REFERENCE LIBRARY.

SPECIAL NOTICE.

The Council, in view of the increased accommodation afforded by their new offices in St. Michael's House, have removed there the Library, which has up to the present time been located in the Library of the London Institution. At the same time they have added a number of Dictionaries and other works of general reference; and it is their intention to increase the collection of books, by additional purchases from time to time. It is hoped that the central position of the Institute's offices will lead Members to make use of the Library, a revised Catalogue of which will be prepared and circulated at the close of the year.

The attention of Members is requested to the list of books, etc., required to complete sets, and the Council take this opportunity of expressing their continued readiness to accept donations of books for addition to the Library.

The Council desire to request the attention of Members to the following list of works, which, among others, are required in the Library :

Economist. Volumes prior to 1879.

Bankers' Magazine, prior to 1874.

Journal of the Statistical Society. Ditto.

The Times, piror of 1879.

Early copies of the London Directory.

Banking Almanack prior to 1879.

The Annual Register.

Lawson's History of Banking.

Hansard's Parliamentary Debates.

Tooke's History of Prices.

Lord Overstone's Select Tracts on Currency, &c.

The Council of the Institute of Bankers desire it to be distinctly understood, that Authors alone are responsible for the contents of their Papers, both as to matters of fact and of opinion, and, also, that the Institute accepts no responsibility for the opinions which may be expressed in the various discussions.

BY ORDER OF THE COUNCIL.

SUBJECT AND CONDITIONS FOR PRIZE ESSAY.

SESSION 1884-5.

THE following is the title of the Essay to which a First Prize of £20 and a Second Prize of £10 will be awarded at the May meeting of the Institute, 1885. The Essays must be lodged with the Secretary on or before the 1st January, 1885:

"PERIODIC FINANCIAL AND COMMERCIAL FLUCTUATIONS CONSIDERED IN THEIR RELATION TO THE BUSINESS OF BANKING.

(The subject is not to be treated simply historically, and the term "fluctuation is meant to be used generally, and not merely to include the ten year fluctuation, but also the autumn drain, the quarterly variation due to Government operations, &c. Intending competitors are recommended to study (among other works) Professor Jevons's "Investigations in Currency and Finance.")

The following are the conditions :

Each Essay to bear a motto, and be accompanied by a sealed letter, marked with the like motto, and containing the name and address of the author; such letter not to be opened, except in the case of the successful Essay.

No Essay to exceed in length 30 pages (Svo.) of this publication, and distinct references should be made to such authorities as may be quoted or referred to.

The Council shall, if they see fit, cause the successful Essays, or abridgments thereof, to be read at a meeting of the Institute of Bankers, and shall have the right of publishing the Essays in their Journal one month before their appearance in any separate independent form; this right of publication to continue till six months after the award of Prize.

Competition for the above Prizes shall be limited to the Associates and Members of the Institute of Bankers.

The Council shall not award the Prizes, except to the authors of Essays, in their opinion, of a sufficient standard of merit.

The Essays must be legibly written, and on one side of the paper only.

If further explanation is required, it may be obtained from the Secretary, at the Offices of the Institute, 2, St. Michael's House, E.C.

The Institute of Bankers.

OCTOBER, 1884.

A SYSTEM OF BANK BOOK-KEEPING.* Being the Essay for which was awarded the Prize of £50, offered by Geo. Rae, Esq.

By W. A. STEEL, an Associate of the Institute.

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CHAPTER I.

INTRODUCTORY.

OOK-KEEPING is the art of recording the financial facts that affect the affairs of a person or firm in business. It collects and arranges such facts in the form of accounts that tell us in the briefest possible way all that has occurred to increase or lessen the prosperity of the undertaking in question, so that we understand how it stood at its first establishment, what have been its enterprises, transactions, gains, and losses, and what is, at the

The writer desires to acknowledge valuable assistance derived from the following works :

"Gilbart's History and Principles of Banking."-Edited by A. S. Michie. "The Scottish Banker."-By W. H. Logan.

"The Banker's Clerk;" especially Chapter on "Bill Books."

"The Practice of Banking."-By J. Hutchison.-Vol. II.

The full title was as follows :—“ On that system of Bank Book-keeping which shall combine clearness and efficiency with the minimum of book entry and calculation; the essay to include the best form of books, accounts, and returns, as between the head office of a bank and its branches."

