Chapter 9

Banking and Accounting

Procedures

Banking and Accounting Procedures

Banking Procedures

Accounting Procedures

Ethics in Accounting Procedures

International Currency Exchange

Office Procedures for the 21 st

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Century, 8e

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Banking Procedures

Traditional Banking Procedures

Cashier’s check

Bank draft

Bank money order

Traveler’s check

Electronic funds transfer (EFT)

Automated teller machines (ATMs)

Direct payroll deposit

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Banking Procedures

(continued)

Automatic deposits

Automatic debits

Web banking

Telephone transfers

Check endorsements

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Banking Procedures

(continued)

Checks

Establish checking account at bank

Transfer of funds –ordinary checks

Check –written by depositor

Drawer –also called maker; person who writes a check

Drawee –bank from which check is drawn

Payee –person to whom the check is written

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Banking Procedures

(continued)

Cashier’s Check

Also known as treasurer’s check or official check

Written by an authorized officer of bank on its own funds

Guarantees payment to payee by drawer’s bank

Depositor obtains official check by writing bank a check on his/her funds for amount plus fee

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Banking Procedures

(continued)

Bank Draft

Check drawn by bank on its own funds in another bank located either in same city or another city

Made payable to third party, and upon endorsement, may be cashed at bank on which it is drawn

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Banking Procedures

(continued)

Bank Money Order

Requires endorsement of payee

May be cashed at any bank

Purchaser charged small fee

Amount of money may be limited

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Banking Procedures

(continued)

Traveler’s Check

Used in place of cash

Must obtain in person and sign in presence of selling agent

Purchased from banks and credit unions

If lost or stolen, will usually be refunded

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Banking Procedures

(continued)

Electronic funds transfer (EFT)

Delivery system for electronic transactions

No lost or stolen checks

Payment made quickly and on time

Major services —EFT, ATMs, centers for electronic funds transfers, payment by telephone

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Banking Procedures

(continued)

Automated teller machines (ATMs)

Many convenient locations

Customers can obtain cash or make deposits

Requires EFT card and personal identification number (PIN) or password

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Banking Procedures

(continued)

Debit card

Used in place of checks

Money is taken directly from the individual or company’s checking account

May be used as debit card or credit card

When used as a debit card, requires a pin number or password; when used as a credit card must sign sales slip

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Banking Procedures

(continued)

Direct Payroll Deposit

Organization pays employees without checks

Organization provides bank with magnetic tape description of payroll disbursements made to the employees

Employee receives statement from company or third party

Statement shows gross payment, type and amount of deductions, and net payment

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Century, 8e

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Banking Procedures

(continued)

Automatic deposits

Funds automatically deposited

Electronic routing number and account number are needed for deposit

Routing number and bank account number is usually printed on bottom of checks

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Banking Procedures

(continued)

Automatic debits

 Preauthorized automated transfer of funds from one account to another account within same financial institution

For an individual or company

From checking or savings

Example: Payment of utilities

Copy of canceled check, account number and signature authorizing transfer is required

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Banking Procedures

(continued)

Web banking

Must have access to Internet

Primary functions

Easy online management of banking transactions

Ability to make electronic transfers

Provides real-time information

Software/password to access may be needed

Requires ID

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Banking Procedures

(continued)

Telephone transfers

Call the company, provide nine-digit routing number of bank, bank account number, check number, and amount

May be charged a fee

Company will draft the amount from your checking account and bank honors check

Payment can be made on exact due date, avoiding late charges

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Banking Procedures

(continued)

Bank checks

Stop-payment notification

Used when check is lost or stolen

Used when check is written for incorrect amount

Conditions of agreement are not met

Check endorsement

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Banking Procedures

(continued)

Endorsing Checks

 Check presented for cash or deposit must be signed (endorsed)

By the payee

On reverse side of check

Bank will accept for deposit checks that have been endorsed by representative of payee

Endorsement can be rubber stamped or handwritten in ink

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Banking Procedures

(continued)

Three types of endorsements

Blank endorsement

Restrictive endorsement

Full endorsement

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Banking Procedures

(continued)

Blank endorsement

Consists only of signature of payee

Payable to bearer

Use with caution when depositing or cashing checks

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Century, 8e

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Banking Procedures

(continued)

Restrictive endorsement

Limits use of check

Words such as “For deposit only” or “Pay to” are written before organization’s name or depositor’s signature

Use when deposits are sent to bank by mail

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Banking Procedures

(continued)

Full endorsement

Also called a two-party check

Transfer check to specified person or organization

“Pay to the order of” followed by name of person/organization receiving funds is written on check preceding signature of endorser

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Century, 8e

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Banking Procedures

(continued)

Bank deposits

Preparing the cash/coin

Coin values per roll

Currency preparation

Separate by denomination

Arrange all president’s faces going in same direction

Strap all currency that meets required amounts

Each strap must contain same denomination

Preparing the deposit slip

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Century, 8e

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Bank Statement Reconciliation

