sale of D. S. short ribs, or D. S. extra short clears, twenty-five
cents per thousand pounds.
The minimum rates allowed upon the above transactions made for
the account of members of the board are one-half of the foregoing
minimum rates.
BOOKS AND FORMS USED
=18.= There are a number of ordinary forms, such as checks, drafts,
receipts, requisitions, etc., that are common with most lines of
business and used in the brokerage business, which will not be necessary
to reproduce. Most brokers have all such forms printed or lithographed
for their especial use with their name and address prominently displayed
thereon.
ORDER BLANK
[Illustration:
Fig. 2. Telegraphic Buying and Selling Orders
]
=19.= The first form of importance in connection with the accounting
department of a brokerage firm is the _order_ of the customer. This must
invariably be in written form with the signature of the customer and the
order must be expressed in the plainest terms so that there is no
possibility of misconstruction. As these orders are frequently received
by wire, or often dispatched by wire to New York or other branch office
for execution, blanks for the purpose, as shown in Fig. 2, are furnished
to customers, those used for buying orders being printed in black and
those used for selling orders being printed in red. These orders are
made out by the purchaser or his authorized agent and should not only
show the date of the order but also the time of the day it was given,
which is frequently of great importance in an active market. Whatever
margin is required by the broker upon the deal must be deposited by the
client at the time the order is given, as without this protection, the
broker will not proceed to execute the order. It is sometimes the custom
for brokers to accept collateral covering a certain amount of margin, in
which case the broker gives the customer a receipt in due form, holding
the collateral as trustee until settlement of account. All orders are
executed at the earliest possible moment after their receipt. Legitimate
brokers are members of the board of trade often in various cities and
have their representatives on the floor, during the business hours of
the board, to buy or sell as ordered.
[Illustration:
Fig. 3. Credit Slip Given to Customer by Broker
]
DEBIT AND CREDIT SLIP
=20.= As soon as the transaction is accepted by the broker, he gives to
the customer a debit or credit slip showing the nature of the
transaction, or it is sent by mail, as soon as possible after business
hours; the charge or credit depend upon whether it is a purchase or a
sale. The blanks for this purpose, as shown in Fig. 3, should be printed
on different colored paper; the debit blank is usually on white and the
credit blank on buff or yellow paper. If a client buys, the amount of
his purchase appears as a debit to his account, with the commission
added. He receives credit for whatever amount of margin he deposits, and
the account stands thus until delivery, when the entire balance must be
paid. If a sale is made by the client before the time of delivery, the
amount of the sale is credited to his account, less the commission due
for selling and any other charges. The difference in the account,
whether it is an amount due from the broker to the client or from the
client to the broker, is paid in cash as soon as the deal is closed.
[Illustration:
Fig. 4. Daily Sales Journal or Record of Stock Sales
]
DAILY RECORD SHEET
=21.= As a most perfect record must be kept of every transaction, the
daily record sheets, as shown in Fig. 4, are of the greatest importance.
This book is called the _daily journal_ as frequently as it is
designated the _daily record_.
[Illustration:
Fig. 5. Daily Sales Journal or Record of Grain Sales
]
This book is most convenient when kept in loose-leaf form, as a small
number of leaves may be kept in the binder for current use, and after
the sheet is filled, it may be filed away for future reference. The size
of the sheet is usually 16 by 14 inches, and it is ruled and printed to
show date, remarks, shares, stock, price, charge stock account,
commission, credit account of, and folio. The _purchase blank_ for this
record is exactly the same with the exception that it is used to credit
stock account instead of charging, and to charge customers' accounts
instead of crediting. There should also be a _grain sales sheet_ and a
_grain purchase sheet_, which differ slightly in the column headings but
not necessarily in the ruling—_number of bushels_ taking the place of
the column headed _shares_, and _kind of grain_ taking the place of
_stock_, as shown in Fig. 5. There should also be a _sundries sales and
purchase sheet_ for recording orders upon other commodities than grain
or stock. Its form is the same as that shown with the exception that
_amount_ takes the place of _shares_, and _commodities_ the place of
stock in each form.
[Illustration:
Fig. 6. Special Journal Used by a Grain Commission Company
]
As soon as an order is received, it is entered upon the proper record
with all of the particulars, and the postings to customers' accounts are
made daily, but the posting to the general ledger accounts need not be
made more frequently than once a month, unless it is desired to take off
a general ledger balance at more frequent intervals.
