all 
 bonds owned, on all bonds and mort- 
 gages, and on all demand and time loans. 
 Then head an ordinary piece of analysis 
 paper or a page in a suitable columnar 
 book, as shown in Figure 2. These sheets 
 will be referred to hereafter as "Accrual 
 Sheets." Use one sheet or one page for 
 demand loans, another for time loans, 
 another for bonds, and still another for 
 bonds and mortgages. Then analyze the 
 loans according to rates and prove the 
 totals with the general ledger. This clas- 
 
 [17] 
 
ACCRUED INTEREST 
 
 sification may be made upon the sheets 
 above referred to, though it will make a 
 cleaner record if the analysis is made on 
 separate sheets and the totals transferred 
 to the accrual sheets. 
 
 Bonds are carried on the books of 
 banks in one of several ways and the 
 manner of carrying them on the general 
 ledger will determine how they shall be 
 entered on the accrual sheet. Suppose, 
 for example, that we have a $1,000 bond, 
 purchased at 80, bearing interest at 5 per 
 cent. The investment of $800 earns $50 
 each year, which is at the rate of 6.25 
 per cent. 
 
 If a bank should follow the practice of 
 carrying its bond investments at par, the 
 bond referred to should be entered on the 
 accrual sheet as $1,000 under the 5 per 
 cent rate. This is manifestly incorrect, as 
 the bank has invested but $800 and this 
 amount is earning 6.25 per cent. The 
 
 [18] 
 
ACCRUED INTEREST 
 
 
 AocRueo h^ra^EST- R 
 
 /Li 
 
 
 1 
 
 NloNTM A)^o Day 
 
 ^% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 [20] 
 
RECEIVABLE AND PAYABLE 
 
 <AB.L£ OAf DsMAA/O LOAA/S. 
 
 
 J-% 
 
 6% 
 
 To7-^L^ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 [21] 
 
RECEIVABLE AND PAYABLE 
 
 bond should, therefore, be entered as $800 
 upon the books of the bank and upon the 
 accrual sheet for that amount in the 6.25 
 per cent column. 
 
 Some financial institutions carry bonds 
 at amortized values. This may be most 
 simply illustrated by taking a bond 
 bought at a premium. Let us consider a 
 $1,000 bond, bearing 6 per cent interest, 
 purchased at 120, having ten years to 
 run. Stating the matter in its simplest 
 terms, the institution invests $1,200 and 
 receives $30 in interest at each semi- 
 annual interest period. 
 
 If this institution were to credit all of 
 the semi-annual interest payments to 
 earnings it would find itself with an un- 
 collectible asset on its books after the face 
 of the bond had been paid at maturity. 
 In order to provide against this contin- 
 gency it should "amortize" or ''kill" the 
 premium by setting aside a definite pro^ 
 
 [23] 
 
ACCRUED INTEREST 
 
 portion of the income and crediting it to 
 the investment account. 
 
 Since the bond is to be retired in ten 
 years and there are two interest periods 
 in each year, it will be necessary to set 
 aside one-twentieth of $200 each interest 
 period. This will take $10 of the $30 
 payment, leaving $20 as the semi-annual 
 return. If we multiply this by two to 
 increase the interest earned to an annual 
 basis and then divide by the amount in- 
 vested we find that the actual earning 
 power of the money invested is 3 1-3 per 
 cent. The book value of the bond, $1,200, 
 should be entered under this rate. 
 
 In order to simplify the accounting, 
 these semi-annual deductions of $10 
 should be credited to a resen^e account 
 and be used at the maturity of the bond 
 to eliminate the premium. 
 
 It must be understood that the above 
 presentation of the process of amortiza- 
 tion of premium on bonds is not mathe- 
 
 [24] 
 
RECEIVABLE AND PAYABLE 
 
 matically correct. The proportion of the 
 income set aside is reinvested and the in- 
 come received is used to reduce the 
 amount that needs to be deducted from 
 the interest payment. This, of course, in- 
 creases the actual rate of return upon the 
 investment. Those who are familiar with 
 the theory of amortization will make the 
 proper adjustments and carry the invest- 
 ment on the accrual sheet at the proper 
 rate. 
 
 If bonds are bought on a basis valua- 
 tion and carried at cost, the columns 
 must be headed with these odd rates and 
 the actual book value entered. 
 
 Having prepared these schedules, 
 proved the totals with the general ledger, 
 and having figured the accrued interest 
 receivable, the following entries should be 
 prepared and passed through the books 
 in order to establish the earning accounts 
 on the proper basis: 
 
 [25] 
 
ACCRUED INTEREST 
 
 Interest Accrued Receivable — Demand Loans 
 Interest Accrued Receivable — Time Loans 
 Interest Accrued Receivable — Bonds 
 Interest Accrued Receivable — Bonds and Mortgages 
 to 
 
 Interest Earned — Demand Loans 
 
 Interest Earned — Time Loans 
 
 Interest Earned — Bonds 
 
 Interest Earned — Bonds and Mortgages 
 
 The effect of these entries is obviously 
 to credit the earning accounts with the 
 amount of all interest accrued to the date 
 the entries go through the books and to 
 establish contra accounts to offset the 
 credits so made. When cash is received 
 on account of interest it is credited to 
 these debit accounts instead of to the 
 earning accounts. 
 
