The customer deposits a certain sum in the bank for which he receives a letter of credit, less commissions and exchange.

His signature is taken, the transaction is entered upon a journal, showing both the American and the foreign money represented, and the commission and the exchange. An account is opened with the

THE AMOUNT DRAWN AGAINST THIS CREDIT NOT TO EXCEED
POUNDS STERLING.

depositor on a ledger kept for the purpose, crediting him with the sum represented by the letter of credit. The various correspondents are notified at once of the issue of the letter. As sums are drawn by the traveler the amount is endorsed in the place prepared for it on the inside of the letter; the home bank is at once notified, and the ledger account charged with the sum.

Fig. 149 and 149 (continued) show the forms for both sides of a letter of credit.

CHAPTER VII.

CERTIFICATES OF DEPOSIT, CASHIERS' CHECKS AND DUE

BILLS.

CERTIFICATES OF DEPOSIT.

It is customary for banks to receive deposits and to account for them by other means than by keeping a ledger account with the depositor. For this class of deposits the bank gives the depositor a receipt or a certificate.

These certificates of deposit are not subject to check, and should so state on the face. They form a convenient means of depositing for savings, and it is customary in such cases to allow the depositor interest for a specified time. The fact that money cannot be drawn from this class of deposits by checks, as with the ordinary deposits, makes this form too inconvenient for the usual commercial transactions. Their chief use is for the deposit of trust funds, for savings deposits, as before mentioned, for the safe transmission or carriage of money from one section of the country to another, and for the transfer of funds from one individual to another.

The certificates state upon the face that a certain specified sum has been deposited payable to either the depositor or to some other individual, whose name must appear. If the depositor has the certificate made payable to himself he should leave his signature at the bank, but this is not necessary if it be payable to some one else. There are two classes of certificates of deposit issued-demand certificates, which permit the holder to present them at any time for payment, and time certificates, in which some specified time is mentioned. Upon these latter the banks generally pay interest, the rate depending often upon the length of time the money is to remain. In many banks a time limit is specified in the certificate, and no interest is paid after the expiration of this limit. This is a safe measure. In fact, the time certificate will be found an advantageous form.

During a financial pressure the bank is protected by the time limit from any danger of a run. In such times it is very comfortable to be able to look over the certificate register and learn when certificates will mature, and their amount, and be able to prepare for them.

The time limit, both as to the interest and the principal, should be very specifically stated, however, otherwise, according to the ruling of the courts in some States, the bank may sustain a loss.

Fig. 150 shows the usual form for a demand certificate of deposit. This is shown with a

stub attached, as many small banks prefer to have them bound in a book, with stub, and in such an institution it will be found convenient, but the larger banks prefer to have the certificates made in tablets, numbered consecutively, and to keep the record on a certificate register.

Fig. 151 shows a time certificate, the limit of time and the rate of interest being specified. Fig. 152 shows a form for a certificate of deposit in which two time limits are specified, each bearing a different rate of interest, which is often found convenient.

It is of course necessary that the records regarding both the issuing and the paying of the certificates of deposit be kept with great care.

The first to be considered is the issuing. It too often occurs that when a customer wishes a certificate of deposit the certificate is issued upon his verbal instructions. This is not as it should be, for there should be a voucher for the receipt of the money, containing full written directions, as much so as for the

receipt of ordinary deposits or for the issuance of drafts. This voucher should be in the form of a ticket and should state specifically the date of issue, the name of the depositor, for whose benefit,

and the amount. Wherever possible it is better that this slip should be filled out by the depositor. The teller then counts the money as shown by the ticket, having checked it, and passes the ticket over to the clerk whose business it is to fill out the certificate. When the certificate is made out, it, together with the ticket, is

$500 Traders National Bank

taken to the Cashier for his signature, and that officer has the opportunity of seeing that the issuance is regular. The ticket, with the number of the certificate marked upon it, is finally filed away for reference.

From this ticket the entry is made on the stub of the certificate book, or in the certificate register, and where no certificate register is used, and an itemized account of the certificates kept on the gen

Certificates of Deposit

MERCHANTS NATIONAL BANK

Noms

Whose Order

Time
Demand

CENTRE CITY, PA.

.190

eral ledger, the ticket is the voucher from which the posting is made.

Fig. 153 shows a good form for such a ticket.

It is not sufficient that a mere record of the issuing of the certificates be kept, but this should be kept in such a way as to be able to record the payments properly, thus enabling one to learn at any time the actual amount of certificates outstanding.

There are two ways of doing this; one, which is applicable to the small banks, and especially to those that have the certificates bound in a book with stub, is to keep a ledger account in detail, styled certificates of deposit, crediting the account with each certificate issued and charging it with each payment opposite its respective issue. Some banks keep this account on the general ledger and some on the individual ledger. I think it is preferable to keep it on the former, for this class of deposits are different from the ordinary, and in making reports must be reported separately.

FIG. 153.-CERTIFICATE OF DEPOSIT

TICKET.

Fig. 154 shows the customary form of keeping this account on the ledger in detail.