1. 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?

2. 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.

3. 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

4. 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.)

5. 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

6. 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

7. 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 (con’t.)

8. Making Deposits to a Checking Account Businesses make regular deposits to protect the currency, coins, and checks received. Section 1Banking Procedures (con’t.)

9. 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 (con’t.)

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

11. Writing Checks Section 1Banking Procedures (con’t.) 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

12. 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.

13. Check Your Understanding Cash is protected through internal controls and external controls. Describe controls over cash. Section 1Banking Procedures (con’t.)

14. Section 2Reconciling the Bank Account What You’ll Learn  Why a business reconciles a bank statement.  How to journalize and post entries relating to bank service charges.  The accounting procedure for stopping payment on a check.  How to record an NSF check.  How electronic funds transfer systems enable banks to transfer funds quickly and accurately. What You’ll Learn  Why a business reconciles a bank statement.  How to journalize and post entries relating to bank service charges.  The accounting procedure for stopping payment on a check.  How to record an NSF check.  How electronic funds transfer systems enable banks to transfer funds quickly and accurately.

15. Why It’s Important Reconciling the bank account ensures that a business owner is aware of all transactions that affect cash. Why It’s Important Reconciling the bank account ensures that a business owner is aware of all transactions that affect cash. Section 2Reconciling the Bank Account (con’t.) Key Terms  bank statement  canceled checks  reconciling the bank statement  outstanding checks  outstanding deposits Key Terms  bank statement  canceled checks  reconciling the bank statement  outstanding checks  outstanding deposits  bank service charge  stop payment order  NSF check  electronic funds transfer system (EFTS)  bank service charge  stop payment order  NSF check  electronic funds transfer system (EFTS)

16. Proving Cash Section 2Reconciling the Bank Account (con’t.) General Ledger Cash in Bank account General Ledger Cash in Bank account Checkbook Balance Checkbook Balance = =

17. 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 (con’t.)

18. The Bank Statement (con’t.) Section 2Reconciling the Bank Account (con’t.) 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

19. Reconciling a Bank Statement Documents the differences between the bank balance and the checkbook balance. Section 2Reconciling the Bank Account (con’t.)

20. Closing Entry (con’t.) 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 (con’t.) Recording Bank Service Charges A bank service charge is an expense that is recorded in the accounting records.

21. Check Your Understanding Cash is protected through internal controls and external controls. Describe controls over cash. Section 2Reconciling the Bank Account (con’t.)