Deposit — Definition, Formula & Examples
A deposit is money you add into a bank account, increasing your balance. Each deposit raises the total amount of money available in the account.
A deposit is a credit transaction in which a specified sum of money is placed into a financial account, resulting in an increase to the account's existing balance by the deposited amount.
Key Formula
Where:
- = Account balance after the deposit
- = Account balance before the deposit
- = Amount deposited
How It Works
When you make a deposit, the bank adds that amount to your current balance. You can deposit cash, checks, or electronic transfers. To find your new balance after a deposit, simply add the deposit amount to your previous balance. Deposits are the opposite of withdrawals, which subtract from your balance.
Worked Example
Problem: Your savings account has a balance of $250. You deposit $75 from your part-time job. What is your new balance?
Identify values: The old balance is $250 and the deposit is $75.
Add the deposit: Add the deposit amount to the existing balance.
Answer: Your new balance is $325.
Why It Matters
Tracking deposits is essential for managing a checking or savings account and avoiding overdrafts. In personal finance courses, you practice recording deposits and withdrawals in a ledger to maintain an accurate running balance. Careers in banking, accounting, and bookkeeping all rely on correctly processing deposit transactions.
Common Mistakes
Mistake: Subtracting a deposit from the balance instead of adding it
Correction: A deposit increases your balance. Only withdrawals are subtracted. Remember: deposit means money goes in, so you add.