1/14/2020

ACCOUNTING FOR BANK’S DEPOSIT

BANK ACCOUNTING TAKING OPERATION

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LOGONGUYEN THI DIEM HIEN, MSc. LOGONGUYEN THI DIEM HIEN, MSc.

LOGO LOGO
Agenda
1. Deposit taking activity Commercial Bank’s Basic Function?
2. Depositing Process
3. Accounting Principles
4. Recording in the Accounts

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Deposit taking activity Deposit taking activity
Deposit taking means receiving money Receiving deposit
from an organization or individual as  Demand deposit
demand or term deposit, savings deposit,  Term deposit
issuing deposit certificates, bills or
 Savings deposit
treasury bills, and other forms of receiving
deposits on the principles of full payment Issuing valuable papers
of principals and interests to depositors  CDs
under agreement  Bills or treasury bills
 Bonds
Brrowing from other banks

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Depositing Process Accounting Principles
Maintain the account balance with the
debit and credit account
Duty separation between opening deposit
account and accounting book recording
Deposit interest expenses be recorded
conforming to matching principle
Interest payment time: agreement
between banks and customers

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LOGO Presentation on Financial LOGO

Interest payment method
Statements
Term balance method Deposit are presented on Financial
Statements in accordance with bank’s
manangerial orientation: type of deposit
presentation is usually bank’s choice.
Deposit presentation according to VAS No.
Average daily balance method 22:
 Distinguish between deposits customer
accounts and deposits of other financial
institutions, between funds from deposit and
funds from issuing securities
 Do not balance assets and liabilities one
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another
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 Assets and Liabilities are analyzed in term

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Acounting Documents
Source Balance Sheet
Cash documents:
 Cash deposit form
 Cash withdrawal form
 Cash receipts…
Transfering documents :
 Payment order
 Cash transfer form…
Other documents
 Passbook
 Interest calculation sheet…
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Deposit Accounts Deposits of customers -
Deposits of customers - 42xx 42xx
Account 421x: VND deposits of domestic
customers
Withdrawing Depositing money
money Account 422x: Foreign currency deposits of
Adding interest to domestic customers
principal
Account 423x: VND savings deposits
Balance Account 424x: Savings deposits in foreign
Depositing balance currency and gold
Account 425x: VND deposits of foreign
Detailed Accouting:
customers
Account 426x: Foreign currency deposits of
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Which accounts are used?

LOGO Credit institutions issuing valuable papers
LOGO

- 43
1. Customer A deposits cash VND 300mil for Face value of valuable papers - 431, 434
period of 3 months.
2. Company B deposits on demand VND
Paying on maturity issuing valuable papers
200mil (Face value)
3. Customer C deposits on demand
VND12mil
4. Company C deposits VND 1 bil, time: 3 Valuable papers balance
months.
5. Receiving $100.000 from overseas banks
to pay to Company D

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Credit institutions issuing valuable papers

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- 43
Discount of valuable papers - 432, 435 Discount of valuable papers

4310 1011
Discount of valuable Allocated into expenses
papers in the in the accounting period
accounting period Face Cash
value

Debit balance: 4320

Discount of valuable papers are
not allocated into expenses
Discount

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Credit institutions issuing valuable papers

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Additional valuable papers - 433, 436 Additional valuable papers

4310 1011
Additional valuable
Allocated into expenses in papers in the accounting
the accounting period period Face Cash
value

Crebit balance : 4330

Additional valuable of valuable
papers are not allocated into Additional
expenses valuable

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Expense on credit activities - 80 Interests and fees payable - 49

Payment of deposit interests – 801

Interests payable to deposits - 491
Payment of valuable papers issuance interests - 803
Interests payable on issued valuable papers - 492
- Decreasing expenses in
the accounting period
Interest expenses in
- Closing balance carried
the accounting period Accumulated planned
over to Undistributed Interest paid to customer interest payable
profits

Debit balance : Interest Payable Balance

To reflect interest expenses in
the accounting period

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Prepaid (Deferred) Expenses- 388 Other accounts

Costs pending for allocation - 3880

Account 1011: Cash at the entity in VND
Costs pending for Prepaid expenses has Account 1014: Cash in ATMs in VND
allocation increases in been allocated into Account 1113: Payment deposits at the
the accounting period expenses in the
State Bank in VND
accounting period
Account 4531: Payable value added tax
Balance: Account 4599: Other items pending for
Prepaid (Deferred) Expenses
payment
Account 50xx: Payment between credit
institutions
Account 7110: Incomes from payment
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services

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Recording in the accounts Recording in the accounts

Receiving deposits from customers
Customers withdraw from their
Cash / Payment Intermediate (Dr) accounts
Customer Deposit Account (Cr) Customer Account (Dr)
Cash / Payment Intermediate (Cr)
Service fee Incomes (Cr)
Payable VAT (Cr)

