Ch 9: Checking Accounts and Other Banking Services

Purpose of a Checking Account

What is a Check?

A Checking account is an account that allows depositors to write checks to make payments

A check is a written order to a bank to pay the stated amount to the person or business named on the check (payee)

A checking account is also called a demand deposit because money can be withdrawn at any time (on demand)

Checking Accounts

Banks may require a minimum balance in

your checking account. Why?

Fees may apply if you drop below the

minimum balance

Other fees may apply:

Overdraft

Advantages of a Checking Account

Convenience

Safer than cash.

It is harder to steal and get cash from a check

than just stealing cash

Built-in Record keeping system.

You must keep records of the checks you write

and this helps you keep track of where your

money is going.

Opening a Checking Account

You must sign a Signature Authorization

Form

Provides an Official Signature that the bank

uses to compare to verify that your signature

was not forged

Parts of a Check

A. Drawer’s

Information

Parts of a Check

B. ABA Number

Parts of a Check

C. Date

Parts of a Check

D. Check Number

Parts of a Check

E. Payee

Parts of a Check

F. Amount of Check

Parts of a Check

G. Written Amount

of Check

Parts of a Check

H. Drawer’s Bank

Information

Parts of a Check

I. Memo Line

Parts of a Check

J. Drawer’s Signature

Parts of a Check

K. Routing

Number

Parts of a Check

L. Account Number

Parts of a Check

M. Check Number

(same as the other check number)

Completed Check Example

Billy Jones 55.75 Fifty five dollars and 75/100 ------------------------

Computer Repair Sarah Smith

Sarah Smith

314 Memphis Villas

Brooklyn, Ohio 44144

(216) 351-9577

12/5/2014

Writing Checks

Always use Pen

Write Legibly, Start at the edge of each line, cross out any blank spaces

Sign your name exactly as it appears on the check; No shortened names or nicknames

If you make a mistake, Write VOID across the check and write a new check

Make sure you have enough money in your account to cover the check

Check Register

•Your Personal Record of Transactions

•Be sure to fill out the check register immediately when

writing a check

Debit Cards

Debit Cards work like electronic

checks; the money is deducted

from your checking account.

Debit cards may look like credit

cards, but they are different.

Debit cards use the money in your

checking account.

Credit cards are loans; you borrow

the money and pay it back plus

interest.

Deposit Slip

100 00 350 00 # 2-74

450 00 ---------

00 450

July 1, xx

Deposit slips are used when you add money into your

account.

Check Clearing

What happens to a Check after you write it?

Visit the following website and create a flowchart describing the path a check takes to clear. Label each object in your chart!

http://www.howstuffworks.com/check-processing.htm

Check Clearing

A check that has cleared is a check that… Has been returned to your bank and the funds have been deducted

from your account

A Cancelled check is a check that… Has cleared, has been stamped by your bank, and returned to you

A truncated check is a check that… Is cancelled, but the bank does not return to you.

A check that is written for more money than is in the checking account is called an…

Overdraft

Floating a check means… Writing a check for more than the amount you currently have in

the account; hoping your deposit clears before the check clears

Reconciling a Your Account

When you receive your monthly statement, you will notice that the balance on the statement does NOT match the balance in your check Register. Why?

Reconciling is the process of matching your checkbook register balance with the statement balance

This will account for outstanding fees, checks, and deposits

Bank Reconciliation

Check Book Register

Balance 824.00

Plus Outstanding

Deposits: 0.00

Minus Outstanding

Fees: 0.00

Reconciled Balance: 824.00

Finding Outstanding Deposits, Checks

Find the Outstanding Checks &

Deposits by going through the

statement and checking off the

checks that have cleared in your

Check Register. The ones that you

did not check off are outstanding.

36.12 7/1

20.00 7/15

220.50

Endorsements

An Endorsement is the signature of the Payee on the back of the check.

Checks MUST be endorsed before they can be cashed.

Blank Endorsements

are the most common type

Joint Accounts

A Joint account is opened by two or more people

Both people can draw on the account

You can set it up so that both people must sign the checks or you can set it up where either person can sign checks

If one person dies, the other becomes the sole owner of the account

Other Methods of Payment

When you don't want to send cash, but

your check isn't acceptable, consider:

1. Certified Check

Your own check guaranteed by the

bank.Your money is set aside to pay the

check. A certified check will not bounce.

2. Cashier's Check

A check drawn by the bank on its own

funds.You must pay cash for it, or have

it taken from your checking or savings

account. A cashier's check will not

bounce.