(American Banking Association) Lesson 6-1 (GJ) DEPOSITING CASH ABA # (American Banking Association) City # Bank # Federal ID # Lesson 6-1, page 120

DEPOSIT RECORDED ON A CHECK STUB What I had before this check What I deposited in the bank What is available to spend before any “other” changes What is available to spend What I am spending now What I will have left Lesson 6-1, page 120

CHECK STUB EXAMPLE From Check #77 No “Other” changes, so

COMPLETED CHECK STUB AND CHECK 1. Write the amount of the check. 1 2 2. Write the date of the check. 7. Write the date. 7 3 3. Write to whom the check is to be paid. 4 4. Record purpose of the check. 9 9. Write the amount in figures. 8 8. Write to whom the check is to be paid. 10 10. Write the amount in words. Signature Card 11 11. Write the purpose of the check. 12 12. Sign the check. 5 5. Write the amount of the check. 6 6. Calculate the new account balance. Preparing check stubs Preparing checks Lesson 6-1, page 122-123

BLANK ENDORSEMENT, SPECIAL ENDORSEMENT, AND RESTRICTIVE ENDORSEMENT (“special instructions”) Restrictive Endorsement (ONLY for deposit) Lesson 6-1, page 121

RECORDING A VOIDED CHECK 4. Place a check mark in the Post. Ref. column. 4 C19 3. Write the check number. 3 2. Write the word VOID in the account title. 2 1. Record the date. 1 5. Place a dash in both the Debit and Credit columns. 5 Lesson 6-1, page 123

WT

Lesson 6-1 (GJ) BANK STATEMENT Lesson 6-2, page 125

BANK STATEMENT RECONCILIATION 1 1. Date DEDUCT OUTSTANDING CHECKS: 2 2. Check Stub Balance 5. Bank Balance Statement 5 3 3. Service Charge 6. Outstanding Deposits 6 4 4. Adjusted Check Stub Balance 7 7. Subtotal 8 8. Outstanding Checks 9 9. Adjusted Bank Balance 10. Compare Adjusted Balances 10 Now you know that your records match the bank’s records. So sleep well. (bank knows, but your records don’t) (you know but bank records don’t) Lesson 6-2, page 126

RECORDING A BANK SERVICE CHARGE ON A CHECK STUB 1 1. Write Service Charge. 2 2. Write the amount of the service charge. 3 3. Calculate and record the new subtotal. **Gets Journalized as a Miscellaneous Expense Lesson 6-2, page 127

WT

it becomes an EXPENSE to the business What happens when MY bank won’t cash a check from a customer because THEIR account doesn’t have enough money to “cover” the check? Our bank will not “Honor” it… …it becomes a “Dishonored Check” Other reasons a bank might dishonor a check: Check was altered Signature doesn’t match signature card Figures and words don’t agree The check is post-dated The issuer has placed a “stop payment” on the check We’ll try to get the money again, but oftentimes it cannot be recovered – it becomes an EXPENSE to the business Lesson 6-3, page 130

JOURNALIZING A DISHONORED CHECK November 29. Received notice from the bank of a dishonored check from Learn N Play, $35.00, plus $15.00 fee; total, $50.00. Memorandum No. 55. Objective Evidence requires us to create a Memo 1. Which accounts are affected? Accounts Receivable—Learn N Play Cash 4. How is each amount entered in the accounts? Assets increase on the debit side. Assets decrease on the credit side. 3. How is each classification changed? Assets are increased. Assets are decreased. 2. How is each account classified? Accounts Receivable—Learn N Play is an asset account. Cash is an asset account. Accounts Rec.—Learn N Play Debit Normal Balance  50.00 Lesson 6-3, page 131

RECORDING A DISHONORED CHECK ON A CHECK STUB Lesson 6-1 (GJ) RECORDING A DISHONORED CHECK ON A CHECK STUB When we got the check, we recorded it as receiving cash. We have to adjust our checking account to show that we didn’t actually receive it. aaand…We have to tell our journal: 1 – Cash isn’t there 2 – That person still owes us the moolah!! 1 1. Write Dishonored Check $50.00. 2 2. Write the amount of the dishonored check. 3 3. Calculate and record the new subtotal. Lesson 6-3, page 130

Electronic Funds Transfer (EFT) & Debit Cards (MAC Cards) The journal entries for making payments on account through EFT and the use of a debit card is the same as when a check is written …EXCEPT for the source document …because there are no checks (C5) Objective Evidence requires that we create… A MEMO Both EFT & MAC payments get recorded on the check stub as “other” to keep our balances up to date Lesson 6-3, pages 132-133

ESTABLISHING A PETTY CASH FUND Petty cash – an amount of cash kept on hand and used for making small payments; writing a check is not time or cost effective Do Girl Scouts take checks for cookies?? Stamps Printer Ink Lunch Encore Music has a petty cash fund of $200.00 …with no one payment for more than $20.00 Lesson 6-4, page 135

ESTABLISHING A PETTY CASH FUND Lesson 6-1 (GJ) ESTABLISHING A PETTY CASH FUND August 17. Paid cash to establish a petty cash fund, $200.00. Check No. 8. $20 max at one time Cash Petty Cash 1. Which accounts are affected? Petty Cash Cash 4. How is each amount entered in the accounts? Assets increase on the debit side. Assets decrease on the credit side. 3. How is each classification changed? Assets are increased. Assets are decreased. 2. How is each account classified? Petty Cash is an asset account. Cash is an asset account. Debit Normal Balance  200.00 Lesson 6-4, page 135

MAKING PAYMENTS FROM A PETTY CASH FUND WITH A PETTY CASH SLIP Slips are kept in the petty cash box until the fund is replenished Lesson 6-4, page 136

MAKING PAYMENTS FROM A PETTY CASH FUND WITH A PETTY CASH SLIP $58 $57 $40 $10 Spent $165 Do I have $200 in the box so that I am ready for next month? How much do I have left? Lesson 6-4, page 136

REPLENISHING PETTY CASH “Replenishing” means bringing the amount back up to $200.00 Encore Music replenishes whenever the cash is reduced to $75.00 Always replenish at the end of the month …record transactions WHEN they occur (MEWR) $35 $200 **Notice that “Petty Cash” is not Debited or Credited** Lesson 6-4, page 137

“Petty Cash” is ONLY affected when you are ESTABLISHING the petty cash fund initially, or when you are adjusting the amount that is needed to be kept in the petty cash box!! Lesson 6-4, page 137

CHECK FIGURES FOR SELECTED APPLICATIONS 6-1 Endorse the checks (sign your own name) Complete each check and check stub Balance carried forward on last check stub should be 9278.71 6-2 Reconcile the bank statement Update the “Other” section of check stub 312 Do not fill out the top (check #312 info part) JUST calculate the final subtotal for this check 2665.99 – matches your bank reconciliation now! Journalize the bank service charge (What kind of expense is that?) 6-4 Establish petty cash Replenish petty cash – TOTAL 165.00 6-5 Journalize all entries