LESSON 5-1 Checking Accounts 4/21/2017 LESSON 5-1 Checking Accounts

New Vocabulary Checking Account Endorsement A bank account from which payments can be ordered by a depositor Endorsement A signature or stamp on the back of a check transferring ownership 6-1

Restrictive Endorsement Three Types of Endorsements Blank Endorsement An endorsement consisting only of the endorser’s signature Special Endorsement An endorsement indicating a new owner of a check Restrictive Endorsement An endorsement restricting further transfer of a check’s ownership 5-1

Examples Blank Endorsement Special Endorsement Restrictive Endorsement page 127 Blank Endorsement Special Endorsement Restrictive Endorsement 6-1

Completed Check Stub and Check A check stub is a record of each check written for a cash payment transaction. Concept: Objective Evidence Always prepare the stub before you write the check 6-1

COMPLETED CHECK STUB 1. Write the amount of the check. 1 2 3 page 128 2 3 2. Write the date of the check. 4 3. Write to whom the check is to be paid. 4. Record the purpose of the check. 5. Write the amount of the check. 5 6 6. Calculate the new checking account balance. 6-1

COMPLETED CHECK 7 8 9 10 11 12 7. Write the date. page 128 7 8 9 10 11 12 7. Write the date. 10. Write the amount in words. 8. Write to whom the check is to be paid. 11. Write the purpose of the check. 9. Write the amount in figures. 12. Sign the check. 6-1

Recording a Voided Check If an error is made, void should be written on the check. Do not destroy the check. Make a journal entry so the Doc. Number column records all checks. Page 129 6-1

RECORDING A VOIDED CHECK LESSON 5-1 RECORDING A VOIDED CHECK 4/21/2017 page 129 6-1

DEPOSITING CASH page 126 6-1

DEPOSIT RECORDED ON A CHECK STUB page 119 6-1

Audit Your Understanding List the three types of endorsements. Blank Restrictive Special 6-1

5-1 Work Together Workbook Page / Handout 5-1

LESSON 5-1 Bank Reconciliation 4/21/2017 LESSON 5-2 Bank Reconciliation

5-2 Bank Statement A report of deposits, withdrawals, and bank balances sent to a depositor by a bank. When a statement is received, the depositor must check it for accuracy. 5-1

BANK STATEMENT page 124 5-1

Bank Statement (cont.) A bank’s records and a depositors records may differ and both may still be correct. 6-2

There are four reasons why this may happen. A service charge may not have been recorded by the depositor. Outstanding deposits recorded by the depositor may not be on the bank statement. Outstanding checks may be recorded by the depositor, but not by the bank yet. A depositor may have made math or recording errors. 6-2

When a statement is received... Compare canceled checks with check stubs and place a check mark on each stub for canceled checks. Follow the same procedure for deposits. Page 124 6-2

BANK STATEMENT RECONCILIATION page 125 1. Date 1 2. Check Stub Balance 2 5 3. Service Charge 4. Adjusted Check Stub Balance 6 3 7 5. Bank Statement Balance 6. Outstanding Deposits 8 4 9 7. Subtotal 8. Outstanding Checks 10 9. Adjusted Bank Balance 10. Compare Adjusted Balances 6-2

After you complete the reconciliation... Remember, the bank has already taken the amount of the service charge out of your account. Write the service charge on a check stub and deduct it from your account balance. Pg. 126 6-2

After you complete the reconciliation... The service charge must also be recorded in the journal. Pg. 127 No check is written for the service charge. Use a memo as your source document. Miscellaneous expense is debited Cash is credited 5-1

RECORDING A BANK SERVICE CHARGE ON A CHECK STUB page 126 1. Write Service Charge $8.00 on the check stub under the heading “Other.” 2. Write the amount of the service charge in the amount column. 1 2 3 3. Calculate and record the new subtotal on the Subtotal line. 6-2

