Chapter 5. Cash Control Systems

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1 Chapter 5 Cash Control Systems

2 5-1 Terms checking account: a bank account from which payments can be ordered by a depositor code of conduct: a statement that guides the ethical behavior of a company and its employees endorsement: a signature or stamp on the back of a check transferring ownership restrictive endorsement: an endorsement restricting further transfer of a check s ownership special endorsement: an endorsement indicating a new owner of a check blank endorsement: an endorsement consisting only of the endorser s signature postdated check: a check with a future date on it

3 5-1 Checking Accounts Deposit Slip A deposit slip is prepared each time cash or checks are put into a bank. All banking institutions deposit slips are different, however, they all contain the same information. Deposit Recorded on a Check Stub All deposits need to recorded on the check stub. You will add the previous balance to the deposited amount to get the business current balance.

4 DEPOSITING CASH

5 DEPOSIT RECORDED ON A CHECK STUB

6 Types of Endorsements When you sign the back of a check, you are transferring ownership. Endorsements should be signed exactly the way it is shown on the check. Blank Endorsements Special Endorsements Restrictive Endorsements

7 ENDORSEMENTS Blank Endorsement Special Endorsement Restrictive Endorsement

COMPLETED CHECK STUB 2 4 6 3 1 5 1. Write the amount of the check. 2. Write the date of the check. 3. Write to whom the check is to be paid.

8 COMPLETED CHECK STUB Write the amount of the check. 2. Write the date of the check. 3. Write to whom the check is to be paid. 4. Record the purpose of the check. 5. Write the amount of the check. 6. Calculate the new checking account balance.

COMPLETED CHECK 7 8 9 10 11 12 7. Write the date. 8. Write to whom the check is to be paid. 9. Write the amount in figures.

9 COMPLETED CHECK Write the date. 8. Write to whom the check is to be paid. 9. Write the amount in figures. 10. Write the amount in words. 11. Write the purpose of the check. 12. Sign the check.

10 5-2 Terms bank statement: a report of deposits, withdrawals, and bank balances sent to a depositor by a bank.

11 BANK STATEMENT

12 5-2 Bank Reconciliation Banks will send businesses on a monthly basis a record of all deposits, withdrawals, and the bank balance for the business. A banks balance may differ from the businesses, but may still be correct. A service charge may not have been recorded. Outstanding deposits may be recorded in the businesses recorded but not the banks. Outstanding checks may be recorded in the businesses records, but not the banks. A depositor may have made a math or recording error. It is important to analyze a bank statement each time it is received.

13 Bank Statement Reconciliation When businesses receive their statements, canceled check may come with it. Canceled checks should be compared with check stubs and a check mark should be placed on each stub for a canceled check. Same should be done for deposits. If there is a service charge, banks have already deducted that. When you are done reconciliation the two balances should equal.

14 BANK STATEMENT RECONCILIATION 1. Date 2. Check Stub Balance 2 3. Service Charge 4. Adjusted Check 6 Stub Balance 3 5. Bank Statement Balance 6. Outstanding Deposits Subtotal 8. Outstanding Checks Adjusted Bank Balance 10. Compare Adjusted Balances

15 RECORDING A BANK SERVICE CHARGE ON A CHECK STUB 1. Write Service Charge $8.00 on the check stub under the heading Other. 2. Write the amount of the service charge in the amount column Calculate and record the new subtotal on the Subtotal line.

16 JOURNALIZING A BANK SERVICE CHARGE August 31. Received bank statement showing August bank service charge, $8.00. Memorandum No Date. Write the date. 2. Debit. Write the title of the account to be debited. Record the amount debited. 3. Credit. Record the amount credited. 4. Source document. Write the source document number.

17 5-3 Terms dishonored check: a check that a bank refuses to pay electronic funds transfer: a computerized cash payments system that transfers funds without the use of checks, currency, or other paper documents debit card: a bank card that automatically deducts the amount of a purchase from the checking account of the cardholder

18 5-3 Dishonored Checks Banks dishonor checks when there is not enough money to cover the check (Illegal). There is usually a fee for this. A check is looks to be altered Signature of the person does not match the one on a signature card. Check is postdated. Check writer stop payment.

19 RECORDING A DISHONORED CHECK ON A CHECK STUB Write Dishonored check $ on the line under the heading Other. 2. Write the total of the dishonored check in the amount column. 3. Calculate and record the new subtotal on the Subtotal line.

JOURNALIZING A DISHONORED CHECK November 29. Received notice from the bank of a dishonored check from Campus Internet Café, $70.00, plus $35.00 fee; total, $105.00. Memorandum No.

20 JOURNALIZING A DISHONORED CHECK November 29. Received notice from the bank of a dishonored check from Campus Internet Café, $70.00, plus $35.00 fee; total, $ Memorandum No Date. Write the date. 2. Debit. Write the title of the account to be debited. 3. Credit. Write the amount credited. 4. Source document. Write the source document number. 4 3

JOURNALIZING AN ELECTRONIC FUNDS TRANSFER September 2. Paid cash on account to Kelson Enterprises, $350.00, using EFT. Memorandum No. 10. 1 2 3 1. Date. Write the date. 2. Debit.

21 JOURNALIZING AN ELECTRONIC FUNDS TRANSFER September 2. Paid cash on account to Kelson Enterprises, $350.00, using EFT. Memorandum No Date. Write the date. 2. Debit. Write the title of the account to be debited. Record the amount debited. 3. Credit. Record the amount credited. 4. Source document. Write the source document number. 4

22 JOURNALIZING A DEBIT CARD TRANSACTION September 5. Purchased supplies, $24.00, using debit card. Memorandum No Date. Write the date. 2. Debit. Write the title of the account to be debited. Record the amount debited. 3. Credit. Record the amount credited. 4. Source document. Write the source document number. 4

23 5-4 Terms petty cash: an amount of cash kept on hand and used for making small payments petty cash slip: a form showing proof of a petty cash payment

ESTABLISHING A PETTY CASH FUND August 17. Paid cash to establish a petty cash fund, $100.00. Check No. 8. 1 2 3 1. Date. Write the date. 2. Debit.

24 ESTABLISHING A PETTY CASH FUND August 17. Paid cash to establish a petty cash fund, $ Check No Date. Write the date. 2. Debit. Write the title of the account to be debited. Record the amount debited. 3. Credit. Record the amount credited. 4. Source document. Write the source document number. 4

25 Petty Cash Slip Petty cash slip shows the following information Petty cash slip number Date of petty cash payment To whom it was paid Reason for payment Amount paid Account to be recorded Signature of person approving petty cash.

26 MAKING PAYMENTS FROM A PETTY CASH FUND WITH A PETTY CASH SLIP

REPLENISHING PETTY CASH August 31. Paid cash to replenish the petty cash fund, $30.00: miscellaneous expense, $20.00; advertising, $10.00. Check No. 12. 4 1 1. Date. Write the date. 2 2. Debit.

27 REPLENISHING PETTY CASH August 31. Paid cash to replenish the petty cash fund, $30.00: miscellaneous expense, $20.00; advertising, $ Check No Date. Write the date Debit. Write the title of the first account to be debited. Write the amount to be debited. Write the title of the second account to be debited. Record the amount to be debited. 3. Credit. Record the amount credited. 4. Source document. Write the source document number. 3

Chapter 5: Cash Control Systems

Chapter 5: Cash Control Systems Goals of Chapter 5: Define accounting terms related to using a checking account and a petty cash fund Identify accounting concepts and practices related to using a checking