Statement issued by bank to depositor

Shows previous month’s balance, deposits, checks paid, bank charges, and ending balance

Comparison of bank balance on the statement with the checkbook balance

To make comparison, checks listed on statement are checked off in check register

Office Procedures for the 21 st

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Century, 8e

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Bank Statement Reconciliation

(continued)

Steps to reconcile bank statement

Record in the company’s checkbook all automatic transactions not previously entered

+ any interest earned

+ automatic deposits

- service charges

- automatic payments

- telephone transfers and charges

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Century, 8e

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Bank Statement Reconciliation

(continued)

Enter in company’s checkbook register a check mark for each canceled check and all deposits received by the bank listed on the bank statement

Total all outstanding checks (not paid by bank)

Total all deposits shown in checkbook register that are not on bank statement

Office Procedures for the 21 st

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Century, 8e

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Bank Statement Reconciliation

(continued)

Adjust the bank statement balance

Enter the checking account balance shown on front of bank statement

Add any deposits not yet shown on statement

Subtract the total of outstanding checks

The adjusted bank statement balance from the reconciliation should agree with the adjusted checkbook balance

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Century, 8e

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Bank Statement Reconciliation

(continued)

If the adjusted bank statement balance and checkbook balance do not agree, follow these steps:

Find the difference between the two

Check the bank statement balance for errors

Look for omission of checks and deposits

Check for a math error in the check stubs

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Century, 8e

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Accounting Procedures

Petty cash fund

Established for small office expenditures

Used for things such as

Messenger service, postage due on a package, or emergency purchase of office supplies

All expenses must be accounted for

Balance petty cash fund regularly

Keep the cash and completed vouchers in a box or envelope and put them in a safe place

Prepare a petty cash voucher for each expenditure made

Keep an accurate petty cash record, book, or distribution sheet for each period; record each transaction in this record

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Accounting Procedures

(continued)

Replenish the petty cash fund periodically or soon enough to keep an adequate supply of cash on hand

To replenish the petty cash fund, balance the petty cash record, formally request a check for the amount needed to bring the fund amount back to its beginning balance

Submit records called for by the accounting department

Cash the check and enter the beginning amount on the first line of the “Explanation” column of the petty cash record

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Accounting Procedures

(continued)

Payroll

Payroll register used to summarize each employee’s pay for a particular period

Summarizes each employee status

Wages earned

Payroll deductions

Final take-home pay

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Accounting Procedures

(continued)

Completing a payroll register

In the payroll register, enter the employee’s information —name, marital status, number of withholding allowances, hourly rate, regular hours worked and overtime hours worked

Calculate regular earnings

Calculate overtime earnings

Add regular and overtime earnings to determine gross earnings

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Accounting Procedures

(continued)

Calculate social security (OASDI) by multiplying gross earnings by 6.2%

Calculate Medicare by multiplying gross earnings by

1.45%

Look up federal income tax in tax tables obtained from

Circular E Employer’s Tax Guide if not provided for you

Enter any other deductions in the payroll register

Total all deductions

Subtract deductions from gross pay to determine net pay

Checks are written for the net pay amount to each employee

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Accounting Procedures

(continued)

Financial statements

Income Statement

Operating statement also called profit and loss statement showing money earned and expenses incurred

Balance Sheet

Summarizes the balances of the assets

Reports what a company is worth on any one given day

Assets, liabilities, and owner’s equity

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Accounting Procedures

(continued)

Budgeting

Process of planning future business operations and defining those plans, expressed in financial terms in a formal report

Estimate of income and expenses of all areas of organization for a certain period of time

(month or year)

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Accounting Procedures

(continued)

Budget reports

Provides the basis for analyzing and revising spending activities

Compares actual sales or costs with figures budgeted

Follow the budget by not overspending the budgeted amount

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Century, 8e

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Accounting Procedures

(continued)

Office supplies inventory

Record of supplies on hand

Perpetual inventory record

Inventory each item

Keep balance accurate

Add to item when ordering more

Subtract from item when removing

Decide if balance on hand is sufficient or if time to replenish

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Accounting Procedures

(continued)

Accounting department

Handles cost control for company

Budgets have account titles and numbers

Typically, managers are responsible for their area

Which accounts are used most often?

How accounts may be used?

Correct procedures for ordering and spending

Allowable expenses

Department code to use

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Ethics in Accounting Procedures

Auditors and accountants create the financial statements and must be the watch-dogs for accurately reporting information

Ethics is stressed in the accounting field by requiring CPAs to take an ethics course once every three years

High ethical standards are required in every phase of the office professional’s job

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Century, 8e

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International Currency Exchange

Necessary when manager travels abroad

Locate current exchange rate

Available via Internet

Call local banks

At airports with international flights

Exchange rates are quoted per $1 U.S

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Century, 8e

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