The goals of this chapter are: Define and state the purpose of signature cards, checks, deposit slips, check stubs, check registers, and endorsements; correctly prepare deposit slips and write checks; explain the trends in the banking industry; define and state the purpose of the bank statement; complete a check register and a bank reconciliation; explain the trends in online banking pro and con.
Banking Chapter Four McGrawHill/Irwin Copyright © 2014 by The McGrawHill Companies, Inc. All rights reserved Learning unit objectives LU 4-1: The Checking Account Define and state the purpose of signature cards, checks, deposit slips, check stubs, check registers, and endorsements Correctly prepare deposit slips and write checks LU 4-2: Bank Statement and Reconciliation Process; Latest Trends in Mobile Banking Explain the trends in the banking industry Define and state the purpose of the bank statement Complete a check register and a bank reconciliation Explain the trends in online banking pro and 42 Checks/Drafts Checks/Drafts – A written order instructing a bank, credit union, or savings and loan institution to pay a designated amount of your money on deposit with the bank to a person or organization Drawer - One who writes the check Drawee – Bank ordered to pay Payee - To whom check is payable 43 Deposit Slip Figure 4.1 44 The structure of a check Figure 4.2 45 Types of Endorsements Blank Gracie’s Natural Superstore 88190662 Can be further endorsed Full Restricted Pay to the order of Ipswich Bank Gracie’s Natural Superstore 88190662 Pay to the order of Ipswich Bank Only person or company named in the endorsement can transfer the check to someone Limits any further negotiation of the check For deposit only Gracie’s Natural Superstore 88190662 46 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 website for the latest updates on banking bailouts and government intervention: www.mhhe.com/slater11e 47 Bank Statement Bank Statement- A statement of different types of activity that have taken place during the month § Debit: decreases the account — § Credit: increases the account + 48 Bank Statement Ipswich Bank 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 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 49 Check Register Used to track written checks RECORD ALL CHARGES OR CREDIT THAT AFFECT YOUR ACCOUNT Number Date Description of Transaction 2009 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 00 410 Bank Reconciliation Reconciles the difference between the bank statement and the checkbook Checkbook Bank Statement Differences in timing Transactions not entered in checkbook 411 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 Checkbook Bank Balance +Deposit in transit -Outstanding checks +/-Bank errors Bank Statement 412 Steps in Reconciling Account Steps Step Identify outstanding checks Step Identify deposits in transit Step Analyze bank statement for transactions not recorded in check register Step Check for recording errors in checks, deposits, addition, or subtraction Step Compare the adjusted balances; if different, repeat Steps 1-4 413 Bank Reconciliation GRACIE’S NATURAL SUPERSTORE Bank Reconciliation as of March 31, 2013 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 payment 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 $12,546.00 414 Trends in Online Banking Pros and Cons PROS Many online savings accounts are paying 4.4% interest Online accounts, like all bank accounts, are protected by the Federal Deposit Insurance Corporation (FDIC) 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 415 ... deposit -ATM withdrawals -Automatic withdrawals -NSF check -Online fees -Automatic payments -Overdrafts -Service charges -Stop payments +/-Book errors Checkbook Bank Balance +Deposit in transit -Outstanding... prepare deposit slips and write checks LU 4-2 : Bank Statement and Reconciliation Process; Latest Trends in Mobile Banking Explain the trends in the banking industry Define and state the purpose... check For deposit only Gracie’s Natural Superstore 88190662 46 Trends in Banking Industry Since 2008 trends in banking have been changing rapidly The government has been involved in many