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Showing posts with label Banking. Show all posts
Showing posts with label Banking. Show all posts

Concept And Meaning Of Unit Banking

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Unit banking has one office. Generally, limited banking services are offered to customers by unit banking organization. Although unit banking organization has one banking office, it can spread cash counters in market place such as walk-in windows, automated teller machines, retail store point-of-sale terminals that are linked to the bank's computer system.

Unit banking is the oldest kind of banking organization most common in the world banking today. One reason for the comparatively large number of unit banks is the rapid formation of new banks. It can be established easily even in an age of electronic banking and mega mergers among industry leaders. Many customers still seem to prefer small banks, which get to know their customers well and often provide personalized services.

Most new banks start out as unit organization, because their capital, management and staffs are severely limited until the bank can grow and attract additional resources and professional staff. Later, they try to convert them into branch banking organization. However, economic and legal barriers to banks expanding geographically into new territory still exist in some places. Yet, most banks desire to create multiple service facilities-branch offices, electronic networks, and other service outlets. In competitive banking market, it is essential to open new markets and diversify geographically in order to lower risk and cost of banking services. If the surrounding economy weakens and people move away to other market areas, it becomes very risky in relying on a single office location, from which to receive customers and income.

Related Posts
Concept And Meaning Of Bank
Services Offered By Modern Commercial Banks

Services Offered By Modern Commercial Banks

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Generally, modern commercial banks offer following services to customers or public:

1. Accepting Deposit
Accepting deposit from savers or account holders is the primary function of bank. Banks accept deposit from those who can save money, but cannot utilize in profitable sectors. People prefer to deposit their savings in a bank because by doing so, they earn interest.

2. Advancing Of Loans
Banks are profit oriented business organizations. So they have to advance loan to public and generate interest from them as profit. After keeping certain cash reserves, banks provide short-term, medium-term and long-term loans to needy borrowers. 

3. Discounting Of Bill Of Exchange
Bill of exchange is a negotiable instrument, which is accepted by the debtor, drawn upon him/her by the creditor and agrees to pay the amount mentioned on maturity. Discounting bill of exchange is another function of modern commercial bank. Under this, banks purchase bill of exchange from holder in discount after making some marginal deduction in the form of commission. The banks pay the deducted value to the holders when traders discount it into bank.

                       Also read: Concept And Meaning Of Bank

4. Cheque Payment
Banks provide cheque pads to the account holders. Account holders can draw cheque upon bank to pay money. Banks pay for cheques of customers after formal verification and official procedures. .

5. Remittance
Remittance is a system, through which cash fund is transferred from one place to another. Banks provide the facilities of remittance to the customers and earn some service charge.

6. Collection And Payment Of Credit Instruments
In modern business, different types of credit instruments such as bill of exchange, promissory notes, cheques etc. are used. Banks deal with such instruments. Modern banks collect and pay different types of credit instruments as the representative of the customers.

                      Also read: Meaning Of Unit Banking

7. Foreign Currency Exchange
Banks deal with foreign currencies. As the requirement of customers, banks exchange foreign currencies with local currencies, which is essential to settle down the dues in the international trade.

8. Consultancy
Modern commercial banks are large organizations. They can expand their function to consultancy business. In this function, banks hire financial, legal and market experts, who provide advices to customers in regarding investment, industry, trade, income, tax etc.

9. Bank Guarantee
Customers are provided the facility of bank guarantee by modern commercial banks. When customers have to deposit certain fund in governmental offices or courts for specific purpose, bank can present itself as the guarantee for the customer, instead of depositing fund by customers.

Concept And Meaning Of Bank

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A bank is financial institution, which deals with money and credit. Bank accepts deposits from the public and mobilizes the fund to productive sectors. Bank also provides remittance facility to transfer money from one place to another. Generally, bank accepts deposits from business institutions and individuals , which is mobilized into productive sectors mainly business and consumer lending. So bank is also called a dealer of money. At present context, a bank may engaged in different types of functions such as remittance, exchange currency, joint venture, underwriting, bank guarantee, discounting bills etc. The modern bank refers to an institution having the following characteristics:

* Bank deals with money: it accepts deposits and advances loans.
* Bank also deals with credit: it has the ability to create credit by expanding its liabilities.
* Bank is commercial institution: it aims at earning profit.

