Lecture Practical business math procedures (11/e) - Chapter 4: Banking

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.

Chapter Four

Banking

LU 4-1: The Checking Account

1. Define and state the purpose of signature

cards, checks, deposit slips, check stubs, check registers, and endorsements

2. Correctly prepare deposit slips and write checks

LU 4-2: Bank Statement and Reconciliation Process; Latest Trends in

Mobile Banking

3. Explain the trends in the banking industry

4. Define and state the purpose of the bank statement

5. Complete a check register and a bank reconciliation

6. Explain the trends in online banking pro and con

Learning unit objectives

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

Drawee – Bank ordered to pay

Payee - To whom

check is payable

Drawer - One who

writes the check

Deposit Slip

Figure 4.1

The structure of a check

Figure 4.2

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

financial crises

Check textbook website for the latest updates on banking bailouts and

Bank Statement

Bank Statement- A statement of different types of activity that have taken

place during the month

Bank 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

Checking Account Transactions

Check Register

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

00

15,136 24

9,136 24

8,116 24

Bank Reconciliation

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

Step 1 Identify outstanding checks

Step 2 Identify deposits in transit

Step 3 Analyze bank statement for

transactions not recorded in check register

Step 4 Check for recording errors in

checks, deposits, addition, or subtraction

Step 5 Compare the adjusted balances; if

different, repeat Steps 1-4

5 Steps

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

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

Trends in Online Banking

Pros and Cons

PROS

interest

protected by the Federal Deposit Insurance

Corporation (FDIC) up to $250,000 per account

holder

CONS

four days

wants to make sure our funds are good before it