Bank Accounting Definition

The accounting is the science and technology that is responsible for providing useful information for making economic decisions. Its task is to study the heritage and reflect the results in accounting or financial statements, which represent the summary of an economic situation.

Banking, on the other hand, is an adjective that refers to what belongs to or related to commercial banking. It should be remembered that a bank is, in this sense, a financial institution dedicated to money management, offering services such as capital loans and securities deposits.

What is bank accounting

The bank accounting, therefore, is a notion that is linked to the accounting branch dedicated to the analysis of financial elements circulating internally in a bank.

Thanks to this discipline, the information regarding the money that circulates in the bank is recorded, so that bank accounting provides knowledge to managers so that they can make the best decisions for the entity.

The products and services offered by the bank depend, to a large extent, on the statements reflected by the bank accounting. By knowing precisely what the internal capital flow is in the entity, decision makers can determine what types of products and services to launch for clients.

Questions to analyze

In addition to all the above, it is necessary to record other fundamental aspects of the aforementioned bank accounting. Specifically, it must be borne in mind that it must be based on three pillars:

  • The real knowledge of costs, since it is the way they can be reduced.
    • The knowledge of the profitability, regarding each one of the products and services that are had.
    • Control of the so-called fundamental variables. Specifically, among them is, for example, the type of risk that the relevant bank can or wants to assume at all times.

Clear and detailed information, the key to bank accounting

In the same way, it is essential that, within this type of accounting, the entity always has an up-to-date and detailed knowledge and management of current accounts, loan granting, fixed-term deposits, accounts savings or credit openings, for example.

Of course, we must not overlook two other fundamental characteristics that all bank accounting must have:

  • It must be synonymous with clear information.
    • It is essential that it is available to suppliers, customers or users, for example.

Heritage care tool

The costs, profitability and risks are among the most important variables that analyzes financial accounting. The objective is to take care of the patrimony of the entity so that the development of the activities does not threaten the stability of the organization and allows to obtain profits.

Many are the professionals in the banking sector or in the field of accounting, who make the decision to train in the specific area that we are analyzing. To do this, they take courses where they acquire all the knowledge related to issues such as economic-financial operations, investment management, accounting legislation, accounting for banking operations, the application of accounting-type management…

Bank Accounting