In the more progressive banks it is customary to keep records classified first by currency, and under currency by date or month of delivery, showing the commitments of the bank in the purchase and sale of exchange. The sheets for each currency have purchase and sales sides. Under "purchase" would be shown, of course, all commitments to buy giving: (1) Contract number; (2) from whom bought; (3) foreign amount; (4) rate; (5) dollar amount; (6) kind of exchange (that is, cable, demand or time bill); and (7) date delivered. On the "sales" side would appear similar information with respect to sales contracts, that is: (1) Contract number; (2) to whom sold; (3) foreign amount; (4) rate; (5) dollar amount; (6) kind of exchange (that is, cable, demand or time bill); and (7) date delivered. It will be obvious that the dollar amount of all purchase contracts as at the close of a given day must represent the dollar equivalent of the bank's commitments to buy. That is obviously a liability on its part, but it is also an asset by virtue of the fact that though the bank has agreed to receive at a certain or determinable time and is thus liable to the seller, the seller is also liable to the bank for the act of delivery. The opposite is true with sales contracts. The bank has committed itself to deliver exchange at certain rates at a definite or determinable time, and the total dollar value of these sales contracts represents the amount of the bank's liability; but as was shown for purchase contracts, there is a corresponding asset representing the agreement on the part of the buyer to receive. These commitments to buy and sell exchange are satisfactorily shown in a bank's daily statement by setting up four accounts, two assets and two liabilities.

Contracts to Buy Exchange - Asset Contracts to Buy Exchange - Liability

These should offset each other and should represent the total dollar amount of the commitments to buy exchange. There should be similar accounts for sales contracts, namely:

Contracts to Sell Exchange - Asset Contracts to Sell Exchange - Liability

These two accounts also should offset each other. As new contracts are engaged in, the figures of the accounts mentioned increase. As deliveries are made, these commitment figures decrease. Commitment accounts are usually placed below the line on the daily statement so as not to inflate the figures. They are, of course, more contingent in character than many of the assets and liabilities appearing above the line.