Banks are the principal source of credit for millions of individuals and families and for many units of government. They are among the most important financial institutions in the economy. Moreover, for small local businesses to large dealers, banks are often the major source of credit to stock the shelves with merchandise. Banks grand more installment loans to consumer than any other financial institutions.
Banks are among the leading buyers of bonds and notes issued by government to finance public facilities, ranging from hospitals and football stadiums to airports and highways. Moreover, bank reserves are the principal channel for government economic policy to stabilize the economy.
Banks are the important sources of short-term working capital for businesses. They have become increasingly active in recent years in making long-term business loans for new plants and equipment. When businesses and consumers must make payments for purchase of goods and services, more often they use bank provided cheques, debit or credit cards, or electronic accounts connected to a computer network.
Bank is a intermediary which accepts deposits and grants loans. It offers widest menu of services of any financial institution. In fact, a modern bank performs such a variety of functions that it is difficult to give a precise and general definition of a bank.

Related Posts
Services Offered By Modern Commercial Banks
Concept And Meaning Of Unit Banking

Concept Of Investment Bankers And Their Functions

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Concept Of Investment Bankers
Investment bankers are financial middlemen in security offering process. They purchase securities from companies and governments and resell them to the general public. Thus, investment bankers bring together suppliers and users of long-term funds in a capital market and there by play a key role in security offering process. It is to be noted that investment bankers are neither investors nor bankers. They do not invest their own funds permanently nor accept and guard the savings of others, as commercial banks do.

Functions Of Investment Bankers
The traditional function of the investment bankers has been to act as middlemen in channeling individual's savings and funds into the purchase of business securities. But now a days, they also provide advice and help in distribution of securities. Thus, investment bankers perform four basic functions as follows:

1. Underwriting
When underwriting a security issue, an investment banker guarantees the issuer that it will receive a specific amount from the issue. In this process, investment banker buys the security at a lower price and then sells them at a higher price i.e. offer price to public. In this sense, underwriting is the insurance function of bearing the risks of adverse price fluctuation during the period of distribution. Investment bankers take this risk for a specific amount of underwriting spread or commission. If investment banker can not sell securities at specified price, the underwriter, not the company, suffers the loss. Underwriter's gain or loss is computed using the following equation.

Gain or loss to underwriter = Gross proceed- proceed to the company- underwriter's expenses.
Where, 
Gross proceed = price to public X number of shares to be issued.

2. Distributing
Once the investment banker owns new securities. it must get them into the hands of ultimate investors. Hence, the second function of investment banker is marketing new issue of securities. The investment banker is a specialist with a staff and organization to distribute securities. So, they perform physical distribution functions more efficiently and more economically than and individual company.

3. Advising
The investment banker, through experience becomes an expert in the issuance and marketing of new securities. Business firms may take valuable advice and counsel from the investment bankers. Thus, investment bankers perform an advisory function by analyzing the firm's financial needs and recommending appropriate means of financing.

4. Making A Market
In case of a company going public for the first time, the investment banker may be obliged to maintain a market for the shares after the issue. The investment banker generally agrees to make a market in the stock and to keep it reasonably liquid. In making a market, the underwriter maintains an inventory in the stocks, quotes bid and asked prices, and stands ready to buy and sell it at those prices. Thus, investment banker also helps to maintain an active secondary market in the stock of small and newly established company.

Classification Or Types Of Financial Institutions

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In financial market there are many types of financial institutions or intermediaries exist for the flow of funds. Some of them involve in depositary type of transactions whereas other involve in non-depositary type of transactions. The type of financial institutions can be divided into two types as follows:

1. Depository Institutions
The depository types of financial institutions include banks, credit unions, saving and loan associations and mutual saving banks

* Commercial banks
Commercial banks are those financial institutions, which help in pooling the savings of surplus units and arrange their productive uses. They basically accepts the deposits from individuals and institutions, which are repayable on demand. These deposits from individuals and institutions are invested to satisfy the short-term financing requirement of business and industry.