 If desired, the general ledger debit and 
 credit accounts may be combined into one 
 for the debits and one for the credits. 
 This will reduce the number of entries 
 passing through the general ledger each 
 
 [26] 
 
RECEIVABLE AND PAYABLE 
 
 day. The accrual figures should, how- 
 ever, be kept on separate sheets, so that 
 proofs may be made from time to time. 
 Having passed entries transferring in- 
 terest accrued into earnings nothing more 
 needs to be done until the day following. 
 Let us assume that the accruals have 
 been figured to the close of business 
 Tuesday, JMarch 4, that the figures have 
 been entered on the accrual sheet as 
 shown in Figure 3, that Interest Earned 
 on Demand Loans has been credited with 
 $1,532.77 and that a contra accoimt, In- 
 terest Accrued Receivable on Demand 
 Loans has been charged with a like 
 amount. The entries which follow will 
 then carry the accruals through the books 
 for a period of one week. 
 
 On Wednesday, March 5, three new 
 loans are made, $1,000 at 4 per cent, 
 $5,000 at 5 per cent and $10,000 at 6 
 per cent. These are entered on the ac- 
 
 [27] 
 
ACCRUED INTEREST 
 
 crual sheet in black ink, as shown in 
 Pigure 3. No other changes are made in 
 the demand loans on Wednesday, so new 
 totals are brought down. 
 
 One day's interest is then figured on 
 these new totals as follows: 
 
 One day's interest on $101,000 at 4,%.$il£l 
 One day's interest on 155,000 at 5%. 21M 
 One day's interest on 860,000 at 6% . 60.00 
 
 Total $92.71,, 
 
 Entries are then passed as follows: 
 
 Interest Accrued Receivable 
 
 Demand Loans .$92. H 
 
 to 
 
 Interest Earned Demand 
 
 Loans $92.71^ 
 
 The total interest for the one day is 
 then entered in the last column on the 
 accrual sheet in black ink, and a new 
 total brought down. This represents the 
 accrued interest receivable but not paid 
 
 [28] 
 

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RECEIVABLE AND PAYABLE 
 
 at the close of business Wednesday, or 
 more properly speaking at the opening 
 of business Thursday morning. 
 
 No loans were made on Thursday, but 
 two loans were paid with interest. One 
 of these was $6,000 and with it was re- 
 ceived interest for thirty-one days at 4 
 per cent, amounting to $20.67; the other 
 was $15,000, on which the interest 
 amounted to $51.66. These loans are 
 entered in red ink in their respective 
 columns and the total interest received, 
 $72.33, is entered in red in the accrued 
 receivable, net, column at the right. New 
 totals are struck. Entries are passed 
 covering the payments as follows: 
 
 Cash $21,072,38 
 
 to 
 
 Demand Loans... $21,000.00 
 
 Interest Accrued 
 
 Receivable 72.SS 
 
 One day's interest is then figured on 
 
 [33] 
 
ACCRUED INTEREST 
 
 the new balances at the proper rates aa 
 follows : 
 
 One day's interest on $95,000 at i%, $10,55 
 One day's interest on HOfiOO at 5%. 1946 
 One day's interest on 860,000 at 6%. 60.00' 
 
 Total $90M 
 
 Entries are passed as follows: 
 
 Interest Accrued Receivable 
 
 Demand Loans $90,01 
 
 to 
 
 Interest Earned Demand 
 
 Loans $90,01 
 
 Friday's business shows loans made 
 and loans paid at varying rates, but it 
 makes no difference how many or how 
 few transactions are passed through the 
 books, or whether they are entered on the 
 accrual sheets in detail or en bloc. The 
 onlj^ requisite is that thej^ be entered 
 correctly or there will be trouble when 
 proving the interest accrued receivable 
 account. 
 
 [34] 
 
RECEIVABLE AND PAYABLE 
 
 After the close of business Friday, the 
 interest is figured as before on the new 
 balances : 
 
 One day's interest on $95,000 at 4% .$10,55 
 One day's interest on 135,000 at 5%. 18.77 
 One day's interest on 365,000 at 6% . 60.88 
 
 Total $90.15 
 
 The usual entries are passed: 
 
 Interest Accrued Receivable 
 
 Demand Loans $90.15 
 
 to 
 
 Interest Earned Demand 
 
 Loans $90.15 
 
 The sheet shows that no loans were 
 made or paid on Saturday, so all that 
 needs to be done is to repeat the accrual 
 figures used on Friday, $90.15, enter the 
 amount in black in the last column and 
 strike a new balance and pass the usual 
 entries. 
 
 On Monday two sets of figures must 
 
 [351 
 
ACCRUED INTEREST 
 
 be prepared in ease there is action of any 
 kind. One of these is to repeat the 
 accrual for Sunday and the other to take 
 care of Monday's earnings. The sheet 
 shows changes in the loans on Monday 
 and the following calculations are neces- 
 sary : 
 
 One day's interest on $100,000 at i% ,$11.11 
 One day's interest on 11^.0 fiOO at 5% . 1946 
 One day's interest on 880,000 at 6%, 68,88 
 
 Total $98.90 
 
 The interest for the day is added to 
 the last column, a new total struck and 
 entries prepared in the usual manner. 
 This completes the cycle and illustrates 
 every kind of transaction that will need 
 to pass through an interest accrued re- 
 ceivable sheet. 
 
