LESSON 5-3 Dishonored Checks and Electronic Banking

TERMS Dishonored check: a check that a bank refuses to pay Electronic funds transfer: a computerized cash payments system that uses electronic impulses to transfer funds Debit card: a bank card that automatically deducts the amount of a purchase from the checking account of the cardholder

DISHONOR CHECKS Banks will dishonor a check when: The person who wrote the check has insufficient funds Check appears to be altered Signature on check does not match bank records Written amount in figures does not agree with numeric amount The check is postdated The person who wrote the check has stopped payment

DISHONORED CHECKS CONTINUED When the dishonored check is uncollectable: Bank charges a dishonored check fee to the business receiving the check Dishonored check value + check fee = expense to the business that received the check The business receiving the check will attempt to collect the check amount + the fee from the business that wrote the check Example: Your business received a check for $40 and it is uncollectable. The bank fee is $35. What is the amount your business will try to recover from the other business? $75

You work for TechKnow Consulting. You receive notice of a Dishonored check from your bank. Tables of two groups get together and discuss the process that you will need to take to record the dishonored check?

RECORDING A DISHONORED CHECK: Step 1: Write a Memorandum Received a dishonored check from Campus Internet Café, $70.00, plus $35.00 fee; total, $ Attach Notice from the bank to memorandum and given to accountant Step 2: Enter $105 onto next unused Check Stub under Other Step 3: Journalize the transaction The original transaction = received a payment of $70 on Account Increased cash, decreased amount the business owed you To reverse this, What two accounts are impacted? Reduces your Cash Increases the amount of money someone owes you – What account? November 29. Received notice from the bank of a dishonored check from Campus Internet Café, $70.00, plus $35.00 fee; total, $ Memorandum No. 55

RECORDING A DISHONORED CHECK ON A CHECK STUB 1.Enter Dishonored check on the line under the heading Other. on the next unused check stub 2.Enter total of the dishonored check & fee 3.Record new Subtotal November 29. Received notice from the bank of a dishonored check from Campus Internet Café, $70.00, plus $35.00 fee; total, $ Memorandum No. 55

COMPLETE THE MEMORANDUM Received a dishonored check from Campus Internet Café, $70.00, plus $35.00 fee; total, $ Nov 29,

JOURNALIZING A DISHONORED CHECK November 29. Received notice from the bank of a dishonored check from Campus Internet Café, $70.00, plus $35.00 fee; total, $ Memorandum No. 55. What two accounts are affected and how? General Sales Credit Cash DateAccount Title Doc No. Post Ref DebitCreditDebitCredit

ELECTRONIC FUNDS TRANSFER Electronic funds transfer: a computerized cash payments system that uses electronic impulses to transfer funds Businesses may use EFT to pay vendors instead of checks Same accounts impacted as when a check is written Uses a different source document than a check. What source document is used? Memorandum How do you keep the checkbook in balance for ETF? Recorded on check stub under Other and subtracted from balance

RECORDING AN EFT: Step 1: Write a Memorandum Step 2: Written on next unused Check Stub under Other Step 3: Journalize the transaction December 2. Paid cash on account to Kelson Enterprises, $350.00, using EFT. Memorandum No. 56. Dec. 2, EFT Payment on Account to Kelson Enterprises for $350.00

RECORDING AN EFT PAYMENT ON A CHECK STUB 1.Write EFT Payment on the line under the heading Other. 2.Write the total of $ on the other amount column. 3.Subtract the payment and record the new subtotal December 2. Paid cash on account to Kelson Enterprises, $350.00, using EFT. Memorandum No EFT payment – Kelson Enterprises

JOURNALIZING AN EFT December 2. Paid cash on account to Kelson Enterprises, $350.00, using EFT. Memorandum No. 56. M56 What two accounts are affected and how?

DEBIT CARD PAYMENTS Debit card: a bank card that automatically deducts the amount of a purchase from the checking account of the cardholder Eliminates the need for a checkbook Chance of recording errors increase Same process as an EFT payment Same accounts impacted as a check, in the journal and posting except different source document

RECORDING AN DEBIT CARD PAYMENT: Step 1: Write a Memorandum Step 2: Enter onto next unused Check Stub under Other Step 3: Journalize the transaction. September 5. Purchased supplies, $24.00, using debit card. Memorandum No. 12. Sep. 2, Debit Card Payment to purchase supplies for cash for $350.00

RECORDING AN EFT PAYMENT ON A CHECK STUB 1.Write Debit Card Payment on the line under the heading Other. 2.Write the total of $24.00 on the other amount column. 3.Calculate and record the new subtotal on the Subtotal line Supplies purchased for cash – debit card September 5. Purchased supplies, $24.00, using debit card. Memorandum No

JOURNALIZING A DEBIT CARD TRANSACTION September 5. Purchased supplies, $24.00, using debit card. Memorandum No. 57. What two accounts are affected and how? M57

TERMS REVIEW dishonored check electronic funds transfer debit card

General Sales Credit Cash DateAccount Title Doc No. Post Ref DebitCreditDebitCredit NO. 119$ Date 20 To For BAL BROT FORD ………… AMT DEPOSITIED.. SUBTOTAL ………………… OTHER SUBTOTAL…………………. AMT. THIS CHECK………….. BAL. CARD FORD………… 121

NO. 119$ Date 20 To For BAL BROT FORD ………… AMT DEPOSITIED.. SUBTOTAL ………………… OTHER SUBTOTAL…………………. AMT. THIS CHECK………….. BAL. CARD FORD………… NO. 119$ Date 20 To For BAL BROT FORD ………… AMT DEPOSITIED.. SUBTOTAL ………………… OTHER SUBTOTAL…………………. AMT. THIS CHECK………….. BAL. CARD FORD…………