Bank Accounting

People with accounting backgrounds may not be familiar with how bank accounting operates. When you think of bank operations you have to remember that the primary income of the bank is interest income. The main operating expense is interest that they pay out to customers. After subtracting the interest income from the interest expense, you then have operating income before the banks expenses.  For example, banks are required by regulatory agencies to keep a certain amount of money on hand as reserves. In addition, banks have two sources to borrow; one is the Federal Reserve and the other is banks.