What is Bank Accounting? What Does It Involve? What Is the Process?

Vu Khoi

Author at Wotech Electronics Blog

Bank accounting is a critical activity that reflects how a bank is operating. Because of the industry's distinctive nature, bank accounting has its own particular characteristics that differ from corporate accounting. At this point, many people are probably still wondering what exactly bank accountants do. Let's explore and answer that question with SimERP.

What is bank accounting?

Bank accounting is the activity of explaining, classifying, and analyzing the financial operations related to monetary and credit transactions as well as other banking services, in order to produce information about the bank's operating situation. Beyond providing the necessary information to stakeholders, it also serves as the basis for the bank's management and strategic decisions.

Like other accounting activities, bank accounting is work that demands timeliness and a high degree of accuracy. Accounting operations must strictly comply with accounting regulations. However, bank accounting also has distinctive features, such as:

• Strong social character: Bank accounting is not limited to banking operations; it also reflects the state of the economy through monetary and credit activities and through the relationship between banks and businesses.

• Highly transactional: In a bank, economic transactions must be journalized immediately once they occur.

• Tied to the circulation of capital in the economy: Because of the bank's special nature, accounting documents not only record transaction information within the bank but also verify capital flows in the wider economy.

What does a bank accountant do?

The duties of bank accounting

Given the special nature of the banking industry, the accountant's work consists of the following main duties:

• Recording information: Bank accountants are responsible for recording the transactions arising in the bank promptly, accurately, and completely, according to accounting standards, in order to safeguard the assets of the bank and of society as a whole.

• Consolidating and analyzing information: After recording the information, bank accounting staff need to consolidate and analyze it to form a comprehensive view of the bank's operations. This information then serves as the basis for decision-making and long-term strategy.

• Monitoring the use of capital: Track and closely supervise the bank's use of capital through financial transactions and the use of the bank's assets, to ensure capital is deployed effectively.

• Serving customers: Alongside accounting activities, bank accounting must also ensure that financial transactions are well organized in order to give customers the best possible experience.

The work of a bank accountant

With the four main duties above, many people still wonder exactly what tasks bank accounting involves:

• Checking the accuracy of checks and writing receipts for valid checks

• Reviewing payment requests, then preparing payment orders and dispatch documents and foreign currency purchase papers

• Preparing and managing bank guarantee files

• Preparing, tracking, and managing corporate bank loan and repayment files

• Preparing files for opening credit and following the process of opening payments and credit guarantees

• Checking the bank's documents

• Checking bank deposit balances to promptly detect errors and adjust cash flow plans

The bank accounting chart of accounts

Under the latest 2006 banking accounting regime, the bank chart of accounts consists of 10 categories, of which 8 belong to the balance sheet and 2 accounts (category 9 and category 0) are off-balance-sheet.

• Category 1: Cash and liquid assets

• Category 2: Loans, trading in negotiable instruments, and settlements with the State

• Category 3: Fixed assets and other assets on the asset side

• Category 4: Currency issuance and liabilities

• Category 5: Capital, funds, and results of operations of the State Bank

• Category 6: Intermediary accounts

• Category 7: Income

• Category 8: Expenses

• Category 9: Off-balance-sheet commitments

• Category 0: Off-balance-sheet memoranda

The bank accounting process

As with other accounting operations, accounting staff follow a standard process. Knowing the process well makes accounting work easier, more transparent, and more accurate. The bank accounting process consists of 6 steps.

• Step 1: Consolidate the transactions that have arisen

• Step 2: Collect original documents based on the consolidated transactions

• Step 3: Verify the authenticity of the original documents

• Step 4: Proceed with bookkeeping

• Step 5: Perform end-of-period journal entries

• Step 6: Prepare the financial statements

Knowledge and skills needed for bank accounting

Bank accounting is a profession that demands considerable specialized knowledge as well as soft skills. For individuals who want to pursue this career, hone the knowledge and skills below.

• Accounting knowledge

Fundamentally, a bank accountant needs a firm grasp of basic accounting operations. In addition, because the banking industry has many particular features, accounting staff need to develop knowledge of tax accounting, credit accounting, and the chart of accounts used in banking.

• Data skills

Besides accounting knowledge, bank accountants need to sharpen their skills in observing, analyzing, and consolidating data. Day-to-day accounting work involves working with countless figures and transactions. Without the ability to work with numbers, a person will easily fall behind schedule and cause errors. Moreover, an accountant must not only know how to record and consolidate data, but also be able to draw analyses and inferences, thereby giving the board of directors a comprehensive view of business performance.

• Office skills

In addition, office skills are a prerequisite for success in this field. Alongside basic computer software, an accountant needs to be proficient in the relevant accounting software to make consolidating and analyzing information easier.

The career potential of bank accounting

In Vietnam, bank accounting is a profession with attractive incomes, ranging from 12 to 15 million VND at the staff level. Management-level salaries can exceed 20 million VND. At major banks, salaries are even somewhat more competitive due to the more complex nature of the work. On top of base salary, bank employees also enjoy many benefits and bonuses.

Beyond the attractive salary, bank accounting also offers many opportunities for growth. As the economy develops, demand for banking services among the public keeps rising, which means job opportunities in this industry will only widen. In addition, bank accountants have the potential to advance to Head of Accounting.

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