Cash Control and Banking Activities Making Accounting Relevant Businesses deposit all cash and...
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Transcript of Cash Control and Banking Activities Making Accounting Relevant Businesses deposit all cash and...
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.
Section 1 Banking Procedures (cont'd.)Section 1 Banking Procedures (cont'd.)
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.
Section 1 Banking Procedures (cont'd.)Section 1 Banking Procedures (cont'd.)
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.
Section 1 Banking Procedures (cont'd.)Section 1 Banking Procedures (cont'd.)
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.
Section 1 Banking Procedures (cont'd.)Section 1 Banking Procedures (cont'd.)
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.
Section 1 Banking Procedures (cont'd.)Section 1 Banking Procedures (cont'd.)
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
Section 1 Banking Procedures (cont'd.)Section 1 Banking Procedures (cont'd.)
Restrictive Endorsement
Recording Deposits in the CheckbookRecording Deposits in the Checkbook
Section 1 Banking Procedures (cont'd.)Section 1 Banking Procedures (cont'd.)
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 amountEnter amount
Enter payeeEnter payee
Enter purposeEnter purpose
Enter new balanceEnter new balance
Writing ChecksWriting Checks
Section 1 Banking Procedures (cont'd.)Section 1 Banking Procedures (cont'd.)
Enter payeeEnter payee
Enter dateEnter date
Enter amountEnter amount
Drawer signs checkDrawer signs checkEnter dollar amount in wordsEnter dollar amount in words
Bank is the draweeBank is the drawee
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
Section 1 Banking Procedures (cont'd.)Section 1 Banking Procedures (cont'd.)
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.
Section 2 Reconciling the Bank Account (cont'd.)Section 2 Reconciling the Bank Account (cont'd.)
The Bank Statement (cont'd.)The Bank Statement (cont'd.)
Section 2 Reconciling the Bank Account (cont'd.)Section 2 Reconciling the Bank Account (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.
Section 2 Reconciling the Bank Account (cont'd.)Section 2 Reconciling the Bank Account (cont'd.)
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)
Section 2 Reconciling the Bank Account (cont'd.)Section 2 Reconciling the Bank Account (cont'd.)