Wednesday, December 28, 2011

4. (D) Basic Banking Guide A to Z


D

D/A
Documents against acceptance, Arrangement under DA L/C or documentary collection in which an exporter instructs the presenting bank to hand over shipping and title documents to the importer only if the importer accepts the accompanying bill of exchange or draft by signing it..

Damages
Compensation for causing loss or injury through negligence, or a court's estimate or award of a sum as a fine for breach of a contract.

Data
General Information in raw or unorganized form, in Computers terminology it refers to the basic details  that are input, stored, and processed by a computer, for obtaining desired  information, in required form.

Dead Stock
Obsolete inventory, it exists in trading organizations and negatively impacts companies' cash flow.

Dead weight
A maximum burden that a carrier can carry. Full loading capacity of a Ship.

Dealer
Individual or firm that buys goods from a producer  for wholesale or retail reselling.

Debenture
Debentures are loans that are usually secured and are said to have either fixed or floating charges with them. Assets attached cannot be disposed off, unless the debenture holder agrees. Debenture holders have the right to receive their return payments before any dividend is payable to shareholders and, even if a company makes a loss, it still has to pay return / interest to the debenture holders.

Debit
The term debit comes from the Latin  word debitum which means "that which is owing" Debit is abbreviated to Dr. In accounting terms, an entry on the left-hand side of an account record.  

Debit advice
Written confirmation to a person or firm that the account is debited, for  funds transferred, service performed, or payment made etc.

Debit card
Bank card is a plastic card used in cash transactions, and alternative payment method to cash when making purchases.  it can also be called an electronic cheque, because, the funds are withdrawn directly from either the  bank account, or from the remaining balance on the card.In a debit card transaction, the amount of a purchase is withdrawn from the available balance in the cardholder's account. If the available funds are insufficient, the transaction is not completed.

Debt
A debt is an obligation to pay money, for deliver goods, or render service under an express or implied agreement. Debts are considered an asset, because on realization these will be converted into cash in the bank. 

Debt / equity ratio
This ratio  is used to measure  a firm's capacity for debt repayment, it indicates proportion of firm's total working capital contributed by trade creditors and lenders. Also called leverage ratio or gearing ratio.

Debtor
Debtors  (accounts receivable) are people or other firms who owe money to the firm. This happens where the firms have sold goods for some period of credit. Debtors are taken as current assets in Balance Sheet.

Debtor days ratio
Average number of days a firm takes to collect payments on goods sold. Numbers higher then 50 days indicate collection problems (possible bed debts).
The formula is :
Average  debtors (account receivable) in the period
Average value of credit sale

Debt-to-income ratio (DTI)
The percentage of a customer's monthly gross income that will go towards payment of debts. Generally, the higher the ratio, lower is the chance of approval of facility. 

Deceased account
On the death of account holder account is immediately marked as deceased. No further withdrawals are allowed, but credit in accounts can be received. If balance in the account is small it can be released against indemnity, on production of death certificate, Heir ship certificate,. In case of large amount production of succession certificate is must along with other related document as per operation manual of the bank. 

Deceased partner
Death of a partner dissolves the partnership unless this is mentioned in the partnership deed that, on the death of a partner, partnership shall be carried on. The share of the deceased partner must be determined and paid to the legal heirs.

Deductible
This is a Fixed amount or percentage of an insurance claim that is to be born by  insured, and which the insurance company will deduct from every  claim payment. They are imposed by the insurer to avoid paying a large number of small claims.

Deed
Deed is an agreement in solemn form between two or more persons which require the author's signatures and witnessed by two persons. It must state on its face that  it is a deed, all the parties should have legal capacity to sign it, It should be properly acknowledged before a competent officer such as magistrate /judge or a notary public.

Deed of covenant
Arrangement under which a party promises to pay a certain sum regularly to another party within a specified timeframe.

Deed of Partnership
A deed of partnership is a legally binding agreement between the partners who are willing to run a business together. It’s not necessary to have a deed of partnership in order to start a partnership, but it's a better as it will help to avoid misunderstandings and disputes between partners in the future. The partnership deed should cover ,the amount of capital that each partner is to contribute to the business, the way in which partners will share profits or losses, and whether any of the partners should be paid a salary, working arrangements, such as how much time each partner should contribute to the business, who does what management tasks and what type of decisions need collective agreement between the partners , changes to the partnership, such as how new partners can be appointed and what happens if a partner dies or wishes to leave the partnership.

