Assume that on June 30 we buy 100 Liberty Bonds at 3 1/2%, due 1932 at $99.50, that the accrued interest thereon is $20 and that the commission is $5. These figures on interest and commission are based on no particular interest or commission rate. The general ledger entries under the cash as against the accrual method, which will be fully explained subsequently, are as follows:

Illustrations of the general ledger have been given during previous transactions so that they will not be shown here. It is sufficient to say that the U. S. Government security account would be handled as to debits and credits on the general ledger just as the loan and bills discounted accounts which have already been illustrated.

Auxiliary Security Records

Depending upon the size of the bank various records of securities should be kept, among which are: the bond register, a book of original entry; the bond or security ledger; the bond number record, showing the numbers and denominations of all securities; and a coupon maturity record. Illustrations will be given here of only the more important records, namely the register and ledger:

It should be noted that the cost plus the accrued interest and seller's commission columns equals the amount paid for the securities.

2. Bond or Security Ledger is posted from the register which is illustrated above. The name of the security would appear on the top of the page of the ledger, the debit side of which should give substantially the following particulars, usually arranged in vertical columnar form:

Accrued interest and interest collected on bonds is kept by many on the bond ledger. That is desirable but not vital. It will be noted that accrued interest is strictly not a part of the cost, because the bank gets that back on interest maturity date.