Chapter 2

The Treasury

Treasury Department A bank has to

receive cash and pay cash for its various activities, so Most of banks transactions are presented in:

Receipts

1- Receipts, which is represented in: deposits with all it's kinds, sell of foreign currencies and collecting promissory notes, etc.,(On this side, cash account is always debited. All cash receipts are debited).

Payments

2- Payments of funds either in the form of implementation of withdrawals from the various deposits, making loans and purchasing of foreign currencies. (On this side, a cash account is always credited; all cash receipts are credited).

Treasury department

All of these activities go through Treasury department in the bank's completion of these tasks through:1-Main Treasury.2 - Subsidiary fund of receipts3 - Subsidiary funds of payments

Functions of Main

treasury.

Functions of Main treasury

1. Keeping and manage the money of the bank.

2. Supplying the branches with their need from money, and receiving their surplus.

3. Preparing and making Certain Adjustments.

4. Depositing of surplus in central bank or other financial institutions.

What Is The Functions of Subsidiary fund of receipts

Functions of Subsidiary fund of receipts

1. Receiving money from customers (deposits, repayments, ..etc).

2. To delivering the Accumulated amounts at the end of the day, to the main treasury.

3. Preparing and making Certain Adjustments, which related to receipts.

Functions of Subsidiary fund of payments

1. Receiving the necessary cash from the main treasury everyday.

2. Paying cheques, payroll orders (drawings from deposits, salary and other expenses' payments.

Functions of Subsidiary fund of payments

3- Delivering the remainder of the cash to the main treasury at the end of the day.

4- Preparing and making certain adjustments related to payments.

How to record the financial transactions (Accounting entries) for

the treasury:?

Accounting entries for the main treasury

Treasury receipts should be recorded in the debited side of the treasury while payments should be recorded in the credited side, as the following:

entries for the main treasury

1- At the establishment of a bank , depositing the capital at the main treasury takes place:

Treasury *** Capital ***

entries for the main treasury

2- Supplying the Subsidiary fund with cash:

Sub fund No. ... ***_____Main treasury_________***

entries for the main treasury

3- Supplying branches with cash:

Branch account No..... *** Main Treasury________***_

entries for the main treasury

4- Receiving accumulated amounts from the subsidiary funds at the end of the day:

Main treasury *** Subsidiary fund No. ... ***

entries for the main treasury

5- Receiving surplus from branches:

Main treasury *** Branch No. ... ***

entries for the main treasury

6- Depositing surplus at central bank or any other banks:

Central Bank /Bank... *** Main treasury ***

entries for the main treasury

7- Withdrawing cash from Central bank or any other banks:

Main treasury *** Central Bank/ bank... ***

Now let’s turn our attention to see Accounting entries for the Subsidiary fund

Accounting entries for the Subsidiary fund

Financial transaction for the Subsidiary fund presented in: Receipts and payments, but we should preparing daily Journal, in order to be able to prepare a statement per each Subsidiary fund, which includes receipts and payments and the accumulated amount at the end of the day, to be able to make the settlements as following:

1- Balancing between main treasury journal and Subsidiary fund journal.

2- Making actual inventory to the treasury.

3- Preparing a daily journal then sending it to the accounting department of the bank.

Accounting Procedures for the treatment of increase or deficit in the treasury.

1- Conditions of Surplus:

Treasury *** Surplus in treasury ***

In the case of not discovering reasons behind surplus, it's posted to the revenue account at the end of the year.

Surplus in treasury *** Accidental revenues ***

- 2- Conditions of Deficit:

Deficit in treasury *** Treasury ***

- When holding the responsibility on the treasurer:

Treasurer *** Deficit in Treasury ***

When repaying the deficit:

Treasury *** Treasurer ***

Example

1- In 1st Jan.-2005, The National Bank started a business with Capital of 6,000,000 $; it deposited 3,000,000 of the amount at the Central bank and 1,500,000 at the X bank and 1,500,000 at the Y bank .

Withdrawing 500,000 from the central bank to the main treasure.

During a certain working day, the following transaction took place:

Example1- Take order to transfer 1,000,000 $ from

bank X to Central bank .2- The subsidiary payment fund was

provided with 150,000 $.3- paid to buildings 30,000 $, 5000 $ to tools.4- Purchased furniture for 15,000 $ at

bank X.5- Purchased computers for 20,000 $ at

bank Y.4- Purchased cars for 120,000 $ at bank

X

Example6- Time depositors deposited 40,000 $ in their

accounts.7- Savings depositors deposited 28,000 $ in their

accounts. 8- current accounts deposited 52,000 $ in their

accounts.9- The amount of 20000 was withdrawn from the

current accounts.10- payment the amount of a note promissory in

favor of customers with 15,000.

Example

Required:1- Recording the central journal

entries.2- Preparing a journal of cash

transactions for the following: A- Payments fund. B- Receipts fund. C- Main treasury.

End of Chapter 2