De facto
This is a Latin term meaning "in fact." actually; in reality; as, de facto President -- Used to refer a situation in which a person or institution performs duties legally, but which is not officially covered. A term used to denote a thing actually done by.

Default
In banking default means, failure to meet the terms of a financing. Such as failure to make repayment of loan installment on the date. Generally, if a payment is 30 days overdue, the loan is in default. 

Deferred charges
An expenditure shown as a cost of operation carried forward and expense out in one or more future accounting periods.

Deferred payment
A payment postponed until a future date. 

Deferred shares
Shares on which dividend is not paid until some fixed date or until some conditional event.

Deficit
The amount by which a sum of money falls short of the required or expected amount; e.g. budget deficits.

Deflation
Deflation is opposite of inflation, it result into increase in the purchasing power of the peoples due to the falling prices.

Defunct product
Defunct means no longer living or existing and defunct products are those, which are no longer available/ offered by the bank.

Delegation of authority
Delegation of authority is the action by which a senior assigns part of his or her authority / responsibility to a subordinate.. The extent of the authority delegated must be clearly stated. There should be a defined policy for delegation of authority and limits of authority delegated to different positions within the bank and to establish the types and maximum amount that may be approved by individuals singly and jointly.

Delinquency
A debt that was due not paid. 

Delivery note
This a Document issued by bank or shipping agent accompanying a shipment of goods that lists the description, grade, and quantity of the goods delivered for consignees verification.

Delivery order
A delivery order refers to an "order given by an owner of goods (banker in case of goods pledged) to a person in possession of them (the carrier or warehouseman/ godown keeper) directing that person to deliver the goods to a person named in the order.

Demand deposit
A deposit account from where funds can be withdrawn without any advance notice. 

Demand draft
Demand draft is a value received instrument issued by the bank. It is an order to pay money drawn by one branch of a bank upon another branch of the same bank or its correspondent. Since this is an order instrument, the drawee bank is discharged by payment in due course and the instrument is transferred through negotiation. DDs are generally drawn on other cities with an objective of making payments there.

Demonetize
To withdraw a coin or note from a country's currency

Demurrage
Penalty for exceeding free time allowed for taking delivery of a shipment from the port, or transport company's warehouse.

Deposit
Deposits are the source of funds for the bank. Deposit accounts can be current, savings, and time/ term. All types of banks deposits products falls under these categories. These transactions are recorded on the bank's books, and the resulting balances are recorded as a liability for the bank. This represents the amount owed by the bank to the customer. Some banks charge a fee for not maintaining minimum balance requirement. The word deposit is also used for down payment given in advance to support the customers intention to complete a commercial transaction.

Deposit rates
Percentage of profit paid by a banking / financial institution  on the different types of deposit products. The bank/FI at the start of half year (January/ July)  announce projected rates of return  (expected return that they plans to pay on customer’s deposits). On completion of the half year maximum within 20 days banks/FIs pay actual return on deposits which are called declared rates.

Deposit receipt
Banks and financial on receipt of term deposits issue a certificate in the form of a receipt jointly signed by two authorized officers. Since this is not an operative account, no statement of account is issued. 

Deposit slip
A pay in slip of the cash and other funds that a customer presents to the bank for credit to his or her account. 

Depreciation    
This is the gradual conversion of the cost of a tangible capital asset or fixed asset (excluding land because it has unlimited life) into an operational expense over the asset's estimated useful. 

Depression
It refers to the lowest point in an economic cycle which result into reduced purchasing power,  mass unemployment,  falling prices, falling wages and source of income, and general lack of confidence in the future. Most of the western societies are now days are passing through depression. Most effected areas are real estate, automobile and costly consumer items. This is an alternate term of slump.

Descriptive statistics
Descriptive statistics is the mathematical methods such as mean, median, standard deviation that summarize and interpret some of the properties of a sample but do not infer the properties of the population from which the sample was drawn.

Devaluation
An official downward adjustment to a country's official exchange rate in relation to other currencies 

Direct deposit
A payment that is electronically deposited into an account. 

Direct tax
A direct tax is the tax which cannot be passed on to another entity and borne entirely by the entity that pays it e.g. income tax corporate tax etc.

Directors reports
This is annual report which states summary of the bank's business activities and its future prospects, and its subsidiaries, recommended dividend for the reporting year, post-balance sheet date events that may materially affect the bank's finances, and significant changes in the assets portfolio. 