 Similar sheets should be prepared for 
 time loans, bonds, bonds and mortgages 
 and for bank balances on which interest 
 is received. In estimating the interest 
 
 [36] 
 
RECEIVABLE AND PAYABLE 
 
 earned on bank balances, it will not be 
 necessary to post the debits and credits 
 as in the case of loans, but to accrue for 
 one day on the interest bearing balance 
 as nearly as that can be determined. 
 
 It should be carefully noted that in- 
 terest on bonds and on bonds and mort- 
 gages is figured on a basis of twelve 
 months of thirty days to the year. It 
 will be necessary, therefore, to omit the 
 thirty-first day when accruing for the 
 thirty-one day months and to add the 
 proper number of days to bring Feb- 
 ruary's accrual up to thirty days. 
 
 Bankers do not, as a rule, pay sufficient 
 attention to the average earning power of 
 the money they have invested in various 
 ways and at sundry rates. Two very 
 interesting and helpful percentages may 
 be obtained from these accrual sheets and 
 adjusted daily. The first may be called 
 the average earning power of money in- 
 vested. It is found by adding together 
 
 [37] 
 
ACCRUED INTEREST 
 
 the various amounts of income from in- 
 vestments, loans and the hke, as they are 
 shown on the accrual sheets. The figure 
 obtained must be reduced to an annual 
 basis and then divided by the total of the 
 amounts invested which earn the interest 
 summarized. 
 
 It is evident that this rate will fluctuate 
 through a very narrow margin, but the 
 fluctuations will indicate whether more 
 loans should be sought at a higher rate 
 in order to increase earnings or whether it 
 will be possible to pursue a more conser- 
 vative course by accepting investments at 
 lower rates. 
 
 The second average that may be ob- 
 tained may be called "the effective earn- 
 ing power of money." Banks must carry 
 non-interest bearing reserves ; they find it 
 necessary to carry balances with other 
 banks to f acihtate collections, for the pur- 
 pose of selling exchange, and for other 
 
 [38] 
 
RECEIVABLE AND PAYABLE 
 
 purposes. These non-interest bearing 
 balances should be carried into the base 
 and thus increase it while the interest re- 
 mains the same. The rate obtained by 
 this process is "the effective earning pow- 
 er of money." 
 
 It is doubtful if this average is of any 
 more value than the average return on 
 money invested, but it is conceivable that 
 if a bank finds it necessary to maintain 
 the equipment mentioned it is fair to con- 
 sider its cost in some part of the account- 
 ing. 
 
 [89] 
 
UNEARNED DISCOUNT 
 
I 
 
CHAPTER III. 
 
 UNEARNED DISCOUNT 
 
 TN order to establish the accounts neces- 
 ^ sary to show unearned discount it 
 will be necessary to follow the procedure 
 described for accruing interest earned but 
 not received. The accounts to be estab- 
 lished and maintained are slightly dif- 
 ferent, but the process is the same. 
 
 It will be necessary to find the amount 
 of discount received but not earned on a 
 given date. Everj^ bank man is familiar 
 with the process. When this has been 
 determined entries should be passed 
 transferring the unearned discount from 
 the earning account in which it is carried 
 to a new suspense account as follows: 
 
 [43] 
 
ACCRUED INTEREST 
 
 Discount Received 
 to 
 
 Unearned Discount 
 
 The balance left in the Discount Re- 
 ceived account is all earned and the title 
 of the account should be changed to Dis- 
 count Earned. All subsequent entries 
 covering discount which has actually been 
 earned will be posted to this account. 
 The discount received on all notes after 
 the accrual sheets have been established 
 will be credited to Unearned Discount. 
 
 The totals of the bills discounted at the 
 various rates must then be entered on 
 accrual sheets and the amount of im- 
 earned discount extended into a suitable 
 column. For purposes of illustration let 
 us assume that the inventory of discounts 
 and the amount unearned at the close of 
 business, Tuesday, March 4, are as fol- 
 lows (see Figure 4) : 
 
 [44] 
 

 
 
 
 
 Un£ARa/£ 
 
 
 
 
 
 
 4% 
 
 ^Vo 
 
 (> 
 
 
 ThoA/. */' 
 
 C> 
 
 ooo 
 
 
 /6 
 
 oco 
 
 
 /(. 
 
 o 
 
 / 
 
 . S 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 . L 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 / 
 
 o< 
 
 
 
 4 
 
 o o « 
 
 
 ...-™ 
 
 ooo 
 
 
 /S 
 
 O 4 
 
 TyujiCcu^ 
 
 7 
 
 
 
 
 
 
 
 loo 
 
 
 
 
 / 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 J 
 
 o 
 
 OaZcuLcLo^ 
 
 . ? 
 
