Chapter 4 Banking 4-1 McGraw-Hill/Irwin Copyright 2006 by The McGraw-Hill Companies, Inc. All rights reserved.
Checks 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 Drawee- Bank ordered to pay Drawer - One who writes the check Payee - To whom check is payable 4-2
Deposit Slip - Fig 4.1 Gracie s Natural Superstore 80 Garfield Street Bartlet, NH 01835 December 18 04 Date 20 DEPOSITS MAY NOT BE AVAILABLE FOR IMMEDIATE WITHDRAWAL CASH List Checks Singly 1800.00 200.00 Total 2000.00 USE OTHER SIDE FOR ADDITIONAL LISTING. < ENTER TOTAL HERE. IpswichBank ipswichbank.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 4-3
The structure of a check - Fig 4.2 Gracie s Natural Superstore 80 Garfield Street 53-7058/2113 No. 12 Bartlet, NH 01835 88190662 Pay 20 March 8 04 To The Order no of $ Staples Corporation 6,000. 00 no Six Thousand and 100 DOLLARS IpswichBank ipswichbank.com Memo Office Equipment Molly Kate :211370587 88190662 12 0000007535 4-4
Check Register RECORD ALL CHARGES OR CREDIT THAT AFFECT YOUR ACCOUNT Number Date Description of Transaction Payment/Debit x Fee Deposit/Credit Balance 2004 391 68 633 12/15 Staples Co. 75 35-75 35 335 80 12/18 Deposit 412 78 +412 78 748 58 634 12/22 Health Food, Inc. 79 33-79 33 4-5
Types of Endorsements Blank Full Restricted Gracie s Superstore 88190662 Pay to the order of Ipswich Bank Gracie s Superstore 88190662 Pay to the order of Ipswich Bank For deposit only Gracie s Superstore 88190662 4-6 Check is payable to anyone holding the check. It can be further endorsed. Only the person or business named in the endorsement can transfer the check to someone else. Safest kind of endorsement. Check must be deposited in the firm s bank account. Limits any further negotiation of the check.
Credit Card Transactions Manual Deposit Electronic Deposit Fill out slips, batch & deposit Lower monthly fee Money deposited immediately Higher monthly fee 4-7
Bank Statement A statement of different types of activity that have taken place during the month Debit - decreases the account - Credit - increases the account + 4-8
Bank Statement Ipswich Bank 1 Pleasant St. Bartlett, NH 01835 Account Statement Gracies Natural Superstore Checking Acct. 881900662 80 Garfield St. Barltett, NH 01835 Summary as of 3/31/07 Beginning Total Total Service Ending Balance Deposits Withdrawal Charge Balance $13,112.24 $8,705.28 $9,926.00 $28.50 $11,863.02 Checking Account Transactions Deposits Date Amount Deposit 3/5 2,000.00 EFT Leasing 3/18 1,808.06 Interest 3/31 56.02 Charges Date Amount Service 3/31 28.50 EFT: Health 3/21 722.00 Checks Daily Balance Number Date Amount Date Balance 633 3/7 6,000.00 2/28 13,112.24 634 3/13 300.00 3/5 15,232.24 4-9 Monthly Summary: $8,721.44 Average Balance: $12,170.38
Check Register RECORD ALL CHARGES OR CREDIT THAT AFFECT YOUR ACCOUNT Number Date Description of Transaction Payment/Debit x Fee Deposit/Credit Balance 2004 391 68 633 12/15 Staples Co. 75 35-75 35 335 80 12/18 Deposit 412 78 +412 78 748 58 634 12/22 Health Food, Inc. 79 33-79 33 4-10 When reconciling your checking account, write an x in the X column for every check and deposit listed on the statement.
Bank Reconciliation Reconciles the difference between the bank statement and the checkbook Checkbook Bank Statement 4-11 Differences in timing Transactions not entered in checkbook
Reconciliation Checkbook Balance +EFT (electronic funds transfer) +Notes collected +Interest earned +Direct Deposit -ATM withdrawals -Automatic withdrawals - Check redeposits -Service charges -Online fees -Overdrafts -Automatic payments -Stop payments -NSF check +/-Book errors Bank Balance +Deposit in transit -Outstanding checks +/-Bank errors Checkbook Bank Statement 4-12
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 4-13
Bank Reconciliation GRACIE S NATURAL SUPERSTORE Bank Reconciliation as of March 31, 2006 Checkbook Balance Bank Balance Gracie s checkbook balance $6,588.42 Bank Balance $11,863.02 Add: Add: EFT leasing: Bakery dept. $1,808.06 Deposit in transit 3,383.26 EFT leasing: Meat dept. 4,228.00 $15,246.28 Interest 56.02 Error: Overstated ck # 634 720.00 6,812.08 $13,400.50 Deduct: Deduct: Service charge $28.50 Outstanding checks: NSF 104.00 No. 638 $572.00 EFT Health Insurance pmt. 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 4-14
Trends in Online Banking Increase Use of Internet New Bank Legislation Role of Middlemen in the Internet 4-15