THE LEDGERS
28. Stock Ledger. Some brokerage firms, besides keeping the stock record, keep a stock ledger, opening an account with each line of stock bought or sold and posting therein daily from the orders. This ledger account, with each class of stock, indicates at all times just how much of each line is held by the house and is very necessary in order to show what may be sold if occasion demands. As a large amount of stock held by brokerage firms is usually deposited with their bank as collateral for loans, and, as it is frequently the case that portions of this stock must be delivered to customers or sold upon their order, it is necessary to frequently change the collateral deposited with the bank, substituting other stock for that taken from the bank.
BASEMENT SHIPPING PLATFORM, FARWELL, OZMUN, KIRK & CO. (WHOLESALE HARDWARE), ST. PAUL, MINN.
Fig. 13. This Shows a Variety of Rulings for the Customers' Ledger
The stock ledger form in loose leaf is 13¾ by 14 inches, and the name of the stock should be inserted in the heading. It is ruled and printed to show: Date bought, preferred, common, extra column, price, account, date sold, preferred, common, extra column, and price, as shown in Fig. 12. Each sheet should have a number, and these numbers should follow consecutively. There are two ways of indexing these accounts. The one strictly in accordance with the theory of loose leaf is the insertion of the sheets in their proper alphabetical sequence. When the accounts are carried in this manner, leather tabbed index sheets appear at intervals throughout the ledger or ledgers. The division of the alphabet depends entirely upon how many accounts it is necessary to run and ledgers may be alphabetically subdivided into from twenty-five to two hundred divisions. The better the subdivision, the easier it becomes to turn to an account.
Since the majority of listed stocks are designated by initials or abbreviations in order to handle them with greater ease, some firms prefer to run the stock ledger on the numerical plan. By this plan each account is numbered and the accounts follow consecutively. Tabbed index sheets occur at intervals of from ten to twenty numbers, showing the location of any numbered account. With this arrangement it is necessary to keep a separate index of the various listed stocks, with their respective numbers, and to find an account the number of the stock must first be ascertained. By constant handling and entering, the bookkeeper becomes very familiar with the numbers and it is but little trouble for him to locate an account. The greater difficulty would be for someone who is unfamiliar with the books to find an account when wanted. Owing to this fact, the alphabetical arrangement is preferred.
29. Customers' Ledger. Brokers who deal in grain and other food products, cotton, and stocks, usually require ledger sheets slightly differing, to keep a record of customers' accounts. The different rulings are not frequently used for the same customer, as those who deal in grain are not often stock manipulators. As interest is charged to the customer for deferred payments upon stock deals, this item must be taken care of in the ledger. Upon grain transactions, the balance on the purchase price is not paid until the delivery of the goods, consequently there are no interest charges upon these accounts until after maturity.
Fig. 13 shows rulings of six ledgers used by prominent brokerage houses in Chicago and St. Louis, and a study of the different forms as to the columnar arrangement will show how varied are ideas in regard to ledger rulings. All of these forms are useful, and the choice is merely a matter of individual preference. One thing which should be borne in mind in regard to ledger rulings is that the information shown in the ledger account should be exactly the same as that which it is necessary to convey to the customer in his monthly or weekly statement. The reason for this is that it should never be necessary to refer to any book except the ledger in preparing customers' statements, and it will be noticed in the statement of Logan & Bryan, shown later, that it is not only a reproduction of the ledger account as to matter contained therein, but also follows it exactly in form and ruling.
This book is used the same as any other loose-leaf ledger with the exception that there is much more detail entered in these ledger accounts than is usual in a mercantile business.
Not more than one account should be entered on one leaf, for the reason that it is impossible to maintain a perfect alphabetical arrangement unless each account is absolutely independent.
After the names have been entered, the ledger sheets should be arranged alphabetically under each leather tabbed indexed subdivision. This arrangement should be carried, if necessary, to the fifth or sixth letter and when names are the same, like Smith, they are indexed alphabetically by initials. The brokerage business is one where there should be no loss of time in referring to accounts, hence the more perfect the indexing the more easily the account is located. Ledgers can be balanced daily by the aid of an adding machine without writing off the amounts of the balances.
The binders to use for this ledger are a current binder for active accounts and a transfer binder for closed accounts.
Postings should be made from the daily record sheet to the ledger as soon as possible after the consummation of the deal, and the postings from the cash book must also necessarily be kept up to date. At any moment the statement of the customer may be required, and it would be quite inconvenient for the broker if, on account of delayed posting, the statement were incomplete or incorrect. The number of customers' ledgers that should be kept depends entirely upon the number of customers. One loose-leaf ledger binder will accommodate at least five hundred accounts, and if the number exceeds this, two current binders should be used. By keeping the ledgers well gleaned and transferring closed accounts to a transfer ledger, the active accounts only remain in the current binder, which facilitates posting, statement making, and reference.
Fig. 14. Conventional Balance Form for General Ledger
Some firms use the vertical filing drawer for transferred accounts instead of placing them in another binder, as it is much easier to secure these accounts for replacement in the current binder in case the account is reopened.
30. General Ledger. A general ledger should be kept for the personal accounts of members of the firm, controlling accounts of subsidiary ledgers, controlling account of bills receivable and bills payable, and all impersonal accounts. This book may be in loose leaf if desired, although many firms prefer to use a bound ledger for this purpose. The best form is the regular four-column ledger, debit, credit, debit balance, and credit balance, as in Fig. 14.
The periodical statement of the condition of the firm is taken from the general ledger, and all subsidiary books controlled through its accounts must balance with the amounts shown therein.
Fig. 15. Broker's Statement to a Customer, Which is a Duplicate of his Ledger Account
Most large brokerage houses have branches in different cities and it is necessary to keep accounts in the general ledger with each of these branches showing the expense of the branch and the receipts therefrom, taken from the regular statements furnished at whatever period required. It is very necessary that the profits or losses from these branches be readily computed as it might be deemed expedient, if it were known that the branch was not doing well, to discontinue it. Frequent statements, complete in their nature as to receipts and expenditures, should be demanded.
The principal expense accounts of a brokerage firm are salaries, rent, private telegraph wires, telephone booths, tickers, advertising, special commissions, and sundry expenses. As before stated, the receipts are from commissions and interest. Commissions accruing to brokers from the sale of stock are twenty-five cents per share—twelve and one-half cents for sales, and the same amount for purchases.