Chapter 4
BankingBanking
McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved
• Define and state the purpose of signature cards, checks, deposit slips, check stubs, check registers, and endorsements
• Correctly prepare deposit slips, write checks
Banking#4#4Learning Unit ObjectivesThe Checking Account; Credit Card Transactions
LU4.1LU4.1
4-2
• Define and state the purpose of the bank statement
• Complete a check register and a bank reconciliation
• Explain the trends in online banking
Banking#4#4Learning Unit ObjectivesBank Statement and Reconciliation Process; Trends in Banking
LU4.2LU4.2
4-3
4-4
Checks/Drafts
Written order instructing a bank, credit union, or savings and loan institution to pay a designated amount of your money on deposit w/the bank to a person or organization
Payee - To whom check is payable
Drawee- Bank ordered to pay
Drawer - One who writes the check
4-5
Deposit Slip - Fig 4.1
Gracie’s Natural Superstore80 Garfield StreetBartlet, NH 01835
Date ________________ 20 __________DEPOSITS MAY NOT BE AVAILABLE FOR IMMEDIATE WITHDRAWAL
IpswichBankipswichbank.com
211370587 88190662
Checks and other items are received for deposit subject to the provisions of the uniform commercial code or any applicable collection agreement
CASHList Checks Singly 1800.00
200.00
Total 2000.00
USE OTHER SIDE FOR ADDITIONAL LISTING. < ENTER TOTAL HERE.
March 4 0953-7058
4-6
The structure of a check - Fig 4.2
Gracie’s Natural Superstore80 Garfield Street 53-7058/2113 No. 633Bartlet, NH 01835 88190662
Pay ____________________20 _____To The Orderof ____________________________________________________$ ___________________
_________________________________________________________________ DOLLARS
IpswichBankipswichbank.com
Memo____________________________ _____________________
:211370587 88190662 633 0000006000
Staples Corporation
March 8 09
xx Six Thousand and 100
xx6,000 100
Molly KateOffice Equipment
4-7
Types of Endorsements
Gracie’s Natural Superstore88190662
Pay to the order ofIpswich Bank
For deposit onlyGracie’s Natural Superstore88190662
Blank Full Restricted
Pay to the order ofIpswich BankGracie’s Natural Superstore 88190662
Can be further endorsed
Only person or company named in
the endorsement can transfer the
check to someone
Limits any further negotiation of the
check
4-8
Bank Statement
A statement of different types of activity that have taken place during the month
•Debit - decreases the account -
• Credit - increases the account +
4-9
Ipswich Bank Account Statement1 Pleasant St.Bartlett, NH 01835
Gracies Natural Superstore Checking Acct. 881900662
80 Garfield St.Barltett, NH 01835 Summary as of 3/31/07
Beginning Total Total Service EndingBalance Deposits WithdrawalsCharge Balance$13,112.24 $8,705.28 $9,926.00 $28.50 $11,863.02
Deposits Date AmountDeposit 3/5 2,000.00EFT Leasing 3/18 1,808.06Interest 3/31 56.02
Charges Date AmountService 3/31 28.50EFT: Health 3/21 722.00
Checks Daily BalanceNumber Date Amount Date Balance633 3/7 6,000.00 2/28 13,112.24634 3/13 300.00 3/5 15,232.24
Monthly Summary: $8,721.44Average Balance: $12,170.38
Checking Account Transactions
Bank Statement
4-10
Check Register
Used to track written checks
RECORD ALL CHARGES OR CREDIT THAT AFFECT YOUR ACCOUNT
Number Date Description of Transaction Payment/Debit x Fee Deposit/Credit Balance
633 12/15 Staples Co. 75 35 -75 35
2009
12/18 Deposit 412 78 +412 78
634 12/22 Health Food, Inc. 79 33 649 78
391 68
316.33
729 11
4-11
Bank Reconciliation
• Reconciles the difference between the bank statement and the checkbook
Differences in timing Transactions not entered in checkbook
CheckbookCheckbook Bank StatementBank Statement
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Reconciliation
Checkbook Balance
+EFT (electronic funds transfer) +Interest earned +Notes collected+Direct Deposit-ATM withdrawals-Automatic withdrawals-NSF check-Online fees-Automatic payments-Overdrafts-Service charges-Stop payments+/-Book errors
Bank Balance
+Deposit in transit-Outstanding checks+/-Bank errors
Bank StatementBank StatementCheckbook Checkbook
4-13
Steps in Reconciling Account
1) Identify outstanding checks
2) Identify deposits in transit
3) Analyze bank statement for transactions not recorded in check register
4) Check for recording errors in checks, deposits, addition or subtraction
5) Compare the adjusted balances, if different repeat steps 1-4
4-14
Bank ReconciliationGRACIE’S NATURAL SUPERSTORE
Bank Reconciliation as of March 31, 2009Checkbook Balance Bank BalanceGracie’s checkbook balance $6,588.42 Bank Balance $11,863.02Add: Add:EFT leasing: Bakery dept. $1,808.06 Deposit in transit 3,383.26EFT leasing: Meat dept. 4,228.00 $15,246.28Interest 56.02Error: Overstated ck # 634 720.00 6,6812.08
$13,400.50Deduct: Deduct:Service charge $28.50 Outstanding checks:NSF 104.00 No. 638 $572.00EFT Health Insurance pymt. 722.00 854.50 No. 639 638.94
No. 640 166.00
No. 641 406.28 No. 642 917.06 2,700.28
Reconciled balance $12,546.00 Reconciled balance $12,546.00
4-15
Trends in Online Banking
• Increase Use of Internet • New Bank Legislation• Role of Middlemen in the Internet
4-16
Problem 4-9:
Solution:
Sue’s Checkbook Balance $604.30 Bank Balance $ 315.65 Add: Add: Interest 5.15 Deposit in Transit 1,215.15 $609.45 $1,530.80 Deduct: Deduct: Service Charge $ 6.50 Outstanding Checks: Overdraft 25.00 31.50 No. 250 $603.15 No. 253 218.90 No. 254 130.80 952.85
Reconciled Balance: $577.95 Reconciled Balance: $ 577.95
4-17
Challenge Problem
Solution:
Checkbook Balance: $ 985. 20 Bank Balance: $1,430.33 Add: Add: Interest $ 2.33 Deposit in Transit 931.08 IRS Refund 1,030.05 1,032.38 $2,361.41 $2,017.58 Deduct: Deduct: Gas Company $ 135.20 Outstanding Checks: ATM Fee 6.50 No. 235 $138.20 Service Fee 8.00 No. 237 184.13 Debit (5x$.45) 2.25 No. 238 118.12 Printing 3.50 155.45 No. 239 38.83 499.28
Reconciled Balance $1,862.13 Reconciled Balance $1,862.13