[Illustration:
Fig. 7. Daily Advice of Purchase or Sale Rendered to Customers
]
GRAIN COMMISSION JOURNAL SHEET
=22.= In this connection it is advantageous for the student to study the
journal form used by an exclusive grain commission company, Fig. 6. This
form is used for recording the sales as they are made in a manner
similar to that described in the daily record sheet. The form is
loose-leaf and may be 11 by 14 inches in size, or if preferred could be
made 16 by 14 inches, giving the advantage of a longer page. The
necessity for a long or short page is determined altogether by the
amount of business done by the house in one day, as it is the intention
with this record to use one full page or more for each day's
transactions. This journal bears the day and the date at the top of the
page, and is ruled and printed to show columns for folio, names, number
of sale, net proceeds, insurance, sack rent, freight and charges,
commission, and total. The entries in this journal are made from the
sales sheet, and the total amount is posted to the ledger for customers
from this medium.
[Illustration:
Fig. 8. Record of Stocks in Hands of the Broker
]
ADVICE OF PURCHASE OF SALE
=23.= A very important document used by commission merchants and brokers
is the _advice_ or _notification to customer_ of their action in filling
his orders. This advice is rendered daily to each customer and should be
checked by him carefully, so that there may be no errors in the deals
and no differences in opinion between the client and his broker. The
advice would begin with the date and read something like this: "Mr. Geo.
Bronson, Milwaukee, Wis.: We have this day bought for your account and
risk, 100 shares American Car and Foundry (preferred) at 111⅛; 200
shares Canadian Pacific at 177; 100 shares Pullman at 187." On the lower
part of the form, as shown in Fig. 7, are printed the rules of the house
in regard to the order and it should be signed by some one in authority.
If the customer accepts the same, it is an evidence that the transaction
is according to orders.
STOCK RECORD
=24.= Owing to the fact that a very large amount of stock of various
companies is being bought and sold continually by a brokerage firm, no
book kept in the accounting department is of greater importance than the
_stock record_. Not only is the broker's business with customers but it
is also very largely with other brokerage concerns as he is buying and
selling continually. Every share of stock which is bought or sold must
be recorded in the stock record. This record shows: Record number, date,
number of certificate, number of shares, from whom received, in name of,
record number, number of shares, to whom delivered, and date of
delivery, as in Fig. 8. It is not necessary in this book, to keep a
record of either the price paid or the price at which sold, as this
register is intended merely to show the disposition of the certificates
of stock and whether they are still in the house, or if disposed of, to
whom they have been delivered. It is needless to point to the necessity
for the greatest care in keeping this record, as any errors might make
it very difficult to trace the paper and result in loss, or at least
considerable trouble for the house.
CASH BOOK
=25.= The general cash book for a brokerage firm in loose leaf should be
sheet size 14 by 14 inches. In a bound book, it would not be necessary
to have it more than 12 inches wide. In this particular business, it is
not desirable to carry the general cash debit on one sheet and the
general cash credit on another, although it might be advantageous in
certain cases to run the grain in the general cash book and to keep a
subsidiary cash book for the stocks, which might be run upon similarly
ruled sheets, the total of the day's transactions being brought into the
general cash at night. By doing this the posting clerk could be using
one of the cash books while the cashier was working on the other.
[Illustration:
Fig. 9. Broker's General Cash Book
]
At the heading of the general cash sheet appears the sheet number and
either the date (providing one sheet or more is used for each day), or
the month with an extra day column, next to the margin. The columns are
ruled and printed to show stocks, grain, and general ledger on the debit
side and the same on the credit side, with the posting columns and
sufficient room for the names of customers in center, as in Fig. 9. In
this cash book should be entered all payments for margin on purchases of
either grain or stock, all deposits by customers, which should be
carried into the column indicated by their account—if they deal in grain
their account is in the grain ledger and if in stocks their account is
in the stocks ledger. All items of receipts or expenditures, not from or
to customers, should be entered in the general ledger column, except as
shown in the subsidiary cash sheet called _office cash disbursements_.
Cash book sheets should always be paged consecutively when made, and
each sheet accounted for, if loose-leaf cash books are used.
The best binder to use for a loose-leaf cash book is a flat opening
spring back holder, in which may be placed enough leaves to last for the
month, to be used for the current work, and when the new month is
started the sheets for the previous month are placed in a reserve
binder—which should be of the sectional post variety—for reference. If
the back of the binder is labeled as the front and the leaves are
reversed when placed in the transfer binder, they will run consecutively
as to pages and dates.