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moment of examination, owing to and by it. The first merit of a system of book-keeping is exactitude; that everything affecting the pecuniary position of a commercial concern shall be recorded, and recorded accurately. But a system of accounts may be complete and correct, and yet be confused, difficult to unravel, owing, it may be, to transactions of similar nature being classified under different heads, or transactions of dissimilar kinds classified together. The second merit, then, of good book-keeping is, to be clear and intelligible; that the accounts shall be so arranged as to tell their own story, and yield an intelligible result without any laborious examination. Yet accounts may be both accurate and clear, and still the system on which they are arranged may be diffuse and cumbrous. Despatch and facility are also important. So that a third merit of good book-keeping is, to be concise, free from needless detail; and if we have a system of accounts which gives accuracy, ready intelligibility, and conciseness, we need ask for nothing more.

No large business of any kind can be properly conducted without a good system of book-keeping, and it is scarcely necessary to dwell upon its essential value in banking. It is not a matter of theory only, but of experience, that one of the principal sources of danger in bank-management is a want of system, or looseness and inaccuracy of system, in keeping the books. Mr. Gilbart, in his "History and Principles of Banking," mentions a striking illustration of this in the case of the Agricultural and Commercial Bank of Ireland. The evidence brought before a Parliamentary Committee in 1837, in reference to this bank, showed that its failure was largely contributed to by the extraordinary negligence of its directors in the matter of book-keeping. Many of the most important books were wanting. There were no books to show the amount each shareholder had paid on his share; there were none to record the amount of notes in circulation. There were further omissions equally serious. Negligence of this kind had its natural consequence in the bankruptcy of the bank. It may readily be allowed that no such extreme instance could be found among existing banks, but it can be affirmed with confidence that in some more recent failures, faults in the system of book-keeping have been apparent, and that there is no more essential point in the prudent management of a bank than a good system of book-keeping, although, of course, this in itself is not sufficient to counterbalance incapacity or recklessness. The law of some countries makes it compulsory for every business firm to have proper books in which all transactions are clearly set down, and heavy penalties attach, in case of insolvency, to any neglect. That, to a banker, a good and properly kept set of books is indispensable, the slightest consideration will show. With such books he knows from week to week, or from day to day, how he stands, not only in a general way, but in relation to each particular branch of his business, and to each particular customer; without them, he must work in the dark, with consequences that may possibly be disastrous.

The principles of book-keeping remain the same to whatever kinds of business they are applied. The system of Double Entry, as explained in the best manuals of the subject, and worked out in connection with the transactions of merchants, varies when used in bankers' books merely so far as the important circumstance may require, that money in various shapes is the banker's only "merchandise." The system of books in a bank, when first looked at, may appear complicated far beyond what is usual in a merchant's office, but a closer examination will prove that the differences are mainly in scale or in detail, owing to the greatly altered proportions that some departments of business must assume in banking as compared with general commerce. As in a merchant's office, where the books are kept by double entry, so in a banker's, every sum paid or received is entered twice, to the debit of one account and the credit of some other. As in a merchant's, so in a banker's books, we have Personal and Impersonal Accounts, although the latter in banking refer to such things as bills of exchange, notes, &c., instead of "Cotton," "Sugar," or other merchandise. The banker also, like the merchant, must have as the summary and abstract of his affairs, the General Ledger, in which the state of the accounts, not only individually but collectively, is shown. Any person, therefore, having a general acquaintance with the rules and practice of double entry, will find no difficulty in understanding such additional books as the vast detail of a large banking business demands.

A general idea of what has to be dealt with in bankers' books, will be gained by any one who examines carefully a bank balance-sheet and observes what it contains. Such an account, presented at yearly or half-yearly meetings of shareholders, may be meagre enough in its information, but it does in every case profess to exhibit what the bank owes, and what it possesses or has owing to it. This General Statement of Assets and Liabilities, with more or less detail, will show, first :

WHAT THE BANK OWES :

(a) To the proprietors; in the shape of Paid-up Capital, Reserve Fund or Guarantee Fund, Undivided Profits.

(b) To its customers; for Money Lodged either on current or deposit accounts, or for Drafts Issued, &c.

(c) To the public; for Notes in circulation.

And, on the other side,

WHAT THE BANK POSSESSES OR HAS OWING TO IT, in various forms, as follows:- :

(a) Cash in hand and at call.

(b) Bills discounted.

(c) Loans or Advances.

(d) Investments; in the public funds, in Bank Stock, Railway Debentures, and other approved securities.

(e) Cost of Bank Premises, Furniture, &c.