Chapter (6)

Financial Papers Department

*Include all types of stocks and shares, bonds which are considered as a type of investment for
different firms and individuals.
* Services concerning the financial papers:
1- Keeping financial papers for safety.
2- Collecting the coupons of the financial papers.
3- Buying and selling the financial papers.
4-Issuing the financial papers on behalf of companies.
5- Paying the dividends (Coupons) of the financial papers on behalf of the companies.
6- Lending by the guarantee of financial papers.
First: Keeping financial papers for safety.
* The service provided by the bank to his customers. The customer presented financial papers to
the bank to keep them for safety.
*These financial papers are owned by the customer, not by the bank.

1- The bank records the receiving of financial papers from the customer as a contra account
entry.

F.P deposited for safety xx

Customer’s F.P deposited for safety xx

2- The bank gets some fees on providing the services.

Customer’s Credited current account xx

Fees xx
3- The customer withdraw the financial papers again , and the bank reverses the contra account
entry.

Customer’s F.P deposited for safety xx

F.P deposited for safety xx

Second: Collecting the coupon due on the financial papers

* In providing this service, there are two situations:
1- The financial papers belong to the customer himself and he gives the authority to the bank to
collect the coupon on behalf of himself .
2- The financial papers belong to the bank.

1- The financial papers belong to the customer.

*When the customer’s bank (National bank) collects the money from another bank (Cairo
bank).
1- The bank records that he receives financial papers from customer to collect coupons due.
(Contra account)

Coupons under collection xx

Customer’s coupons under collection xx

2- When the bank collects the money of these coupons, it deducts fees from money.

Local bank xx
or cash xx

Commission xx
Credited current account xx

3- After collecting the money from his customer, the bank has to reverse contra account entry.

Customer’s coupons under collection xx

Coupons under collection xx

*If The same bank (Cairo bank ) is responsible for distributing dividends of ABC company
and collecting money for his customer (Mohamed ) as well.
‫لو البنك اللى اصدر الساهم هوهو البنك بتاع العميل اللى عاوز يجمع ارباحها‬
* The bank records contra account entry , as there are some coupons due to be collected for the
customer.

Coupons under collection xx

Customer’s coupons under collection xx

*If the bank of (ABC Company) and customer collect money for the customer, he will record this
entry

Current account of ABC CO. xx

Commission xx
 Credited current account xx

3- After collecting the money , the bank has to reverse the contra account

Customer’s coupons under collection xx

Coupons under collection xx

2- The coupon belong to the bank itself ‫يعنى البنك هو صاحب الوراق الماليه‬
1- The company announces that the coupons are due, The bank has the right of receiving money
of the due coupons. This money is considered as revenue for the bank.

Coupons under collection xx

Revenue of financial papers xx

2- When the bank collect the money.

Different bank
Local bank / cash xx

Coupons under collection xx

Same Bank :

Current account of ABC CO. xx

Coupons under collection xx

 Third : Buying and selling the financial papers
* it is usually , when dealing with the financial papers , either by buying or selling to be carried
through an intermediary called broker.
‫شركة سامسره تبع البنك هى اللى بتشترى او تبيع الساهم‬
* Buying: If the customer has an account in the bank.

1- The bank makes contra account entry to control the operation between the bank, broker and
the customer. ‫ البنك هينفذ امر البيع والشراء عن طريق شركة السمسره بتاعته‬.

Execution of purchase orders xx

Broker of executing of purchase orders xx

2- when the broker implements this procedure , the bank will record this transaction.

Customer’s credited current account xx

Broker of F.P (value+ Commission) xx

Commission xx
Charges xx
‫البنك هيأخد من حساب العميل فلوس الوراق الماليه والعموله بتاع شركة السمسره وهياخد برده العموله بتاعته‬

*If broker has no current account :

*The bank will pay the amount to broker in cash.

Broker of F.P xx

Cash xx
*If Broker has current account
Broker of F.P xx

Cash xx
4- As The transaction is completed by buying the financial papers , the bank reverses the contra
account entry. ‫هنعكس اول قيد‬

Broker of executing of Purchase orders xx

Execution of purchase orders xx

Second Case: If the customer has no current account in the bank

* The bank asks the customer to give him a certain amount to buy financial papers and record
this

Cash xx

Money deposited for buying financial papers xx

2- When the broker informs the bank that he bought the required financial papers for the
customer.

Money deposited for buying F.P xx

Commission xx
Charges xx
Broker of F.P xx

3- When the bank pays the amount to the broker cash or to his current account.

Broker of F.P xx

Cash/ Broker current account xx

4- Reversing the first entry with remaining amount

‫يعنى لو انا كنت واخد من العميل فلوس اكثر من ثمن الوراق الماليه هرجعله الباقى بعد الشراء‬

Money deposited for buying F.P xx

Cash xx
2- Buying financial papers for the bank itself
* When the broker sends notes to the bank that he bought the required financial papers .

F.P of the bank xx

 Broker of F.P xx
*Second: Selling the financial papers
1- The financial papers belong to the customer

a- The customer has current account with the bank

* Suppose F.P= 1000 ، Commission of broker = 10

Broker of F.P 1000

Customer current account 980

Commission 5
Charges 5

b- The customer has no current account in the bank

* The bank will send financial papers to broker and when the broker sells the financial papers ,
he will send a note to the bank saying that selling price and commission for the broker. The bank
records the following entry.
Broker of F.P 990

Money deposited for selling F.P 980

Commission 5
Charges 5

*When the customer comes to receive his money.

