Learning Materials For Accounting, Management , Finance And Economics.

Tuesday, June 22, 2010

Concept And Types Of Bank Accounts

Concept Of Bank Account

In order to perform cash transactions through bank, a business requires to operate an account in commercial bank which is known as 'Bank Account'.

Types Of Bank Accounts
 
The following are the types of bank accounts in which amount can be deposited or cash transactions can be operated.

1. Current Account

A current account is one in which there is no restriction in respect of the number of withdrawals and extent of the amount to be drawn. Mostly, it is operated by businessmen for the sake of convenience ans safety in handling cash transactions. No interest is allowed by the bank on the deposit made in current account. The trader is required to maintain a minimum balance in current account all the times. The minimum balance may vary depending upon the policy of individual bank. The business deposits cash and cheques in its current account and withdraws amount from it as and when required. The bank does not give credit to the current account for the cheque deposited until it collects the amount from the drawee bank. The business is required to fill in a pay-in-slip and submit to the bank at the time of depositing cash and cheques.

2. Saving Account

A saving account is one in which there is restriction in respect of the number of withdrawals and the extent of the amount to be drawn. Saving account is not suitable for business. Usually, it is opened by individuals. An individual prefers to open saving account to earn moderate interest. The depositor or the account holder is required to maintain the minimum balance all the times. The amount of minimum balance is usually less than that of the current account. Banks do not restrict for number of withdrawals provided daily withdrawals do not exceed the maximum limit. They require pre-information to withdraw more than the limit specified. They provide the facility of debit card from which amount can be withdrawn at any time not exceeding the limit fixed by the bank without issuing cheque. The account holder can draw the money by using debit card from any branch bank where the ATM service is available.

3. Fixed Deposit Account

A fixed deposit account is one in which a large sum is deposited for fixed period of time, say, for 1 year or 2 years or more years. The account holder can not withdraw her/his deposit before the period expires. If the depositor does not require the amount before the expiry of a fixed period then he prefers to deposit his/her amount in fixed deposit account. The rate of interest is the highest in such account. The bank issues a fixed deposit receipt against the deposit made. The account holder returns the fixed deposit receipt on maturity and gets his/her amount back. Usually, the interest is allowed by the bank on half-yearly basis. The fixed deposit account is not suitable for a trader.