* Credit Unions
Credit unions are cooperative associations where large numbers of people are voluntarily associated for savings and borrowing purposes. These individuals are the members of credit unions as they make share investment along with deposits. The saving generated from these members are used to lend the members of the union only.

* Saving And Loan Associations
Saving and loan associations are the financial institutions involved in collecting funds of many small savers and lending these funds to home buyers and other types of borrowers.

* Mutual Saving Banks
Mutual saving banks are more or less similar to saving and loan associations. They primarily accepts savings of individuals and they are lent to the home users and consumers on a long-term basis.

2. Non-depository Institutions
Non-depository institutions are not banks in real sense. They make contractual arrangement and investment in securities to satisfy the needs and preferences of investors. The non-depository institutions include insurance companies, pension funds, finance companies and mutual funds.

* Insurance Companies
Insurance companies are the contractual saving institutions which collect periodic premium from insured party and in return agree to compensate against the risk of loss of life and properties. 

* Pension/Provident Funds
Pension funds are financial institutions which accept saving to provide pension and other kinds of retirement benefits to the employees of government units and other corporations. Pension funds are basically funded by corporation and government units for their employees, which make a periodic deposit to the pension fund and the fund provides benefits to associated employees on the retirement. The pension funds basically invest in stocks, bonds and other type of long-term securities including real estate. 

* Finance Companies
Finance companies are the financial institutions that engage in satisfying individual credit needs, and perform merchant banking functions. In other words, finance companies are non-bank financial institutions that tend to meet various kinds of consumer credit needs. They involve in leasing, project financing, housing and other kind of real estate financing.

* Mutual Funds
Mutual funds are open-end investment companies. They are the associations or trusts of public members and invest in financial instruments or assets of the business sector or corporate sector for the mutual benefit of its members. Mutual funds are basically a large public portfolio that accepts funds from members and then use these funds to buy common stocks, preferred stocks, bonds and other short-term debt instruments issued by government and corporation. 

Concept And Meaning Of Financial Institutions

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Financial institutions are organizations that deals with transaction of financial claims and financial assets. They issue financial claims against themselves for cash and use the proceeds from this issuance to purchase primarily the financial assets of others. Financial institutions primarily collect saving from people, business and government by offering accounts and by issuing securities. The savings are lent to the user of the funds. They also work as the intermediaries between issuer of securities and the investing public. Thus, financial institutions are the specialized firms that facilitate the transfer of funds from savers to borrowers. They offer accounts to the savers and in turn the money deposited are used to buy the financial assets issued by other forms.  Similarly, they also issue the financial claims against themselves and the proceeds are used to buy the securities of other firms. Since financial claims simply represent the liability side of balance sheet for an organization, the key distinction between financial institution and other types of organizations involves what is on the assets side of the balance sheet.

For example, a typical commercial bank issues financial claims against itself in the form of debt (for instance, checking and saving accounts) and equity; and so does a typical manufacturing firm. However, structure of assets held by a commercial bank reveals that most of the bank's money is invested in loans to individuals, corporations, and government as well. On the other hand, typical manufacturing firm invest primarily in real assets. Accordingly, banks are classified as financial institutions and manufacturing firms are not. Besides commercial banks, other example of financial institutions are finance companies, insurance companies, credit unions, pension funds, mutual funds savings and loan associations, and so on.

Preparation Of Bank reconciliation statement

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The following procedures are followed while preparing the bank reconciliation statement:

* Compare cash book and pass book items.

* Give sign to all the items of cash book and pass book which are matched with each other.

* Make a list of unmatched items found in cash book and pass book.

* Prepare bank reconciliation statement taking balance either from cash book or pass book as a basis.

* Adjust the items which cause the disagreement in the balances. Add the items which have decreased the balance on the book with which reconciliation is to be made. On the contrary subtract the amount of those items which have increased the balance.

These procedures should be followed only when the cash book and pass book are to be compared. But if causes of differences are already given, the above procedures need not be followed.