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LOGO LOGO
Recording in the accounts Recording in the accounts
Cash / Payment Customer Account
Intermediate Other bank
xxx xxx
Customers withdraw cash from their accounts

Amount of money customer

Customer Account Cash Payment
withdraw from account
xxx xxx

Service fee Incomes

Receiving deposits from fee

customers

Payable VAT

VAT

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Recording in the accounts Recording in the accounts
Deposit Interest Expense
Interest recording methods: Deposit Interest Expense: Prepaid Interest
 Cash basic: applied for all kinds of deposits When paying interest:
 Accrual basic: applied only for time deposit Costs pending for allocation (Dr)
and term savings Cash / Deposit account (Cr)
• Prepaid interest
• Periodical interest payment Apportioning into expense in the accounting period
• Interest payment at maturity Expense on Payment of deposit interests (Dr)
Accounting principle: Matching principle Costs pending for allocation (Cr)

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Recording in the accounts
Recording in the accounts

Deposit Interest Expense: Interest payment at Deposit Interest Expense: Interest payment
maturity at maturity
Calculating interest expense: Customer closes the account before the
Expense on Payment of deposit interests (Dr) maturity date, if interest has been calculated
Interests payable to deposits (Cr) as expense for the accounting year

Paying deposit interest Interests payable to deposits(Dr)

Expense on Payment of deposit interests (Cr)
Interests payable to deposits(Dr)
Cash / Deposit account (Cr)

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LOGO LOGO
Recording in the accounts Examples analysis
As a trainee accounts clerk of ABC
Commercial Bank, you have task the job
Cash / Deposit account Interests payable to deposits Interest Expense of making double – entry for the following
xxx
transaction on 15 Jan 2017 (1.000 VND
Pay interest Calculate interest
expense unit)

Costs pending for allocation

xxx
Interest payment Apportion expense

Interest Payment
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Examples analysis Examples analysis

1. Customer A wants to close his time deposit account 2. Customer B deposits cash 100.000 cash to open 3 mths
opened on 15/7/2016: account balance 40.000, interest rate: term saving account, interest rate: 0,5%/mth (will be paid at
0,6%/mth (will be paid at maturity), time: 6 mths maturity)

Dr Cr Dr Cr
Principal payment
Time deposit (Customer A) 40.000
Cash 40.000
Interest payment
Interest Expense (or Interests payable) 1.440
Cash 1.440

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Examples analysis Recording in the accounts
Issuing valuable papers with face
3. Customer C wants to close his time deposit account value
opened on 15/6/2016: account balance 200.000, interest Issuing time:
rate: 7%/yr (monthly interest payment), time: 9 mths
Interest rate applying for principal withdrawing before Cash / Deposit account (Dr)
maturiry is 2%/yr Face value of valuable papers (Cr)
Dr Cr Paying time
Principal payment
Time deposit (Customer C) 200.000
Face value of valuable papers (Dr)
Cash 200.000 Cash / Deposit account (Cr)
Interest payment ???

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Recording in the accounts Recording in the accounts

Issuing discounted valuable papers

Payment at maturity Issuing time
Face value of valuable papers
Cash / Deposit account (Dr)
Cash / Deposit account
xxx Discount of valuable papers (Dr)
Face Value Face value of valuable papers (Cr)
Receiving money from
customers
Apportioning into expense in the accounting
period
Payment of valuable papers issuance interests
(Dr)
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Recording in the accounts Recording in the accounts
Issuing Additional valuable papers Recording interest of valuable papers is
Issuing time same as recording interest of deposits
Cash / Deposit account (Dr)
Face value of valuable papers (Cr)
Additional valuable papers (Cr)

Apportioning into expense in the accounting

period
Additional valuable papers (Dr)
Payment of valuable papers issuance
interests (Cr)
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Recording in the accounts Recording in the accounts
4310 1011, 4211, TTV
Payment of valuable
Interests payable for papers issuance
Cash / Deposit account issued valuable papers interests MG Giá PH
xxx
Pay interest Calculate interest
expense
4320 8030

Costs pending for allocation Số tiền CK

Định kỳ phân bổ
xxx
Interest payment Apportion expense 1011, 4211 4921
Cuối kỳ trả lãi
Định kỳ trích lãi
3880
Interest Payment Trả lãi trước
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44 trảUniversity
trước of Economics and Law

LOGO
Recording in the accounts
4310 1011, 4211, TTV

MG Giá PH

4921 8030 4330

Trích lãi hàng kỳ

Số tiền PT

Định kỳ phân bổ

3880

Phân bổ lãi hàng kỳ

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