If no funds have been retained and the entire face amount has been advanced, the bookkeeper charges the correspondent's dollar account with the net proceeds as received from the corre spondent and charges the account of the drawer with the amount of exchange, collection, and interest charges, if the drawer carries an account with the bank. Otherwise a cash credit ticket is prepared in anticipation of a check in payment of all such charges. The offsetting credits to these tickets are to Bills Discounted Foreign, Subject to Adjustment, with the face amount of the draft, and to Discount account with the amount of the exchange, collection, and interest charges.
If the foreign correspondent does not maintain an account with the New York bank, nor the New York bank with it, when a collection is sent abroad remittance must be received by demand draft on New York. The cage bookkeeper, upon receipt of the check, debits it to Collection account but delays putting through the tickets until sufficient time has elapsed for the collection of the draft to be effected. The tickets are the same as above except that they debit Collection account instead of the corre spondent's dollar account with the bank.
Changing Discounts into Collections In order to relieve itself of responsibility, the bank's policy may well be not to carry in the discount department items the payment of which will be unnecessarily delayed because of con troversies between the drawer and drawee over the terms of the sales' contract. The department's policy should be to clear up
every transaction within six months of the time of its purchase, and if that does not seem possible or probable, the time should be charged back to the drawer and the item entered for collection. 'The drawer should be asked to reimburse the bank for any ad vances received by him on the item, but this policy should be varied according to the credit of the drawer. Extensions of time change the terms of the original negotiation and must be ap proved by the bank officers. If the credit of the drawer is not of the best and does not warrant an extension of time, the depart ment should request a check from him for the amount advanced, less any unearned interest. The commission rate, the corre spondent's charges, and the cost of the bill stamps are not affected by putting the discount on a collection basis, for identical charges prevail in the foreign collection department.