Dirty bill of lading
B/L with adverse remarks or notations by the carrier that the goods received for shipping (or their packaging) look  damaged, or otherwise in doubtful condition, or not of correct quantity. Importers and their banks normally do not accept dirty B/L for payment under a letter of credit. Also called Claused bill of lading.

Dirty Money
It refers to the money, which is derived through illegal, corrupt means. 

Discharge
Formal statement of relinquishment that releases an entity from http://www.businessdictionary.com/definition/debt.html, liability, or obligation.

Disclaimer
Clause or statement in a document that tries to prevent creation of a warranty or contract in relation to some other person or entity.

Disclosures
The information that State laws require from banks / Financial institutions, to give to borrowers in relation to the terms of the credit extended. 

Discount
Deduction from the face amount of an invoice, made in advance of its payment.

Discount rate
The rate at which member banks  may borrow short term funds directly from State Bank of Pakistan.

Discretion
Right of an officer or judge to act according to his or her judgment or principles in certain circumstances but within given limits and taking into consideration customary principles

Dishonor of a cheque
Return of a cheque by the banker, either due to insufficient funds, mistake in drawing/ signing or not presented within period of validity, which is generally Six months. 

Distress borrowing
Borrowing on very high rates. Fore example some people borrow money from money lenders who charge interest on monthly basis.

Dividend
Distribution of the after-tax profit of a company, to its stockholders (shareholders) according to the number and class of stock (shares) held by them.

Dividend warrant
a cheque payable to a shareholder through which dividend is paid.

Documentary bill
In international trading, a bill of exchange or commercial draft that is presented for payment with the required documents such as a clean bill of lading, certificate of insurance, certificate of origin.

Documentary credit
Under documentary credit arrangement, a bank (in the importer's country) undertakes to pay for a shipment, provided the exporter submits the required documents such as a clean bill of lading, certificate of insurance, certificate of origin etc  within a specified period. 

Document of title
Commercial, ownership document such as title deed or shipping document bill of lading, dock receipt, warehouse receipt that proves ownership. A document of title enables its holder to receive, retain, sell, or otherwise dispose of the document and the goods or property listed therein.

Document against acceptance (D/A)
This is an arrangement under documentary L/C or  collection in which an exporter instructs the presenting bank to hand over shipping and title documents to the importer only if the importer accepts the accompanying bill of exchange by signing it for payment of a future date.

Document against payment (D/P)
Under this arrangement an exporter instructs the presenting bank to hand over shipping and title documents to the importer only if the importer fully pays the accompanying bill of exchange or draft. 

Domestic banking
The banking facilities to the customers within the country.

Donation
Payment of money or any valuable without any consideration. It is a gift given by physical or legal persons, typically for charitable purposes and/or to benefit a cause 

Dormant
Inoperative or in active for some time.

Dormant account
Account which has shown no activity deposits and/or withdrawals over a long period, (say one year) other than posting of the profit and/or service charges. Statute of limitations usually does not apply to dormant accounts, and their funds can be claimed by their beneficiary at any time.

Dormant partner
This is an investor who is not active, in managing a firm and may not be known to the outsiders. A dormant partner shares profits and losses with other partners. 

Double entry
This is an accounting technique which records each transaction as both a credit and a debit

Down payment
Deposit made by a buyer to emphasize his or her commitment to complete the deal. In banking, down payment is the difference between the purchase price of a property and the mortgage loan amount.

Drawdown
Transfer of funds from one account to another on the instructions of an account holder.

Drawee
Person or  entity that accept and pay a bill of exchange cheque, draft, letter of credit, etc. on presentation or on a certain future date.

Drawer
Writer / issuer  of a bill of exchange cheque, draft, letter of credit, etc. who directs the drawee to pay the stated amount to the payee or endorsee.

Drawing account
The account in the account books of a sole-proprietorship or partnership firm, which records all monies taken out of the business by the owner or partners

Drive –in ATM
Banks have installed "Drive-through" teller machines. Customers can withdraw cash without leaving their vehicles. To enable customers to use this facility he/she drive up to the cash machine, put down  car window, insert card into machine and enter PIN, enter amount of cash required and withdraw, retrieve card, cash and receipt. 

Drop box
Boxes placed in branch premises, wherein customers can drop payment (cheques) for settlement of consumer payments or utility bills

Dual control
Task under the supervision of more than one person

Due date of bill
Date on which a bill of exchange is payable. Also called law date or maturity date.

Duplicate

Duty
Tax levied on imports by the customs authorities of a country to raise state revenue, and / or to protect domestic industries from more efficient or predatory competitors from abroad. 

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