This document discusses the accounting treatment for savings accounts. It begins by defining savings accounts as accounts meant for non-trading customers to save money with limited transactions. The key steps in accounting for savings accounts are: 1) Open a savings account by depositing funds from cash or a checking account, 2) Withdraw funds from the savings account to cash or a checking account, and 3) Compute and record monthly interest earned on the minimum balance in the account. Interest is calculated using the minimum monthly balance and is recorded initially as an accrued interest account before being added to the savings account periodically. An example is provided to demonstrate computing minimum balances and recording deposits, withdrawals, and monthly interest for three months.
9. 1) Open a saving account.
xx
Dr. Cash
OR
Dr. Customers’ Checking account
xx
Cr. Savings accounts
Note: Sometimes Customers open a saving
account by transferring money from their
checking account. What For .. ?!
11. 2) Withdrawals from a saving account.
xx
Dr. Savings accounts
xx
Cr. Cash
OR
Cr. Customers’ Checking account
Note: Sometimes Customers
withdrawing from a saving
account by transferring money
to their checking account.
13. 3) Compute & Record the interests.
The minimum balance =
the balance at the beginning - withdrawals
We compute the interest by using The minimum balance as follows :-
14. Compute & Record the interests.
The interest is computed monthly .. But it’s added to the account periodically.
xx
Dr. Debit interest on saving account
xx
Cr. Accrued debit interest on saving
account
xx
Dr. Accrued debit interest on saving
account
xx
Cr. Saving account
Step 1 . Compute and journalize the interest.
Step 2 . Adding the interest to the account periodically.
17. 2) Recording the deposit & withdrawal and the interest for each month.
8,000
Dr. Cash
8,000
Cr. Savings account
A. January
3,000
Dr. Saving account
3,000
Cr. Cash
Deposit
Withdrawal
1220
Dr. Debit interest on saving account
1220
Cr. Accrued debit interest on saving account
Recording the interest of the month
The minimum balance = 125,000 – 3,000 = 122,000
The monthly interest = 122,000 * 12% * 1/12 = 1220
18. 2) Recording the deposit & withdrawal and the interest for each month.
15,000
Dr. Cash
15,000
Cr. Savings account
A. Feb
20,000
Dr. Saving account
20,000
Cr. Cash
Deposit
Withdrawal
1100
Dr. Debit interest on saving account
1100
Cr. Accrued debit interest on saving account
Recording the interest of the month
The minimum balance = 130,000 – 20,000 = 110,000
The monthly interest = 110,000 * 12% * 1/12 = 1100
19. 2) Recording the deposit & withdrawal and the interest for each month.
7,000
Dr. Cash
7,000
Cr. Savings account
A. March
5,000
Dr. Saving account
5,000
Cr. Cash
Deposit
Withdrawal
1200
Dr. Debit interest on saving account
1200
Cr. Accrued debit interest on saving account
Recording the interest of the month
The minimum balance = 125,000 – 5,000 = 120,000
The monthly interest = 120,000 * 12% * 1/12 = 1200