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How to record all bank transactions which include the following:

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Current Time Bills of Letters of Financial Documentary

Saving Cheques
accounts deposits exchange guarantee notes credits

3: Saving:

 It isn't condition that the client has a credit current account to

open saving account.

 The clients may be in need for money at any time, the saving
account gives him the right to withdraw any amount at any time
so long as the balance permits.
 Saving accounts has high rate of interest than that of the time
deposits.

 The saving account appears as a liability item in the B/S of the bank.
 The interest of saving computed is an expense as regards the bank.
 The entries can be as follows :
1) Opining the saving a/c:
 In cash :
Dr. Cr.
Cash a/c xx
Saving clients a/c xx

 Through transferring Out of client's credit current account:

Dr. Cr.
Credit current account a/c xx
Saving clients a/c xx

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2) Interest of saving a/c:
Dr. Cr.
Debit interest (saving) a/c xx
Saving clients a/c xx
Notice that: the month during which money is deposited in the saving
account hasn't interest.

3) Withdrawals out of saving accounts:

 In cash :
Dr. Cr.
Saving clients a/c xx
Cash a/c xx
 By transferring a sum of money to his credit current account out
of his saving account.
Dr. Cr.
Saving clients a/c xx
Credit current account a/c xx

4) Closing the saving accounts:

The clients may want to close his saving account and takes the money in it
at cash, or transferring to his credit current account or to his debit
current account, or may be by the two (cash a/c & current account) the
entry will be as follows:
Dr. Cr.
Saving clients a/c xx
Cash a/c xx
Or Credit current account a/c xx
Or Debit current account a/c xx

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Exercise (3):

The following transactions took place at the saving department at a

certain commercial bank

1) Cash deposits 100,000.

2) Money transferred out of credit current accounts 150,000.

3) Debit interest 2000.

4) Money drawn of 70,000 in cash.

5) Money transferred out of saving accounts to the credit current

accounts of 25,000

6) Money transferred out of saving accounts to the debit current

accounts of 15,000.

7) Saving accounts closed through cash transactions 17,000.

8) Saving accounts closed through transferring to:

 Credit current accounts 5000

 Debit current accounts 3000.

You are required to make the necessary entries

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Solution:

No. Accounts Dr. Cr.

1 Cash a/c 100000

Saving clients a/c 100000

2 Credit current accounts a/c 150000

Saving clients a/c 150000

3 Debit interest (saving) a/c 2000

Saving clients a/c 2000

4 Saving clients a/c 70000

Cash a/c 70000

5 Saving clients a/c 25000

Credit current account a/c 25000

6 Saving clients a/c 15000

Debit current accounts a/c 15000

7 Saving clients a/c 17000

Cash a/c 17000

8 Saving clients a/c 8000

Credit current accounts a/c 5000

Debit current accounts a/c 3000