© 2014 Cengage Learning. All Rights Reserved. Do Now ●Predict the process for cashing a check that the bank later determines to be dishonored ●Remember,

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Presentation transcript:

© 2014 Cengage Learning. All Rights Reserved. Do Now ●Predict the process for cashing a check that the bank later determines to be dishonored ●Remember, you were given this check because you were owed this money SLIDE 1

© 2014 Cengage Learning. All Rights Reserved. Use of Video clip: ●Animated Activity & Quiz Via MindTap SLIDE 2

© 2014 Cengage Learning. All Rights Reserved. Recording a Dishonored Check on a Check Stub ●A check that a bank refuses to pay is called a dishonored check. ●A check dishonored by the bank because of insufficient funds in the account of the maker of the check is called a non-sufficient funds check. ●A non-sufficient funds check is also known as an NSF check. ●May affect credit rating of person or business that issued the check ●Often, value can be recovered and becomes expense of business that wrote check SLIDE 3 LO6 Lesson 5-3

© 2014 Cengage Learning. All Rights Reserved. Dishonored Checks ●Banks may dishonor checks for other reasons: 1.Checks appears to be altered in some way 2.Signature of person who signed check does not match one on signature card at bank 3.Amounts written in figures and words do not agree 4.Check post-dated 5.Person who wrote check has stopped payment on check SLIDE 4

© 2014 Cengage Learning. All Rights Reserved. Dishonored Checks ●Most banks charge fee for handling NSF checks that have previously been accepted for deposit ●Expense of business receiving such a check ●Business attempts to collect fee in addition to amount of NSF check from business that wrote the check SLIDE 5

© 2014 Cengage Learning. All Rights Reserved. Dishonored Checks ●When check is dishonored, bank deducts amount of check plus fee from business that received the check ●Dishonored check recorded as cash payment ●Memorandum is source document SLIDE 6

© 2014 Cengage Learning. All Rights Reserved. Recording a Dishonored Check on a Check Stub SLIDE 7 LO6 Lesson Write Dishonored Check under the heading Other Calculate and record the new subtotal Write the total of the dishonored check in the amount column. This is the amount of the dishonored check plus the service fee.

© 2014 Cengage Learning. All Rights Reserved. Take a Breather ●Record a T-account to visualize the journal payment for a dishonored check of $60.00, with a bank charge of $50.00 SLIDE 8

© 2014 Cengage Learning. All Rights Reserved. Journalizing a Dishonored Check SLIDE Accts. Rec.—Valley Landscaping Cash August 29. Received notice from the bank of a dishonored check from Valley Landscaping, $185.00, plus $40.00 fee; total, $ Memorandum No. 52. LO6 Lesson Write the title of the account to be debited in the Account Title column. Record the amount debited in the Debit column Write the date in the Date column On the next line, indented, write the title of the amount credited in the Account Title column. Write the credit amount in the Credit column Write the source document number in the Doc. No. column. 1 1 Date 4 4 Source Document Debit Credit

© 2014 Cengage Learning. All Rights Reserved. Journalizing an Electronic Funds Transfer ●A computerized cash payments system that transfers funds without the use of checks, currency, or other paper documents is called electronic funds transfer (EFT). ●Many businesses use this to pay vendors ●To control cash payments through EFT, person responsible for requesting transfers should be given a password ●Bank should not accept EFT requests from any person unable to provide password SLIDE 10 LO7 Lesson 5-3

© 2014 Cengage Learning. All Rights Reserved. Electronic Funds Transfer ●Journal entry for payments on account through EFT is same as when check is written ●Only difference is that source document used is a memorandum ●Recorded on check stub as “Other” ●Keeps checkbook in balance during time lag from when EFT is made until receipt of bank statement ●Identified in check column of bank statement by “EFT” rather than check number SLIDE 11

© 2014 Cengage Learning. All Rights Reserved. Journalizing an Electronic Funds Transfer SLIDE 12 LO7 Lesson Accts. Pay.—Murniak Enterprises Cash June 5. Paid cash on account to Murniak Enterprises, $380.00, using EFT. Memorandum No Write the title of the account to be debited in the Account Title column. Record the amount debited in the Debit column Write the date in the Date column On the next line, indented, write the title of the amount credited in the Account Title column. Write the credit amount in the Credit column Write the source document number in the Doc. No. column. 1 1 Date 4 4 Source Document Debit Credit

© 2014 Cengage Learning. All Rights Reserved. Journalizing a Debit Card Transaction ●A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder is called a debit card. ●Purchase with debit card means amount of purchase automatically deducted from checking account of cardholder, eliminating need to write check or carry checkbook ●Still record all purchases to avoid errors in checking account ●“Other” on check stub, keeping balance during time lag between payment and bank receipt SLIDE 13 LO8 Lesson 5-3

© 2014 Cengage Learning. All Rights Reserved. June 8. Purchased supplies, $75.00, using debit card. Memorandum No. 21. Journalizing a Debit Card Transaction SLIDE 14 LO8 Lesson Supplies Cash Write the title of the account to be debited in the Account Title column. Record the amount debited in the Debit column Write the date in the Date column On the next line, indented, write the title of the amount credited in the Account Title column. Write the credit amount in the Credit column Write the source document number in the Doc. No. column. 1 1 Date 4 4 Source Document Debit Credit

© 2014 Cengage Learning. All Rights Reserved. QUESTIONING ●FOCUS for students to use: Writing and mailing checks is better than online banking. ●Students ask as many questions as possible, don’t stop asking questions, write down every question as stated, and change any statement into a question ●Students then categorize questions as closed- or open-ended ●Students list advantages and disadvantages of each type of question ●Students then turn closed-ended questions into open-ended questions, and vice-versa ●Students then prioritize questions ●Class discussion/Parking Lot concerning priority of questions (advantages/disadvantages to each way of paying out of checking accounts) ●Class comes to conclusion as to which method of making payments is more efficient SLIDE 15 Lesson 5-3

© 2014 Cengage Learning. All Rights Reserved. Lesson 5-3 Audit Your Understanding 1.List six reasons why a bank may dishonor a check. SLIDE 16 ANSWER 1.The check appears to be altered. 2.The signature on the check does not match the signature on the signature card. 3.The amounts written in figures and in words do not agree. 4.The check is postdated. 5.The person who wrote the check has stopped payment on it. 6.The account of the person who wrote the check has insufficient funds to pay the check. Lesson 5-3

© 2014 Cengage Learning. All Rights Reserved. Lesson 5-3 Audit Your Understanding 2.Which account is credited when electronic funds transfer is used to pay cash on account? SLIDE 17 ANSWER Cash Lesson 5-3

© 2014 Cengage Learning. All Rights Reserved. Lesson 5-3 Audit Your Understanding 3.Which account is credited when a debit card is used to purchase supplies? SLIDE 18 ANSWER Cash Lesson 5-3

© 2014 Cengage Learning. All Rights Reserved. “King of the Hill” Review Game ●Complete WT 5-3 individually ●Top 5 (determined by correctness) advance to next round ●Complete OYO 5-3 (all students) ●Top 2 of remaining 5 advance to next round ●Complete crossword puzzle (all students) ●Student to finish first wins and gets candy ●Outstanding questions SLIDE 19

© 2014 Cengage Learning. All Rights Reserved. Closure ●Fist of Five: ●regarding chapter 5 material thus far SLIDE 20