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.

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 (cont'd.)

Protecting Cash (cont'd.) 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 (cont'd.) INTERNAL CONTROLS

Protecting Cash (cont'd.) 1.Verify signatures on checks. 2.Maintain records of transactions. 1.Verify signatures on checks. 2.Maintain records of transactions. Section 1Banking Procedures (cont'd.) EXTERNAL CONTROLS

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.  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. Section 1Banking Procedures (cont'd.)

Making Deposits to a Checking Account Businesses make regular deposits to protect the currency, coins, and checks received. Section 1Banking Procedures (cont'd.)

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. 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. Section 1Banking Procedures (cont'd.)

Endorsing a check A check CANNOT be cashed until its been endorsed. To endorse a check, the payee named on the face of the check simply signs the back of the check in black/blue ink. –Must be signed in the area provided! You can’t just go crazy on the back of the check. There are three major types of endorsements. –Blank Endorsement – just sign your name –Special Endorsement – used when you are signing over the check to a third person –Restrictive Endorsement – used to limit the use of a check. For example, you can say “for deposit only” above your signature. This means that the check cannot be cashed … only deposited. Examples of different endorsement types: – Endorsing Checks (continued)

Recording Deposits in the Checkbook Section 1Banking Procedures (cont'd.) Deposits New Balance Deposits New Balance

Writing Checks Section 1Banking Procedures (cont'd.) Enter amount Enter amount Enter amount Enter amount Enter date Enter date Enter payee Enter payee Enter purpose Enter purpose Enter payee Enter payee Enter date Enter date Enter amount Enter amount Enter new balance Enter new balance Sign the check Sign the check Enter dollar amount in words Enter dollar amount in words

Voiding a Check Section 1Banking Procedures (cont'd.) Writing the word “Void” in large letters across the front of a check (in ink) is known as voiding a check.

Proving Cash Section 2Reconciling the Bank Account (cont'd.) General Ledger Cash in Bank account General Ledger Cash in Bank account Checkbook Balance Checkbook Balance = =

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. Section 2Reconciling the Bank Account (cont'd.)

The Bank Statement (cont'd.) Section 2Reconciling the Bank Account (cont'd.) Beginning balance Beginning balance Checks paid by bank (cancelled checks) Checks paid by bank (cancelled checks) Other deductions Other deductions Deposits into the account Deposits into the account Ending balance Ending balance

Reconciling a Bank Statement Documents the differences between the bank balance and the checkbook balance. Section 2Reconciling the Bank Account (cont'd.)

Business Transaction (cont’d.) JOURNAL ENTRY On November 1, Roadrunner received the bank statement. A bank service charge of $8 appeared on the statement. Section 2Reconciling the Bank Account (cont'd.) Recording Bank Service Charges A bank service charge is an expense that is recorded in the accounting records.