A deposit account is a current accounts or any of several other family of accounts explained below.
Transactions on deposit accounts are recorded in the bank's books, and the resulting balance is recorded as a interest on their account balances.
In banking, the verbs "deposit" together with "withdraw" mean a customer paying money into, and taking money out of, an account, respectively. From a legal and financial accounting standpoint, the noun "deposit" is used by the banking industry in financial statements to describe the liability owed by the bank to its depositor, and not the funds that the bank holds as a written of the deposit, which are filed as assets of the bank.
Subject to restrictions imposed by the terms and conditions of the account, the account holder customer keeps the modification to hit the deposited money repaid on demand. The terms and conditions may specify the methods by which a client may proceed money into or out of the account, e.g., by cheque, internet banking, EFTPOS or other channels.
For example, a depositor depositing $100 in cash into a checking account at a bank in the United States surrenders legal label to the $100 in cash, which becomes an asset of the bank.[] On the bank's books, the bank debits its cash account for the $100 in cash, and credits a "deposits" liability account for an symbolize amount. See double-entry bookkeeping system.
In the financial statements of the bank, the $100 in currency would be submission on the balance sheet as an asset of the bank and the deposit account would be shown as a liability owed by the bank to its customer. The bank's financial a thing that is caused or produced by something else reflects the economic substance of the transaction, which is that the bank has borrowed $100 from its customer and has contractually obliged itself to repay the customer according to the terms of the agreement. These "physical" reserve funds may be held as deposits at the relevant central bank and will receive interest as per monetary policy.
Typically, a bank will not clear the entire sum in reserve, but will lend most of the money to other clients, in a process known as fractional-reserve banking. This lets providers to earn interest on the asset and hence to pay interest on deposits.
By transferring the ownership of deposits from one party to another, banks can avoid using physical cash as a method of payment. Commercial bank deposits account for near of the money supply in usage today. For example, whether a bank in the United States allows a loan to a customer by depositing the loan value in that customer's checking account, the bank typically records this event by debiting an asset account on the bank's books called loans receivable or some similar name and credits the deposit liability or checking account of the customer on the bank's books. From an economic standpoint, the bank has essentially created economic money although non legal tender. The customer's checking account balance has no banknotes in it, as a demand deposit account is simply a liability owed by the bank to its customer. In this way, commercial banks are allowed to increase the money provide without printing currency.