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Cash Control and Banking Activities
Chapter 11 $ 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. $ $
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$ $ $ $ Why It’s Important Key Terms Chapter 11 internal controls
Section 1 Banking Procedures (cont'd.) Chapter 11 $ Why It’s Important Cash is a valuable asset. It must be protected and processed properly. $ Key Terms internal controls external controls checking account check depositor signature card deposit slip endorsement restrictive endorsement payee drawer drawee voiding a check $ $
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Section 1 Banking Procedures (cont'd.)
Chapter 11 $ Protecting Cash It is important to protect cash from loss, waste, theft, forgery, and embezzlement. $ $ $
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INTERNAL CONTROLS – performed by the business
Section 1 Banking Procedures (cont'd.) Chapter 11 $ Protecting Cash (cont'd.) INTERNAL CONTROLS – performed by the business $ 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. $ $
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EXTERNAL CONTROLS – performed by the bank
Section 1 Banking Procedures (cont'd.) Chapter 11 $ Protecting Cash (cont'd.) $ EXTERNAL CONTROLS – performed by the bank 1. Verify signatures on checks. 2. Maintain records of transactions. $ $
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$ $ $ $ Opening a Checking Account Chapter 11
Section 1 Banking Procedures (cont'd.) Chapter 11 $ 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. $ $ $
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$ $ $ $ Making Deposits to a Checking Account Chapter 11
Section 1 Banking Procedures (cont'd.) Chapter 11 $ Making Deposits to a Checking Account Businesses make regular deposits to protect the currency, coins, and checks received. $ List checks by ABA# Business’s account # at bank $ Oct. 15 $
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Restrictive Endorsement
Section 1 Banking Procedures (cont'd.) Chapter 11 $ 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: $ $ Restrictive Endorsement $
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$ $ $ $ Recording Deposits in the Checkbook Chapter 11
Section 1 Banking Procedures (cont'd.) Chapter 11 $ Recording Deposits in the Checkbook $ $ Deposits with dates New Balance after deposits but before check 103 is written $
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Chapter 11 Checks – check stub completed top and balance before check is filled out.
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$ $ $ $ Writing Checks – complete check stub first Chapter 11
Enter amount Enter payee Enter purpose Enter new balance Enter date $ $ $
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$ $ $ $ Writing Checks Chapter 11
Section 1 Banking Procedures (cont'd.) Chapter 11 $ Writing Checks Bank is the drawee Enter payee $ Enter date Enter amount $ $ Enter dollar amount in words Drawer signs check
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Chapter 11 $ ABA number ABA # $ $ $
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Chapter 11 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:
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$ $ $ $ Writing a check Chapter 11 Write legibly Use a pen
Write all numbers the same size Spell out the amount in words and draw the line $ $ $
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$ $ $ $ Voiding a Check Chapter 11
Section 1 Banking Procedures (cont'd.) Chapter 11 $ Voiding a Check $ Writing the word “Void” in large letters across the front of a check (in ink) is known as voiding a check. $ $
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$ $ $ $ Why It’s Important Key Terms Chapter 11 bank statement
Section 2 Reconciling the Bank Account Chapter 11 $ Why It’s Important Reconciling the bank account ensures that a business owner is aware of all transactions that affect cash. $ 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) $ $
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$ $ $ $ Proving Cash Chapter 11 General Ledger “Cash in Checkbook =
Section 2 Reconciling the Bank Account (cont'd.) Chapter 11 $ Proving Cash $ General Ledger “Cash in Bank” account Checkbook Balance = $ $ Reasons they might not agree: Math error in checkbook Omission of check or deposit in checkbook Mistake in copying balance forward in checkbook
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$ $ $ $ The Bank Statement Chapter 11
Section 2 Reconciling the Bank Account (cont'd.) Chapter 11 $ 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. $ $ $
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$ $ $ $ The Bank Statement (cont'd.) Chapter 11
Section 2 Reconciling the Bank Account (cont'd.) Chapter 11 $ The Bank Statement (cont'd.) Beginning balance Ending balance $ $ $ Checks paid by bank (cancelled checks) Other deductions Deposits into the account
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$ $ $ $ Reconciling a Bank Statement Chapter 11
Section 2 Reconciling the Bank Account (cont'd.) Chapter 11 $ Reconciling a Bank Statement Documents the differences between the bank balance and the checkbook balance. $ $ $
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$ $ $ $ Recording Bank Service Charges Chapter 11
A bank service charge is an expense that is recorded in the accounting records. $ Less: Serv Chg 21, No. 107 $ JOURNAL ENTRY $
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$ $ $ $ Other bank reconciliation items Chapter 11
Section 2 Reconciling the Bank Account (cont'd.) Chapter 11 $ Other bank reconciliation items NSF Check (Insufficient funds) NSF Check fee Stop payment order Electronic Funds Transfer (EFT) $ $ $
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