How banking works?

From a legal and financial accounting standpoint, the noun “deposit” is used by the banking industry in financial statements to describe the liability owed by the bank to its depositor, and not the funds that the bank holds as a result of the deposit, which are shown as assets of the bank. In banking, the verbs “deposit” and “withdrawal” mean a customer paying money into, and taking money out of, an account.

In the financial statements of the bank, the $100 in currency would be shown on the balance sheet as an asset of the bank and the deposit account would be shown as a liability owed by the bank to its customer. The bank’s financial statement reflects the economic substance of the transaction, which is that the bank has borrowed $100 from its customer and has contractually obliged itself to repay the customer according to the terms of the agreement.

A deposit account is a bank account maintained by a financial institution in which a customer can deposit money and which can be withdrawn. Deposit accounts can be savings accounts, current accounts or many other typed of bank account.

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