Opening an Account with the Bank.—Because so much of the bank’s business is based on the honor and integrity of its customers, a prospective depositor is usually required to present a card of introduction signed by a customer of the bank or someone else known to it. A depositor who wishes to open a checking account is asked to file a “signature” card bearing the signatures which he will use in signing checks. As considerable expense attaches to handling depositors’ accounts, some banks require that the balance of the account shall never fall below a fixed minimum.
The Deposit Ticket.—When an account is opened, the depositor is provided with a pass-book and check book. All deposits are made by means of deposit tickets, discount memoranda, or collection notices. The deposit ticket is in form similar to the following:
Form 21. Bank Deposit Ticket
All moneys and checks deposited are listed on this ticket under the indicated classifications. The deposit is handed to the receiving teller of the bank, who, after verifying the ticket, makes an entry of the amount in the depositor’s pass-book. Duplicate deposit tickets are usually kept by the depositor. It is important to note that checks must be indorsed before they are deposited, so as to make them collectible by the bank.
The Pass-Book.—The pass-book is the record of the depositor’s dealings with his bank and, although written up by the bank teller, it is usually kept from the depositor’s viewpoint, i.e., the bank is debited with all deposits and credited with all checks presented for payment. At stated intervals, say monthly, the book is left with the bank for balancing, at which time the total amount of checks paid by the bank is entered in the pass-book and the canceled checks are returned to the depositor. Sometimes the pass-book is kept in account form, the left page indicating deposits, and the right page payments by the bank. More frequently, however, the pages of the pass-book do not have debit and credit significance but constitute a continuous record. In this case, at the end of the period, the deposits are footed and the total of the checks is subtracted from the total deposits, thus showing the balance due the depositor.
A method coming into quite general use among banks is to send a monthly statement of account just as trading concerns do. This statement is a transcript of the bank’s ledger account kept with each depositor, showing deposits and withdrawals. When this is done, withdrawals are not entered on the pass-book, which thus serves only as a memo or receipt of the moneys deposited.
The Check Book.—The check book is provided either with a stub, counterfoil, or interleaf, for making a duplicate record of the check drawn. Provision is usually made in the check book for the entry of the deposits. Sometimes each check is subtracted from the previous balance and the amount of the new balance shown; more often, total checks and total deposits are shown separately and in this way, while it is an easy matter to find the balance by subtracting the total checks from the total deposits, the actual figure does not appear and hence is not available to curious eyes.
The balance shown in the monthly statement or by the periodic balance of the pass-book is seldom the same as that shown in the depositor’s check book, due to the fact that certain checks issued by the depositor have not yet been presented for payment to the bank. The method of reconciling the pass-book with the bank balance is treated in [Chapter L], “Accounts Current.”
Securing a Loan through the Discount of a Note.—A common practice of business men in borrowing money is to discount or sell to their bank or to a broker their own promissory notes and those received from customers. When merchants discount their own notes at a bank, the notes bear only one signature, that of the merchant, and for this reason they are called “one-name” paper. If a merchant receives a note from a customer, indorses it, and then discounts it at the bank, two signatures appear on it—that of the original maker and that of the indorser. Notes of this kind are called “two-name” paper. Banks usually prefer two-name paper because, if the maker fails to pay the note at maturity, the indorser can be held liable for its payment, while in the case of one-name paper the bank has recourse to no one except the maker.