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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

2: Time Deposits:

 Time deposits are money deposited in cash at the bank tied with
a certain period of time and the client has not the right to
withdraw this money or a part of it until the end of that period.

 The bank gives the client of time deposits an interest at a certain

rate determined in advance according to the amount of money and its
period.

 The time deposit appears as a liability item in the B/S of the bank.
 The interest computed is an expense as regards the bank.

 The steps of making a time deposit:

 The client gives the bank instructions to transfer out of his credit
current account in the bank a certain sum of money as a time
deposit.
 No deposits can be made without having an account in the bank and
this account is credit. (i.e. credit current account).

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  The entries can be as follows :
1) Making (opining) the time deposit:
Dr. Cr.
Credit current account a/c xx
Time deposit a/c xx
2) Interest:
Dr. Cr.
Debit interest a/c (expense) xx
Time deposit a/c xx
Or
Dr. Cr.
Debit interest a/c xx
Credit current account a/c xx
3) Cancel of time deposit:
At the end of the period of the time deposit, the clients may want
to cancel the deposit, so, its amount goes to the credit current, account
of the client, then the client may withdraw its amount, but, through his
credit current account.
Dr. Cr.
1 Time deposit a/c xx
Credit current account a/c xx
2 Credit current accounts a/c xx
Cash a/c xx
 Instead of two entries; it may be one entry as follows:
Dr. Cr.
Time deposit a/c xx
Cash a/c xx

4) transfer of time deposit and its debit interest to credit client's

credit current account:
Dr. Cr.
Time deposit a/c xx
Debit interest a/c
Credit current account a/c xx

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Exercise (2):

A- At 1st March 2020, the balance of time deposits at the banks was

1,000,000 and among this figure there is a time deposit of 120,000,

at an interest of 10%, for a period of 6 months, ends 1st Sept., and

the interest is computed monthly, and added to the credit current

accounts of the clients.

B- At 5th March 2020, some clients made time deposits out of their

credit current account at 200,000 with 10% interest, computed

monthly, for a time of 4 months.

C- At 1st July, the client of the time deposits which ends at that date

made these actions:

 Time deposits 400,000 cancelled and its due interest for 4 months

added to the credit current accounts of the clients, and the client

withdraw 150,000 in cash, the interest rate 10%.

The required: make necessary entries.

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Solution:
A- Journal entries of time deposit of 120,000, at an interest of 10%
for a period of 6 months:

Date Accounts Dr. Cr.

1st March No entry

Because this time deposit was made before

1st March An entry for the interest is to be made and

added to the credit current accounts of
the clients and this is made monthly for
period of 6 months (1st March, 1st April,
1st May, 1st June , 1st July , 1st August).
With an amount equals
𝟏
120,000 x 10% x = 1000
𝟏𝟐

Debit interest a/c 1000

Credit current accounts a/c 1000

1st April Debit interest a/c 1000

Credit current accounts a/c 1000

1st May Debit interest a/c 1000

Credit current accounts a/c 1000
1st June Debit interest a/c 1000
Credit current accounts a/c 1000

1st July Debit interest a/c 1000

Credit current accounts a/c 1000

1st Aug. Debit interest a/c 1000

Credit current accounts a/c 1000

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B- Journal entries of time deposit of 200,000, out of credit current
accounts with 10% interest, computed monthly, for a time of 4
months; Started at 5th March 2020:

Date Accounts Dr. Cr.

5th March Credit current account a/c 200000

Time deposit a/c 200000

5th April An entry for the interest is to be made and

added to the credit current accounts of
the clients and this is made monthly for
period of 4 months (5th April, 5th May, 5th
June , 5th July).
With an amount equals
𝟏
200,000 x 10% x = 1,666.70
𝟏𝟐

Debit interest a/c 1666.70

Credit current accounts a/c 1666.70

5th May Debit interest a/c 1666.70

Credit current accounts a/c 1666.70

5th June Debit interest a/c 1666.70

Credit current accounts a/c 1666.70
5th July Debit interest a/c 1666.70
Credit current accounts a/c 1666.70

If the clients of time deposits that end at 5th July, cancel it:
The entry will be as follows

Date Accounts Dr. Cr.

5th July Time deposit a/c 200000

Credit current account a/c 200000
Or Cash a/c

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C- Journal entries of Time deposits 400,000 cancelled at 1st July and

its due interest for 4 months added to the credit current accounts of

the clients, and the client withdraw 150,000 in cash, the interest rate

10%:

 Notice that: (Debit interest = 400,000 x 10% x 𝟏𝟐𝟒 = 13,333.33)

Date Accounts Dr. Cr.

1st July Time deposit a/c 400000

Debit interest a/c 13333.33

Credit current accounts a/c 413333.33

1st July Credit current accounts a/c 150000

Cash a/c 150000