7. Accounts and payments Flashcards
1
Q
What are the different types of bank accounts?
A
- Saving accounts - instant access accounts/ fixed term deposits/ monthly income
- Current account - w/ cheque books/ overdraft/ payments/ direct debits or credit cards
- Basic account
- Sharia compliant account - in accordance with Islam law
2
Q
What factors would you consider when opening a bank account?
A
- Accessibility of funds
- Rate of Interest / If interest is paid gross or net
- Currency
- Telephone/ online banking facilities
- 24 hour banking facilities
- Minimum balance requirements
- Opening or ongoing fees
- International money transfers
- Bank charges
3
Q
What type of information would you require to open an account for a company?
A
- Name
- Registered office address / correspondence address
- Nature and purpose of assets held and likely account activities
- Memorandum and Articles of Association
- Certificate of incorporation
- Certificate of good standing issued by the Companies Registry (or jurisdiction equivalent)
- Copy of board resolution authorising the opening of the bank account documentation to be signed
- Register of members
- Register of directors and secretaries
- Signatory list of the company
4
Q
What type of information would be required to open an account for a trust?
A
- Name of trust
- Type of trust
- Details of the trustees
- Details of the settlor
- Details of the principal beneficiaries
- Details of any protector
5
Q
What is a bank mandate?
A
It provides the bank with the relevant authority to:
- Honour all cheques drawn on the account
- Counterman cheques (revoke / cancel)
- Accept and act on all instructions in relation to the account
- Credit funds received
- Pay out advances
- Deliver documents held in safe keeping
- Set out the signing authorities on the account; and
- Allow an account to go overdrawn if acts on the customers instructions.
6
Q
What may also be needed alongside a bank mandate?
A
A fax indemnity to allow the bank to act on fax instructions.
7
Q
Why would a bank account be closed?
A
- Decision of bank (must give reasonable notice)
- Decision of customer - provide written confirmation with signature i.e. account no longer required.
- Bank/customer relationship may terminate - on death of customer, mental incapacity of customer or customers bankruptcy/liquidation, or certain voluntary legal orders
8
Q
What are the different payment methods?
A
- Cash
- Cheque
- Banker’s draft
- Bank Cards i.e. cheque guarantee card, debit card or credit card
- Direct debit
- Direct credit
- Standing order
9
Q
Cash (3)
A
- Trusted method of payment
- Convenient and used for everyday small transactions
- Available on demand at ATMs
10
Q
Cheques (7)
A
- Customers instruction to bank to pay funds out
- usually on pre-printed form
- customer completes the date, payee, amount and signs
- Magnetic ink shows cheque number, bank sort code and customer account number
- Collecting bank encodes amount when the cheque is paid in
- Cheques are cleared through the ‘cheque clearing system’
- being phased out
11
Q
Banker’s draft [5]
A
- Guaranteed payment by bank as drawn on the bank’s own account i.e. more secure
- Funds must have cleared in individual’s own account
- Low cost
- Range of currencies
- Convenient if attaching documents.
12
Q
What are the types of card?
A
- Cheque guarantee card - used to guarantee cheques up to £250
- Debit card - direct payments of goods and services, as well as cash withdrawals
- Credit card - payments for goods and services are charged to a separate account up to a specified spending limit with repayments made on a monthly basis
- ATM card - cash withdrawals, view balance, order cheque books and statements
13
Q
Direct debit [4]
A
- can be irregular frequency and unspecified amounts
- Beneficiary debits money from payer’s bank account - must notify changes of amount 14 days in advance
- only reputable organisations participate
14
Q
Standing order [3]
A
- usually mandated on bank form
- regular payment of specified amount
- sent by account holder to beneficiary
15
Q
Direct credit [3]
A
- Enables organisations to make payments by electronic transfer directly into bank accounts
- used for wages but might be used for pensions, insurance settlements etc
- more secure than cheques as cannot be lost or stolen
