Cash Control and Banking Activities Making Accounting Relevant Businesses deposit all cash and checks into a bank account and make payments using checks

Cash Control and Banking ActivitiesCash Control and Banking ActivitiesMaking Accounting Relevant

Businesses deposit all cash and checks into a bank account and make payments using checks. This policy helps to protect cash from loss or theft.

Making Accounting Relevant

Businesses deposit all cash and checks into a bank account and make payments using checks. This policy helps to protect cash from loss or theft.

Why It’s Important

Cash is a valuable asset. It must be

protected and processed properly.

Why It’s Important

Cash is a valuable asset. It must be

protected and processed properly.

Section 1 Banking Procedures (cont'd.)Section 1 Banking Procedures (cont'd.)

Key Terms internal controls external controls checking account check depositor signature card deposit slip

Key Terms internal controls external controls checking account check depositor signature card deposit slip

endorsement

restrictive endorsement

payee drawer drawee voiding a check

endorsement

restrictive endorsement

payee drawer drawee voiding a check

Protecting Cash

It is important to protect cash

from loss, waste, theft, forgery,

and embezzlement.

Protecting Cash

It is important to protect cash

from loss, waste, theft, forgery,

and embezzlement.


Protecting Cash (cont'd.)Protecting Cash (cont'd.)

1. Limit the number of persons handling cash.

2. Separate accounting tasks involving cash.

3. Bond (insure) employees who handle cash or cash records.

4. Use a cash register and a safe.

5. Deposit cash receipts in the bank daily.

6. Use checks to make all cash payments.

1. Limit the number of persons handling cash.

2. Separate accounting tasks involving cash.

3. Bond (insure) employees who handle cash or cash records.

4. Use a cash register and a safe.

5. Deposit cash receipts in the bank daily.

6. Use checks to make all cash payments.


INTERNAL CONTROLS – performed by the businessINTERNAL CONTROLS –

performed by the business

Protecting Cash (cont'd.)Protecting Cash (cont'd.)

1. Verify signatures on checks.

2. Maintain records of transactions.

1. Verify signatures on checks.

2. Maintain records of transactions.


EXTERNAL CONTROLS – performed by the bankEXTERNAL CONTROLS – performed by the bank

Opening a Checking AccountOpening a Checking Account

Allows a person or business to deposit cash in a bank and to write checks against the account balance.

A signature card contains the signature(s) of the person(s) authorized to write checks on the account.

Printed checks are packaged together in checkbooks.

Allows a person or business to deposit cash in a bank and to write checks against the account balance.

A signature card contains the signature(s) of the person(s) authorized to write checks on the account.

Printed checks are packaged together in checkbooks.


Making Deposits to a Checking AccountMaking Deposits to a Checking Account

Businesses make regular deposits to protect the currency, coins, and checks received.

Businesses make regular deposits to protect the currency, coins, and checks received.


List checks by ABA#

Oct. 15

Business’s account # at bank

Endorsing ChecksEndorsing ChecksTo deposit the check in a checking

account, the depositor endorses the check to transfer ownership to the bank. An endorsement is an authorized signature written or stamped on the back of a checkrepresenting a promise to pay.See other endorsements:http://aces.nmsu.edu/pubs/_g/G-220/welcome.html

To deposit the check in a checking account, the depositor endorses the check to transfer ownership to the bank. An endorsement is an authorized signature written or stamped on the back of a checkrepresenting a promise to pay.See other endorsements:http://aces.nmsu.edu/pubs/_g/G-220/welcome.html


Restrictive Endorsement

http://aces.nmsu.edu/pubs/_g/G-220/welcome.html

http://aces.nmsu.edu/pubs/_g/G-220/welcome.html

Recording Deposits in the CheckbookRecording Deposits in the Checkbook


Deposits with dates

New Balanceafter deposits but before check 103 is written

Deposits with dates

New Balanceafter deposits but before check 103 is written

Checks – check stub completed top and balance before check is filled out. Checks – check stub completed top and balance before check is filled out.

Writing Checks – complete check stub firstWriting Checks – complete check stub first

Enter dateEnter date

Enter amountEnter amount


Enter payeeEnter payee

Enter purposeEnter purpose

Enter new balanceEnter new balance

Writing ChecksWriting Checks


Enter payeeEnter payee

Enter dateEnter date


Drawer signs checkDrawer signs checkEnter dollar amount in wordsEnter dollar amount in words

Bank is the draweeBank is the drawee

ABA numberABA number ABA #

Top right corner of check: ABA numbers:

# to left of - identifies the city the bank is located in (71)

# to right of – identifies the name of the bank (627)

# below line identifies the Federal Reserve district the bank is located in (3222)

Bottom left of check bottom:

ABA numbers – Account Number – Check number:

Writing a checkWriting a check• Write legibly

• Use a pen

• Write all numbers the same size

• Spell out the amount in words and draw the line

Voiding a CheckVoiding a Check


Writing the word “Void” in large letters across the front of a check (in ink) is known as voiding a check.

Writing the word “Void” in large letters across the front of a check (in ink) is known as voiding a check.

Why It’s ImportantReconciling the bank account

ensures that a business owner is aware of all transactions that affect cash.

Why It’s ImportantReconciling the bank account

ensures that a business owner is aware of all transactions that affect cash.

Section 2 Reconciling the Bank Account

Section 2 Reconciling the Bank Account

Key Terms bank statement canceled checks reconciling the

bank statement outstanding checks outstanding

deposits

Key Terms bank statement canceled checks reconciling the

bank statement outstanding checks outstanding

deposits

bank service charge

stop payment order

NSF check electronic funds

transfer system (EFTS)

bank service charge

stop payment order

NSF check electronic funds

transfer system (EFTS)

Proving CashProving Cash

Section 2 Reconciling the Bank Account (cont'd.)Section 2 Reconciling the Bank Account (cont'd.)

General Ledger “Cash in

Bank” account

General Ledger “Cash in

Bank” account

CheckbookBalance

CheckbookBalance

==

Reasons they might not agree:

1. Math error in checkbook

2. Omission of check or deposit in checkbook

3. Mistake in copying balance forward in checkbook

The Bank StatementThe Bank Statement

A bank statement is an

itemized record of all the

transactions in a depositor’s

account over a given period,

usually a month.

A bank statement is an

itemized record of all the

transactions in a depositor’s

account over a given period,

usually a month.


The Bank Statement (cont'd.)The Bank Statement (cont'd.)


Beginning balanceBeginning balance

Checks paid by bank (cancelled checks)Checks paid by bank (cancelled checks)

OtherdeductionsOtherdeductions

Deposits intothe accountDeposits intothe account

Ending balanceEnding balance

Reconciling a Bank StatementReconciling a Bank Statement

Documents the differences between

the bank balance and the checkbook

balance.

Documents the differences between

the bank balance and the checkbook

balance.


JOURNAL ENTRY

Recording Bank Service ChargesRecording Bank Service ChargesA bank service charge is an expense that is recorded in the accounting records.A bank service charge is an expense that is recorded in the accounting records.

Less: Serv Chg 8 00

21,117 00

No. 107

Other bank reconciliation itemsOther bank reconciliation items

NSF Check (Insufficient funds) NSF Check fee Stop payment order Electronic Funds Transfer (EFT)

NSF Check (Insufficient funds) NSF Check fee Stop payment order Electronic Funds Transfer (EFT)
