Chapter 04
Banking
McGraw-Hill/Irwin
Copyright © 2011 by the McGraw-Hill Companies, Inc. 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
4-2
#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
4-3
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
4-4
Drawer One who
writes the
check
Deposit Slip - Fig 4.1
Gracie’s Natural Superstore
80 Garfield Street
Bartlet, NH 01835
CASH
List Checks Singly
March 4
Date ________________
09
20 __________
53-7058
1800.00
200.00
USE OTHER SIDE FOR
ADDITIONAL LISTING.
< ENTER TOTAL HERE.
DEPOSITS MAY NOT BE AVAILABLE FOR IMMEDIATE WITHDRAWAL
Total
2000.00
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
4-5
The structure of a check - Fig 4.2
Gracie’s Natural Superstore
80 Garfield Street
Bartlet, NH 01835
53-7058/2113
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
4-6
88190662
Molly
Kate
_____________________
633
0000006000
Types of Endorsements
Blank
Gracie’s Natural Superstore
88190662
Can be further
endorsed
4-7
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.
4-8
Bank Statement
A statement of different types of activity
that have taken place during the month
4-9
• Debit - decreases the account
-
• Credit - increases the account
+
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
4-10
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
4-11
389 20
+389 20
Bank Reconciliation
• Reconciles the difference between the bank
statement and the checkbook
Checkbook
Bank Statement
Differences in timing
Transactions not entered in checkbook
4-12
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
4-13
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 1-4
4-14
Bank Reconciliation
Checkbook Balance
Gracie’s checkbook balance
Add:
EFT leasing: Bakery dept.
EFT leasing: Meat dept.
Interest
Error: Overstated ck # 634
Deduct:
Service charge
NSF
EFT Health Insurance pymt.
GRACIE’S NATURAL SUPERSTORE
Bank Reconciliation as of March 31, 2011
Bank Balance
$6,588.42
Bank Balance
$11,863.02
Add:
$1,808.06
Deposit in transit
3,383.26
4,228.00
$15,246.28
56.02
720.00 6,6812.08
$13,400.50
Deduct:
$28.50
Outstanding checks:
104.00
No. 638 $572.00
722.00 854.50
No. 639
638.94
No. 640
166.00
No. 641
No. 642
Reconciled balance
4-15
$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 3-4% 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.
4-16
Problem 4-9:
Solution:
Sue’s Checkbook Balance
Add:
Interest
$604.30 Bank Balance
$ 315.65
Add:
5.15
Deposit in Transit 1,215.15
$609.45
$1,530.80
Deduct:
Deduct:
Service Charge $ 6.50
Outstanding Checks:
Overdraft
25.00 31.50
No. 250 $603.15
No. 253
218.90
No. 254
130.80 952.85
Reconciled Balance:
4-17
$577.95
Reconciled Balance: $ 577.95
Challenge Problem
Solution:
Kinko’s Checkbook Balance: $ 3,301.82.
Add:
Collection on Notes
Receivable
400.00
Less:
Collection Fee
10.00
Error in recording
check No. 884
Deduct:
NSF check
$690.65
Service charge
8.50
Reconciled Balance
4-18
$390.00
Bank Balance:
Add:
Deposit in Transit
$2,955.82
510.19
$3,466.01
69.00
$3,760.82
Deduct:
Outstanding Checks:
No. 748
$210.90
No. 811
$110.94
No. 912
$ 82.50 404.34
699.15
$3,061.67
Reconciled Balance
$3,061.67