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.

1. CHAPTER 2
SAVING
ACCOUNTS

2. Learning objectives:-
• The Meaning and Definition
of the saving account.
• The Accounting Treatment
for the savings account.

3. Saving accounts mainly meant for non-trading customers
who want to save, and who don’t have numerous transactions
in their account.

4. The accounting treatment
for saving accounts
Open a saving
account
Withdrawing from
saving account
Compute &
Record Interests

5. The Daily
Banker Show
Episode 2

8. Open a saving
Account
Withdraw
Interest

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 .. ?!

10. Open a saving
Account
Withdraw
Interest

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.

12. Open a saving
Account
Withdraw
Interest

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.

15. Example.
Withdrawals
Deposits
Balances at the
beginning
Months
3,000
8,000
125,000
Jan
20,000
15,000
???
Feb
5,000
7,000
???
March
If you learn that :-
_ the interest is 12%
_ It adds the interest quarterly to the saving account.
1) compute the missing amounts.
2) Record the deposits and the withdrawals amounts each month and record
the monthly interest.

16. Withdrawals
Deposits
Balances at the
beginning
Months
3,000
8,000
125,000
Jan
20,000
15,000
130,000
Feb
5,000
7,000
125,000
March
1) Compute the missing amounts.

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

20. Thank you