If the causes of disagreement between the cash book and pass book balances are given, the bank reconciliation statement can be prepared either by taking the balance of cash book or pass book. The bank reconciliation statement can be prepared by using either of the following bases.

* Debit balance shown by cash book

* Credit balance shown by cash book (bank overdraft)

* Credit balance shown by pass book

* Debit balance shown by pass book (bank overdraft)

Related Topics
Concept And Meaning Of Bank Reconciliation Statement
Needs And Importance Of Bank Reconciliation Statement
Reasons For Disagreement Between Cash Book And Pass Book Balances

Reasons For Disagreement Between Cash Book And Pass Book Balances

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The following are the important causes or reasons for the disagreement between the balances shown by the pass book and cash book.

1. Cheques issued but not presented for payment.

2. Cheques paid or deposited but not collected and credited by the bank.

3. Interest credited by the bank but entered in cash book.

4. Bank charges, commission and interest in overdraft debited by the bank but not entered in cash book.

5. Expenses directly paid by the bank on behalf of customer but not recorded in cash book.

6. Incomes directly collected by the bank on behalf of customer but not recorded in cash book.

7. Amount directly deposited into the bank by debtors but not entered in cash book.

8. Cheque deposited into the bank but dishonored.

9. Dishonor of bill discounted with the bank.

10. Errors committed in the cash book and pass book.

Related Topics
Concept And Meaning Of Bank Reconciliation Statement
Needs And Importance Of Bank Reconciliation Statement
Preparation Of Bank Reconciliation Statement

Needs And Importance Of Bank Reconciliation Statement

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Bank reconciliation statement is an important technique by which the accuracy of the bank balance shown by the pass book and cash book is ensured. The need and importance of bank reconciliation statement can be summarized in the following points.

* Bank reconciliation statement ensures the accuracy of the balances shown by the pass book and cash book.

* Bank reconciliation statement provides a check on the accuracy of entries made in both the books.

* Bank reconciliation statement helps to detect and rectify any error committed in both the books.

* Bank reconciliation statement helps to update the cash book by discovering some entries not yet recorded.

* Bank reconciliation statement indicates any undue delay in the collection and clearance of some cheques.

Related Topics
Concept And Meaning Of Bank Reconciliation Statement
Reasons For Disagreement Between Cash Book And Pass Book Balances
Preparation Of Bank Reconciliation Statement

Concept And Meaning Of Bank Reconciliation Statement

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A modern business performs its transactions through bank. It generally receives cash through bank deposits and makes cash payments by issuing cheques. In order to keep records of its transactions, it maintains a cash book with bank columns. It is in fact the bank account in the books of the business. On the other hand, bank also maintains the customer's account in its books. Whenever the business opens an account in the bank by depositing some amount, the bank provides it with a cheque book to facilitate the withdrawal or payment of cash, and a pass book which shows the detailed statement of the customer's account in the bank.

Any transaction that takes place through bank is supposed to be simultaneously recorded in the books. For example, if cash is deposited in the customer's account, it is debited in the bank column of the cash book, while it is credited in the pass book. Similarly, if cash is withdrawn from bank or payment is made through bank, the bank column of the cash book is credited and pass book is debited. As a result, it is supposed that the cash balance at bank shown by both cash book and pass book is always the same. However, the balance shown by the pass book hardly equals the balance shown by the bank column of the cash book.

The disagreement between the balance shown by the pass book and cash book occurs due to some transactions or errors that appear only in the cash book but not in the pass book, or only in the pass book but not in the cash book. However, it is essential to reconcile the difference in the balances shown by the pass book and the cash book for ensuring their accuracy. In order to reconcile the balances shown by them, a statement is prepared which is called bank reconciliation statement. A bank reconciliation statement is the statement which is prepared to reconcile the balances shown by the pass book and cash book by finding the causes of difference between the two balances.

