Cash controls and banking activities Chapter 11

Protecting Cash Internal Controls – Procedures within the business that are designed to protect cash and other assets and to keep reliable records Examples (pg 278) External Controls – Procedures outside the business to protect cash and other assets Examples

The Checking Account Checking Account – Check – Written order from a depositor telling the bank to pay the stated amount Depositor – Person or business that has cash on deposit in a bank ABA Number – Fractional # listed below check # Signature Card – Contains authorized signature to write checks on an account Deposit Slip – Bank form listing the cash and checks to be deposited

The Checking Account Endorsement – Authorized signature written or stamped on back of check Blank (Just a signature) Special (Pay to the order of…) Restrictive (For Deposit Only, Signature) Payee – Drawer – Person who signs check Drawee – Bank on which the check is written Voiding a Check -

Reconciling the Bank Statement Proving Cash If all transactions have been journalized and posted Cash in Bank Balance = Checkbook Balance Bank Statement – Itemized record of all transactions over a given period (month) Canceled Checks – Checks that have cleared Some banks mail them back to you Imaged Checks – Copies of the original

Reconciling the Bank Statement Reconciling the Bank Statement – Process of determining differences between bank statement and checkbook Usually Bank Balance ≠ Checkbook Balance Why? Outstanding Transactions Mistakes

Reconciling the Bank Statement Outstanding Checks – Written but not cashed yet Outstanding Deposits – Recorded in checkbook but not on bank statement Bank Service Charge – Fee charged by the bank Miscellaneous Expense

Reconciling the Bank Statement Steps on pg 287 Complete the Bank Reconciliation Form

Journalizing Service Charges Debit Miscellaneous Expense Credit Cash

More Checking Vocabulary Stop Payment Order NSF check Check 21 Postdated check

Even More Checking Vocabulary Electronic Funds Transfer System (EFTS) Bankcard Automated teller machine (ATM)