BANKING FUNCTIONS AND PROCESSES Flashcards
Explain the core functions of banks
- Deposit-taking
- Investment
- Loan/Borrowing
What is the accounting treatment for deposits
Dr Cash
Cr Customer deposit account
What is the accounting treatment for withdrawals
Dr Customer deposit account
Cr Cash
What is the accounting treatment for Loan issuance
Dr Loan receivable account
Cr Cash
What is the accounting treatment for Loan repayment
Dr Cash
Cr Loan receivable account
What is the accounting treatment for Interest earned
Dr Interest receivable account
Cr Interest income account
What is the accounting treatment for interest paid
Dr Interest expense account
Cr Cash
What is bank reconciliation
It reconciles the differences between a company’s cash account balance in its general ledger and the ending balance shown on the corresponding bank statement for a specific period
Reasons for discrepancies in BRS
- outstanding checks
- deposits in transit
- bank errors
- customer errors
BRS process
- obtain bank statement
- compare deposits
- compare withdrawals
- adjust book balance
- adjust bank balance
Importance of BRS
- ensures accuracy and reliability
- detects potential frauds
- provides a clear picture of cash flow
- strengthens internal control (highlights weakness and promotes accountability)
Latest trends in banking
- rise of fintech such as mobile payments and peer-to-peer lending.
- increased focus on digital banking
- emphasis on cyber security
- blockchain technology (streamlines processes and enables secure, transparent and efficient financial transactions)
Fintech impact on accounting
- automation of repetitive tasks such as data entry, invoice processing, and bank reconciliations
- real-time access to data allows to generate reports faster and more accurately.
- challenges in data security such as regulatory compliance and data security.
Digital banking impact on accounting
- streamlined bank reconciliation process [provide a clear and detailed record and simplifies the process]
- Automated data feeds and integration which reduces manual data entry errors.
- Importance of data integrity & audit trail [ensure accurate data is captured and create a clear audit trail for all financial transactions]
Cyber security impact on accounting
- strong cyber security measures such as encryption, access controls and regular data backups to protect financial data
- importance of data encryption [encrypting sensitive financial information making it harder for the hackers to access]
- accountants monitor and report cyber risks [accountants should work with management to implement appropriate safeguards]
