1. Chapter 04 Banking McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

2. 1. Define and state the purpose of signature cards, checks, deposit slips, check stubs, check registers, and endorsements 2. Correctly prepare deposit slips, write checks Banking #4 Learning Unit Objectives The Checking Account LU4.1 4-2

3. 1. Explain the trends in the banking industry 2. Define and state the purpose of the bank statement 3. Complete a check register and a bank reconciliation 4. Explain the trends in online banking pro and con Banking #4 Learning Unit Objectives Trends in Banking Industry: Bank Statement and Reconciliation Process; Trends in Online Banking LU4.2 4-3

4. 4-4 Checks/Drafts Written order instructing a bank, credit union, or savings and loan institution to pay a designated amount of your money on deposit w/the bank to a person or organization Payee - To whom check is payable Drawee- Bank ordered to pay Drawer - One who writes the check

5. 4-5 Deposit Slip - Fig 4.1 Gracie’s Natural Superstore 80 Garfield Street Bartlet, NH 01835 Date ________________ 20 __________ DEPOSITS MAY NOT BE AVAILABLE FOR IMMEDIATE WITHDRAWAL IpswichBank ipswichbank.com 211370587 88190662 Checks and other items are received for deposit subject to the provisions of the uniform commercial code or any applicable collection agreement USE OTHER SIDE FOR ADDITIONAL LISTING. < ENTER TOTAL HERE. March 409 53-7058

6. 4-6 The structure of a check - Fig 4.2 Gracie’s Natural Superstore 80 Garfield Street53-7058/2113 No. 633 Bartlet, NH 01835 88190662 Pay____________________20 _____ To The Order of ____________________________________________________$ ___________________ _________________________________________________________________ DOLLARS IpswichBank ipswichbank.com Memo_________________________________________________ :21137058788190662 6330000006000 Staples Corporation March 809 xx Six Thousand and 100 xx 6,000 100 Molly Kate Office Equipment

7. 4-7 Types of Endorsements Gracie’s Natural Superstore 88190662 Pay to the order of Ipswich Bank For deposit only Gracie’s Natural Superstore 88190662 Blank Full Restricted Pay to the order of Ipswich Bank Gracie’s Natural Superstore 88190662 Can be further endorsed Only person or company named in the endorsement can transfer the check to someone Limits any further negotiation of the check

8. 4-8 Trends in Banking Industry Since 2008 trends in banking have been changing rapidly. The government has been involved in many bailout packages due to the financial crises. Some banks have had to close or merge. Check textbook Web site for the latest updates on banking bailouts and government intervention. www.mhhe.com/slater10e. www.mhhe.com

9. 4-9 Bank Statement A statement of different types of activity that have taken place during the month Debit - decreases the account - Credit - increases the account +

10. 4-10 Bank Statement

11. 4-11 Check Register Used to track written checks RECORD ALL CHARGES OR CREDIT THAT AFFECT YOUR ACCOUNT Number DateDescription of TransactionPayment/Debit x Fee Deposit/Credit Balance 633 3/8 Staples Co. 6,000 00 -6,000 00 2009 634 3/9 Health Food, Inc. 1,020 00 -1,020 00 3/9 Deposit 389 20 +389 20 15,136 24 9,136 24 8,116 24

12. 4-12 Bank Reconciliation Reconciles the difference between the bank statement and the checkbook Differences in timing Transactions not entered in checkbook Checkbook Bank Statement

13. 4-13 Reconciliation Checkbook Balance +EFT (electronic funds transfer) +Interest earned +Notes collected +Direct Deposit -ATM withdrawals -Automatic withdrawals -NSF check -Online fees -Automatic payments -Overdrafts -Service charges -Stop payments +/-Book errors Bank Balance +Deposit in transit -Outstanding checks +/-Bank errors Bank Statement Checkbook

14. 4-14 Steps in Reconciling Account 1) Identify outstanding checks 2) Identify deposits in transit 3) Analyze bank statement for transactions not recorded in check register 4) Check for recording errors in checks, deposits, addition or subtraction 5) Compare the adjusted balances, if different repeat steps 1-4

15. 4-15 Bank Reconciliation GRACIE’S NATURAL SUPERSTORE Bank Reconciliation as of March 31, 2011 Checkbook BalanceBank Balance Gracie’s checkbook balance$6,588.42Bank Balance$11,863.02Add: EFT leasing: Bakery dept.$1,808.06Deposit in transit 3,383.26 EFT leasing: Meat dept. 4,228.00$15,246.28 Interest 56.02 Error: Overstated ck # 634 720.00 6,6812.08 $13,400.50Deduct: Service charge $28.50Outstanding checks: NSF 104.00No. 638$572.00 EFT Health Insurance pymt. 722.00 854.50No. 639 638.94 No. 640 166.00 No. 641 406.28 No. 642 917.06 2,700.28 Reconciled balance$12,546.00Reconciled balance $12,546.00

16. 4-16 Trends in Online Banking Pros and Cons PROS Many Online savings accounts are paying 3-4% interest Online accounts like all bank accounts, are protected by the Federal Deposit Insurance Corp up to $250,000 per account holder CONS Delay in transferring funds between accounts up to four days The bank will hold up a transfer of funds because it wants to make sure our funds are good before it lets us have them.

17. 4-17 Problem 4-9: Solution: Sue’s Checkbook Balance $604.30 Bank Balance $ 315.65 Add: Add: Interest 5.15 Deposit in Transit 1,215.15 $609.45 $1,530.80 Deduct: Deduct: Service Charge $ 6.50 Outstanding Checks: Overdraft 25.00 31.50 No. 250 $603.15 No. 253 218.90 No. 254 130.80 952.85 Reconciled Balance: $577.95 Reconciled Balance: $ 577.95

18. 4-18 Challenge Problem Solution: Kinko’s Checkbook Balance: $ 3,301.82. Bank Balance: $2,955.82 Add: Add: Collection on Notes Deposit in Transit 510.19 Receivable 400.00 $3,466.01 Less: Collection Fee 10.00 $390.00 Deduct: Outstanding Checks: Error in recording No. 748 $210.90 check No. 884 69.00 No. 811 $110.94 $3,760.82 No. 912 $ 82.50 404.34 Deduct: NSF check $690.65 Service charge 8.50 699.15 Reconciled Balance $3,061.67 Reconciled Balance $3,061.67