The Treasurer issues lists of the Government securities which are eligible for this purpose. Assume that $200,000 bonds have been sent to the Treasurer as security for circulation. The general ledger entries to cover such a transaction should be as follows:

United States bonds available for this collateral purpose have been selling at a premium. If there was a premium of two points on the bonds pledged the entry would be as follows:

Under such an arrangement there would be a premium account on the general ledger among the assets which would be reduced from time to time by applications of interest collected. This, however, is an accrual matter which is dealt with in a subsequent chapter.

Auxiliary Records

As was previously stated no formal auxiliary records are absolutely required for such a transaction. A notation on the bond ledger under the account of the securities pledged signifying the fact and amount of pledge, is sufficient in support of the general ledger figures. A more complete practice, however, is that of setting up a memorandum account in the bond ledger showing in one place all of the securities deposited for circulation purposes with the Treasurer. This would be in addition to the notations appearing in the regular bond ledger accounts. A memorandum account is especially desirable when a variety of securities is pledged. When such an account is used it should, of course, prove with the general ledger account showing bonds pledged to secure circulation.