Books maintained by a Bank

The methods of preparation and presentation of Profit and Loss Account and a Balance Sheet of a Bank are very important and significant which include certain peculiar terms. For this purpose, a short description of different books, ledgers, registers and terms which are very important are discussed hereunder.

Books Section

Cash Book: For recording different types of cash transactions two types of cash books are recorded, viz.

• Rough Cash Book which deals with cash receipts and cash payments maintained by a receiving cashier and paying cashier, respectively. It records serial number, depositor’s name, amount received etc. in cash, whereas, in case of cash payment, serial number, payee’s name, amount paid, number of token etc, are recorded.
• A Fair Cash Book, on the other hand, is one when a separate person, after receiving the above information from the paying and receiving cashier, records the transactions in a separate book. Naturally, the transaction of the Fiar Cash Book must tally with the sum total of the above two cash books.
  

Cash Balance Book: The cash balance at the close of the day is written in the book which is duly signed by the cashier and the manager.

Day Book: It records day-to-day transactions of the book relating to cash transfers, clearings etc.

Ledger and Register Sections

Ledger Section:

Current Account Ledger: It records the transactions of those customers who open current accounts. Generally, the bank does not pay interest on the balance of this account but a nominal charge is taken by the bank for rendering the services. If there are many current accounts, those are to be serially numbered.

Savings Bank Ledger: It records the transactions of those customers who open savings account in a bank. The detailed description of the customer, viz, name, address, occupation, etc. are recorded along with an account number. If there are many Savings Account Ledgers, they are to be serially numbered.

Fixed Deposit Ledger: It contains transactions of those customers who have deposited their money into the bank for a fixed period. Generally, at the top of the account, depositor's name and address, rates of interest, period of deposit, the amount so deposited etc. are to be recorded.

General Ledger: It is actually the key ledger of the accounting system of a bank. It contains a total amount in respect of total Current Accounts, total Savings Bank Account, total Loans Account, Total Bills Payable Account, Total Expenses and Total Revenue Accounts. Each ledger is kept under self-balancing system. A trial balance can easily be prepared which help to prepare the Final Account as well.

Besides the above ledgers, overdue fixed deposit ledger, fixed deposit interest ledger, loan ledger, investment ledger may also be prepared.

Register Section

The register section includes, Bills for Collection Register, Securities Register, Document Register, Standing Order Register, Cheque Dishonoured Register, Drafts Issue Register, Drafts Payable Register, D.D. Register, Foreign Letters of Credit Register etc.

The Slip system of Ledger Posting

It is a method of rapid posting in books maintained under Double Entry principle. Under this system posting is done from slips and not from journals or cash books. Slips are loose leaves of journals and these are supplied either by the customers or by the bank staff.

It becomes necessary for a bank to know the position of its individual customer’s account at any time and to see that the transactions are recored as soon as they take place. The same is not actually possible if transactions are recorded in bound books. So, original cheques and paying-in-slips are used as vouchers. Consequently, the cashier, for this purpose, credits cash account for receiving cheque and it passes on to the ledger-keeper concerned for debting the customers’ accounts. On the contrary, for paying-in-slips the cashier debit cash account and passes on the same to the ledger-keeper concerned, for crediting the customers’ accounts. In this way, the Double Entry posting is completed. The transactions which are not covered by original slips are posted by means of ‘dockets’ which is made out by the bank staff. There are used for posting purposes.

Advantages:

The advantages of this system are

• it reduces the possibility of errors and frauds.
• it saves a lot of time since the slips are prepared by the customers themselves.
• it provides a good system of internal check etc.

Disadvantages:

The system is also not free from snags. It suffers from the risk of loss, misappropriation or destruction of slips they are loose.

Special Features of Bank Accounting

• Entries are posted in the personal ledgers directly from slips instead of being posted from the books of primary entry. In a bank, the main slips are pay-in-slips and cheques. These slips are filled in by the bank’s customers; as such the bank saves a lot of clerical labour and cost.
• Trial balance is prepared every day from the balance of accounts in the General ledger.
• Personal ledger are kept under self balancing system. Trial balance is prepared for personal ledgers twice in a month.
• The slips posted into different personal ledgers every day are summarised on summary sheets, totals of which are posted to the control accounts in the General ledger.