Unit 6

Pre-reading

1. What is the best way of keeping valuables safe?

2. How many types of accounts can you mention?

3. Are they different according to a specified period of time?

1. Read and translate the text types of accounts

As you know, accounting is the process of identifying, measuring and communicating economic information so a user of the information may make informed economic judgments and decisions based on it.

At the heart of modern financial accounting is the double-entry bookkeeping system. This system involves making at least two entries for every transaction: a debit in one account, and a corresponding credit in another account. The sum of all debits should always equal the sum of all credits, providing a simple way to check for errors. This system was first used in medieval Europe, although claims have been made that the system dates back to Ancient Rome or Greece.

Accounting reform measures of some kind have been taken in each generation to attempt to keep bookkeeping relevant to capital assets or production capacity. However, these have not changed the basic principles, which are supposed to be independent of economics as such.

There are two general reasons for using a bank account. The first and most common is the convenience and safely provided by a current account at a bank. The second is that small and perhaps regular surpluses are available to be saved, and for this purpose a bank provides deposit accounts.

A checking account is a bank account that uses checks as the primary instrument for withdrawing money. With a checking account, you can make purchases, pay bills, and give or loan money to anyone you choose. You can also use a check to transfer money from your checking account to a bank account at a different financial institution. Usually, financial institutions allow account holders to make as many deposits and withdrawals as they wish. Many allow account holders to make withdrawals and deposits through automatic teller machines (ATM) as well. A typical checking account is handled through careful posting of deposits and withdrawals. The account holder has a supply of official checks which contain all of the essential routing and mailing information. When a check is filled out correctly, the recipient treats it the same as cash and completes the transaction. After this check has been deposited into the recipient's own bank account, a bank worker files the check electronically and the check writer's bank receives the cancelled check and amount to be debited (withdrawn) from the check writer's account. This process continues for every check written against an individual checking account.

Owners of a checking account are ultimately responsible for keeping track of their available funds, even though the bank will routinely issue its own accounting statements. Some banks will protect checking account holders by making the proper payments and notifying the check writer that an overdraft has taken place.

Personal Accounts are a proposed new pension system for all workers in the United Kingdom that do not already have a suitable company pension scheme. They will be a simple, universally available, defined contribution pension scheme, accumulating a fund of money during a worker's life which will be used to purchase a lifetime annuity at their retirement.

A savings account is another type of bank account that allows the holder to make deposits and withdrawals. However, savings accounts are not as flexible as checking accounts. Often, holders of this type of bank account are limited in the number of withdrawals and deposits they can make each month. Also, savings account holders are not able to access their money with checks.

Another type of bank account is a money market account. This type of bank account pays interest at a higher rate than the rate paid on interest-bearing savings and checking accounts. Often, money market accounts impose a minimum balance for the account to start earning interest. The minimum required balance on a money market account is usually higher than that imposed on a checking or savings account. With a money market account, withdrawals are limited to six per month.

Time deposits, frequently referred to as certificates of deposit (CDs), are bank accounts that require the account holder to make a deposit and agree to leave funds in the account for a specific amount of time. In return for this agreement, the financial institution pays interest to the account. Often, the interest paid on a CD is higher than the rate paid on other types of bank account. The account holder is required to keep his or her money in the account until the specified term is over. However, some financial institutions allow account holders to withdraw interest, without affecting the principal. In some cases, account holders may be allowed to withdraw their principal funds before their CD matures, but a penalty is typically charged.

Some financial institutions also offer basic, no-frills bank accounts. A no-frills bank account may allow the holder to pay bills and cash checks without paying the high fees associated with completing such transactions without an account. An account of this type will likely allow for only a limited number of checks, deposits, and withdrawals to be processed in any given month. In most cases, interest is not paid on a no-frills bank account.

A deposit account will not offer a high rate of interest and would not be the best way to save large sums of money for any long period of lime, but it is designed to make saving simple, convenient and safe. It is especially appropriate for those who may save small amounts from time to time without any planned regularity or for those who wish to save for a particular purpose in the immediate future, for example for annual holidays or for the purchase of a major item such as a car.

Most customers of a bank who have opened a deposit account will also have a current account. Regular payments into a deposit account can be made through a standing order to the bank that will automatically transfer the agreed amount according to your instructions. Other payments are made on standard forms. The rate of interest varies from time to time and is publicly advertised in any bank.