Cash and Bank Transaction, Bank account

What is a Cash and Bank Transaction?

Cash and Bank Transaction, Bank account

Concept
Bank is an importance aid to modern business, finance which is the foundation of every business activities is provide by banks. Banks are thus regarded as indispensable spokes in the wheels of commerce.

A bank may be defined as financial institution which deals in money or monetary transactions. It collects surplus money from the public who are not using it a

in a position to use it for the productive purposes.

The bank pays a certain amount of money as interest on the money deposited by the customer. Similarly they charged interest on the leading money. Interest is always calculated at a certain rate percentage per annum. The rate of interest on loans provided is always greater than the deposits' made by the customers.

A bank is said to be a dealer in the money market. Because it buys and sells money in the market, bank acts as middle man or agents between the sever and borrowers of money. The difference between interest charged on loan amount and allowed on deposit amount is the income of bank.

Bank account
In order to conduct the business a transaction through the bank, an account is to be opened which is knows as bank account.
Depositing cash into a bank for first time is called opening of the account with the bank. A bank receives deposit on three accounts. They are:
• Current deposit accounts
• Fixed deposit accounts
• Saving deposit accounts

Current account
A current account may be defined as a running account between a banker and a customer. Customer can deposit money into or withdrawals and to the extent of account to be withdraw. This types of account is mainly open to get security and convenient in handing cash transaction. Under this account the bank does not provides interest but the minimum balance of cash is to be maintained.

Fixed deposit account
A customer can deposit his money with a bank for a fixed period. Such as account is called fixed deposit account. The period in fixed deposit account usually various from three month to five years. The amount deposited cannot be withdrawn before the expiry of the fixed period. The bank normally allows a higher rate of interest on, fixed deposits. The rate of interest increase with the period of deposit. But some case bank rules only withdraws amount only for load.
Saving account
A saving account provided limited withdraws facilities and carries a moderate of interest on deposit. Interest is allowed on the saving banks account on the lowest credit balance keep in a particular month period. These types of account are suitable to the individual in order to earned moderate interest. Under this account a minimum balance of cash is to be maintained but it is less than that of current account.
Meaning of cheque
When a customer wants to discharge his debt, he signs a written order on his bank authorizing the bank to pay certain sum of money to his creditor. This order is knows as cheque. In other words, cheque is written documents issued by a person or organization to a particular bank. Ordering to make payment of certain sum of money only to the order of a person or to the barer of the instrument of for the payment of certain amount of money to a certain person as special in it.
Cheque are drawn on printed forms made up into books and are supplied by the bank to customer whenever required.
Parties to cheque
There are three parties involved in a cheque:
• Drawer: drawer is the account holder who issues a cheque and gives the order to the bank. For paying money to the parties mentioned in the cheque.
• Drawee: the bank receiving the order from its customer or drawer is drawee. After receiving the order in the form of cheque, bank has to pay the amount to the party mentioned.
• Payee: a person or the party receiving the payment made by the is called payee. A drawer mentioned payee name in a cheque. The drawer and payee will be the same person if the drawer received cash from the drawee directly.

Types of cheque
Bearer cheque
The cheque, which can be presented to bank and received the payment by any one, is known as bearer cheque. The bank is liable to pay the amount f cheque to the bearer who presents it into bank. Since anyone can obtain the amount of cheque, the bearer is not safe enough.
Order cheque
The cheque, which can be ordered by the drawer to pay the amount to specific person or party mentioned in the cheque. In this cheque, the bank pays the amount only after appearing the signature of payee. It is safer than bearer cheque.
Cross cheque
A cheque can be crossed by drawing two paralled lines at the top of the cheque with or without the word "& co." between the lines. When a cheque is crossed, the bank will not make payment of such cheque but it will be credited in the account of the customer. The object of crossing is to secure payment to the right person.

Crossing is also of two types' ordinary crossing and special crossing.