Related Topics
Needs And Importance Of Bank Reconciliation Statement
Reasons For Disagreement Between Cash Book And Pass Book Balances
Preparation Of Bank Reconciliation Statement

Dishonor Of Cheque And Reasons For Dishonor

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Meaning Of Dishonor Of Cheque
The bank should pay the amount mentioned on the cheque as soon as it is presented. If the amount of cheque is paid by the bank to the payee, the cheque is said to be honored. If the bank refuses to pay the amount of cheque, then the cheque is said to be dishonored. Thus the dishonored of the cheque means the refusal by the bank to pay the amount of cheque to the payee. It is a condition in which the bank does not pay the amount of the cheque to the payee. In fact, when the drawer draws the cheque without following all the rules of issuing cheque or when he/she draws the cheque exceeding the bank balance then the bank dishonors the cheque.

Following are the some important reasons for dishonoring a cheque

* If the date is not written or written incorrectly or the date given is of three months before or if the advance date is given.

* If the name of the payee is not written or not written clearly.

* If the ordered or crossed cheques are transferred without proper endorsement and delivery.

* If the amount is not written in words and figures or written incorrectly or if the amount written in words and figures does not match with each other.

* If the alteration made on the cheque is not proved by the drawer giving signature.

* If the account number is not mentioned or if it is not clear or if it is not mentioned clearly.

* If the signature is not given or if the signature given in the cheque does not match with the signature given on the signature specification card kept by the bank.

* If the amount mentioned on the cheque is more than the amount that the drawer has in his bank account or if as per bank's rule the minimum balance in the account of the drawer can not remain.

* If the cheque is overwritten.

* If the cheque is not found in proper condition or it is found wet, torn or spotted.

* If the drawer has given order to the bank to stop payment of the cheque.

* If the bank has got the information regarding the death or insolvency or lunacy of the drawer of depositor.

* If the court of law orders the bank to stop payment of the cheque.

* If the bank balance remains shortage on account of not collecting the cheque deposited.

* If the drawer has closed his/her account before presenting the cheque.

Related Topics
Meaning And Characteristics Of Cheque
Parties Involved In A Cheque
Rules For Drawing A Cheque

Rules For Drawing A Cheque

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If the drawer makes the cheque properly and if the balance of the drawer at the bank permits, the bank must pay the amount of cheque as soon as it is presented. If the drawer does not make the cheque properly, the bank rejects payment. Hence, to make the cheque properly, the following points or rules must be considered.

1. Date
Date should be mentioned on the cheque properly. If the cheque is more than three months old or contains future date then the bank will not pay the amount.

2. Name Of The Payee
The name of the payee should be mentioned on the cheque.

3. Amount Of The Cheque
The amount of the cheque should be mentioned both in words and figures clearly. The amount written in the word should tally with the amount written in figures.

4. Signature
The drawer should sign the cheque properly. The signature given on the cheque should tally with the signature given on the signature specification card. The signature specification card is kept by the bank.

5. Account Number
The drawer should mention his account number clearly and correctly.

6. Minimum Balance
The amount mentioned on the cheque should not be more than the amount deposited in the bank. Beside it, a certain amount of minimum balance should always be there in the account as per the rule of the bank.

7. Crossing And Overwriting
There should not be any crossing and overwriting in the cheque.

8. Condition Of The Cheque
Cheque should be in proper condition. If the cheque is torn, wet and spotted, it will not be acceptable to the bank.

9. Endorsement
The ordered and crossed cheques should be transferred by proper endorsement and delivery; otherwise, the amount of cheque will not be paid by the bank

Related Topics
Meaning And Characteristics Of Cheque
Parties Involved In A Cheque
Dishonor Of Cheque And Reasons For Dishonor

Parties To A Cheque Or Parties Involved In A Cheque

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There are three parties involved in a cheque. They are as follows


1. Drawer

Drawer is the party who draws the cheque upon a specified banker. He is the maker of the cheque. He is the account holder who draws the cheque for drawing money from his bank account. He is the person who issues cheque directing the bank to pay a certain sum of money to a certain person or to the bearer. Thus, the person who signs the cheque is known as drawer.

