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Interest Balance
Source:
Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority and you can order
it here)
Prior to
passage of the Banking Act of 1933 which prohibited interest on demand
deposits, the interest balance of an account was the amount upon which
interest for the day was computed.
This amount did not necessarily agree with the total credit balance
in the account because of deposit of checks and other items not available
until cleared or collected.
In
modern account analysis, average collected balances, after deducting reverse
requirements, are the basis for allowance of the earnings credit to the
account, usually based on the current rate or return on earning assets.
Against this, the cost of handling items deposited or drawn is
charged.
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