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.
[Illustration:
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withdrawn by the substitution of other collateral satisfactory to the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withdrawn and that substituted should be kept.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:
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.
[Illustration:
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.
[Illustration:
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.
To sum up, the accounting work in connection with the brokerage business
is in taking care of the orders received from customers, being sure that
they are correctly interpreted and promptly filled, noting the loans
necessary to complete the contract, keeping a careful record of
commissions and interest due the house, being watchful in regard to the
margins of customers, and arranging all accounts with customers so that
they may be kept up to date and instantly available.
GLOSSARY OF BOARD OF TRADE TERMS
=BEAR:= One who believes the conditions are ripe for a decline in
prices, or one who desires such an event. One may believe that
the price of a certain security is about to decline and
therefore is said to be a _bear_ on that particular security,
whereas he may not be so on others. The natural attitude of a
_bear_ is that of a seller but he may be so for the sake of
buying at a lower price later.
=BEARING THE MARKET:= An artificial lowering or forcing down of
prices.
=BID PRICE:= The price offered or bid for any security or commodity.
=BORROWING STOCK:= A broker borrows stock when he has made a
contract to deliver and the stock which he has sold, for any one
of various reasons cannot be delivered at the time agreed.
=BREAK IN THE MARKET:= A sudden and considerable decline in price.
=BROKEN LOT:= Same as _odd lot_ in reference to stocks and less than
ten thousand dollars par value in bonds.
=BUCKET SHOPS:= Offices run by irresponsible brokers not members of
any stock exchange and who do a marginal business upon one
dollar per share and upwards. As a matter of fact the stock
itself is neither purchased nor sold for the customer by these
operators. If the order is actually executed upon a _bonâ fide_
exchange then the _bucket shop_ puts in a contrary order for a
like amount. For example: This kind of a dealer would sell an
amount equivalent to a customer's purchase or purchase an amount
equivalent to a customer's sale, thus, in no event carrying
stocks.
=BULL:= One who believes that conditions are ripe for an advance in
prices or one who desires such an advance and talks _bullish_ in
consequence. One writer defines a bull as a man who has
something to sell, consequently he is anxiously waiting for
prices to go up that he may sell at a good price.
=BUY AT MARKET:= An order to buy at the lowest prices at which the
security can be obtained without any price limit being set by
the one giving the order.
=BUYER'S OPTION:= A contract under the terms of which the buyer of a
security need not receive delivery until the end of a specified
time, but he has the right to demand delivery at any time within
the period covered by the contract by giving the seller one
day's notice. The understanding is briefly expressed as "buyer
4," "buyer 10," the figures indicating the number of days
provided for in the agreement.
=BUYING ORDER:= An order given to a broker to buy a certain security
with or without limit as to price as the case may be. An order
to buy is good for the date for which it was given only, unless
otherwise specified. Sometimes an order is given "until
countermanded" or "until cancelled" by which the broker
understands that there is no definite limit as to time; but
brokers usually remind their customers regarding orders to be
sure that they still desire them to be kept in force.
=CABLES:= Telegrams from foreign countries on the conditions of the
market. Large brokers receive cables each morning from London,
Paris, and other points giving closing prices of grain and
provision in that market.
=CALL:= A privilege which one party buys of another to _call_
(receive) from him a certain amount of stocks, grain, etc., at a
certain price and date.
=CARRYING CHARGES:= The interest charged by brokers for the amount
of money advanced by them to customers in marginal transactions;
also used by a Chicago firm to indicate storage rates, interest,
and insurance on grain or provisions.
=CASH GRAIN:= Grain for delivery at once. _Spot grain_ has the same
meaning.
=COMMISSIONS:= The charge made by any broker for buying or selling
securities for someone else.
=CURB:= Securities which are not traded in upon the large stock
exchanges or new securities which have not yet been listed upon
such exchanges are handled in what is known as the _curb
market_. The reason for the existence of "curb market" in the
open rather than in some building is that if the latter plan
were pursued there would, in truth, exist another exchange, and
it would not be permissible for a member of the regular exchange
of the same city to be represented thereon as he frequently now
is upon the _curb_.
