Bank Accounts and Related Documents

Looking at any Statement of Financial Position, the first item will always be Cash or
Cash and Cash Equivalents. In business, the term cash may include cash on kept on
hand, cash for deposit to the bank and cash in the bank, may it be in local currency or
foreign currency.

Keeping cash in the bank not only helps in security of the asset but also in recording of
transactions.

Types of Bank Accounts

These types of accounts are normally maintained by a business:

1. Savings Account
A deposit account maintained at the bank that provides security and modest interest.
➢ Deposits and withdrawals are made using forms provided by the bank.
➢ Banks usually pay an interest rate that is higher than a current account.
➢ Savings accounts have a passbook, in which transactions are logged in a small
booklet that the depositor keeps
➢ Some savings accounts charge a fee if the balance falls below a specified
minimum

2. Current Account
An account maintained for the payment of expenses and purchases.
➢ Also called checking account or demand deposit account
➢ Money held under a checking account can be withdrawn through issuance of a
check
➢ Banks usually allow numerous withdrawals and unlimited deposit under this type
of account.
➢ The interest rate for a checking account is usually lower as compared to a savings
account.
➢ The account holder or depositor of a checking account is normally provided a
monthly bank statement showing all the deposits made, checks paid by the bank,
and the balance of the account
➢ The depositor is given easy access to the funds as compared to a savings account.
3. Time Deposit
A written agreement with the bank that an amount is deposited and will not be
withdrawn for a certain period
➢ Also called a certificate of deposit account
➢ Type of a savings account that is held for a fixed-term and can be withdrawn only
after the agreed period and by giving notice to the bank
➢ The account may be withdrawn also anytime however the bank usually charges
penalties.
➢ This type of account yields high interest.

Savings Current Time Deposit

Typically maintained
as savings reserved
Used for everyday Used as long-term
Deposit for emergencies or a expenses and investment
specific goal purchases

Interest Moderate Low High

During banking Only after a maturity
hours using a to receive interest or
Withdrawal Anytime by
withdrawal slip or anytime but with
anytime using an
issuance of checks payment of bank
ATM penalties

Certificate of
Document Passbook Checkbook
deposit

Bank Forms and Documents

1. Deposit Slip
A bank form that the depositor fills out every time money is placed to the account.
Information usually required in a Deposit Slip are the following:
➢ Account Name – the complete name of the depositor that is reflected in the
records of the bank. If it has a pass book, the account name is indicated on the
first page inside the passbook.
➢ Account Number – a unique identifier of the account maintained by the
depositor.
➢ Date of Deposit
 ➢ Type of Account
➢ Currency
➢ Amount in words and in figures – the amount that the depositor wishes to
put into his account. The amount to be deposited may be in the form of cash or
check. If it is a cash deposit, the breakdown of the cash is usually listed in the
deposit slip if it is a check deposit, the details of the checks are indicated in the
deposit slip, for example: Issuing Bank, Address of the Issuing Bank, date of the
check and the amount.

2. Withdrawal Slip
A bank form that the depositor fills out every time money is taken out of the
account. Without a withdrawal slip, the bank will not allow you to get money from
your account.

Information usually required in a Withdrawal Slip are the following:

➢ Account Name - the name of the depositor
➢ Account Number – the unique identifier given by the bank for every account
maintained
➢ Date of the withdrawal
➢ Type of account - savings or current
➢ Currency
➢ Amount to be withdrawn - the amount that the depositor wishes to withdraw
from his account. Amounts in words and in figures are indicated.
➢ Signature of the Depositor – this is the most important part in the
withdrawal slip. The signature is a proof that the depositor is authorizing the
bank to get money from his account. Usually, the bank compares the signature in
the withdrawal slip against the signature in the bank records submitted during
the opening of the account.
***There are instances that the depositor cannot attend personally to withdraw the
funds, he may authorize a representative by indicating the name of the representative in
the space provided and the representative must sign. There is a need for the
representative to bring a valid identification card upon withdrawal otherwise the bank
will not approve the withdrawal.
3. Cheque/check
A cheque is a document that orders a bank to pay a specific amount of money
from a person's account to the person in whose name the cheque has been issued. The
person writing the cheque, the drawer, has a current account where his money is held.
The drawer fills out the cheque, and signs it, ordering his bank, known as the drawee,
to pay that person or company (payee) the amount of money stated.

Checks are a type of bill of exchange and were developed as a way to make payments
without the need to carry large amounts of money.

The check number is usually indicated in the upper right portion of the check.

Information usually required on a cheque are the following:

➢ name of payee
➢ date of payout
➢ amount in figures and in words
➢ signature of the account holder

The following are the parties involved in a transaction that uses check as medium of
exchange:
➢ Drawer - the account holder and the person or entity who makes the check
➢ Payee - the recipient of the money
➢ Drawee - the bank or other financial institution where the cheque can be
presented for payment.
A. Crossed Check
➢ It is marked to specify an instruction about the way it is to be redeemed. A
common instruction is to specify that it must be deposited directly into an
account of the payee. It is usually done by writing two parallel lines on the
upper left portion of the check. A crossed check cannot be encashed over
the counter by the payee. It should be deposited to the payees account.
B. Stale Check
➢ A cheque which a bank will not accept and exchange for money or
payment because it was written more than a certain number of months
 ago. In the Philippines a check becomes stale if it exceeds 6 months from
the date of the check.
C. Bounced Check
➢ A deposited check from a customer that “bounces” because of insufficient
funds. Banks may refer to it in these codes:
a. NSF - Non Sufficient Funds
b. DAIF - Drawn Against Insufficient Fund
c. DAUD - Drawn Against Uncleared Deposits

4. Bank Statement
At the end of every month, the bank furnishes a statement to the depositor
showing the movement of the account. It contains all the withdrawals, deposits and
balance of your account after every transaction. It may also indicate bank charges that
were deducted by the bank automatically. Also, interest earned by the account is
likewise reflected.

The date column indicates the date the transaction was made. The check number
indicates the details of the check paid by the bank. The transaction code is normally a
bank code for the transactions. The Debit column represents all charges or deductions
made by the bank to your account. The Credit column represents the deposits or
additions to your account that was made by the bank. The Balance column is the
running balance after considering the effect of the transaction to your account.

Samples of Debit transaction

➢ Bank service charge - monthly fee charged by the bank for its services (Ex. cost of
printing checks writing funds to other locations and other fees)
➢ Payment of issued checks

Samples of Credit transaction

➢ Interest income earned by the deposit.
➢ Deposits made on the account