Part 41

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.

CUSTOMERS' STATEMENT

=31.= In a brokerage and commission business, customers are very likely to demand a statement at any time, and even should they not do so, it is deemed expedient to make statements to customers often enough to keep them fully posted regarding the condition of their accounts. The best form of statement to use for this purpose is shown in Fig. 15, and is an exact reproduction of the ledger account. As these statements are made very frequently it is unnecessary to provide blanks with more than nine or ten lines.

BILLS PAYABLE RECORD

=32.= Taking into consideration the large amount of money borrowed in this business, and the constant fluctuation of the amount due to banks, it will be seen that a careful, complete, and simple bills payable record is a prime necessity. This usual record shows date of loan, call or time, from whom borrowed, to whose account, rate of interest, securities—amount, when paid; securities—when released. A more simple form of this record is shown in Fig. 16.

Fig. 16. A Detailed Record of Loans Payable During Each Month ]

Loans made should be reported immediately to the cashier in writing, and the data concerning them should be entered at once in the cash book and the bills payable record. In some cases, banks arrange with the brokerage firm for what is called a blanket loan varying in amount—from $100,000.00 upward—according to the requirements of the firm. In increasing a loan of this character it is always necessary to keep upon deposit with the bank, collateral amply sufficient to cover the highest amount required, and any part of this collateral may be withdrawn by the substitution of other collateral satisfactory to the bank. In such a case there should be a blanket loan account kept in the general ledger showing, specifically, the collateral in the hands of the bank, and by the system of debit and credit, the record of that withdrawn and that substituted should be kept.

In case there is sufficient fluctuation in values to warrant, a bank can demand additional security at any time or the withdrawal of that held by them and the substitution of something more acceptable, or they may, upon call loans, demand a part or full payment at any time, in which case it is necessary for the broker to make arrangements to take up the loan at once.

JOURNAL

=33.= All orders received are copied from the order blank into the journal, as the order blank used is not of a character to allow its being numbered and filed consecutively, nor can it be readily adapted to the division of the buying and selling accounts.

The journal sheet should have debit and credit columns for each ledger used for customers, and a general ledger column as shown in Fig. 17. Entries from the orders are carried into the proper ledger column. If a man buys stock, he is debited in the stock ledger column; if he buys grain he is debited in the grain ledger column; and if he sells either, he is credited in the proper column.

In making a statement to the customer of purchase and sale, the profit or loss together with the commission charged is shown.

ILLUSTRATION ]

CHECK REGISTER

=34.= Most brokers have accounts with several banks; it is therefore necessary that a check register be kept with each bank, showing the date, number, to whom issued, amount of each check drawn, the deposits, and the daily balance, as in Fig. 18.

Fig. 17. General Journal in Which All Orders are Entered ]

By using this register the account with each bank may be kept separately, and the necessity for filling out stubs in a check book entirely avoided. Many houses have given up the use of check books altogether, having their checks padded in numerical sequence and as the numbers follow consecutively on the check register, each numbered check must be accounted for. In case a check is spoiled, the line should be voided in red ink, and the spoiled check filed with returned checks.

In case the office cash carries an account for itself from which checks are made, a separate check register should be kept for this account, as its balance does not enter into the general cash balance of the firm.

Fig. 18. Check Register Showing Condition of Bank Account ]

In no just sense can a broker be held to be the owner of shares of stock which he purchases and carries for a customer, and it is a breach of trust to use this collateral to his own advantage. The certificate of shares of stock is not considered, according to the decision of the Supreme Court of the United States, property itself; it is but the evidence of the property in the shares.