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

Section 1Banking Procedures What You’ll Learn  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. What You’ll Learn  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 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 (con’t.) 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

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 (con’t.) Steps the business itself takes to protect cash and other assets. INTERNAL CONTROLS

Protecting Cash (con’t.) 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 (con’t.) INTERNAL CONTROLS

Protecting Cash (con’t.) 1.Verify signatures on checks. 2.Maintain records of transactions. 1.Verify signatures on checks. 2.Maintain records of transactions. Section 1Banking Procedures (con’t.) EXTERNAL CONTROLS Measurements and procedures provided outside the business to protect cash and other assets.

Opening a Checking Account  Allows a person or business to deposit cash in a bank and to write checks against the account balance.  A check is a written order from a depositor telling the bank to pay a stated amount of cash to the person or business named on the check.  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 check is a written order from a depositor telling the bank to pay a stated amount of cash to the person or business named on the check.  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 (con’t.)

Opening a Checking Account  American Bankers Association (ABA) number is the code that identifies the bank.  The number above the line and to the left of the hyphen represents the city or state where the bank is located.  The number to the right of the hyphen indicates the specific bank.  The number below the line is the code of the Federal Reserve District where the bank is located. Federal Reserve District  American Bankers Association (ABA) number is the code that identifies the bank.  The number above the line and to the left of the hyphen represents the city or state where the bank is located.  The number to the right of the hyphen indicates the specific bank.  The number below the line is the code of the Federal Reserve District where the bank is located. Federal Reserve District Section 1Banking Procedures (con’t.)

Opening a Checking Account (con’t.) Section 1Banking Procedures (con’t.)  The ABA #, the depositor’s account #, and the check # is in special ink and typeface at the bottom of the check. These specially printed numbers are called MICR (magnetic ink character recognition) numbers.  MICR is used for electronic sorting.

Making Deposits to a Checking Account  Businesses make regular deposits to protect the currency, coins, and checks received.  Deposits are accompanied by a deposit slip.  List Checks separately by their ABA#’s. Only the two #’s above the line.  The checks are to be arranged in the order listed on the deposit slip.  Businesses make regular deposits to protect the currency, coins, and checks received.  Deposits are accompanied by a deposit slip.  List Checks separately by their ABA#’s. Only the two #’s above the line.  The checks are to be arranged in the order listed on the deposit slip. Section 1Banking Procedures (con’t.)

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.  A restrictive endorsement limits, or restricts, how a check may be handled.  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.  A restrictive endorsement limits, or restricts, how a check may be handled. Section 1Banking Procedures (con’t.)

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

Writing Checks Section 1Banking Procedures (con’t.) Enter new balanceSign the check Enter amountEnter dollar amount in words Enter new balanceSign the check Enter amountEnter dollar amount in words Enter amount Enter dateEnter payee Enter payee Enter date Enter purpose Enter amount Enter amount Enter dateEnter payee Enter payee Enter date Enter purpose Enter amount Write checks in ink, or prepare typewritten or computer-generated checks. Fill out the check stub first.

Voiding a Check Section 1Banking Procedures (con’t.) Writing the word “Void” in large letters across the front of a check (in ink) is known as voiding a check. Drawer is the person who signs the check. The bank on which the check is written is the drawee.

Demonstration Problems Problems 11-1 and Section 1Banking Procedures (con’t.)

April ,203.84

ABA# City or state were bank is located Identifies the specific bank Code for the federal reserve district were the bank is located $ May 8,---- Valley Utilities April electric bill , May 8, --- Valley Utilities One hundred fifteen and 86/ $ April electric bill Susan Y. Rucker PayeeDraweeDrawer

Assignment: Check Your Understanding p264 Thinking Critically 1&2 Problem 2 is worth 6 points (be descriptive) Problem 11-1 Check Your Understanding p264 Thinking Critically 1&2 Problem 2 is worth 6 points (be descriptive) Problem 11-1 Section 1Banking Procedures (con’t.)