Answer to Question #263320 in Accounting for Another you

Question

A. Differentiate the three types of bank deposits.

• Savings Deposit
• Demand Deposit
• Time Deposit

Answer 1

Savings deposit account allows you to start with a small balance and add to it or withdraw from it as often as you wish. It is an account that doesn’t require a passbook, it’s a little different. It often has a withdrawal limit as well as the number of times one should withdraw annually.

Demand deposit accounts allow you to withdraw money from the account “on demand,” at any time. The money in a demand deposit account is generally considered to be liquid or equivalent to ready cash. With a demand deposit account, you can withdraw any amount of money, up to and including the entire account balance, at any time without penalty.

Unlike demand deposit accounts, which allow you to take money out at any time, time deposit account , also called term deposits, require you to deposit your money for for a specific length of time. The most common type of time deposit account is a certificate of deposit or CD, which requires you to commit your savings for a specific term of months or years.