Chapter 4 Banking McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved

Define and state the purpose of signature cards, checks, deposit slips, check stubs, check registers, and endorsements Correctly prepare deposit slips, write checks Banking #4 Learning Unit Objectives The Checking Account; Credit Card Transactions LU

Define and state the purpose of the bank statement Complete a check register and a bank reconciliation Explain the trends in online banking Banking #4 Learning Unit Objectives Bank Statement and Reconciliation Process; Trends in Banking LU

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

4-5 Deposit Slip - Fig 4.1 Gracie’s Natural Superstore 80 Garfield Street Bartlet, NH Date ________________ 20 __________ DEPOSITS MAY NOT BE AVAILABLE FOR IMMEDIATE WITHDRAWAL IpswichBank ipswichbank.com 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

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

4-7 Types of Endorsements Gracie’s Natural Superstore Pay to the order of Ipswich Bank For deposit only Gracie’s Natural Superstore Blank Full Restricted Pay to the order of Ipswich Bank Gracie’s Natural Superstore 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

4-8 Bank Statement A statement of different types of activity that have taken place during the month Debit - decreases the account - Credit - increases the account +

4-9 Bank Statement

4-10 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 /15 Staples Co /18 Deposit /22 Health Food, Inc

4-11 Bank Reconciliation Reconciles the difference between the bank statement and the checkbook Differences in timing Transactions not entered in checkbook Checkbook Bank Statement

4-12 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

4-13 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

4-14 Bank Reconciliation GRACIE’S NATURAL SUPERSTORE Bank Reconciliation as of March 31, 2009 Checkbook BalanceBank Balance Gracie’s checkbook balance$6,588.42Bank Balance$11,863.02Add: EFT leasing: Bakery dept.$1,808.06Deposit in transit 3, EFT leasing: Meat dept. 4,228.00$15, Interest Error: Overstated ck # , $13,400.50Deduct: Service charge $28.50Outstanding checks: NSF No. 638$ EFT Health Insurance pymt No No No No , Reconciled balance$12,546.00Reconciled balance $12,546.00

4-15 Trends in Online Banking Increase Use of Internet New Bank Legislation Role of Middlemen in the Internet

4-16 Problem 4-9: Solution: Sue’s Checkbook Balance $ Bank Balance $ Add: Add: Interest 5.15 Deposit in Transit 1, $ $1, Deduct: Deduct: Service Charge $ 6.50 Outstanding Checks: Overdraft No. 250 $ No No Reconciled Balance: $ Reconciled Balance: $

4-17 Challenge Problem Solution: Checkbook Balance: $ Bank Balance: $1, Add: Add: Interest $ 2.33 Deposit in Transit IRS Refund 1, , $2, $2, Deduct: Deduct: Gas Company $ Outstanding Checks: ATM Fee 6.50 No. 235 $ Service Fee 8.00 No Debit (5x$.45) 2.25 No Printing No Reconciled Balance $1,862.13