1.The money which a bank obtains from its customers is generally known as its “deposits” and represents the balances which customers keep on their accounts with their banks. These accounts are of two main kinds: current accounts on which customers can draw check but receive no interest, and deposit and savings accounts on which the banks pay interest for the use of the money.
2.But the shareholders' money is only a small part of the total amount of money which the clearing banks have at their command. Who provided the rest of this enormous sum? The banks' customers. Banks, in effect, borrow from their customers as well as lend to them.
3.Shareholders of the banks, or their predecessors, provided the money to set up the banks and to enlarge them. This money is known as a bank’s capital.
4.When a bank makes a payment on a check, it cancels the check. That is, it marks the check with some kind of stamp so that the check cannot be used again. Postage stamps are also canceled to indicate that they have been used and cannot be used again.
5.Advances are the amounts which the banks lend to their customers. They earn a higher rate of interest than the banks' other assets. Advances cannot be so conveniently and quickly turned into cash as most of a bank's other assets.