Bank Consignment: Characteristics, Types And Example

The bank deposit is the placement of funds in a bank or other financial institutions for safekeeping. These consignments are made by depositing into accounts such as savings accounts, checking accounts, and money market accounts.

From an accounting and legal point of view, the banking industry uses the name “consignment” in financial statements to describe the liability that the bank owes its depositor, and not the funds that the bank owns as a result of the deposit, which is shown as active.

The account holder has the right to withdraw the deposited funds, as established in the terms that govern the corresponding account agreement. A consignment account is any type of bank account that allows the owner of the account to deposit and withdraw money.

Some banks may or may not charge a fee for this service, while others may pay the customer interest on the funds posted.


When someone opens a bank account and makes a cash consignment, they hand over legal title to the cash and it becomes an asset of the bank. In turn, the account is a liability for the bank.

The consignment itself is a liability owed by the bank to the depositor. Bank appropriations refer to this liability rather than the actual funds that have been deposited.

If the bank where you have an account has a local branch, money can be deposited at the ATM at any time, or with an ATM during normal business hours.

You can also fill out what is known as a consignment voucher, so that the money is safely consigned to the account.

Investment and money supply

Bank consignments are a common act where clients deposit funds into their accounts. The bank must provide cash to the customer each time funds are withdrawn.

However, if they are not withdrawn, banks will generally use the funds as loans to other customers or as investments, until the depositor makes a withdrawal. This process is significant as far as the money supply is concerned.

Bank consignments are a main tool for investment. Without them, companies would not be able to access individual funds at all.

Investing is largely possible because people can move large sums of money by saving, transferring, and withdrawing funds from bank accounts.


Consignment at sight

It is the placement of funds in an account that allows the depositor to withdraw their funds from it without prior notice.

Current account

It is simply a checking account. Consumers consign money, which they can withdraw as they wish on demand. The holder of the same can withdraw funds at any time using bank cards, checks or withdrawal receipts.

There is no limit to the number of transactions that can be had on these accounts. This does not mean that the bank cannot charge a fee for each transaction.

Savings account

They offer holders interest on their deposits. However, in some cases, holders of these accounts may incur a monthly fee if they do not maintain a minimum balance or a certain number of deposits.

Although these accounts are not linked to checks like checking accounts, their funds are relatively easy for holders to access.

Demand consignment account

These accounts combine the features of checking and savings accounts. They allow consumers easy access to their money, but also earn interest on their appropriations.

Banks refer to these accounts as interest checking or plus checking accounts.

Term consignment

It is a consignment with interest that a bank maintains for a specified period, for which the depositor can withdraw the funds only after notification.

Term consignments generally refer to certificates of deposit. Banks generally require a minimum of 30 days to withdraw these deposits.

Forward consignments are often viewed by companies as readily available cash, although technically they are not payable on demand.

The notification requirement means that banks can impose a withdrawal penalty before a specific date.

Term Deposit Account

Like a savings account, this type of account is an investment vehicle for consumers.

Term deposit accounts or certificates of deposit tend to offer a higher rate of return than traditional savings accounts. However, the money must remain in the account for a specified period of time.


A depositor who places $ 100 in cash in his checking account at a bank is surrendering legal title to the $ 100 in cash, which becomes an asset of the bank.

In the accounting books, the bank debits the $ 100 in cash in the cash account and credits the consignment liability account for the same amount.

In the bank’s financial statements, the $ 100 in currency will show on the balance sheet as an asset of the bank and the consignment account will show as a liability that the bank owes to the customer.

This reflects the economic substance of the transaction. That is, the bank borrowed $ 100 from its depositor and has been contractually obligated to repay it to the customer, in accordance with the agreed terms.

These physical reserve funds may be consigned to the relevant central bank, receiving interest according to monetary policy.

Creation of cheap money

In general, a bank will not hold the full amount of funds in reserve, but will instead loan most of the money to other customers. This allows the bank to earn interest on the asset and thus pay interest on the appropriations.

By transferring ownership of consignments from one party to another, banks avoid using physical cash as a method of payment. Bank appropriations account for the majority of the money supply in use.

For example, if a bank grants a loan to a client by consigning the loan funds to that client’s account, the bank records this event in its books of account by debiting the asset account called loans receivable, and crediting the obligation to consign the loan. client.

From an economic perspective, essentially the bank has created cheap money. The balance of the client’s checking account has no money in bills. This account is simply a liability that the bank owes to its customer.


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  5. Kim Olson (2017). How Do You Deposit Money in a Bank? Go Banking Rates. Taken from:

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