The work of analyzing an ordinary account is not very onerous, especially if systematically followed out. The course of the deposit balances is the main information required. Wholesale and other accounts depositing a large number of cash items involve more work, especially if the data for the whole year is required. Usually, however, the transactions for a month are sufficient for all general purposes.
The amount earned on an account depends principally on the value of the credit balances maintained. For purposes of analysis the minimum weekly credit balance is the one which should be considered. Any money on deposit less than a week has no loanable value to a bank so far as an individual account is concerned. It may be contended that under the law of averages, and considering the accounts as a whole, the average weekly or even daily balance is of value, but in an analysis no account should depend for strength in any particular on another account. For purposes of comparison, however, the average monthly balance should be considered in the general sizing up of the account.
If the account shows debit balances during the period, the exact number of days overdrawn and the amount at credit should be shown.
Debit balances do not enter into the value of a deposit account. The net discount or interest earned thereon is considered as part of the profits accruing from the general loanable funds of the bank, and cannot, therefore, be regarded as a benefit derived from any individual account. Furthermore, in the analysis, credit is accorded the account for any loanable funds supplied.
The average debit balance, however, is of value for purposes of comparison, and can be easily ascertained on the basis of the interest debited to the account during the period.
If interest is allowed on the credit balance or any part of it the amount of interest credited should be taken into account as part of the expenses. Care should be taken to see that the interest credited covers the whole period under analysis.