=CURBSTONE BROKER:= One who usually, not being a member of the stock
exchange, goes from office to office or transacts his business
on the curb.
=DELIVERY:= The actual turning over to the buyer of the thing
bought. If delivery is offered after hours, the buyer may refuse
it until the following business day, but the seller has no right
to demand interest for extended time.
=DIVIDEND:= A portion of the profit of a corporation authorized by
the board of directors to be paid to the stockholders.
=DUMP:= An amount of stock that is forced upon the market for the
purpose of getting rid of it. It does not mean so much the
disposing of an undesirable investment but in offering any
investment in large amounts.
=EVEN:= A broker is even on stock when he has contracted to receive
and deliver equal amounts of the same stock with another broker.
A settlement of the difference in prices is the only thing
called for.
=FLURRY:= A small panic. An excitement caused by a rapidly falling
market and advancing money rates.
=FUTURES:= Buying or selling grain for future delivery. Literally
speaking when you buy grain in February which is known as _May
grain_ you contract for delivery in May at prices then existing.
=IN SIGHT:= The amount of grain, coffee, cotton, tobacco, or any
commodity available for immediate use.
=LIMIT:= A price which a broker must not exceed in executing an
order for his customers. It may also be a restriction of the
amount to be purchased or sold.
=LISTED SECURITIES:= Securities before they can be listed upon any
board of trade or stock exchange must have complied with certain
rules of the exchange. This does not imply that listed stock has
any greater intrinsic merit than unlisted stock but it merely
shows that certain facts and figures in relation to the security
have been given more or less publicity.
=LONG:= One who holds stock or grain for a rise in price, or, one
who has a contract under which he can demand such stock or grain
on or before a certain day. The opposite of _short_.
=MARGIN:= An amount of money deposited with the broker to insure him
against loss; a part of the purchase or selling price.
=O:= The "Ticker" abbreviation for _offered_ when accompanied by
figures; for instance, "G. N. O. 76" would mean that Great
Northern Common Stock was offered at $76.00 per share.
=OPEN MARKET:= A market where any or all may buy or sell.
=OPEN ORDER:= An order which is good until cancelled.
=OPTION:= An agreement of purchase or sale, good only for a certain
time.
=PIT:= The portion of the board of trade where floor trades are
made. This term is particularly applied to Chicago. Other stock
exchanges set aside certain places signified by posts set in the
floor for trading and in these exchanges the trading points are
called _posts_ instead of pits.
=POOL:= A combination of buyers who work together and invest their
joint capital as one. (The different boards of trade have
enacted strict rules against pooling.)
=PUT:= A privilege which one party buys of another to _put_
(deliver) to him a certain amount of stock, grain, etc., at a
certain price and date.
=PUT AND CALL:= A _put_ and a _call_ may be combined in one
instrument, the holder of which may either buy or sell as he
chooses at a fixed price and date.
=REMARGIN:= To give more margin.
=RING:= A combination of brokers to offset and settle trades with
each other; also an exclusive combination of persons for a
selfish purpose as, to control the market. (Rings have the same
standing in the board of trade as pooling, if of the same
character.)
=SELL AT MARKET:= An order to one's broker giving authority to sell
stock or grain at market price.
SELL AT OPENING: An order to sell immediately after the opening of
the stock exchange at the best price obtainable.
=SELLING ORDER:= An order given to a broker to sell a certain
security with or without limit as to price, as the case may be.
A selling order is good for the day for which it is given only
unless otherwise specified.
=SETTLEMENT:= The payment of differences in trades between brokers.
=SHORT:= One who has sold for future delivery what he does not own,
but hopes to buy at a lower rate.
=SKYROCKETING:= Pushing the prices of securities up to unnatural
levels or forcing the price up with startling rapidity.
=SLUMP:= A sudden and a considerable fall in prices.