1. General crossing: general crossing is such crossing of cheque where two parallel lines are drawn of the face of a cheque with or without "& co." this types of crossing cheque can be collected by any bank.
2. Special crossing: special crossing is that crossing where and additional instruction is written between the two parallel lines with the word "Nepal Bank Limited". Account payee only. The effect of special crossing that the amount of crossing cheque can be collected only be the bank mentioned on the cross cheque.

Requirement or Quality of cheque for payment
The following are the qualities of cheque for payments:
• The cheque amount written in words and figures should be tallied.
• There should be signature of the accountholder.
• Date in cheque should bear the current account number.
• Cheque should bear the current account number.
• Cheque should not be torn or wet.
• There should be sufficient amount in the account of the drawer to make payment of cheque.

Dishonored of cheque

The cheque is dishonored due to the following reasons:
• When the bank receives stop payment notic from the customer or court.
• If the customer has died and the bank has been noticed of his death.
• If the customer has not got sufficient amount with the bank.
• If the back dated cheque or the cheque of three month after the date of cheque presented.
• If account number is not clearly written.
• If the signature of the drawer does not tally the specimen of signature.
Pay in slip
Pay in slip is a document used by costumer for depositor their cash or cheque into the bank. It contains a counterfoil which is returned to the customer or depositor after making the signature of the cashier, as a receipt. This sampled counterfoil provides the evidence to the depositor of deposing their account.
Endorsement of cheque
The act of singing a cheque for the purpose of transferring it ownership to somebody else other than payee himself is known as endorsement. Two parties are needed to do endorsement. They are endorser and endorsee. The person who transfers the cheque is known as endorser one who receives after transferring it, is known as endorsee.
Bank statement (pass book)
When customer opens an account in a bank. The bank issues a small book to keep records of customer's transactions in it, is known as pass book. In the pass book, all the transactions between the bank and customer are recorded. This book is maintained by bank and therefore customer is required to present this book to the periodically so that bank can make entries in the pass book of custer transaction that may have taken place during the period. The customer is entitled to rely up on the entries made in pass book by the bank. The specimen of pass book is given below:
Meaning of cash book
a cash book is a special journal which is used for recording all cash receipts and cash payments. It is a book of original entry (or prime entry) since transactions are recorded for the first time from time from the source documents. It is a ledger in the sense that it is designed in the form of a cash account and records cash receipts on the debit side and cash payments on the credit side. Thus, cash book is both a journal and a ledger.

Types of cash books

User's points of view, the cash books may be classified into:
1. Single or simple column cash book.
2. Double column cash book.
a. Cash book with and discount column.
b. Cash book with bank and discount column
c. Cash book with cash and bank column
3. Triple column cash book with cash, bank and discount column
4. Petty cash book.
a. Simple petty cash book.
b. Analytical petty cash book

Simple/single column cash book

Simple column cash book is a book, which is maintained to keep the record of cash receipt and payment having single column in both the side and debit is used for recording cash receipts and right hand or credit side is used to record cash payments. Its specimen is given below:

Double column cash book
A cash book having provisions of recording transactions related to cash and discount, bank and discount and cash and bank transactions having two columns in both debit and credit side to keep the records of amount of cash and discount, bank and discount and cash and bank is knows as double columns cash book. Cash received and discount allowed are recorded in debit side and cash payment and discount received are recorded in credit side.

Contra entry

The term contra entry is derived from the Latin word 'contra" which means the other side. When both the debit and credit aspects of transactions are recorded in the cash book, they are called contra entries. For example. When cash deposited into bank. It is recorded in the bank column of debit side and cash column of credit side. Similarly when cash withdraw from bank for official use. It is recorded in the cash columns of debit side and in the bank column of credit side. Contra entry is denoted by the word 'C' which is written in L.F. column in both sides.
Triple column cash book
A cash book having three columns in the both sides to keep the record of amount of cash, bank and discount column is known as triple column cash book. In a business, where discount is offered and received, payment is made in cash and through cheque. In the book, all cash received, discount allowed and cash deposit into bank Is recorded in debit side in respective columns and cash payment, discount received and cash withdrew from bank is recorded in credit side in respective columns. Its specimen is given below.