If a business pays $2.000 into a bank account then the bank owes that money back to the business. The bank is therefore a receivable of the business. Equally, the business is a payable from the banks point of view.
Alternatively if the bank allows the business an overdraft then the bank is a payable of the business and the business in a receivable in the banks eyes. The situation in one set of accounting records is a mirror image of the other
The importance of this relationship is that the bank can use the businesss $2,000 in order to invest and hopefully make a profit. This profit does not have to be repaid to the business. This is for the bank to retain. The bank must however repay the $2.000 as and when requested
Banks provide a number of services to customers and often charge interest and commission. There are pure banking services such as operating current and business accounts which permit the use of direct debits and standing orders, overdrafts and loans. There are also other services such as the provision of insurance, tax advice and travel facilities
Although a bank does not have to account to its customers for any profit that it makes with the money deposited, it does have a number of obligations to its customers
The banker must repay the amount of the deposit on demand or pay it to a third party when requested to by the drawing of a cheque or other authorised instruction, perhaps a direct debit or standing order. The bank does not have to pay a cheque in part. For example if a customer has only $100 in their bank account but draws a cheque for $160 then the bank is under no obligation to pay only $100. It should either pay in full or refuse to make payment altogether.
The banker has a duty to honour a customers cheques up to the amount of the bank balance or agreed overdraft if the cheque has been properly prepared
The banker must provide the amount of the balance on the account at any time on the request of the customer.
The banker must provide a statement showing the transactions on the account for an agreed period within a reasonable time of the end of that period. The customer is not obliged to check the statement and therefore any errors made by the bank will usually be binding on the bank.
The banker has a contractual duty not to disclose any information regarding the banking details or personal information of the customer unless instructed by the customer or compelled by law to do so.
In more general terms the banker is expected to use a professional level of care and skill when dealing with the customer and their account.
The main duty of the customer is to ensure that reasonable care is exercised when preparing cheques and other form of instruction to make payments. For example, cheques should be prepared so as to not mislead the bank and not to facilitate forgery.