Lessson # 6 Basic Documents and Transactions Related to Bank Deposits

Most Essential Learning competencies

The learner…

1. identify the types of bank accounts normally maintained by a business

2. prepare bank deposit and withdrawal slips
3. identify and prepare checks
4. identify and understand the contents of a bank statement

Types of bank accounts normally maintained by a business

A. Savings Accounts
• These are intended to provide an incentive for the depositor to save money.
• The depositor can make deposits and withdrawals using the form provided by the bank.
• Banks usually pay an interest rate that is higher than a checking account or a current account.
• Some savings accounts have a passbook, in which transactions are logged in a small booklet that the
depositor keep
• Some savings accounts charge a fee if the balance falls below a specified minimum

B. Checking or Current Accounts

• Money held under a checking account can be withdrawn through issuance of a check
• Banks usually allows numerous withdrawals and unlimited deposit under this type of account.
• The interest rate for checking account is usually lower as compared to a savings account.
• The account holder or depositor of a checking account is normally provided at the end of the month
a 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.

Preparation of bank deposit and withdrawal slips

A withdrawal slip and deposit slip are written orders to the bank. These slips are used to take out money or to put in money to
the depositor’s account.

Withdrawal Slip
*Without a withdrawal slip, the bank will not allow you to get money from your account. The required information in the
withdrawal slip are:

• 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• Amount to be withdrawn - the amount that the depositor wishes to withdraw from his account. The 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 approval the withdrawal.
Deposit Slip
The bank provides deposit slip that the depositor will fill up every time the depositor will put in money to his account. The
usually required information in a deposit slip are:

• Account Name – this is 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 first page inside the passbook.

• Account Number – this is 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
maybe in 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.
Identify and prepare check (cheque)
A check 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 transaction banking
account where his money is held. The drawer writes the various details including the monetary amount, date, and
a payee on the cheque, and signs it, ordering his bank, known as the drawee, to pay that person or company 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.

The following are the parties involved in a transaction that uses check as medium of exchange:

• Drawer, 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.

Identify and understand the contents of a bank statement

At the end of every month, the bank furnishes a statement to the depositor showing the movement of the
account. It contain 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
deduction 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)

• NSF - (Not Sufficient Fund) – Banks also use a debit memorandum when a deposited check from a customer “bounces”
because of insufficient funds. Nowadays bank refer to this as DAIF (Drawn Against Insufficient Fund) or DAUD (Drawn
Against Uncleared Deposits)

Samples of Credit transactions

• Collection of cash proceeds from notes receivables.

• Interest income earned by the deposit.

As part of control, the bank statement received from the bank is compared with the accounting records of the business.
This process is called bank reconciliation. Bank reconciliation will be discussed in the succeeding chapters.

Together with the bank statements, the banks will include the copies of checks cleared or paid by the bank for that
particular month.

Why companies issue checks?

• Payment of debts

• Gifts

• Payment of supplies

• Payment of electric bills

Quiz # 8
Essay.

1. What is a bank statement and discuss the importance of a bank statement to a depositor?
2. What is a check and who are the parties involved in the issuance of a check? Discuss the role of
each party.