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

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Presentation on theme: "Cash Control and Banking Activities Making Accounting Relevant Businesses deposit all cash and checks into a bank account and make payments using checks."— Presentation transcript:

1 Cash Control and Banking Activities 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. 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.

2 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 1Banking 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

3 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 1Banking Procedures (cont'd.)

4 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 1Banking Procedures (cont'd.) INTERNAL CONTROLS – performed by the business

5 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 1Banking Procedures (cont'd.) EXTERNAL CONTROLS – performed by the bank

6 Opening 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 1Banking Procedures (cont'd.)

7 Making Deposits to a Checking Account Businesses make regular deposits to protect the currency, coins, and checks received. Section 1Banking Procedures (cont'd.) List checks by ABA# Oct. 15 Business’s account # at bank

8 Endorsing Checks 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 check representing a promise to pay. See other endorsements: 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 check representing a promise to pay. See other endorsements: Section 1Banking Procedures (cont'd.) Restrictive Endorsement

9 Recording Deposits in the Checkbook Section 1Banking Procedures (cont'd.) Deposits with dates New Balance after deposits but before check 103 is written Deposits with dates New Balance after deposits but before check 103 is written

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

11 Writing Checks – complete check stub first Enter date Enter amount Enter payee Enter purpose Enter new balance

12 Writing Checks Section 1Banking Procedures (cont'd.) Enter payee Enter payee Enter date Enter date Enter amount Enter amount Drawer signs check Drawer signs check Enter dollar amount in words Enter dollar amount in words Bank is the drawee Bank is the drawee

13 ABA number ABA #

14 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:

15 Writing a check Write legibly Use a pen Write all numbers the same size Spell out the amount in words and draw the line

16 Voiding a Check Section 1Banking Procedures (cont'd.) Writing the word “Void” in large letters across the front of a check (in ink) is known as voiding a check.

17 Why It’s Important Reconciling the bank account ensures that a business owner is aware of all transactions that affect cash. Why It’s Important Reconciling the bank account ensures that a business owner is aware of all transactions that affect cash. Section 2Reconciling 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)

18 Proving Cash Section 2Reconciling the Bank Account (cont'd.) General Ledger “Cash in Bank” account General Ledger “Cash in Bank” account Checkbook Balance Checkbook Balance = = 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

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

21 The Bank Statement (cont'd.) Section 2Reconciling the Bank Account (cont'd.) Beginning balance Beginning balance Checks paid by bank (cancelled checks) Checks paid by bank (cancelled checks) Other deductions Other deductions Deposits into the account Deposits into the account Ending balance Ending balance

22 Reconciling a Bank Statement Documents the differences between the bank balance and the checkbook balance. Section 2Reconciling the Bank Account (cont'd.)

23 JOURNAL ENTRY Recording Bank Service Charges A bank service charge is an expense that is recorded in the accounting records. Less: Serv Chg , No. 107

24 Other 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 2Reconciling the Bank Account (cont'd.)


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