What is a Checking Account?
A checking account is an account opened by a business with a bank to enable it to deposit and withdraw money. Withdrawals are normally done by check (hence the name), but can be done by other means such as debit cards, cash machines, or electronic bank transfer.
The purpose of the checking account is to allow the business to carry out its day to day banking transactions, and therefore funds are always available on demand, and consequently a zero or low rate of interest is paid on deposits.
The balance on the checking account is a current asset of the business and is shown on the balance sheet under the heading of cash.
Checking accounts are sometimes referred to as transaction accounts or demand deposit accounts. In the UK a checking account is usually referred to as a current account.
For further information on the checking account see the Wikipedia definition.
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About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.