Unit-2 Deposit Account Video | Class 9th Banking & Insurance Video

Unit-2 Deposit Account Notes | Class 9th Banking & Insurance Notes

1. Demand Deposits

Demand deposits refer to accounts where funds can be withdrawn at any time without prior notice. These are ideal for daily transactions.

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A. Savings Accounts

A savings account is designed for individuals to save money while earning interest on their deposits.

a. Features of a Savings Account

1. Interest Calculations on Savings Account Balances:
   • Interest is calculated on the daily closing balance and credited quarterly or monthly, depending on the bank.
   • For example, if you have ₹10,000 in your account at a 4% annual interest rate, you’ll earn ₹400 annually.
2. Eligibility for Opening a Savings Account:
   • Any individual, including minors (with a guardian), senior citizens, and salaried employees, can open a savings account.
   • Real-Life Example: A college student opens a savings account to deposit pocket money and earn interest on their savings.

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B. Current Accounts

A current account is primarily for businesses or individuals who perform frequent transactions.

a. Users of Current Accounts

• Businesspersons, firms, companies, and traders with high transaction volumes.

b. Features of Current Accounts

1. Overdraft Facility: Allows account holders to withdraw more than their account balance.
2. No Interest Earned: Banks do not pay interest due to the high frequency of transactions.
3. Real-Life Example: A shop owner uses a current account for daily deposits from sales and withdrawals for inventory purchases.

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2. Term Deposits

Term deposits are accounts where funds are deposited for a fixed period to earn higher interest rates.

A. Types of Term Deposits

1. Fixed Deposits (FD)
2. Recurring Deposits (RD)

B. Features of Fixed Deposit Account

• Higher interest rates than savings accounts.
• Fixed tenure ranging from 7 days to 10 years.

C. Advantages of Fixed Deposit

1. Guaranteed returns.
2. Flexible tenure.
3. Premature withdrawal with nominal penalties.

D. Factors Affecting the Rate of Interest

1. Duration of Deposit: Longer tenures usually yield higher interest rates.
2. Market Conditions: Economic policies impact interest rates.

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3. Other Deposit Schemes

A. Recurring Deposit (RD)

Recurring deposits allow individuals to deposit a fixed amount regularly and earn interest at a predetermined rate.

B. Features of Recurring Deposit Account

1. Fixed monthly installments.
2. Tenure ranging from 6 months to 10 years.

C. Advantages of Recurring Deposits

1. Encourages disciplined saving habits.
2. Earns higher returns compared to savings accounts.
3. Real-Life Example: A parent opens an RD to save for their child’s school fees.

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4. Types of Account Holders

A. Partnership Account:

• Opened by partnerships for business operations.

B. Minor:

• Accounts opened by guardians on behalf of minors.

C. Joint Stock Company:

• Corporations use this account for financial transactions.

D. Joint Account:

• Held by two or more individuals with shared account privileges.

E. Hindu Undivided Family (HUF):

• Accounts for managing family finances under a single entity.

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5. Opening of Accounts

A. Opening of Accounts and Form Filling:

• The customer fills out an account opening form with necessary details.

B. Opening the Account in the Ledger and Other Operational Procedures:

• Banks enter customer details in the ledger and activate the account.

C. Allotting UCIC (Unique Customer Identification Code):

• Every customer is provided a unique code to track their accounts.

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6. Cash Book, Pass Book & Bank Reconciliation Statement

A. Cash Book (of the Customer):

1. Features of the Cash Book:
   • Records cash and bank transactions.
2. Objects or Need of Cash Book:
   • To track daily cash flow.

B. Passbook:

• Issued by the bank, recording all transactions from the customer’s account.

C. Bank Reconciliation Statement (BRS):

• Reconciles differences between the cash book and the bank statement.

The Reasons for Differences Include:

1. Cheques issued but not yet cleared.
2. Bank charges not recorded in the cash book.
3. Deposits in transit.

D. Sample BRS of ABC LTD

Particulars	Amount (₹)	Amount (₹)
Balance as per Cash Book	10,000
Add: Cheques deposited	5,000
Less: Bank charges		200
Balance as per Passbook		14,800

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Summary

Deposit accounts cater to different customer needs, from daily transactions in demand deposits to long-term savings in term deposits. The ability to reconcile accounts using tools like the cash book and passbook ensures financial transparency and accuracy.

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10 Most Important Questions with Solutions

1. Define demand deposits and give examples.
   Ans: Demand deposits are accounts where funds can be withdrawn anytime. Examples: Savings and current accounts.
2. Explain the features of a savings account.
   Ans: Interest-bearing account, unlimited deposits/withdrawals, suitable for personal savings.
3. Who are the users of current accounts?
   Ans: Businesspersons, traders, and companies with high transaction needs.
4. What are term deposits? List their types.
   Ans: Fixed deposits and recurring deposits where funds are locked for a fixed tenure.
5. State the differences between a savings account and a current account.
   Ans: Savings accounts earn interest; current accounts don’t but offer overdraft facilities.
6. What is the significance of UCIC?
   Ans: Unique Customer Identification Code ensures better account tracking and customer service.
7. What are the features of a recurring deposit?
   Ans: Fixed monthly contributions, predetermined tenure, higher returns.
8. What are the reasons for differences between the cash book and passbook?
   Ans: Cheques in transit, bank charges, and unrecorded transactions.
9. Explain the process of account opening.
   Ans: Fill out a form, submit necessary documents, and complete operational formalities.
10. What is a bank reconciliation statement? Provide an example.
    Ans: A BRS reconciles differences between cash book and bank statement to ensure accuracy. Example: A cheque issued but not yet cleared causes a mismatch.