BANK:A bank is an institution, which deals in money and credit. A bank receives deposits, lands money, makes collections and renders many others services. KINDS OF BANK:
The important kinds of bank are: Central or State Bank Commercial bank Exchange Banks Industrial banks Saving Banks Agricultural Banks Co-operative Banks Investment Banks.
FUNCTIONS OF A BANK:-
Bank renders following types of functions: PRIMARY FUNCTIONS:-
a) b) c) d)
Banks accepts accepts money money deposit depositss from the public. public. Banks lend money money to people people and and obtain obtain interest interest on it. it. Banks remit remit money money to any part of the the country country and outside outside the country. country. Banks collect collect the proceeds proceeds of the the both local local and outstatio outstation n checks.
AGENCY SERVICES:-
a) b) c) d)
Bank renders services as an agent of customers. Collection Collection of bills, bills, salaries, salaries, pensions, pensions, dividends dividends and promissory promissory notes etc. etc. Bank Bankss un under derta take ke to make make paym paymen ents ts in resp respec ectt of subs subscr crip ipti tion ons, s, insu insuran rance ce premium, shares and other securities. Bank Bankss under underta take ke to purc purcha hase se and and sell sell debent debenture ures, s, bond bonds, s, shar shares es and and other other securities. A bank also also acts as a trustee trustee and administra administrator tor of immovab immovable le property. property.
MISCELLANEOUS SERVICES:-
a) Bank Bank accepts accepts jewelle jewellery, ry, importa important nt document documentss and other valuabl valuables es for safe safe custody. b) Banks Banks deals deals in in foreign foreign excha exchange nge.. c) Bank Bank issue issue commerci commercial al letters letters of credit credit for facili facilitat tating ing and financ financing ing foreign foreign trade. 1|Page
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Financial accounting notes
CHECK:The check is the written order by which the customer (account holder) requires to draw money from he bank. They also serve as the proof of payment. A check is a piece of commercial paper drawn on a bank and payable on demand. KINDS OF CHECKS:
Open check Blank check Bearer check Order check Crossed check Past-Dated check
CHECK BOOK:A book containing some blank checks to a page, perforated so that they may be removed singly. To the left of each check is a check sub. The depositor’s name and address are printed on each check and the “MICR” numbers are shown on the bottom edge. PARTIES TO THE CHECK:
There are three parties to a check: a) THE DRAWER is a person on whose signatures the check is paid to its hold. b) THE DRAWEE is the bank which is ordered by the drawer of the check to pay the amount stated in the check on demand. c) THE PAYEE is person who receives the payment of the check from the bank. DISHONOR OF CHECK:
Checks are sometimes returned unpaid for certain reasons. It is called “dishonor of check”. Check may be dishonored because of following reasons: a) Insufficient Insufficient funds in custom customers ers account. account. b) When the the amounts amounts in in words words and figures figures differ. differ. c) When When sign signat ature uress diffe differ. r. d) If payme payment nt is stop stopped ped by drawer. drawer. e) When an an out dated dated check check is presented presented at at the counter. counter. f) When the the drawer drawer becomes becomes bankrup bankrupt; t; on receiving receiving such such informatio information. n. g) When crossed crossed check check is is presented presented at the the counter. counter. h) Notice Notice of the drawer’s drawer’s death received received by the the bank. bank. i) Alterna Alternatio tions ns made made in the check check if if not signe signed d by the drawe drawer. r.
BANK DRAFT:DRAFT:It is a check drawn by one bank on another branch of the same bank situated at a different town payable on demand.
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Financial accounting notes
BANK CHARGES:The charges made by the bank for services rendered to its customers are called “Bank Charges”, e-g bank commission or bank services fees.
BANK RECONCILIATION STATEMENT:The balance at bank shown by the depositor’s depositor’s record must agree with the balance shown by the bank statement. But the balances of both the records seldom agree. So a statement is prepared to find out the reasons for disagreement between the the two two reco record rds. s. Th The e stat statem emen entt prep prepar ared ed for for this this purp purpos ose e is call called ed a “Bank Reconciliation Statement”. In simple words, “Bank Reconciliation Statement is a report which shows the differences in our record (Business Record) and the record of the Bank”. It is usually prepared at the end of a particular period, i.e. one month. REASONS TO PREPARE BANK RECONCILIATIO RECONCILIATION N STATEMENT:
a) Check(s) Check(s) issued but not yet presented presented for payment payment in the bank. b) Check(s) deposited in the bank bank but not yet cleared cleared or credited in the bank record. c) Amount debited debited in the bank but not yet posted posted in our cash/bank cash/bank book. d) Amount credited in the bank but not not yet posted in our cash/bank book. OBJECTIVES OF BANK RECONCILIATION STATEMENT:
The objectives of preparing reconciliation statement may be stated as under: a) To know the the correct correct bank balance. balance. b) To record record correct correct balanc balance e of cash at bank bank in the trial trial balanc balance e and the balance balance sheet. c) To make necessary necessary adjustm adjustments ents prior to the end of the term. term. d) To find out the errors if any and to correct them in time. e) For the completi completion on of cash records. records. f) To verify verify the payments payments made made through through checks. checks. g) To know the amount amount of checks checks and drafts collected collected..