At the end of the month the totals of the grain ledger and stocks ledger
are brought into the general ledger column and posted to the controlling
account for that ledger.
OFFICE CASH DISBURSEMENTS
=26.= As there are a number of disbursements for office help,
advertising, telegraph, etc., that should be kept separate from the
general cash, it is very desirable to establish an _office cash fund_.
This fund is started by charging to office cash in the general ledger a
definite amount, say $500.00, which amount is drawn from the bank or set
aside for special checking for the payment of all miscellaneous bills or
drawings of principals on account of salary, also the drawings of
salaried employes. This account may be as large as is required for the
purpose, and when the office cash becomes depleted, more is drawn which
can be added to the account. At the end of the month, a statement is
made of the totals of the different columns which should be a duplicate
of the office disbursement sheet. These totals are entered in the
general cash posted therefrom, a check given for office cash
disbursements for the amount of the interest, say $500.00, and credit
given the account for the difference in the amount spent as shown by the
statement.
[Illustration:
Fig. 10. Detailed Record of Office Cash Disbursements
]
The office cash disbursement sheet, shown in Fig. 10, should be 14 by 16
inches in size, with _sheet number_ and _month of_, in the heading. The
box headings are as follows: Day, item, posting, general ledger,
salaries, office help, advertising, private wire, tickers, telephone and
telegraph, special commissions, rent, and sundries. The office cash
balance should be kept independent of the general cash balance and,
preferably, by another clerk.
Entries should be made as money is disbursed, with the proper vouchers
for the same, to be turned in with the report.
[Illustration:
Fig. 11. Record of Margin Balances to Protect the Customer's Account
]
The totals of the different accounts, having been entered in the general
cash, are posted to the debit of their respective accounts in the
general ledger.
In localities where cotton is largely dealt in, or where tobacco is
largely dealt in, it may be necessary to add columns for the tobacco
ledger or the cotton ledger in the general cash, but in localities where
the transactions are not frequent, the accounts for such transactions
and also the deals in provisions are carried in the grain ledger.
Any cash book sheet which should happen to be spoiled should be marked
_void_ in red ink, and filed in its regular order with the other cash
sheets, but _in no case should it be destroyed_.
MARGIN BOOK
=27.= It is as necessary in the brokerage business to know the condition
of customers' accounts as it is in a bank, and perhaps a little more so,
as fluctuations in the market may _wipe out_ his margin without his
knowledge, and while it is not absolutely obligatory on the part of the
broker to notify his customer, still it is very much to his interest to
do so.
The margin clerk has the balance of each customer every morning. All
orders to buy or sell received during the day pass through his hands and
he makes the necessary memorandum against the customer's account. He
keeps posted on the fluctuations of the market and immediately notifies
the principals of any account which needs protection. After the trading
for the day is finished, which on the board is 1:15 o'clock P.M. on any
day except Saturday, and Saturday at 12:00 M., the margin clerk extends
the balances of the various customers' accounts, these balances are
checked by the bookkeeper from his accounts to prove their correctness,
and a new list of the balances is made for the use of the margin clerk
the following day.
This book is kept in most houses as a form of blotter, but the best form
is a short sheet with numbered lines for the names of customers and a
long sheet with similarly numbered lines divided into inch columns, with
the balance column at the beginning and at the end, to be inserted under
the short sheet, to care for the transactions of the day. By this means
the names of customers will not have to be duplicated daily.
The sheets should be kept in a holder so that the names run
alphabetically and the initial letter of the names on one short sheet
should be penciled upon the long sheet each day. The bookkeeper can, if
desired, have a duplicate set of the short sheets, shown in Fig. 11, to
use for making up the balances for the succeeding day.
Where there are a sufficient number of accounts to warrant, they should
be divided by tabbed index sheets with a leather tab projecting, in
alphabetical arrangement, so that any account may be turned to
instantly; for instance, if the account of L. S. Tucker & Co. is wanted,
turning up the tab _T_ will bring to light all of the customers whose
names begin with _T_. This index may be further subdivided if it is
deemed advisable.
The sheets for each day's work should be dated at the beginning of the
day and may be kept, if desired, for reference, although after they have
been proven by the books, they are of no practical value.
[Illustration:
Fig. 12. Ledger Account of Each Stock Handled
]
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.
[Illustration:
BASEMENT SHIPPING PLATFORM, FARWELL, OZMUN, KIRK & CO. (WHOLESALE
HARDWARE), ST. PAUL, MINN.
]
[Illustration:
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.
[Illustration:
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.
[Illustration:
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.