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. $ $ What other benefit does a business gain from the use of a checking account?

$ $ $ $ Section 1 Banking Procedures What You’ll Learn Chapter 11 What controls a business uses to protect cash and why these controls are needed. To complete forms used to open a checking account. To record information on check stubs. To prepare a check correctly. $ $ $

$ $ $ $ Why It’s Important Key Terms Chapter 11 internal controls Section 1 Banking Procedures (con’t.) 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 $ $

Section 1 Banking Procedures (con’t.) Chapter 11 $ Protecting Cash It is important to protect cash from loss, waste, theft, forgery, and embezzlement. $ $ $

$ $ $ $ Protecting Cash (con’t.) Chapter 11 INTERNAL CONTROLS Section 1 Banking Procedures (con’t.) Chapter 11 $ Protecting Cash (con’t.) INTERNAL CONTROLS $ 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. $ $

$ $ $ $ Protecting Cash (con’t.) Chapter 11 EXTERNAL CONTROLS Section 1 Banking Procedures (con’t.) Chapter 11 $ Protecting Cash (con’t.) $ EXTERNAL CONTROLS 1. Verify signatures on checks. 2. Maintain records of transactions. $ $

$ $ $ $ Opening a Checking Account Chapter 11 Section 1 Banking Procedures (con’t.) 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. $ $ $

$ $ $ $ Making Deposits to a Checking Account Chapter 11 Section 1 Banking Procedures (con’t.) Chapter 11 $ Making Deposits to a Checking Account Businesses make regular deposits to protect the currency, coins, and checks received. $ $ $

$ $ $ $ Endorsing Checks Chapter 11 Section 1 Banking Procedures (con’t.) 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. $ $ $

$ $ $ $ Recording Deposits in the Checkbook Chapter 11 Deposits Section 1 Banking Procedures (con’t.) Chapter 11 $ Recording Deposits in the Checkbook $ $ Deposits New Balance $

$ $ $ $ Writing Checks Chapter 11 Section 1 Banking Procedures (con’t.) Chapter 11 $ Writing Checks Enter amount Enter date Enter payee $ Enter payee Enter date Enter purpose Enter amount $ $ Enter new balance Sign the check Enter amount Enter dollar amount in words

$ $ $ $ Voiding a Check Chapter 11 Section 1 Banking Procedures (con’t.) 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. $ $

$ $ $ $ Section 2 Reconciling the Bank Account What You’ll Learn Chapter 11 $ Section 2 Reconciling the Bank Account What You’ll Learn Why a business reconciles a bank statement. How to journalize and post entries relating to bank service charges. The accounting procedure for stopping payment on a check. How to record an NSF check. How electronic funds transfer systems enable banks to transfer funds quickly and accurately. $ $ $

$ $ $ $ Why It’s Important Key Terms Chapter 11 bank statement Section 2 Reconciling the Bank Account (con’t.) 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) $ $

$ $ $ $ Proving Cash Chapter 11 General Ledger Checkbook Cash in = Section 2 Reconciling the Bank Account (con’t.) Chapter 11 $ Proving Cash $ General Ledger Cash in Bank account Checkbook Balance = $ $

$ $ $ $ The Bank Statement Chapter 11 Section 2 Reconciling the Bank Account (con’t.) 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. $ $ $

$ $ $ $ The Bank Statement (con’t.) Chapter 11 Section 2 Reconciling the Bank Account (con’t.) Chapter 11 $ The Bank Statement (con’t.) Beginning balance Ending balance $ $ $ Checks paid by bank (cancelled checks) Other deductions Deposits into the account

$ $ $ $ Reconciling a Bank Statement Chapter 11 Section 2 Reconciling the Bank Account (con’t.) Chapter 11 $ Reconciling a Bank Statement Documents the differences between the bank balance and the checkbook balance. $ $ $

$ $ $ $ Recording Bank Service Charges Chapter 11 Section 2 Reconciling the Bank Account (con’t.) Chapter 11 $ Recording Bank Service Charges A bank service charge is an expense that is recorded in the accounting records. $ Closing Entry (con’t.) On November 1 Roadrunner received the bank statement. A bank service charge of $8 appeared on the statement. $ JOURNAL ENTRY $