 L 
 
 & o o 
 
 
 ts 
 
 ooo 
 
 
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 o 
 
 1 
 
 
 
 
 
 
 
 
 
 
 TKyi/^^dLou^ 
 
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 ^ 
 
 VQO^ 
 
 
 /J 
 
 ooo 
 
 
 ic 
 
 
 
 1 
 
 
 
 'O- 
 
 
 
 -o- 
 
 
 /oe 
 
 O 1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RECEIVABLE AND PAYABLE 
 
 $1,000 two days to run at 6% $0,38 
 
 5,000 three days to run at 6% ... 2M0 
 
 15,000 six days to run at 5% 12,50 
 
 10,000 six days to run at 6% , . 10,00 
 
 6,000 six days to run at 4% 4^,00 
 
 Total unearned discount. . . .* $29,38 
 
 After the close of business on Wednes- 
 day, March 5, the bank will have earned 
 one day's interest on all its bills and the 
 unearned account must be reduced by 
 that amount. This is calculated as fol- 
 lows : 
 
 One day's interest on $6,000 at 4% $0,67 
 
 One day's interest on 15,000 at 5% 2.08 
 
 One day's interest on 16,000 at 6% 2.67 
 
 Total $5.4,2 
 
 The following entries are then passed 
 through the books : 
 
 Unearned Discount $5.4^ 
 
 to 
 
 Discount Earned $5.42 
 
 [49] 
 
ACCRUED INTEREST 
 
 This amount is then entered in red ink 
 in the last column on the accrual sheet as 
 shown in the figure and deducted from 
 the balance. 
 
 The figure shows that a note for $1,000 
 discounted at 6 per cent matured on 
 Thursday. The discount earned that day- 
 must be accounted for so the deduction 
 for the payment is not made till after the 
 discount earned has been deducted. There 
 is, therefore, no change to be made in the 
 totals of discounts at the various rates 
 and the amount of discount used on the 
 day previous must be deducted again, 
 leaving a balance of $18.49 unearned. 
 The usual entries must also be passed. 
 The paid note is then entered in red in 
 the proper columns and new totals 
 brought down. These totals are the basis 
 for the calculation of the discount earned 
 on Friday, which amounts to $5.25. 
 
 The figure shows a new discount made 
 on Friday of $100,000 at 6 per cent, 
 
 [50] 
 
RECEIVABLE AND PAYABLE 
 
 running for sixty days. The discount 
 received is credited to Unearned Dis- 
 count and is entered on the accrual sheet, 
 together with the amount of the note. 
 The latter is entered in the proper col- 
 umn under the 6 per cent rate and also 
 in the total column. When these entries 
 have been made the balance in the un- 
 earned column after the close of business 
 on Friday is $1,013.24. 
 
 On Friday, also, a note of $5,000 at 6 
 per cent is paid and is entered in the 
 proper columns in red and new totals 
 struck. These are used in figuring Sat- 
 urdaj^'s earnings. 
 
 On Saturday, the eighth, one day's 
 earnings on the new totals are figured 
 and entered in red in the proper column 
 and the new balance carried down. The 
 daily earnings show a decided increase 
 because of the $100,000 discount and now 
 amount to $21.08. After deducting this 
 amount there remains $992.16 unearned. 
 
 [51] 
 
ACCRUED INTEREST 
 
 Before entering three notes paid on 
 Monday, the unearned discount column 
 must be reduced by two day's interest on 
 the total covering Sunday and Monday's 
 earnings. The total for the two days, is 
 $42.16. After deducting this in the usual 
 manner there remains $950.00 unearned. 
 
 The notes maturing on Monday are 
 deducted and there remains but one note, 
 $100,000, at 6 per cent, with fifty-seven 
 days yet to run. The unearned discount 
 on this note is equal to the balance in the 
 account, proving the work of the accrual 
 sheet. 
 
 If notes are rebated before maturity, 
 simply enter the face of the note in red 
 in the proper column and deduct the 
 amount of the discount to maturity from 
 the Unearned Discount column. Then 
 pass entries as follows: 
 
 Unearned Discount 
 to 
 
 Individual Deposits 
 
 [52] 
 
RECEIVABLE AND PAYABLE 
 
 Miscellaneous earnings may be accrued 
 daily in much the same way. Take rents, 
 for example. These may be calculated 
 easily and reduced to a per diem basis. 
 They may be combined, perhaps, with 
 others, such as safe deposit rentals and 
 commissions, and carried in one account. 
 Each day, entries should be passed sub- 
 stantially as follows: 
 
 Rents, Etc, Receivable 
 to 
 
 Rents, Etc, Earned 
 
 The cash receipts will be credited to 
 Rents, Etc., Receivable. This will reduce 
 to a daily basis, every earning account 
 and effectively dispose of any and all 
 violent fluctuations in earnings. 
 
 [53] 
 
EXPENSES 
 
CHAPTER IV. 
 
 EXPENSES 
 
 T^HE daily accruing of expenses is 
 •*- neither so easy nor so accurate a 
 process as accruing earnings, but results 
 can be obtained which will be very satis- 
 factory. If included in the daily state- 
 ment in the same way as the interest ac- 
 crued and the discount earned, the result- 
 ing statement will always be up to date 
 and violent fluctuations of all kinds will 
 be eliminated. 
 
 The chief items of expense are: 
 Interest paid on deposits. 
 Rent. 
 Taxes. 
 Salaries. 
 Stationery, printing and supplies. 
 
 [57] 
 
ACCRUED INTEREST 
 
 Furniture and equipment. 
 Miscellaneous items. 
 