=SPREAD:= A "put and call" at differing prices.
=STOP LOSS ORDER:= This is a method of limiting losses by giving a
stop order to the broker to sell if stock declines below a
certain point. These are sometimes called _stock orders_.
=STRADDLE:= A "put and a call."
=SWEETEN:= To give more collateral or margin.
=TICKER:= A small printing machine operated by telegraph by which
the outside world obtains the reliable information as to the
prices of securities and commodities dealt in upon the principal
exchanges of the world. It is a never failing source of
information to the broker. The results are printed on a strip of
paper like a ribbon which automatically unwinds and after
passing under the printing device runs into a basket. The ribbon
is called the _tape_. All fluctuations in prices are thus wired
to the principal exchanges immediately.
=WASH SALE:= An illegitimate or fictitious transaction.
[Illustration:
THE WHOLESALE HOUSE OF MARSHALL FIELD & CO., CHICAGO, ILL.
]
BILLING AND ORDER RECORDING[5]
=Introduction.= The survival of the fittest applies most forcefully to
business men and their methods. The success of the men depends upon
their methods; the efficiency of the methods, upon the men. Large
corporations of to-day would be impossible without method. They plan
their work, and method tells them daily whether they are working their
plan successfully or unsuccessfully.
Footnote 5:
_Copyright, 1909, by American School of Correspondence._
It is commonly supposed by the smaller business men that method is a
result of business growth. Sometimes it is. If a business grows fast,
better methods become a necessity. Without method any business must
remain small—with few exceptions, just as small as the capacity of the
man at the helm. "To the extent which system is intelligently used, it
multiplies one's powers of achievement in all directions."
The importance of the order billing and shipping departments, the amount
of waste effort therein, and the relation of each to all other branches
of the business, make them a most interesting and profitable study for
the progressive business student, whether he be a beginner, an
executive, or an owner. To attain quick results and to eliminate useless
head, hand, and leg work, learn the capacity, capability, and usefulness
of office machinery and the short-cut methods made possible thereby.
During the last eight years there has been a tremendous amount of
improvement made both in this country and abroad in handling office
work, changing from hand to machine methods. Most of these improvements
have been literally forced upon the business men of the country by
specialty companies having labor-saving devices for sale. Wide-awake
merchants have in some cases left the installation of such devices to
office people who feared the loss of their positions through the use of
them.
One of the pioneers in the development of the class of work above
mentioned is Hiram J. Halle, who overcame all obstacles, and gave the
impetus to modern billing methods which has been such a help to our
economic results in office practice. The typewriter companies have
followed his lead and equipped cylinder machines with the necessary
attachments for accomplishing almost any desired result, except writing
in a bound book. In order to overcome this obstacle, the McMillan and
the Empire and some other loose-leaf books have been invented. These
books are loose-leaf only while they are being written upon; after
completion they are permanently bound by a simple device, and become as
secure as a sewed book.
In any book of this character, the student must consider the text as a
series of problems, with explanations of how each has been solved. If
the student does not learn to exercise his own powers of originality as
a result of a study of this volume, he will fail to secure the result
intended. Rarely, if ever, will two problems be met in two commercial
establishments which will be alike. The judgment of the person
installing the system will determine the best method to be used under
certain conditions.
Before starting in on the regular work, it will not be out of place to
give a comparison of the methods of business in various foreign
countries.
The rush in the business life of the United States is accounted for by
our fast growth and national desire to accumulate wealth. Commercial
concerns have grown both fast and slowly to undreamed proportions.
Strenuous efforts have been made to secure business, and then a
corresponding effort has been made to effect the small economies which
in a large business aggregate large sums. As a nation, we are rushing at
headlong speed, seeking all the means which will give us results. In
transportation we advance from steam to electricity; in social life we
turn from horses and carriages to automobiles; in commercial life we use
every known device to short-cut the work and effect economies—adding
machines, typewriters, cash registers, envelope openers, envelope
sealers, multigraphs, etc.
