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Popenko Iryna Tarasivna
Scientific adviser: Mamontova N. A.
National University of Ostroh Academy
In this article the theoretical basis of the effective deposit operations of commercial banks under regulatory support is appraised. In addition, the main problems of deposit account transactions are identified.
Keywords: deposit operations, passive transactions, account transactions, account balance.
Formulation of the problem. The creation of a resource base is the economic foundation for efficient operation of a commercial bank. The reason is that for any commercial and business activity the bank should have the appropriate amount of money and resources. The main component of the resource base of the bank is deposit money. Thus, the issue concerning the creation of an effective mechanism for accounting and control of deposit operations of the commercial bank is becoming more important.
Analysis of recent research and publications. The theoretical principles and practical bases of accounting and control over the deposit transactions have been studied by such researchers as A. M. Herasymovych, V.B. Kyrylenko, O.V. Vasiurenko, O.V. Dziubliuk, O.E. Kuzminska and others.
The aim and task of the study. The purpose of the study is to explain the theoretical and practical bases of accounting and control of commercial bank deposit operations.
Summary of the basic material. The basis of the resource base of commercial banks is deposit operations. Deposit is cash or non-cash funds in national or foreign currency, which are held on client accounts in the bank according to terms and conditions of the use of the deposit that specified in the agreement or without a specific term. They can be returned to the customer in accordance with the legislation of Ukraine and the contract.
By its nature, the deposit has two sides, the first one can be defined as client money that he/she can use in the future for his/her own benefit, the second one is bank funds used for performing active operations and obtaining the income. So, deposit is financial resources or capital by means of which the bank gets profits. Deposit is more effective than cash to bring income to the owner, but that income is much lower than the income that capital brings. This feature is the basic principle of any bank, namely people get small payment for the deposit, but they pay much more for taking the credit [1, p. 245].
The object of deposit operations is funds provided by their owners to the bank on certain bilateral treaty provisions. The subjects are banks and owners of the funds, in particular money lenders and other creditors.
There is a classification of deposit operations:
- The method of execution:
– bearer deposits;
– personal deposits.
- The terms:
– demand deposits;
– term deposits;
– savings deposits.
- The economic agents:
– deposits of economic entities;
– deposits of individuals;
– deposits from other banks [2, p. 287].
Nowadays there is a problem of accounting control and deposit operations. This situation is associated with strong competition among banks and the introduction of new information technologies that have not been mastered well yet by our banks.
Considering the experience of foreign banks, significant losses of banks for deposit transactions were sustained due to errors in the accounting process. The cause of errors is negligence, dishonesty, unprofessionalism of the bank employees. This situation is the result of imperfections in hardware and software as well as internal control.
The most effective way of preventing loss of bank funds because of errors by bank employees is to implement internal control system. The internal control system of the bank is a set of procedures aimed at preventing, detecting and correcting errors and ensuring the protection and preservation of assets and accounting records. The internal control system may become an integral part of the bank operations that would combine administrative and accounting control over assets and liabilities of the bank.
Commercial banks should use the following procedures of internal bank controls:
a) administrative control:
- organizational control procedures;
- management control procedures;
- distribution functions;
- physical controls (protection and conservation of assets, tangible assets and accounting registers).
b) accounting control:
- all accounting operations;
- timely verification;
- valuation .
While appraising the initial account deposit operations, it should be noted that the main legal document that governs the deposit operations of the commercial bank is a Decision on approval of the Regulation of the procedure of deposit (deposit) transactions with corporations and indviduals approved by the Board of the National Bank of Ukraine of December, 3, 2003 № 516 .
According to the above mentioned Regulation, the documents proving the involvement of bank deposits (deposits) of businesses and individuals are:
– bank account agreement;
– the contract of bank deposit with the issuance of passbook;
– the contract of bank deposit with the issuance of savings (deposit) certificate;
– the contract of bank deposit with the issuance of other document confirming the amount of money or precious metals that were contributed and it meets the requirements established by law and other regulations in the field of banking activities (banking rules) and business practices.
Internal control over deposits should be taken in accordance with the regulations on the organization of accounting and reporting in the banking institutions of Ukraine approved by the National Bank of Ukraine of December 30, 1998, № 566 in order to ensure:
– attracting and putting the deposit within the terms and limits set by the Management Board;
– accepting and placing all deposits at the interest rate applied under the policy instituted by the bank;
– reflecting the deposit operations in accounting timely and correctly.
The system of accounting control on deposit operations includes deposit registration system. Accounting system of deposit operations must display such data:
– number of contract;
– name of the counterparty;
– type of contract (available for use);
– base interest rate;
– date of acquiring (placing) deposit;
– nominal of deposit;
– currency of deposit;
– interest rate;
– interest payment date;
– conditions of interest payment;
– deposit repayment date.
Banks should establish the procedures for checking identity of data of analytical accounts and balances on accounts synthetic accounting.
Charging of the interest and keeping of the record in accounting must be checked periodically by a person not involved in handling the charges. Interest displayed on a separate analytical account of interest expense (income) should be checked against the amount of interest paid for the depositor or received from bank. In case the interest is paid directly from the accounts of expenditures, it is necessary to provide additional control and check written off costs and amounts of interest credited to investor accounts.