 The first of these accounts causes the 
 most violent fluctuations in the expense 
 section, especially where interest is cred- 
 ited quarterly or semi-annually. An 
 actual figure might be found each day by 
 running through the ledgers, taking off 
 all interest bearing balances and calcu- 
 lating one day's interest on the total. 
 This, however, would serve no other use- 
 ful purpose and would be a fearful waste 
 of effort. An estimated figure will prove 
 quite as satisfactory and be much easier 
 to obtain. Moreover, most banks calcu- 
 late interest monthly, and when this is 
 done the accrued figure may be revised 
 and proper adjustments made in the 
 accrual figure. 
 
 In order to start this accrual the 
 average cost of deposits for at least six 
 months should be taken so as to make the 
 calculation as accurate as possible. After 
 
 [58] 
 
RECEIVABLE AND PAYABLE 
 
 having a start the monthly revision of the 
 Tate and the adjustment of the account 
 will keep the daily calculations so nearly 
 accurate that no one could possibly ques- 
 tion them. For those who have not pre- 
 pared averages in this way the following 
 suggestions may be helpful. 
 
 First find the average daily deposits 
 for the period to be reviewed, by listing 
 the totals of each day's deposits as they 
 appear on the general ledger. Then di- 
 vide this total by the actual number of 
 days in the period under review. Be 
 careful to carry Saturday's total in twice 
 so as to provide for the interest accrued 
 on Sunday. It will be found desirable to 
 calculate these averages to a natural clos- 
 ing period when all interest is paid or 
 credited so that the accrual record may 
 be started with a clean slate. 
 
 The next thing to do is to analyze the 
 interest paid during the period under 
 review and eliminate any amounts that 
 
 [59] 
 
ACCRUED INTEREST 
 
 represent interest payments on deposits 
 held prior to the beginning of the period. 
 Then reduce the interest actually paid 
 during the period under review to an 
 annual basis. Divide the estimated in- 
 terest paid for one year by the average 
 amount of deposits and the result will be 
 the average per cent cost of deposits. 
 Every step in the process is important 
 and the calculations should be checked 
 very carefully. 
 
 The estimated accrued interest payable 
 should be determined each day by finding 
 one day's interest on the total deposits at 
 the determined rate. The memorandum 
 of this daily accrual should be entered in 
 the proper columns in a record similar to 
 that shown in Figure 5, 
 
 Entries should be passed as follows: 
 
 Accrued Interest Payable 
 to 
 Reserved for Interest Accrued 
 
 [60] 
 
ACCRUED INTEREST 
 
 AcC'?U£0 I^TCf^tST Paya,BI£ 
 
 D/^Y 
 
 /fee /^(j so If^TSf^esT Pay f^ a LB, 
 
 fhr/rt, Oepo^jrs 
 
 /ff^TB 
 
 Xyr-^ffBST- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Fi( 
 
 [62] 
 
RECEIVABLE AND PAYABLE 
 
 ) RsSB^VSS /=o/^ £<Pe/V^£3. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1 
 
 
 
 
 
 
 
 
 
 
 
 1 
 
 i 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 11 
 
 j 
 
 
 
 
 
 
 [63] 
 
 
 
 
 
RECEIVABLE AND PAYABLE 
 
 The debit account should be closed into 
 Profit and Loss at the closing of the 
 books in the same manner as Interest 
 Paid. The reserve account should be 
 charged with all payments of interest to 
 depositors. 
 
 Let us suppose that a banker has before 
 him each day a statement in somewhat 
 the following form: 
 
 Average earning power of money in- 
 vested ^.If2S6% 
 
 Average interest cost of deposits. . ,2.281^3% 
 
 Gross profit on deposits 2.1893% 
 
 A banker who knows this much about 
 his earnings knows also just how much it 
 will take to run his bank for a year and 
 to provide a suitable dividend and a prop- 
 er credit to undivided profits. He will 
 apply his rate of gross profit against his 
 average line of deposits and will not guess 
 that he can afford to raise his rate of in- 
 terest a bit on an attractive account. He 
 
 [65] 
 
ACCRUED INTEREST 
 
 will know, not guess, that he can afford 
 to cut his rate of interest on loans, or buy 
 an investment with a lower rate of yield 
 but with correspondingly higher security. 
 These percentages will be valuable only in 
 a banking center where interest rates fluc- 
 tuate from day to day or week to week. 
 Some of the other expense items are 
 more or less fixed charges and so may 
 easily be reduced to a per diem basis. 
 Others may be estimated on the basis of 
 the expenses of previous years, due allow- 
 ance being made for increases and de- 
 creases due to changes in operating 
 details. The per diem expense may be 
 reduced to an exact figure by establishing 
 budgets for the various departments and 
 insisting upon their operating under the 
 amount assigned. Any process may be 
 used so long as it gives a reasonably ac- 
 curate estimate of the daily current ex- 
 pense. 
 
 [66] 
 
RECEIVABLE AND PAYABLE 
 
 In order to pass entries through the 
 books each daj^ it will be necessary to 
 charge Current Expense with the daily 
 accrual and to credit a reserve account, 
 which may have any acceptable title such 
 as, Reserved for Expenses, Provision for 
 Disbursements or any other. The actual 
 expense bills should be charged to the 
 reserve account when paid. 
 
