Chapter 3 Accounting for Current Accounts Department

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Presentation transcript:

Chapter 3 Accounting for Current Accounts Department

Current Accounts In the majority of banks, accounts or deposits are divided into three types: Current accounts, Savings accounts and time deposits

Current accounts: current account is a deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels. Because money is available on demand, these accounts are also referred to as demand accounts or demand deposit accounts.

Current accounts: Opening current accounts in a bank to customers for the purpose of depositing their money in cash or cheques or transfer, the Bank, in return, is developing systems that enable these clients to withdraw from these amounts, usually they do not pay interest, and they may restrict or impose additional fees for excessive activity

Current accounts: It is usually the agreement between the bank and the customer to open a current account by signing a request to open the account (account opening form) and update the documents and papers necessary to do so.

Current accounts: To regulate this process, the current account record of the customer reflects the series of movements on the account. The left side of the record restricts the amounts deposited in the account, and the right side restricts the withdrawals by the customer on the account, and the difference between them is the balance of the account.

Current accounts: The process of opening accounts is considered as a contract between the client and the bank, and the relationship between them is the relationship between (creditor and debtor).

Current accounts: Types of Current Accounts: 1- Credits accounts. 2- Debit accounts

Form of Current Accounts: Debit Item Credit *** Drawings Deposits Balance Total

The Main operations of the Current Account Department Opening of current accounts for customers. Accepting deposits in cash, cheques and transfers. Implementing drawings operations from the current accounts.

The Main operations of the Current Account Department Counting the Interests and commissions on the current accounts. Keeping the cards of customers' signatures. Preparing the cheques books and delivering it o customers.

The Main operations of the Current Account Department Preparing the statements of current accounts. Preparing and implementing operations of accounting department.

Procedures of opening a current account: Fill the form of account opening. Fill of card of credited signatures for customers. Providing the documents necessary

Documentary and Accounting cycle for the current account: 1- Cash deposits: 2-Cheques deposits:

1- Cash deposits: Procedures of Documentary cycle for depositing: The client will fill the form. The client will deposit the money in the treasury and take a receipt.

1- Cash deposits: Copies are distributed as follows :( a copy for depositor, a copy for current accounts, and a copy for treasurer). The current accounts department records its copy in the journal for current accounts and the current account ledger.

1- Cash deposits: Sending the receipts at the end of the day to the accounting department, to record it at the journal and ledger current account. Accounting department will record the deposits as following: Treasury ** Current account **

2-Cheques deposits: Definition of Cheques: A cheque (or check - USA) is a negotiable instrument instructing a financial institution to pay a specific amount of a specific currency from a specified demand account held in the maker/depositor's name with that institution. Both the maker and payee may be natural persons or legal entities.

Parts of cheque: Cheques generally contain: 1. place of issue 2. cheque number 3. date of issue 4. payee 5. amount of currency 6. signature of the drawer 7. Routing / account number

Kinds of deposit cheques: A- Deposits Cheques in the client current account withdrawn from a client who has an account at the same branch:

Procedures of deposits as following: The client will deposit the Cheque, then the treasurer will check the cheque. The treasurer will give the client cheques package, and then fill the cheque data, and the client will take a copy after signed from the treasurer.

Procedures of deposits as following: Sending a copy of cheques package to the unit of clients center in the current accounts, to record it in the clients accounts. Recording the financial transactions at the journal and ledger of current accounts.

Procedures of deposits as following: Central accounting department will record this entry: Current account ***

Kinds of deposit cheques: B- Deposits Cheques in the client current account withdrawn from a client who has an account at another branch:

Procedures of deposits as following The client will deposit the cheque, then the treasurer will fill the form of deposit which includes several copies, the treasurer will check the cheque and deliver a copy to the client.

Procedures of deposits as following The bank will send the cheque and the form to the unit of clients accounts, then the unit will send the cheques to the withdrawn branch. Recording of the financial transaction at the journal and ledger

Procedures of deposits as following Sending copy of the cheques to the central accounting department, then the department will record this entry: Branches *** Current account ***

Kinds of deposit cheques: Depositing Cheques at the client current account drawing on another customer has an account at another bank. We will talk ar5out that later in the clearing chapter

The Documentary cycle of Cash Drawing: Procedures of Drawing as following: 1. The client presents the cheque to the treasurer who checks its data, such as name, signature, date and amount. 2. Making sure of the drawer balance is enough to cover the cheque amount, and his signature.

The Documentary cycle of Cash Drawing: 3. The treasurer dispenses the cheques amount. 4. Cheques are being sent to the unit of client accounts. 5. Dispensed cheques are being documented in the journal and ledger.

The Documentary cycle of Cash Drawing: 6. Then the journal and cheques are being transferred to the central accounting department. 7. The central accounting department verifies accuracy of the transactions, financially and technically, and performs the following entry: Current account *** Treasury ***

The Documentary cycle for transferring from current accounts to current accounts 1. The client must fill in a form of transfer from the current accounts. 2. The treasurer verifies the data, the account-balance, and the signature.

The Documentary cycle for transferring from current accounts to current accounts 3. Then the transfer notes- original and copies- are being prepared to include the transferred amount, commission, and expenses. 4. The client receives a notice of the transfer.

The financial transactions (Accounting entries) as follows: 1- Transferring from current account another at the same branch: Current account ***

The financial transactions (Accounting entries) as follows: 2- Transferring from one current account to another at another branch: Current account *** Branch ***

The financial transactions (Accounting entries) as follows: 3- Transferring from one current account to another at another bank: Current account *** Bank ***

The financial transactions for the coming transfers to the hank as follows: 1- Incoming transfer from the branch to the client's current account: Branch *** Current account ***

The financial transactions for the coming transfers to the hank as follows: 2- Incoming transfer from another bank to the client's current account: Bank *** Current account ***

Exercise: These transactions occurred at the current accounts department at AI-Quds Bank: 1- Cash deposits 50,000 USD, and cheques withdrawn from the same branch with 70,000 USD. 2- Cheques deposits withdrawn from another branch with 60,000 USD. 3- Clients cheques withdrawn with 40,000 USD.

Exercise: 4- The transfers from the current account to another in another branch with 10,000 USD. 5- The coming transfers from the branches to the current account with 14,000 USD

Exercise: Required: Record the financial transactions, and make the record of the current accounts , it is worth noting ,The balance of the current account at the previous day is 1,200,000 USD.