The basic details and conditions of the deposit agreement must be:
– name and address of the bank that takes deposits:
– name and address of the owner of the funds;
– date of deposit;
– sum of deposit;
– date when funds should be returned to the depositor;
– the interest rate on the deposit (commercial bank may reserve the right to change the interest rate according to the change rate of the National Bank of Ukraine with the relevant notification of the depositor. In case of disagreement the contract may be modified or terminated in accordance with the current legislation of Ukraine);
– obligation of the bank to return all deposit money;
– signatures of the parties: the head of the executive body of the bank or an authorized individual and investors ( for legal entity – signature of the chief or the authorized individual, for the individual person – fund owner or the authorized individual).
An important aspect in organization of accounting of deposit operations in the commercial bank is to conduct synthetic and analytical accounting, which help to conduct business operations associated with the receipts and the use of bank funds.
Synthetic accounting reflects the transaction conducted without real money, and it gives an overview of the performed operation as well as major changes observed in the bank’s balance sheet.
The main registers of synthetic accounting of the bank are consolidated turnover balance sheets.
The reverse statement (accounting log) is a register of synthetic accounting that reflects cumulative debit and credit turnovers over a certain period of time. It involves balance sheet and off-balance sheet accounts in the context of the fourth-order accounts with the interim results on account of third and second order. Roll (log) is checked and signed by the chief and chief accountant or by the authorized individuals.
Requirements of the formation of daily turnover balance sheet are identified by the Regulations on accounting and reporting in banks of Ukraine approved by the National Bank of Ukraine on 30.12.1998, № 566 .
Analytical accounting of deposit operations displays the operations with all details, namely the date of transaction, type of document, number of postal account, date.
The basis of analytical accounting of cash transactions in commercial banks involves primary documents that serve as the basis of economic analysis.
Accounting entries play an important role in the organization of accounting of deposit operations that reflect the business transactions related to cash flow. The preparation of accounting entries in commercial banks are governed by the Instruction on the application of the Chart of Accounts in Ukrainian banks, № 280 of 17 June 2004 .
Accounting (financial) operations connected with involvement, placement and repayment of deposits, charges and write-offs (receipt) of expense (income) carried in the following groups of balance sheet accounts:
120 Demand deposit for the National Bank of Ukraine;
121 Time deposits in the National Bank of Ukraine;
130 Correspondent account of the National Bank of Ukraine in commercial banks;
150 Demand deposits in other banks;
151 Time deposits placed in other banks;
160 Demand deposits for other banks;
161 Time deposits of other banks;
251 Funds of State Budget of Ukraine;
252 State funds of the clients held by the State Budget of Ukraine;
254 Funds of local budgets and budget funds of clients upported by local budgets;
256 Extrabudgetary assets of funds;
260 Demand deposit for business entities;
261 Term deposits for economic activity;
262 Demand deposits for individuals;
263 Term deposits for individuals;
350 Deferred expenses;
360 Deferred revenue;
600 Interest income on funds placed in the National Bank of Ukraine;
601 Interest income on funds placed in other banks;
609 Other interest income;
610 Fee and commission income from bank transactions;
611 Fee and commission income from customers transactions;
620 Result of trading operations;
700 Interest expense on funds received from the National Bank of Ukraine;
701 Interest expense on funds from other banks;
702 Interest expense on funds of economic entities;
703 Interest expense on the budget and extrabudgetary funds of Ukraine;
704 Interest expense on funds of individuals;
705 Interest expense on bank stock of own debt;
709 Other interest expense;
710 Commission expenses.
Conclusions. The basis of the resource base of commercial banks is deposit operations. Deposit is cash or non-cash funds in national or foreign currency, which are held on client accounts in the bank according to terms and conditions of the use of the deposit that specified in the agreement or without a specific term. They can be returned to the customer in accordance with the legislation of Ukraine and the contract.
In its turn, the optimal accounting organization of bank deposit operations allows not only to satisfy the management needs for delivering quality, reliable and useful accounting information, but it also provides comfortable and qualified deposit operations for clients.
Consequently, the organization of primary, synthetic and analytical accounting plays an important role in deposit operations in commercial banks of Ukraine. The amounts of money shown on the accounts of analytical accounting must correspond to the amounts shown on the accounts of synthetic accounting. Analytical accounting is carried out on the basis of primary documents. Thus, banks can control operations by terms of content as well as by form. In addition, analytical accounting data is the basis of economic analysis and financial reporting. Compliance with regulatory requirements and legislation is an important aspect of organizing the registration of deposit operations, which reflects the basic principles of organization and deposit operations, considering all innovations and changes.
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- On approval of the Regulation on the organization of operations in banks of Ukraine: Resolution of the National Bank of Ukraine No. 254 of 18.06.2003 (with amendments and additions) – [Electronic Resource]. ─ Access mode: http://zakon3.rada.gov.ua/laws/show/z0559-03/page
- On approval of the Regulation of the procedure of deposit (deposit) transactions with corporations and individuals approved by the Board of the National Bank of Ukraine No. 516 dated 03.12.2003 (with amendments and additions) – [Electronic resource]. ─ Access mode: http://zakon2.rada.gov.ua/laws/show/z0048-08/page#n15
- On Accounting and Reporting in Banking Institutions of Ukraine: Provisions of the National Bank of Ukraine No. 566, December 30, 1998 (with amendments and additions) ─ [Electronic Resource]. ─ Access mode: http://zakon3.rada.gov.ua/laws/show/z0367-04
- About application of banks of Ukraine: Instruction of the National Bank of Ukraine No. 280, June 17, 2004 (with amendments and additions) ─ [Electronic resource]. ─ Access mode: http://zakon3.rada.gov.ua/laws/show/z0918-04