Banking and Accounting Procedures
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Office Procedures for the 21 st
Burton and Shelton
Century, 8e
2
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Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
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Cashier’s check
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Bank draft
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Bank money order
Traveler’s check
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Electronic funds transfer (EFT)
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Automated teller machines (ATMs)
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Direct payroll deposit
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
3
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Office Procedures for the 21 st
Burton and Shelton
Century, 8e
4
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Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Establish checking account at bank
Transfer of funds –ordinary checks
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Check –written by depositor
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Drawer –also called maker; person who writes a check
Drawee –bank from which check is drawn
Payee –person to whom the check is written
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
5
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Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Cashier’s Check
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Also known as treasurer’s check or official check
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Written by an authorized officer of bank on its own funds
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Guarantees payment to payee by drawer’s bank
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Depositor obtains official check by writing bank a check on his/her funds for amount plus fee
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
6
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Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Check drawn by bank on its own funds in another bank located either in same city or another city
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Made payable to third party, and upon endorsement, may be cashed at bank on which it is drawn
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
7
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Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Requires endorsement of payee
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May be cashed at any bank
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Purchaser charged small fee
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Amount of money may be limited
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
8
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Used in place of cash
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Must obtain in person and sign in presence of selling agent
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Purchased from banks and credit unions
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If lost or stolen, will usually be refunded
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
9
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Delivery system for electronic transactions
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No lost or stolen checks
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Payment made quickly and on time
Major services —EFT, ATMs, centers for electronic funds transfers, payment by telephone
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
10
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Many convenient locations
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Customers can obtain cash or make deposits
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Requires EFT card and personal identification number (PIN) or password
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
11
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Used in place of checks
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Money is taken directly from the individual or company’s checking account
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May be used as debit card or credit card
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When used as a debit card, requires a pin number or password; when used as a credit card must sign sales slip
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
12
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Organization pays employees without checks
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Organization provides bank with magnetic tape description of payroll disbursements made to the employees
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Employee receives statement from company or third party
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Statement shows gross payment, type and amount of deductions, and net payment
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
13
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Funds automatically deposited
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Electronic routing number and account number are needed for deposit
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Routing number and bank account number is usually printed on bottom of checks
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
14
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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 Preauthorized automated transfer of funds from one account to another account within same financial institution
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For an individual or company
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From checking or savings
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Example: Payment of utilities
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Copy of canceled check, account number and signature authorizing transfer is required
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
15
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Must have access to Internet
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Primary functions
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Easy online management of banking transactions
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Ability to make electronic transfers
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Provides real-time information
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Software/password to access may be needed
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Requires ID
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
16
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Call the company, provide nine-digit routing number of bank, bank account number, check number, and amount
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May be charged a fee
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Company will draft the amount from your checking account and bank honors check
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Payment can be made on exact due date, avoiding late charges
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
17
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Stop-payment notification
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Used when check is lost or stolen
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Used when check is written for incorrect amount
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Conditions of agreement are not met
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Check endorsement
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
18
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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 Check presented for cash or deposit must be signed (endorsed)
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By the payee
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On reverse side of check
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Bank will accept for deposit checks that have been endorsed by representative of payee
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Endorsement can be rubber stamped or handwritten in ink
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
19
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Blank endorsement
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Restrictive endorsement
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Full endorsement
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
20
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Consists only of signature of payee
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Payable to bearer
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Use with caution when depositing or cashing checks
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
21
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Limits use of check
Words such as “For deposit only” or “Pay to” are written before organization’s name or depositor’s signature
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Use when deposits are sent to bank by mail
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
22
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Also called a two-party check
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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
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
23
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Banking Procedures
(continued)
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Preparing the cash/coin
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Coin values per roll
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Currency preparation
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Separate by denomination
Arrange all president’s faces going in same direction
Strap all currency that meets required amounts
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Each strap must contain same denomination
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Preparing the deposit slip
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
24
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Bank Statement Reconciliation