 A brief study of some of the other ex- 
 pense details may be helpful. Rent, for 
 example, is a fixed charge. The annual 
 rental should be divided by twelve and 
 then by the actual number of days in the 
 month for which the accrual is to be es- 
 tabhshed, thirty-one in January, twenty- 
 eight in February and so on. 
 
 Franchise, real estate, income, war and 
 excess profits taxes should be estimated 
 and the amount to be set up in the ac- 
 crual account determined for each day in 
 January, February, March and the other 
 months in the year. In each case the 
 
 [67] 
 
ACCRUED INTEREST 
 
 monthly amount should be divided by the 
 actual number of davs in the month, Sun- 
 days and holidays included, in order to 
 determine the daily amount to be accrued. 
 
 Salary expenses may be reduced to an 
 accurate daily basis. Establish a memo- 
 randum account showing on the one side 
 the total salary roll liability for the 
 month. Credit the account with the net 
 amount of all increases and debit it with 
 the decreases also reduced to a monthly 
 basis. Make proper allowances for parts 
 of a month. Divide the resulting balance 
 by the number of days in the month. 
 Revise the record from month to month 
 in order to keep the accrual figure exact. 
 
 The variable expense items, such as sta- 
 tionery and supplies, telegraph and tele- 
 phone, car fares, light, heat and power, 
 etc., etc., must be studied and the amount 
 to be accrued, determined after careful 
 analysis of these items for a period of six 
 months or more. 
 
 [68] 
 
RECEIVABLE AND PAYABLE 
 
 Do not fail to allow for Sundays and 
 holidays in full, for while the vault door 
 may be closed, the tellers' cages vacant 
 and the bookkeepers' desks covered with 
 up-ended stools, the loans and invest- 
 ments are working and it is well known 
 that interest on deposits, rent, taxes and 
 salaries go on forever. 
 
 How analyze these new expense ac- 
 counts for comparative purposes? Well 
 perhaps on both sides. Make an elabo- 
 rate analysis of current expenses from 
 the debit side of the reserve account and 
 an extremely simple analysis of the credit 
 side. 
 
 If furniture and equipment is carried 
 as an asset an appropriate charge should 
 be made to current expense each day as 
 a depreciation charge. If charged to 
 Current Expense, as bought, include in 
 the budget or estimate and accrue in the 
 same manner as other items. 
 
 Among the expenses of a bank, as well 
 
 [69] 
 
ACCRUED INTEREST 
 
 as any other business, are some that are 
 paid in advance. Among these items are 
 premiums on fidelity bonds, fire insur- 
 ance, some times a part of the real estate 
 tax. As a rule, they are so small, com- 
 pared with other expense items, that they 
 are not considered as assets. If they 
 comprise an appreciable part of the ex- 
 pense account they should be distributed 
 daily by charging the payments to Ex- 
 penses Paid in Advance in the first in- 
 stance and then by charging Current 
 Expense in the daily accrual and credit- 
 ing Expenses Paid in Advance. Other 
 earnings and expenses, if any, should be 
 reduced to a daily basis and entered on 
 the accrual sheets. 
 
 [70] 
 
THE DAILY STATEMENT 
 

 CHAPTER V. 
 
 THE DAILY STATEMENT 
 
 T^TOW let us see what we have accom- 
 ^ ^ plished. Let us not forget that we 
 are not correct in calling the set of 
 figures presented each morning by the 
 general bookkeeper, The Daily State- 
 ment. A statement of condition, and 
 that is what the term "statement" means, 
 should not include current earnings and 
 current expenses. It would not, if pre- 
 sented in the best of form, show real es- 
 tate owned on one side and reser\^e for 
 depreciation of real estate on the other, 
 but would show the reserve for deprecia- 
 tion as a deduction from the real estate. 
 The figures presented by the general 
 bookkeeper should be called a Trial Bal- 
 ance of the General Ledger, but we 
 
 [73] 
 
ACCRUED INTEREST 
 
 wouldn't get the book if we touched the 
 buzzer and called for it in that way, so 
 we shall stick to the term Daily State- 
 ment. 
 
 The ordinary daily statement shows 
 the following: 
 
 LOANS 
 
 Demand Loans 
 Time Loans 
 Bills Discounted 
 
 CAPITAL ACCTS. 
 
 Capital 
 
 Surplus 
 Undivided Profits 
 
 INVESTMENTS 
 U. S. Bonds 
 Other Bonds 
 Real Estate 
 
 CURRENT EXPENSE 
 
 DUE FROM BANKS 
 AND CASH ITEMS 
 
 RESERVES 
 
 EARNINGS 
 
 Discount 
 Interest 
 Exchange 
 Sundry Profits 
 
 DEPOSITS 
 Banks 
 Individuals 
 Certified Checks 
 Cashier's Checks 
 
 TOTAL 
 RESOURCES 
 
 TOTAL 
 LIABILITIES 
 
 [74] 
 
RECEIVABLE AND PAYABLE 
 
 This is elaborated upon, sometimes in 
 great detail, frequently without regard 
 to the natural grouping of the accounts, 
 but the general principles are the same 
 in practically every banking institution 
 in the country. The resource side shows, 
 loans, investments, current expense, due 
 from banks and cash items and reserves. 
 The liability side shows, capital accounts, 
 earnings and deposits. Many banks in- 
 sert a section between earnings and de- 
 posits for reserves and other suspense 
 accounts. 
 
