163. The Accounting

The principal feature to be shown by the accounting for investments is the amount outstanding and the record of interest payments. Many banks open an account with each kind of security in the general ledger. The account is charged with the actual cost of the security and is credited with the proceeds of subsequent sales and often with part of the interest received each period. When a statement is prepared, a summary of the balances must be made to make up the total of stocks and bonds. This record will answer as well as any other if only a few bonds are held, provided the interest periods are carefully tickled so that no delay may occur in collecting the interest.

Bond Or Investment Ledger

Bond of.....................................................................................................................................................................................................................................................................

Interest rate........................Payable............................................................Basis........................................................Principal Due....................................................................

Safe No.....................Compartment No.................................................

Figure 130. Bond Or Investment Ledger.

In a bank which has a large line of bond investments or in a trust company, something more elaborate must be installed. The general ledger should have only a controlling account for the entire holding of stocks and bonds and a subsidiary ledger kept by the bond department to show the detail of the company's holdings. Figure 130 on page 285 shows a form of ledger suitable for this purpose. A loose-leaf record will be found to be more desirable than a bound one, owing to the fact that all the securities of a certain issue may be sold if the market price is considerably above the book value. The dead leaves may then be transferred. Very little space has been left to the record of interest on this ledger. As before, a separate record or tickler should be kept to prevent failure to present coupons on the actual due date. This tickler may be made very simple by the use of cards as shown in Figure 131 on page 288. They should be filed in a drawer with monthly guide cards. Each month's cards should be arranged alphabetically. Some bonds, but fortunately very few, have maturity dates other than the first of the month. If there are enough of these to warrant, cards of another color may be used or a little tab bearing the date may be fastened to the top of the card.

When the clerk who is charged with the responsibility of collecting the interest finds time to cut off some of the coupons falling due, he removes a few of the cards from the box and gets the bonds from the vault, giving a receipt for the bonds to the custodian. He then tears off the coupons, puts them into envelopes ruled for the purpose and makes the proper notation to the effect that this much of the work of collecting the interest is done. He then returns the bonds to the vault and receives the receipt given by him, which he destroys. The card is then returned to the case, in the current month, but behind a guide card reading "coupons cut." After the coupons have been collected, the cards should be again removed and the proper note of credit made thereon. The actual ticket crediting interest should go to the clerk having charge of the investments so that he may note in the last column the date on which the credit to interest is made. Only one issue should be kept on a ledger sheet and card.

The records necessary for bonds and mortgages have been fully described in Section 34.