A distinct surprise awaits the person visiting Europe on a mission of
introducing "short-cut" methods. While we are in business to make all
the money we can, most of the Europeans are in business to make a
living, or reasonable earnings.
Imagine the surprise of the writer when told by the managing director of
one of the largest department stores in London that they did not care to
save the services of thirty-five clerks (which was possible by modern
methods) as they were making a certain amount of money each year, and
did not care to make any more; besides, they did not wish to put these
people out of positions. It is not an easy matter to secure positions in
England. Employes are very diligent and pay strict attention to
business. A manager of one of the large banks in London said that once a
clerk is hired he is discharged for gross misconduct only—not even for
incompetency. There are young men clerks (pronounced _clarks_) in the
Bank of England who are doing the same work for the bank as done by
their grandfathers. There are old men in the Bank of England to-day who
still use quill pens and the sand box instead of a blotter. There are,
however, adding machines being used there by the younger generation, and
they are of more use to them than to us in a way, as their currency is
so much more difficult to add.
Each year, more improved methods are being introduced into England.
Typewriters have been used for a number of years, and of late years
adding machines have made headway. It is more difficult there to
introduce new methods, but, once installed, it is difficult to dislodge
them for other ones.
Some of the wholesale houses have very old methods. In one house in
London, an order was copied twenty-nine times from the time it was
received until it was finally charged. The concern was over two hundred
years old and had never made any effort to improve its methods. It had
four boys whose duty it was to hunt orders lost about the warerooms. A
system of manifolding was installed, which eliminated so much waste of
time in copying and recopying orders that it was difficult to convince
the firm that something had not been overlooked. After four weeks they
were delighted.
An American going abroad is much impressed by the deliberation of
Europeans and is inclined to criticise them for it. After a time, they
can point out enough Americans who have worn out at forty years of age,
and are in Europe seeking health, to convince them that perhaps the
Europeans are not wholly wrong.
In Germany, the railroads are controlled by the government. When one
attempts to introduce short-cut methods, he is confronted by the fact
that work is needed to keep busy old soldiers for whom the government
has to care. In asking an agent of an American firm dealing in
labor-saving devices why he did not use any of the devices, the answer
was given that in Germany the young men work three years for nothing; he
did not feel the necessity of doing away with any of them. At the end of
three years' work in an office, a young man receives a diploma for
efficiency, if he has attained it. The government exercises a strict
supervision over all commercial concerns, and inspects their books at
periodic intervals. Commercial failures are therefore more rare there
than at home. Fraudulent schemes are dealt with severely.
There are many large firms in Germany, both jobbers and manufacturers,
that are striving to be progressive. The Siemens-Halske Electric Co. are
just as progressive in their order and billing methods as any American
firm in the same line. To show the attention to details given by the
Germans—a managing director of one of the large department stores in
Berlin, when asked how long he had lived in the United States, said he
had never been there. Upon being complimented upon his American accent,
he replied that when talking to an American he always used the American
accent, slang, intonation, etc., and when talking to an Englishman he
changed his accent, etc., to correspond. He had all the American devices
in his accounting department which one would find in any department
store in the United States, and sent out monthly typewritten bills the
same as John Wanamaker, Altman, and others of New York, and the same as
all large department stores do in all American cities.
In France, the commercial houses are very conservative and are subject
to the same government supervision as practiced in Germany. In one of
the railroad companies, the Chemin de fer du Nord, they use the manibill
system of billing (whereby each shipment is billed separately and
manifolded on a form of seven sheets) which is the shortest form of
billing known, but which has never been adopted by American railroads on
account of the bulk of papers increasing too rapidly. The present
American method is to put several shipments on a way bill for shipments
to any given town, and when the goods arrive at the given town, the
receiving stations make out separate freight bills for each shipment,
copying the information from the blanket way bill made out at the
forwarding station. Some of the American railroads are now adopting the
special roll machine for car accountants' work, as shown in Fig. 1.
[Illustration:
Fig. 1. Underwood Special Roll Machine for Car Accountants' Work
]