 If accounts are set up in accordance 
 with the foregoing pages, the reserve sec- 
 tion on the liability side will be active 
 and a new section will be needed on the 
 resource side for suspended items such 
 as Interest Accrued Receivable, the off- 
 set to the daily credits to earnings. If 
 the entire programme is carried out as 
 set forth the daily statement will appear 
 as follows: 
 
 [75] 
 
ACCRUED INTEREST 
 
 RESOURCES 
 
 LOANS 
 
 Demand Loans 
 Time Loans 
 Bills Discounted 
 
 INVESTMENTS 
 U. S, Bonds 
 Other Bonds 
 Real Estate 
 
 SUSPENDED ITEMS 
 
 Interest Accrued 
 
 Receivable 
 Rents Receivable 
 Accrued Interest 
 
 Payable 
 Expenses Paid in 
 
 advance 
 
 CURRENT EXPENSE 
 
 DUE FROM BANKS 
 AND CASH ITEMS 
 
 RESERVES 
 
 TOTAL 
 
 RESOURCES 
 
 LIABILITIES 
 CAPITAL ACCTS. 
 
 Capital 
 Surplus 
 Undivided Profits 
 
 EARNINGS 
 
 Discount Earned 
 Interest Earned—Loans 
 Interest Earned—In- 
 vestments 
 Rents Earned 
 Exchange 
 Sundry Profits 
 
 SUSPENSE AC- 
 COUNTS 
 
 Unearned Discount 
 Reserve for Interest 
 
 Accrued 
 Provision for Dis- 
 bursements 
 
 DEPOSITS 
 Banks 
 Individuals 
 Certified Checks 
 Cashier's Checks, Etc. 
 
 TOTAL 
 LIABILITIES 
 
RECEIVABLE AND PAYABLE 
 
 It needs only a little imagination to 
 see that some interesting comparative 
 statements may be prepared from the fig- 
 m'es we have been studying. Let us pre- 
 pare another sheet showing the total loans 
 in one column and in an adjoining column 
 the interest earned and next to that the 
 average rate earned, carried out five or 
 six places. Let us set up other sets of 
 columns showing total investments, the 
 interest earned and the rate. Let us do 
 the same for discounts and the other 
 earning accounts. 
 
 Let us then set down the amount of 
 deposits, the estimated amount of inter- 
 est payable and the rate. Let us add, 
 also, columns for each of the expense re- 
 sent accounts estabhshed. 
 
 Then let us assemble the earnings into 
 one column and the expenses into another 
 and show the net gain or loss in an ad- 
 joining column. 
 
 Let us write all of these figures on the 
 
 [77] 
 
ACCRUED INTEREST 
 
 first line across a sheet for the first day of 
 the month and those for the second day 
 on the second line, and so on throughout 
 the month. When we get a full year let 
 us compare this month with last month 
 and with the same month of last year. 
 Let us compare j^ear to date with year 
 to date. 
 
 Now suppose that the bank president 
 has such a statement on his desk each day 
 showing regular and normal changes 
 accruing gradually to the fateful June 
 thirtieth and December thirtj^-first. What 
 an improvement that would be over the 
 figures that actuallj^ work out from the 
 old method of taking discount into earn- 
 ings when received and entering expenses 
 when the bills are paid regardless of the 
 period covered? 
 
 What an improvement it would be to 
 know exactly where the bank stands 
 every morning in its actual surplus as 
 well as in the volume of its deposits, 
 
 [78] 
 
RECEIVABLE AND PAYABLE 
 
 loans, investments, due from banks, and 
 cash? 
 
 One enthusiast for daily analysis in 
 other lines of business has termed the 
 process of daily accruals "The Science of 
 Economy." He argues that if all con- 
 cerns knew from daj^ to day just how 
 their earning and expense accounts were 
 progressing they would not be so enthu- 
 siastic about the success of their enter- 
 prises. There would be no failures, he 
 says, because every business man would 
 know exactly where he stands at all times 
 and would liquidate before the crash. 
 This would save coimtless losses and the 
 banks would be happy ever after. 
 
 Bank accounting is a simple process. 
 Most of the general figures are demanded 
 daily. Why not go a step further and 
 make them tell the truth? 
 
 [79] 
 
1 
 
APPENDIX 
 
J 
 
I 
 
 HOW TO CALCULATE INTER- 
 EST ACCRUED AND UN- 
 EARNED DISCOUNT 
 
 INTEREST 
 
 NTEREST on bonds and on bonds 
 and mortgages is always figured on 
 what is called the month-and-day basis. 
 This means, simply that the number of 
 days in the period is ascertained by count- 
 ing each full month in the period as thirty 
 days regardless of the number of days in 
 the month. The odd days are added. For 
 example: In the period from April 1st 
 to July 15th there are three months and 
 fifteen days, or one hundred and five 
 days. 
 
