Chapter 4

BankingBanking

McGraw-Hill/Irwin ©2011 The McGraw-Hill Companies, All Rights Reserved

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#4Learning Unit ObjectivesThe Checking AccountLU4.1LU4.1

4-2

1. Explain the trends in the banking industry

2. Define and state the purpose of the bank statement

3. Complete a check register and a bank reconciliation

4. Explain the trends in online banking pro and con

Banking#4#4Learning Unit ObjectivesTrends in Banking Industry: Bank Statement and Reconciliation Process; Trends inOnline Banking

LU4.2LU4.2

4-3

4-4

Checks/Drafts

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 ordered to pay

Drawer - One who writes the check

4-5

Deposit Slip - Fig 4.1

Gracie’s Natural Superstore80 Garfield StreetBartlet, NH 01835

Date ________________ 20 __________DEPOSITS MAY NOT BE AVAILABLE FOR IMMEDIATE WITHDRAWAL

IpswichBankipswichbank.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

CASHList Checks Singly 1800.00

200.00

Total 2000.00

USE OTHER SIDE FOR ADDITIONAL LISTING. < ENTER TOTAL HERE.

March 4 0953-7058

4-6

The structure of a check - Fig 4.2

Gracie’s Natural Superstore80 Garfield Street 53-7058/2113 No. 633Bartlet, NH 01835 88190662

Pay ____________________20 _____To The Orderof ____________________________________________________$ ___________________

_________________________________________________________________ DOLLARS

IpswichBankipswichbank.com

Memo____________________________ _____________________

:211370587 88190662 633 0000006000

Staples Corporation

March 8 09

xx Six Thousand and 100

xx6,000 100

Molly KateOffice Equipment

4-7

Types of Endorsements

Gracie’s Natural Superstore88190662

Pay to the order ofIpswich Bank

For deposit onlyGracie’s Natural Superstore88190662

Blank Full Restricted

Pay to the order ofIpswich BankGracie’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

4-8

Trends in Banking Industry

• Since 2008 trends in banking have been changing rapidly.

• The government has been involved in many bailout packages due to the financial crises.

• Some banks have had to close or merge.

Check textbook Web site for the latest updates on banking bailouts and government intervention. www.mhhe.com/slater10e.

4-9

Bank Statement

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

•Debit - decreases the account -

• Credit - increases the account +

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Ipswich Bank Account Statement1 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 EndingBalance Deposits Withdrawals Charge Balance$13,112.24 $8,705.28 $9,926.00 $28.50 $11,863.02

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

Charges Date AmountService 3/31 28.50EFT: Health 3/21 722.00

Checks Daily BalanceNumber Date Amount Date Balance633 3/13 6,000.00 2/28 13,112.24634 3/13 300.00 3/5 15,232.24

Checking Account Transactions

Bank Statement

4-11

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 20

15,136 24

9,136 24

8,116 24

4-12

Bank Reconciliation

• Reconciles the difference between the bank statement and the checkbook

Differences in timing Transactions not entered in checkbook

CheckbookCheckbook Bank StatementBank Statement

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Reconciliation

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 StatementBank StatementCheckbook Checkbook

4-14

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 1-4

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Bank ReconciliationGRACIE’S NATURAL SUPERSTORE

Bank Reconciliation as of March 31, 2011Checkbook Balance Bank BalanceGracie’s checkbook balance $6,588.42 Bank Balance $11,863.02Add: Add:EFT leasing: Bakery dept. $1,808.06 Deposit in transit 3,383.26EFT leasing: Meat dept. 4,228.00 $15,246.28Interest 56.02Error: Overstated ck # 634 720.00 6,6812.08

$13,400.50Deduct: Deduct:Service charge $28.50 Outstanding checks:NSF 104.00 No. 638 $572.00EFT 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

4-16

Trends in Online Banking Pros and Cons

PROS• Many Online savings accounts are paying 3-4% interest• Online accounts like all bank accounts, are protected by the

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

CONS• Delay in transferring funds between accounts up to four days• The bank will hold up a transfer of funds because it wants to

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