BANKING SERVICES AND PROCEDURES

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Brenda Russell
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1 CHAPTER 23 VOCABULARY REVIEW 1. clearinghouses 2. maker 3. principal 4. payer, payee 5. holder BANKING SERVICES AND PROCEDURES 6. Uniform Commercial Code 7. drawee 8. negotiable 9. disbursements 10. reconciliation SKILLS AND CONCEPTS Part I: Short Answers 1. a. It must be written and signed by a maker. b. It must contain a promise or order to pay a sum of money. c. It must be payable on demand or at a fixed future date d. It must be payable to order or bearer. 2. Advantages may include the following: Speed Accessibility 24 hours a day Fast access to account information Ability to check balances anytime Ability to check account information from any computer 3. Patients expect to be treated with exceptional customer service. Because the physician s office provides a service to the patients and because it is, in fact, a business, patients should be respected and given good service. The days of patients waiting for hours to see doctors have passed, and the physician who does not consider customer service as a daily part of the office routine will be much less successful than the physician who cares about the patients time and satisfaction with the way they are treated in the medical facility. 4. Types of checks may include the following: Bank draft Cashier s check Money order 1 Traveler s check Voucher check 5. a. Blank: The payee signs only his or her name. This makes the check payable to the bearer. It is the simplest and most common type of endorsement on personal checks but should be used only when the check is to be cashed or deposited immediately. b. Restrictive: This specifies the purpose of the endorsement. A restrictive endorsement is used in preparing checks for deposit to the physician s checking account. c. Special: This endorsement includes words specifying the person to whom the endorser makes the check payable. d. Qualified: This is an endorsement qualified by disclaiming or destroying any future liability of the endorser. Usually the words without recourse are written above by an attorney who accepts a check on behalf of a client but who has no personal claim in the transaction. 6. a. A stop-payment order may be placed. b. The check may be lost, misplaced, or stolen.

2 c. Delay may cause the check to be returned because of insufficient funds. d. The check may have a restricted time for cashing. e. Prompt deposit is a courtesy to the payer. 7. Guidelines may include the following: Scan the check carefully for the correct date, amount, and signature. Do not accept a check with corrections on it. If you do not know the person presenting a personal check, ask for identification and compare signatures. Accept an out-of-town check, government check, or payroll check only if you are well acquainted with the person presenting it and it does not exceed the amount of the payment. Acceptance of a third-party check is generally unwise. A third-party check is one made out to your patient by a party unknown to you. A check from the patient s health insurance carrier is an exception. When accepting a postal money order for payment, make certain it has only one endorsement. Postal money orders with more than two endorsements will not be honored. Do not accept a check marked Payment in Full unless it does pay the account in full up to and including the date on which it is received. If a check so marked is less than the amount due, you will be unable to collect the balance on the account once you have accepted and deposited such a check. It is illegal for you to scratch out the words Payment in Full. Accepting checks written for more than the amount due and returning cash for the difference between the amount of the check and the amount owed is poor policy. If the check is not honored by the bank, your office will suffer the loss not only of the amount of the check but also of the amount returned in cash. 8. a. Loss of a check b. Disagreement about a purchase c. Disagreement about a payment 9. The American Bankers Association (ABA) number is part of a coding system originated by the ABA. It appears in the upper right area of a printed check. The number is used as a simple way to identify the area where the bank on which the check is written is located and the particular bank in that area. The code number is expressed as a fraction, for example: In the top part of the fraction, before the hyphen, the numbers 1 to 49 designate cities in which Federal Reserve banks are located or other key cities; the numbers 50 to 99 refer to states or territories. The part of the number following the hyphen is a number issued to each bank for its own identification purposes. The ABA number is used in preparing deposit slips to identify each check. The bottom part of the fraction includes the number of the Federal Reserve district in which the bank is located and other identifying information. 10. a. List all checks on the back of the deposit slip. b. Transfer the total to the front of the slip. c. Enter the amount of the total deposit on the deposit stub. 11. The routing number usually appears in the bottom left area of a printed check. The number is used as a simple way to identify the area in which the bank on which the check is written is located and the particular bank within the area. 2

3 12. Electronic funds transfers (EFTs) are electronic payments of payroll, money owed to vendors or business establishments, and payments from government agencies. EFT payments are safe, secure, efficient, and less expensive than paper checks. 13. Many EFTs are processed through an automated clearinghouse (ACH), which is an electronic network for financial transactions in the United States. Part II: Writing Checks for Disbursement of Funds 1. $4, $2, $4, $2, $3, Part III: Writing Refund Checks 1. $3, $3, $10, $10,197 Part IV: Preparing a Bank Deposit 1-4. Total cash: $296; Total personal checks: $117 Total credit cards: $350 Total deposit: $2, BANK NUMBER BANK DEPOSIT DETAIL PAYMENTS BY CHECK OR PMO , BY COIN OR CURRENCY CREDIT CARD TOTALS 1, CURRENCY COIN CHECKS 1, CREDIT CARDS 350 TOTAL RECEIPTS LESS CREDIT CARD $ TOTAL DEPOSITS 2, DEPOSIT DATE: FIRM: 3

