Technical question: how do banks account for deposits?

Customers' deposits into a bank are liabilities from the bank's point of view. They won't appear in the income statement. If the deposits are interest-bearing, the interest will appear as an expense in the income statement.

Attached (at page 105) is the balance sheet of Citigroup. You'll see the various deposits under Liabilities. On page 104 you'll see the income statement where the interest expense is disclosed immediately after interest revenue.

Actually the offset to the deposit goes into a sub - account of cash called "clearing". There are several types and are used to trace a deposit by customer type like corp., personal, interbank, etc. This provides internal stats for the bank and helps weed out bad checks ( 90% + of deposits are non-cash). When reporting is done for all the various fed and state agencies, there are sufficient details to slice and dice the data 10 ways to sunday.

When the funds clear, they are immediately put to use making loans or investments, which the bank is hoping has a higher payout than what it is paying on your deposit/CD/or other bank product.