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g Question 3 (ASC Required - 20 points): After graduation, you work for a few years at a major accounting firm and advance to Senior. However, as part of this role, you start working on a client that is different from your other background: specifically, a major bank located in San Francisco. This bank primarily takes deposits from retail and business customers and lends money out to others. The accounting seems to be completely different from what you are used to and so you go to the Codification to find out what the accounting standards for this industry consist of. Describe the major classes of transactions undertaken by this sort of entity and how they should be accounted for.

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Answer with Explanation:

The major transactions that a bank will be involved in are listed below:

  • Deposits of accounts holders: These deposits are basically the liability of the bank which it will pay them back in near future. Hence it must be recorded as a Current or Non-current liability depending upon the type of account and agreement between the parties to contract.
  • Money lendings to borrowers: This money must be accounted for as a current or non-current asset depending upon the type of account and agreement made.
  • Interest on the money lendings: It is interest income and must be accounted for as revenue.
  • ATM and other Transaction processing charges: These fee charges are also part of income and thus must be accounted for as income.

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