 Investments in bonds and bonds and 
 mortgages are made for long periods of 
 time. Arrangements are made in ad- 
 vance of the needs and there is abundant 
 opportunity to adjust the interest periods 
 
 [83] 
 
ACCRUED INTEREST 
 
 to the dates most satisfactory to all con- 
 cerned. The interest is, therefore, paid 
 periodically and at stated periods, usually 
 semi-annually. 
 
 Loans are made at any time. Some 
 may be paid at any time. It is obvious, 
 therefore, that a month-and-day basis of 
 calculating interest would not be equi- 
 table. The practice is to charge interest 
 for the actual number of days the money 
 is lent. A simple rule for finding the 
 number of days is to count the nights 
 intervening. 
 
 In each case a day is one-three-hun- 
 dred-sixtieth of a year. The tables are 
 known as 360-day tables. 
 
 For the purpose of illustrating the 
 method of calculating the interest accrued 
 receivable on bonds owned by a hj^potheti- 
 cal bank let us assume that its entire in- 
 vestment in bonds at the close of Decem- 
 ber 31, 1917, consisted of the bonds shown 
 in Table No. 1. 
 
 [84] 
 
RECEIVABLE AND PAYABLE 
 
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 [86] 
 
 
 
 
 
 
RECEIVABLE AND PAYABLE 
 
 Let US also assume that it has been the 
 practice to credit interest to earnings only 
 when received and that it is planned to 
 begin to accrue interest daily on January 
 1st. It will then be necessary to calculate 
 the interest earned bj^ the bonds, but not 
 yet received, as at the close of business 
 December 31st. It will be helpful to con- 
 struct a table so that the calculations may 
 be made in a uniform manner. They will 
 appear as in Table No. 2. 
 
 In order to present the matter as simply 
 as possible the par values and the nominal 
 interest rates were used in the above cal- 
 culations. On this basis the total amount 
 of interest accrued but not entered is 
 $1,234.16. Entries should be passed as 
 follows : 
 
 Debit 
 
 Interest Accrued Receiv- 
 able— Bonds $1,2SJ^,16 
 
 Credit 
 
 Interest Earned — Bonds $1,284^.16 
 
 [87] 
 
ACCRUED INTEREST 
 
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 [88] 
 
RECEIVABLE AND PAYABLE 
 
 The tickets should contain an explana- 
 tion somewhat as follows: 
 
 To credit earnings with the amount of 
 interest earned on investments to Janu- 
 ary 1, 191 — , as per schedule attached. 
 
 Then attach a copy of the calculation 
 shown in the above table. 
 
 Next, enter the bonds on the accrual 
 sheets described in the text and illustrated 
 on pages 30 and 31. The accrual sheet 
 will appear as in Table No. 3. 
 
 Then proceed as described in the text 
 beginning at page 17. 
 
 DISCOUNT 
 
 The situation is exactly the reverse in 
 the case of discounts. We have a great 
 many notes varying in amounts and in 
 length of unexpired terms. The discount 
 for the unexpired term is unearned even 
 though it has been credited to earnings. 
 
 In order to determine the amount of 
 
 [89] 
 
ACCRUED INTEREST 
 
 this unearned discount, we must determine 
 the time to maturity of each note and cal- 
 culate the discount. The simplest method 
 is to reduce each note to a one-day basis 
 by multiplying the amount* by the number 
 of unexpired days. Summarizing records 
 should be set up in the manner as shown 
 in Table Xo. 4. 
 
 If discounts are all made at the same 
 rate much work may be saved by taking 
 the total of the tickler for each day in- 
 stead of the individual notes, as in Table 
 No. 5. 
 
 If this plan is followed, it might be 
 well to check the notes to the tickler be- 
 fore starting so as to be sure that all notes 
 are entered and entered correctly. 
 
 Since these summary sheets are prepared 
 by rates, the totals of each will furnish 
 inventory figures for the unearned dis- 
 count sheet shown on pages 46 and 47. 
 
 It would be well to prepare the interest 
 and discount summaries so that they can 
 
 [90] 
 
RECEIVABLE AND PAYABLE 
 
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 91] 
 
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ACCRUED INTEREST 
 
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 [92] 
 
RECEIVABLE AND PAYABLE 
 
 be preserved for future reference. If the 
 work is proved by calculating the discount 
 on each note or group of notes and also 
 on the total for one day the working 
 papers may not be referred to again. 
 One can never tell, however, when old 
 working papers will be needed to settle 
 some knotty problem. They should be 
 held until the interest accrued receivable 
 and the unearned discount accounts have 
 been proved two or three times. 
 
 [93] 
 
THIS BOOK IS DUE ON THE LAST DATE 
 STAMPED BELOW 
 
 AN INITIAL FINE OF 25 CENTS 
 
 WILL BE ASSESSED FOR FAILURE TO RETURN 
 THIS BOOK ON THE DATE DUE. THE PENALTY 
 WILL INCREASE TO 50 CENTS ON THE FOURTH 
 DAY AND TO $1.00 ON THE SEVENTH DAY 
 OVERDUE. 
 
 AfR 9 1934 
 
 "TTTTi ? r> 
 
 R£C. CIR. m2(f^^ 
 
YB 18240 
 
 415514 
 
 UNIVEP^ITY OF CAUFORNIA LIBRARY 
 
%*■" ^}^ 
 
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