cash control and banking activities

Cash Control and Banking ActivitiesCash Control and Banking ActivitiesMaking Accounting Relevant

Businesses deposit all cash and checks into a bank account and make payments using checks. This policy helps to protect cash from loss or theft.

Making Accounting Relevant

Businesses deposit all cash and checks into a bank account and make payments using checks. This policy helps to protect cash from loss or theft.

What other benefit does a business gain from the use of a checking account?What other benefit does a business gain from the use of a checking account?

Section 1 Banking Procedures

Section 1 Banking ProceduresWhat You’ll Learn

What controls a business uses to protect cash and why these controls are needed.

To complete forms used to open a checking account.

To record information on check stubs.

To prepare a check correctly.

What You’ll Learn

What controls a business uses to protect cash and why these controls are needed.

To complete forms used to open a checking account.

To record information on check stubs.

To prepare a check correctly.

Why It’s Important

Cash is a valuable asset. It must be

protected and processed properly.

Why It’s Important

Cash is a valuable asset. It must be

protected and processed properly.

Section 1 Banking Procedures (con’t.)Section 1 Banking Procedures (con’t.)

Key Terms internal controls external controls checking account check depositor signature card deposit slip

Key Terms internal controls external controls checking account check depositor signature card deposit slip

endorsement

restrictive endorsement

payee drawer drawee voiding a check

endorsement

restrictive endorsement

payee drawer drawee voiding a check

Protecting Cash

It is important to protect cash from loss, waste, theft, forgery, and embezzlement.

Protecting Cash

It is important to protect cash from loss, waste, theft, forgery, and embezzlement.


Steps the business itself takes to protect cash and other assets.

INTERNAL CONTROLSINTERNAL CONTROLS

Protecting Cash (con’t.)Protecting Cash (con’t.)

1. Limit the number of persons handling cash.

2. Separate accounting tasks involving cash.

3. Bond (insure) employees who handle cash or cash records.

4. Use a cash register and a safe.

5. Deposit cash receipts in the bank daily.

6. Use checks to make all cash payments.

1. Limit the number of persons handling cash.

2. Separate accounting tasks involving cash.

3. Bond (insure) employees who handle cash or cash records.

4. Use a cash register and a safe.

5. Deposit cash receipts in the bank daily.

6. Use checks to make all cash payments.


INTERNAL CONTROLSINTERNAL CONTROLS

Protecting Cash (con’t.)Protecting Cash (con’t.)

1. Verify signatures on checks.

2. Maintain records of

transactions.

1. Verify signatures on checks.

2. Maintain records of

transactions.


EXTERNAL CONTROLSEXTERNAL CONTROLS

Measurements and procedures provided outside the business to protect cash and other assets.

Opening a Checking AccountOpening a Checking Account Allows a person or business to deposit

cash in a bank and to write checks against the account balance.

A check is a written order from a depositor telling the bank to pay a stated amount of cash to the person or business named on the check.

A signature card contains the signature(s) of the person(s) authorized to write checks on the account.

Printed checks are packaged together in checkbooks.

Allows a person or business to deposit cash in a bank and to write checks against the account balance.

A check is a written order from a depositor telling the bank to pay a stated amount of cash to the person or business named on the check.

A signature card contains the signature(s) of the person(s) authorized to write checks on the account.

Printed checks are packaged together in checkbooks.


Opening a Checking AccountOpening a Checking Account American Bankers

Association (ABA) number is the code that identifies the bank.

The number above the line and to the left of the hyphen represents the city or state where the bank is located.

The number to the right of the hyphen indicates the specific bank.

The number below the line is the code of the Federal Reserve District where the bank is located.

American Bankers Association (ABA) number is the code that identifies the bank.

The number above the line and to the left of the hyphen represents the city or state where the bank is located.

The number to the right of the hyphen indicates the specific bank.

The number below the line is the code of the Federal Reserve District where the bank is located.


http://www.federalreserve.gov/otherfrb.htm




Opening a Checking Account (con’t.)Opening a Checking Account (con’t.)


The ABA #, the depositor’s account #, and the check # is in special ink and typeface at the bottom of the check. These specially printed numbers are called MICR (magnetic ink character recognition) numbers.MICR is used for electronic sorting.

Making Deposits to a Checking AccountMaking Deposits to a Checking AccountBusinesses make regular deposits to protect the currency, coins, and checks received. Deposits are accompanied by a deposit slip.

List Checks separately by their ABA#’s. Only the two #’s above the line.The checks are to be arranged in the order listed on the deposit slip.

Businesses make regular deposits to protect the currency, coins, and checks received. Deposits are accompanied by a deposit slip.

List Checks separately by their ABA#’s. Only the two #’s above the line.The checks are to be arranged in the order listed on the deposit slip.


Endorsing ChecksEndorsing ChecksTo deposit the check in a checking account, the depositor endorses the check to transfer ownership to the bank. An endorsement is an authorized signature written or stamped on the back of a check representing a promise to pay.A restrictive endorsement limits, or restricts, how a check may be handled.

To deposit the check in a checking account, the depositor endorses the check to transfer ownership to the bank. An endorsement is an authorized signature written or stamped on the back of a check representing a promise to pay.A restrictive endorsement limits, or restricts, how a check may be handled.


Recording Deposits in the CheckbookRecording Deposits in the Checkbook


Date

Deposits

New Balance

Date

Deposits

New Balance

Writing ChecksWriting Checks


Enter new balance Sign the check

Enter amount Enter dollar amount in words

Enter new balance Sign the check

Enter amount Enter dollar amount in words

Enter amount

Enter date Enter payee

Enter payee Enter date

Enter purpose Enter amount

Enter amount

Enter date Enter payee

Enter payee Enter date

Enter purpose Enter amount

Write checks in ink, or prepare typewritten or computer-generated checks. Fill out the check stub first.

Voiding a CheckVoiding a Check


Writing the word “Void” in

large letters across the front of a

check (in ink) is known as voiding

a check.

Writing the word “Void” in

large letters across the front of a

check (in ink) is known as voiding

a check.

Drawer is the person who signs the check. The bank on which the check is written is the drawee.

Demonstration ProblemsDemonstration Problems

Problems 11-1 and 11-2.Problems 11-1 and 11-2.


April 10 ----698.00

23.4544-9876 39.8021-4682 361.9017-4141 80.69

1,203.84

64-505610

ABA#

City or state were

bank is located

Identifies the specific bank

Code for the federal reserve

district were the bank is

located

$115.86May 8, ----Valley Utilities

April electric bill

115.861,758.36

May

8,

---Valley Utilities

One hundred fifteen and 86/100---------------

$115.86

April electric bill

Susan Y. Rucker

Payee Drawee Drawer

Assignment:Assignment:

Check Your Understanding p264

Thinking Critically 1&2

Problem 2 is worth 6 points (be descriptive)

Problem 11-1

Check Your Understanding p264

Thinking Critically 1&2

Problem 2 is worth 6 points (be descriptive)

Problem 11-1


cash control and banking activities

Documents

cash payments

cash records

cash control

cash register

banking procedures cont

deposit cash receipts

bank account

checking account cont