Lecture Practical business math procedures (10/e): Chapter 4 - Jeffrey Slater
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Chapter 4
Banking
McGrawHill/Irwin
©2011 The McGrawHill Companies, All Rights Reserved
#4 Banking
Learning Unit Objectives
The Checking Account
LU4.1
1.
Define and state the purpose of signature
cards, checks, deposit slips, check stubs,
check registers, and endorsements
2. Correctly prepare deposit slips, write checks
42
#4 Banking
Learning Unit Objectives
Trends in Banking Industry: Bank Statement
LU4.2
and Reconciliation Process; Trends in
Online Banking
1. Explain the trends in the banking industry
2. Define and state the purpose of the bank
statement
3. Complete a check register and a bank
reconciliation
4. Explain the trends in online banking pro
43
and con
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
Drawee Bank
ordered to pay
Payee To
whom check
is payable
44
Drawer
One who
writes the
check
Deposit Slip Fig 4.1
Gracie’s Natural Superstore
80 Garfield Street
Bartlet, NH 01835
March 4
09
Date ________________ 20 __________
CASH
List Checks Singly
537058
1800.00
200.00
USE OTHER SIDE FOR
ADDITIONAL LISTING.
< ENTER TOTAL HERE.
DEPOSITS MAY NOT BE AVAILABLE FOR IMMEDIATE WITHDRAWAL
Total
IpswichBank
ipswichbank.com
2000.00
211370587 88190662
Checks and other items are received for deposit subject to the provisions of the uniform commercial code or any applicable collection agreement
45
The structure of a check Fig 4.2
Gracie’s Natural Superstore
80 Garfield Street
Bartlet, NH 01835
537058/2113
88190662
No. 633
March 8
09
Pay
____________________20 _____
To The
xx
Order
Staples Corporation
6,000 100
of ____________________________________________________$ ___________________
xx
Six Thousand and 100
_________________________________________________________________
DOLLARS
IpswichBank
ipswichbank.com
Office Equipment
Memo____________________________
:211370587
46
88190662 633
Molly Kate
_____________________
0000006000
Types of Endorsements
Blank
Gracie’s Natural Superstore
88190662
Can be further
endorsed
47
Full
Pay to the order of
Ipswich Bank
Gracie’s Natural Superstore
88190662
Only person or
company named in
the endorsement
can transfer the
check to someone
Restricted
Pay to the order of
Ipswich Bank
For deposit only
Gracie’s Natural Superstore
88190662
Limits any further
negotiation of the
check
Trends in Banking Industry
• Since 2008 trends in banking have been
changing rapidly.
• The government has been involved in many
bailout packages due to the financial crises.
• Some banks have had to close or merge.
Check textbook Web site for the latest updates on banking bailouts and government intervention.
www.mhhe.com/slater10e.
48
Bank Statement
A statement of different types of activity
that have taken place during the month
•
Debit decreases the account
• Credit increases the account +
49
Bank Statement
Ipswich Bank
1 Pleasant St.
Bartlett, NH 01835
Account Statement
Gracies Natural Superstore
80 Garfield St.
Barltett, NH 01835
Checking Acct. 881900662
Beginning
Total
Balance
Deposits
$13,112.24 $8,705.28
Summary as of 3/31/11
Total
Service
Withdrawals Charge
$9,926.00
$28.50
Ending
Balance
$11,863.02
Checking Account Transactions
Deposits
Deposit
EFT Leasing
Interest
Date
Charges
Service
EFT: Health
Date
Checks
Number
633
634
410
Date
3/13
3/13
3/5
3/18
3/31
Amount
2,000.00
1,808.06
56.02
3/31
3/21
Amount
28.50
722.00
Amount
6,000.00
300.00
Daily Balance
Date
Balance
2/28
13,112.24
3/5
15,232.24
Check Register
Used to track written checks
RECORD ALL CHARGES OR CREDIT THAT AFFECT YOUR ACCOUNT
Number Date
2009
Description of Transaction
Payment/Debit x Fee Deposit/Credit Balance
15,136 24
633 3/8 Staples Co. 6,000 00 6,000 00
9,136 24
634 3/9 Health Food, Inc.
1,020 00 1,020 00
8,116 24
3/9 Deposit 389 20 +389 20
411
Bank Reconciliation
• Reconciles the difference between the bank
statement and the checkbook
Checkbook
Bank Statement
Differences in timing
Transactions not entered in checkbook
412
Reconciliation
Checkbook Balance
Bank 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
+Deposit in transit
Outstanding checks
+/Bank errors
Checkbook
413
Bank Statement
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 14
414
Bank Reconciliation
GRACIE’S NATURAL SUPERSTORE
Bank Reconciliation as of March 31, 2011
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 6,6812.08
$13,400.50
Deduct:
Deduct:
Service charge
$28.50
Outstanding checks:
NSF
104.00
No. 638 $572.00
EFT Health Insurance pymt. 722.00 854.50
No. 639 638.94
No. 640 166.00
No. 641
No. 642
Reconciled balance
415
$12,546.00
406.28
917.06 2,700.28
Reconciled balance
$12,546.00
Trends in Online Banking Pros and Cons
PROS
• Many Online savings accounts are paying 34% interest
• Online accounts like all bank accounts, are protected by
the Federal Deposit Insurance Corp up to $250,000 per
account holder
CONS
• Delay in transferring funds between accounts up to four
days
• The bank will hold up a transfer of funds because it
wants to make sure our funds are good before it lets us
have them.
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