Money deposited for selling F.p 980

Cash 980

2- The financial papers belong to the bank

* the bank is concerned with the cost of financial papers to know if there is a gain or loss.

1- when the bank sell financial papers from its portfolio.

Sales of F.P portfolio xx (Cost)

Portfolio xx
‫هسجل الوراق الماليه فى القيد ده بسعر التكلفه‬

*In Case of profit: When the broker sends note to the bank informing that he sold financial
papers with net profit.

* Suppose : F.P cost 2000, Sold at 2400 , commission 20

Broker of F.p 2380

Sales of F.P portfolio 2000

Profit of selling F.p 380

*In case of Loss:

*Suppose that the cost of F.P 2000 and sold for 1900 , Broker’s commission15

Broker of F.P 1885

Loss of selling F.P 115

Sales of F.P portfolio xx

Fourth: paying the coupons on behalf of the company

* Companies issued the financial papers and may ask the bank to pay the coupons on behalf of
them. ‫يعنى الشركه بتخلى البنك يوزع الرباح اللى على اساهمها‬

* The company calculates amount of coupons that will be due and asks the bank to transfer the
amount from company’s current account .

*suppose: that ( the amount is $10000 for the coupon NO.4 and commission 1000

Company’s current account 11000

Coupon No.4 of Co. 10000

commission 1000

* If the company has no current account with the bank, it will be paid in cash.

Cash 11000

Coupon No.4 10000

Commission 1000

* The bank in paying the amount of Coupon to holders of financial papers , has different
methods.

1- The holders of financial papers are customers of the bank, and have current account and asked
the bank to collect their coupon.

* The bank is company’s bank and customer’s bank.

Coupon No.4 of Co. 1000

Customer credited current account 990

commission 10

2- If the holders aren’t customers of the bank but, they asked the bank to collect coupons for
them.

Coupon No.4 of co. 1500

Cash 1480
commission 20

3- If the holders of coupons are customers in another bank and ask their bank to collect coupons
for them.

Coupons No.4 OF Co. 2000

Local bank 1980

Commission 20

4- the holders could be customers of another branch of the bank and ask the bank to collect the
coupon.

Coupon No.4 of Co xx

Branch xx
Commission xx

5- If the bank owns the financial papers ( is owner of F.P)

Coupon No.4 of Co. xx

Revenue of F.P xx

‫ممكن أجمع كل دول فى قيد واحد‬

Coupon No.4 of Co. xx

Customer’s Current account xx

cash xx
Local bank xx
Branchs xx
Revenue of F.P xx
Commission xx
* Sometimes , The company asks the bank to pay these coupons directly, from the company’s
current account
Company’s current account xx

Commission of paying coupons xx

Company’s current account xx

Customer’s current account xx

cash xx
Local bank xx
branch xx
Revenue of F.P xx
Commission xx

*Fifth:Issuing the financial papers on behalf of a corporation.

‫الشركه هتخلى البنك يجمع فلوس الساهم والسندات من الناس اللى عاوزه تشترى يعنى هيجمع فلوس الساهم وتحطهم فى حساب‬
‫وترجعهم للشركه‬

* Sometimes, The corporation issues their stocks and asks the bank to represent the company in
receiving amount of subscription.
* The people apply for this subscription and pay to the bank.

* The subscribers could be one of the following:

1- The public ( The normal people or individuals or another company)
2- The bank it self .

1-The customer applying directly to the bank:

Suppose that the customer submit an application to get some shares of the company's capital and
he will pay the amount of subscription in cash

Cash xx
Stock Subscription of Co. xx
(Name)

2- Suppose the customer asks the bank to transfer the amount from his current account.

Customer’s credited current account xx

Stock Subscription of Co. xx

3- Sometime, the customer asks his local bank to pay for the subscription

Local bank account xx

Stock Subscription of Co. xx

4- The customer may ask his branch to pay for his subscription.

Branch Account xx

Stock subscription of Co. xx

5- When the bank itself subscribe in such shares.

portfolio xx

Stock subscription of Co. xx

6- At the end of The subscription period, The bank transfers all these subscription to the
company’s Current account.

Stock subscription of Co. xx

Company’s current account xx

Commission xx

Sixth: Lending guarantee by Financial papers. ‫اعطاء قروض بضمان الوراق الماليه‬

* IF customers need some money, he asks the bank for a loan and the bank should have
guarantee, against the loan.
* There are some conditions required by the bank in the financial papers agreed to be used and
accepted by the bank as guarantee for lending.
‫بعض الشروط الخاصه بالوراق الماليه علشان البنك يقدمها كضمان‬

1- The financial papers issued by agreed reputation corporation.

2- The financial papers should be recorded in the stock market.

1- The bank has to record contra account entry when receiving financial papers as guarantee for
lending.

F.P deposited as a guarantee for lending xx

 Customer’s F.P deposited as guarantee for lending xx

2- When the customer withdraw some amount from the loan.

Debited current account xx

Cash / Customer current account xx

3- At the end of each month , the bank calculates the interest and added to debited current
account.

Debited current account xx

Interest Revenue xx

4- When the customer repays the loan and interest.

Cash xx

Debited current account xx

5- The bank has to close the contra account entry.

Customer’s F.p deposited as guarantee for lending xx

F.p deposited as guarantee for lending xx