Lecture Practical business math procedures (10/e): Chapter 4 - Jeffrey Slater

Chapter 4 - Banking. After reading this chapter, you should have a good understanding of the following learning objectives: 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

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

Banking

#4

Learning Unit Objectives

The Checking Account

LU4.1

4­2

1 Explain the trends in the banking industry

statement

reconciliation

and con

Banking

#4

Learning Unit Objectives

Trends in Banking Industry: Bank Statement  and Reconciliation Process; Trends in

Online Banking

LU4.2

4­3

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

Payee ­ To  whom check 

is payable

Drawee­ Bank 

writes the  check

Gracie’s Natural Superstore

80 Garfield Street

Bartlet, NH 01835

Date     20 

DEPOSITS MAY NOT BE AVAILABLE FOR IMMEDIATE WITHDRAWAL

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

CASH

List Checks Singly 1800.00

200.00

USE OTHER SIDE FOR  ADDITIONAL LISTING.   

< ENTER TOTAL HERE. 

March  4 09 53­7058

The structure of a check ­ Fig 4.2

Gracie’s Natural Superstore

80 Garfield Street 53­7058/2113        No.  633 Bartlet, NH 01835   88190662

To The  Order

of   $   _

_      

DOLLARS

IpswichBank

ipswichbank.com        Memo _      :211370587 88190662     633 0000006000

Staples Corporation

March 8 09

      xx       Six Thousand and 100 

       xx 6,000 100 

Molly Kate Office Equipment

Types of Endorsements

Gracie’s Natural Superstore

88190662

Pay to the order of Ipswich Bank

For deposit only Gracie’s Natural Superstore 88190662

Pay to the order of Ipswich Bank

Gracie’s Natural Superstore  88190662

Can be further 

endorsed

Only person or  company named in  the endorsement  can transfer the  check to someone

Limits any further  negotiation of the 

check

Trends in Banking Industry

changing rapidly. 

bailout packages due to the financial crises.

Check textbook Web site for the latest updates on banking bailouts and government intervention. 

www.mhhe.com/slater10e

   A statement of different types of activity  that have taken place during the month

•

Debit ­ decreases the account     ­

• Credit ­ increases the account    +   

Ipswich Bank Account Statement

1 Pleasant St.

Bartlett, NH 01835

Gracies Natural Superstore Checking Acct 881900662

80 Garfield St.

Barltett, NH 01835 Summary as of 3/31/11 Beginning Total Total Service Ending Balance Deposits Withdrawals Charge Balance

$13,112.24 $8,705.28 $9,926.00 $28.50 $11,863.02

Deposits Date Amount Deposit 3/5 2,000.00 EFT Leasing 3/18 1,808.06 Interest 3/31 56.02

Charges Date Amount Service 3/31 28.50 EFT: Health 3/21 722.00

Checks Daily Balance Number Date Amount Date Balance

633 3/13 6,000.00 2/28 13,112.24

634 3/13 300.00 3/5 15,232.24

Checking Account Transactions

Bank Statement

Used to track written checks

RECORD ALL CHARGES OR CREDIT THAT AFFECT YOUR ACCOUNT

Number   Date Description of Transaction Payment/Debit      x    Fee   Deposit/Credit    Balance

 633      3/8  Staples Co.       6,000  00      ­6,000  00

2009

 634       3/9  Health Food, Inc.        1,020   00      ­1,020  00

          3/9  Deposit      389  20      +389  20 

 15,136   24 9,136   24   8,116  24

Bank Reconciliation

statement and the checkbook

Differences in timing  Transactions not entered in checkbook

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

Bank Balance +Deposit in transit

­Outstanding checks +/­Bank errors

Bank Statement Checkbook

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

GRACIE’S NATURAL SUPERSTORE Bank Reconciliation as of March 31, 2011

Gracie’s checkbook balance $6,588.42 Bank Balance $11,863.02

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

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   406.28 

No. 642   917.06     2,700.28 Reconciled balance $12,546.00 Reconciled balance  $12,546.00

Trends in Online Banking Pros and Cons

PROS

the Federal Deposit Insurance Corp up to $250,000 per  account holder

CONS

days

wants to make sure our funds are good before it lets us  have them.