2. Drawee
Drawee is the party upon whom the cheque is drawn. Drawee is the bank. It is the party to whom the drawer gives order to pay the amount to the person named on the cheque or his order to the bearer. When the bank follows the order and pays the amount of the cheque then the cheque is said to be honored. In case of refusal of the order, the cheque is said to be dishonored.

3. Payee
Payee is the party who presents the cheque for payment. He is the person who receives money from bank. He is the party in favor of whom cheque is issued. The payee is the person whose name is mentioned on the cheque. If the cheque is made payable to self, the drawer himself becomes the payee.

Related Topics

Meaning And Characteristics Of Cheque

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Cheque is an important means of payment. Cheque is used for paying a large sum of money. It is the most widely used tool for drawing money from the bank. Cheque is used by the buyer or debtor to pay the due amount of goods to his seller or creditor out of his bank deposit. Cheque is a written order issued by a depositor to a particular bank directing it to pay a certain sum of money to a certain person or to the bearer of the cheque.

Characteristics Of Cheque

1. An Unconditional Order
The drawer or the depositor should not lay down any condition in the cheque.

2. Drawn Upon A Specified Banker
The drawer issues cheque directing to a particular bank having deposit in it to pay the amount of cheque.

3. Signed By The Maker
The cheque should be signed by the account holder.

4. Amount In Words And Figures
The amount of cheque should be mentioned in words and figures.

5. Payable On Demand
The amount of cheque must be paid by the bank as soon as it is presented at its counter.

Related Topics
Parties To A Cheque Or Parties Involved In A Cheque
Rules For Drawing A Cheque
Dishonor Of Cheque And Reasons For Dishonor

Concept And Types Of Bank Accounts

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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.

Related Topics
Concept Of Cash And Banking Transactions
Objectives And Importance Of Cash And Banking Transactions

Objectives And Importance Of Cash And Banking Transactions

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A business must have strict financial rules and accounting system to perform , record, report and control the cash and banking transactions. Proper recording and accounting of cash and banking transactions are important to achieve the following objectives.

* To have systematic and permanent record of all cash and banking transactions in a separate book.

* To obtain reliable and detailed information of all cash receipts and payments easily and immediately.

* To keep effective control over misappropriation of cash and banking transaction.

* To know the main sources and heads of payment of cash.

* To know cash and bank balances.

* To help to prepare cash budget and to avoid the possibility of having excess or shortage of cash.

* To make the cashier and other concerned officers accountable for all cash and banking transactions.

Related Topics
Concept Of Cash And Banking Transactions
Concept And Types Of Bank Accounts

Concept Of Cash And Banking Transactions

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All financial transactions are ultimately settled in cash. Some transactions are settled immediately after purchase and sale and the rest are after few days. In fact, business transactions are settled sooner or later either in cash or through bank. Usually, small sums are settled in cash and large sums are settled through bank. There is a greater chance of misappropriating cash while performing cash and banking transactions. Cash can be misappropriated by showing no record or less record of cash receipts. Similarly, it can be misappropriated by showing more or fictitious record of payments. Hence, in order to have proper information and control over cash and banking transactions, every business maintains a separate cash book.

Cash Transaction
Cash transactions refer to cash receipts and payments. The receipts of cash from various sources and payment of cash on various heads are important routine transactions of a business. The main sources of cash receipts are sale of goods and services, sale of old assets, contribution of capital, loan borrowed, interest, rent, commission and other receipt from customers. The main heads of payments are purchase of goods, wages, rent, stationary, interest on loan borrowed, drawing, repayment of liabilities, advertising and payment to suppliers.

Banking Transaction
Banking transactions refer to all receipts and payment made through bank. It is inconvenient and risky affair to get and make payment of large sum directly in cash. A modern business operates bank account to settle all receipts and payment. It issues cheque for making payments accepts cheques for getting amount. It may also instructs its bank to pay and collect amount on its behalf. In fact, the bank is treated by the business as its agent for collecting all receipts and making all payments. Except the balance in petty cash account, no cash balance is maintained in the office of a modern business.

Related Topics
Objectives And Importance Of Cash And Banking Transactions
Concept And Types Of Bank Accounts