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Statement issued by bank to depositor
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Shows previous month’s balance, deposits, checks paid, bank charges, and ending balance
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Comparison of bank balance on the statement with the checkbook balance
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To make comparison, checks listed on statement are checked off in check register
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
25
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Bank Statement Reconciliation
(continued)
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Record in the company’s checkbook all automatic transactions not previously entered
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+ any interest earned
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+ automatic deposits
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- service charges
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- automatic payments
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- telephone transfers and charges
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
26
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Bank Statement Reconciliation
(continued)
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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
Burton and Shelton
Century, 8e
27
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Bank Statement Reconciliation
(continued)
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Adjust the bank statement balance
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Enter the checking account balance shown on front of bank statement
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Add any deposits not yet shown on statement
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Subtract the total of outstanding checks
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The adjusted bank statement balance from the reconciliation should agree with the adjusted checkbook balance
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
28
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Bank Statement Reconciliation
(continued)
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Find the difference between the two
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Check the bank statement balance for errors
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Look for omission of checks and deposits
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Check for a math error in the check stubs
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
29
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Accounting Procedures
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Petty cash fund
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Established for small office expenditures
Used for things such as
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Messenger service, postage due on a package, or emergency purchase of office supplies
All expenses must be accounted for
Balance petty cash fund regularly
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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
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Keep an accurate petty cash record, book, or distribution sheet for each period; record each transaction in this record
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
30
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Accounting Procedures
(continued)
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Replenish the petty cash fund periodically or soon enough to keep an adequate supply of cash on hand
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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
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Submit records called for by the accounting department
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Cash the check and enter the beginning amount on the first line of the “Explanation” column of the petty cash record
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
31
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Accounting Procedures
(continued)
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Payroll register used to summarize each employee’s pay for a particular period
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Summarizes each employee status
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Wages earned
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Payroll deductions
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Final take-home pay
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
32
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Accounting Procedures
(continued)
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Completing a payroll register
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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
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Calculate regular earnings
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Calculate overtime earnings
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Add regular and overtime earnings to determine gross earnings
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
33
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Accounting Procedures
(continued)
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Calculate social security (OASDI) by multiplying gross earnings by 6.2%
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Calculate Medicare by multiplying gross earnings by
1.45%
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Look up federal income tax in tax tables obtained from
Circular E Employer’s Tax Guide if not provided for you
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Enter any other deductions in the payroll register
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Total all deductions
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Subtract deductions from gross pay to determine net pay
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Checks are written for the net pay amount to each employee
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
34
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Accounting Procedures
(continued)
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Income Statement
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Operating statement also called profit and loss statement showing money earned and expenses incurred
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Balance Sheet
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Summarizes the balances of the assets
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Reports what a company is worth on any one given day
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Assets, liabilities, and owner’s equity
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
35
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Accounting Procedures
(continued)
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Process of planning future business operations and defining those plans, expressed in financial terms in a formal report
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Estimate of income and expenses of all areas of organization for a certain period of time
(month or year)
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
36
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Accounting Procedures
(continued)
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Provides the basis for analyzing and revising spending activities
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Compares actual sales or costs with figures budgeted
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Follow the budget by not overspending the budgeted amount
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
37
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Accounting Procedures
(continued)
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Record of supplies on hand
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Perpetual inventory record
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Inventory each item
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Keep balance accurate
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Add to item when ordering more
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Subtract from item when removing
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Decide if balance on hand is sufficient or if time to replenish
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
38
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Accounting Procedures
(continued)
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Accounting department
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Handles cost control for company
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Budgets have account titles and numbers
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Typically, managers are responsible for their area
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Which accounts are used most often?
How accounts may be used?
Correct procedures for ordering and spending
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Allowable expenses
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Department code to use
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
39
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.

Ethics in Accounting Procedures
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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
Office Procedures for the 21 st
Burton and Shelton
Century, 8e
40
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Upper Saddle River, NJ 07458. • All Rights Reserved.

International Currency Exchange
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Available via Internet
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Call local banks
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At airports with international flights
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Office Procedures for the 21 st
Burton and Shelton
Century, 8e
41
© 2011 Pearson Higher Education,
Upper Saddle River, NJ 07458. • All Rights Reserved.