JOURNALIZING A BANK SERVICE CHARGE page 127 August 31. Received bank statement showing August bank service charge, $8.00. Memorandum No. 3. 6-2

Audit Your Understanding List four reasons why a depositor’s records and a bank’s records may differ. A service charge may not have been recorded by the depositor. Outstanding deposits recorded by the depositor may not be on the bank statement. Outstanding checks may be recorded by the depositor, but not by the bank yet. The depositor may have made a math or recording error. 6-2

Audit Your Understanding If a check mark is placed on the check stub of each canceled check, what does a check stub with no check mark indicate? It is an outstanding check. 6-2

5-2 Work Together Workbook Page 95 6-2

LESSON 5-1 Dishonored Checks and Electronic Banking 4/21/2017 LESSON 5-3 Dishonored Checks and Electronic Banking

Dishonored Check A check that a bank refuses to pay. Check appears to be altered. Signature does not match the signature card at the bank. Amounts written in words and figures do not agree. Postdated check Person who wrote check ordered stop payment. Insufficient funds 5-1

RECORDING A DISHONORED CHECK ON A CHECK STUB page 129 1. Write Dishonored check $105.00 on the line under the heading “Other.” 2. Write the total of the dishonored check in the amount column. 1 2 3 3. Calculate and record the new subtotal on the Subtotal line. 5-1

JOURNALIZING A DISHONORED CHECK page 130 November 29. Received notice from the bank of a dishonored check from Campus Internet Café, $70.00, plus $35.00 fee; total, $105.00. Memorandum No. 55. 5-1

Electronic Funds Transfer A computerized cash payments system that uses electronic impulses to transfer funds AKA: EFT The business does not have to write a check. Source document for journal entry is a memo. 5-1

JOURNALIZING AN ELECTRONIC FUNDS TRANSFER page 131 September 2. Paid cash on account to Kelson Enterprises, $350.00, using EFT. Memorandum No. 10. 5-1

Debit Card A bank card that, when making purchases, automatically deducts the amount of the purchase from the checking account of the cardholder. Different from a credit card. Purchase amount is automatically withdrawn from the checking account. 5-1

Debit Card Purchases When journalizing transactions involving debit cards, the source document is a memorandum. Cash is credited. 5-1

JOURNALIZING A DEBIT CARD TRANSACTION page 132 September 5. Purchased supplies, $24.00, using debit card. Memorandum No. 12. 5-1

Audit Your Understanding List 6 Reasons why a bank may dishonor a check. Altered checks Signature does not match Amounts do not match Check is postdated Stop payment issued Insufficient funds 5-1

Audit Your Understanding What account is credited when EFT is used to pay cash on an account? Cash 5-1

Audit Your Understanding What account is credited when a debit card is used to purchase supplies? Cash 5-1

6-3 Work Together Workbook page 97 5-1

LESSON 5-1 4/21/2017 LESSON 5-4 Petty Cash 41

5-4 Petty Cash Petty Cash = Asset Account Normal Debit Balance An amount of cash kept on hand and used for making small payments. The actual dollar amount in the account may differ from business to business. Petty Cash = Asset Account Normal Debit Balance 5-1

ESTABLISHING A PETTY CASH FUND page 134 August 17. Paid cash to establish a petty cash fund, $100.00. Check No. 8. 5-1

Petty Cash Slip Petty cash slip number Date To whom paid Reason for payment Amount paid Account involved Signature 5-1

REPLENISHING PETTY CASH page 136 August 31. Paid cash to replenish the petty cash fund, $30.00: miscellaneous expense, $20.00; advertising, $10.00. Check No. 12. 5-1

Audit Your Understanding: Why do businesses use petty cash funds? For making small cash payments Why is Cash and not Petty Cash credited when a petty cash fund is replenished? The check issued to replenish petty cash is a credit to Cash and does not affect Petty Cash. 5-1

5-4 Work Together Workbook Page 99 5-1