4 Part V: Reconciling a Bank Statement 1. ITEMS OUTSTANDING NUMBER AMOUNT , ENTER The NEW BALANCE shown on this statement $6, Note: Includes $2, deposit ADD Any deposits listed in your register $ or transfers into your account $ which are not shown on this $ statement. +$ TOTAL CALCULATE THE SUBTOTAL $ SUBTRACT The total outstanding checks and withdrawals from the chart at left $2, CALCULATE THE ENDING BALANCE This amount should be the same as the current balance shown in your check register $4, TOTAL $ 2, Yes 3. $4,

5 CHAPTER 24 FINANCIAL AND PRACTICE MANAGEMENT VOCABULARY REVIEW 1. fiscal 2. receivable 3. payable 4. assets 5. bookkeeping 6. invoice 7. cash 8. in balance 9. balance 10. accrual 11. disbursements journal 12. statement 13. trial balance 14. petty cash 15. income, expense 16. control 17. cash flow statement 18. disbursements journal 19. liability 20. equity 21. admonition SKILLS AND CONCEPTS Part I: Short Answers 1. a. How much was earned in a given period b. How much was collected c. How much is owed d. The distribution of expenses incurred 2. well-formed figures 3. a. Every amount paid out b. Date and check number c. Purpose of payment 4. Common accounting systems may include the following: Single-entry Double-entry Pegboard or write-it-once 5. Accounting is a system of recording, classifying, and summarizing financial transactions. Bookkeeping is mainly the recording part of the accounting process. 6. Answers may include the following: Use good penmanship. Use the same pen and ink style. Keep columns straight. Write well-formed figures. Enter charges and receipts immediately. Endorse checks as soon as they are received. Pay most expenses, other than small incidentals, by check. Do not erase, blot out, or write over figures. Do not work on financial records when distracted. 7. Disadvantages include the following: Errors are not easily detected. The system has no built-in controls. Periodic analyses are inadequate for financial planning. 8. a. Social Security number b. Number of withholding allowances claimed c. Amount of gross salary d. Records of all types of deductions 5

6 9. An annual Federal Unemployment Tax Act (FUTA) return must be filed on Form 940 on or before January 31 following the close of the calendar year for which the tax is due. 10. Expense categories may include the following: Insurance Rent Depreciation Loan payments Advertising and promotions Legal and accounting Miscellaneous expenses Supplies Part II: Bookkeeping Systems 6 Salaries and wages Utilities Dues, subscriptions, and fees Taxes Repairs and maintenance Medical equipment Administrative equipment Medication and pharmacy expenses 1. In a single-entry system, each entry is made separately. The records of charges and receipts usually are entered into a bound journal with a page for each day of the year, monthly summary pages, and an annual summary. Daily pages have columns for entering each transaction that show the patient s name, the service performed and the charge, any payments received, and the totals for charges and receipts. The daily totals are entered on the monthly summary, and the monthly totals are carried forward to the annual summary. The same bound book also may have space for recording cash payments, or the checkbook may be the only cash payment journal. Monthly and annual summaries would be done from the checkbook. The accounts receivable ledger usually consists of an account card for each patient, on which are entered the charges and payments from the general journal. The patients statements are prepared from these cards. 2. The system is based on the following accounting equation: Assets = Liabilities + Proprietorship (Capital) Every transaction requires an entry on each side of the accounting equation, and the two sides must always be in balance. For this reason, the system is called double-entry bookkeeping. It is the most complete of the three systems. 3. In the pegboard system, the first section is the proof of posting section, which deals with the transactions that occurred that day on the day sheet. In the second section, the month-to-date accounts receivable proof and the day s totals being added to the monthto-date totals should balance to the penny. The last section is the year-to-date accounts receivable proof, which adds the accounts, including the day s totals, to the year-to-date total. Most systems also have a deposit ticket, which can be double-checked when adding the cash receipts and the checks. This is handy when preparing the day s deposit. The totals at the bottom of the second and third sections must be identical. When the end-of-the-day summarizing does not balance, the medical assistant first should check the addition of each column, both horizontally and vertically. 4. Answers will vary. Part III: Forms 1. Application for Social Security Number (individual) 2. Wage and Tax Statement; given to each employee from whom income tax or Social Security tax has been withheld or from whom income tax would have been withheld if the employee had claimed no more than one withholding allowance 3. Transmittal of Income and Tax Statement; used annually to transmit wage and income tax withheld statements (Form W-2) to the Social Security Administration 4. Employee s Withholding Allowance Certificate showing the number of withholding allowances claimed

7 WORKPLACE APPLICATION OPTIONS Solve the following addition problems = = = = = 724 Solve the following subtraction problems = = = 297 Solve the following multiplication problems = = = = = 630 Solve the following division problems = , = , = = = = = = = = = = = = = , = , = 675 7

Ch.6 Internal Control and Accounting for Cash

Ch.6 Internal Control and Accounting for Cash Internal control and its objectives Understand cash and internal control procedures related to cash Accounting for petty cash Combined Journal Prepare a bank