Cash Control Systems Chapter Five

Terms Code of conduct Checking account Endorsement Blank endorsement Special endorsement Restrictive endorsement Postdated check Bank Statement Dishonored Check Electronic Funds Transfer Debit Card Petty Cash Petty Cash Slip

Books - A - Million Customers use cash and credit cards to make purchases – What control problems may occur when employees except cash for sales? Where do you work – – What control systems do you have?

Section 1: Checking Accounts Cash transactions occur more frequently than other types of transactions – more chances occur to make recording errors Cash can be transferred from one person to another without any questions about ownership Cash could also be lost from one place to another

Safety Measures Cash in the bank All Cash receipts are placed in the bank – Evidence to support accounting records – Compare record of checks with bank statements Code of conduct: – Statement that guides the ethical behavior of a company and its employees. Example p. 118

Depositing Cash Business from ordering a bank to pay cash from a bank account is a check. Checking account – bank account from which payments can be ordered – Signature on card Deposit slip is prepared by a customer each time cash or checks are placed in an account. – Checks listed on slip by routing number – Receipt given – Record deposit on check stub

DEPOSITING CASH page 119

DEPOSIT RECORDED ON A CHECK STUB page 119

Lets Talk About Endorsements! Endorsement – signature or stamp on the back of a check transferring ownership – Blank (just initial owners signature) If lost with this anyone can cash the check – Special (indicates a new owner) – Restrictive (restricts further transfer) Examples page 120

ENDORSEMENTS page 120 Blank Endorsement Special Endorsement Restrictive Endorsement

Completing Check Stub & Check Example p. 121 Postdated check – most banks will not accept postdated checks because money cannot be drawn until that date. Check writing habits Recording a voided check

5.Write the amount of the check. 2.Write the date of the check. 3.Write to whom the check is to be paid. 4.Record the purpose of the check. 1.Write the amount of the check. 6.Calculate the new checking account balance. COMPLETED CHECK STUB page

COMPLETED CHECK 7.Write the date. page Write the amount in words. 8.Write to whom the check is to be paid. 9.Write the amount in figures. 11.Write the purpose of the check. 12.Sign the check.

1.Record the date. 2.Write the word VOID in the Account Title column 3.Write the check number. 4.Place a check mark in the Post. Ref. column. 5.Place a dash in the Cash Credit column. RECORDING A VOIDED CHECK page

TERMS REVIEW code of conduct checking account endorsement blank endorsement special endorsement restrictive endorsement postdated check page 123

Practice Working Together On Your Own

Review Quiz 1. Why are cash control systems needed? 2. What is an endorsement - hint what does it do? (not a signature on the back of a check) 3. List the three types of endorsements? 4. What is a postdated check and how do banks feel about them? 5. What is all included on a check stub? 6. What type of endorsement includes pay to the order of? 7. What type of endorsement includes only an individuals name? 8. What type of endorsement includes for deposit only?

Section 5:2 Bank Reconciliation Bank statement – report of deposits, withdrawals, and bank balances sent to a depositor by a bank Bank records and depositor’s records may differ for several reasons: – Service charge – Outstanding deposits – Outstanding checks – Math errors

Bank Reconciliation Verifying that the information on a bank statement agrees with the checkbook Reconciling immediately is very important in cash control Example – p. 125 Recording service charge on check stub Journalizing a bank service charge

BANK STATEMENT page 124

5.Bank Statement Balance BANK STATEMENT RECONCILIATION Adjusted Bank Balance page Check Stub Balance 10.Compare Adjusted Balances 1.Date 3.Service Charge 4.Adjusted Check Stub Balance 6.Outstanding Deposits 7.Subtotal 8.Outstanding Checks 10

1.Write Service Charge $8.00 on the check stub under the heading “Other.” RECORDING A BANK SERVICE CHARGE ON A CHECK STUB page Write the amount of the service charge in the amount column. 3.Calculate and record the new subtotal on the Subtotal line.

JOURNALIZING A BANK SERVICE CHARGE 1.Date. Write the date. page August 31. Received bank statement showing August bank service charge, $8.00. Memorandum No Debit. Write the title of the account to be debited. Record the amount debited. 3.Credit. Record the amount credited. 4.Source document. Write the source document number.

TERM REVIEW bank statement page 128

Practice Working Together On Your Own Application Problems 1-2

Review Code of conduct Checking account Endorsement Blank Endorsement Special Endorsement Restrictive Endorsement Postdated check Preparing a check stub Preparing a check Purpose of bank reconciliation Reflection on Jig saw

Section 5:3 – Dishonored Checks & Electronic Banking Check the bank refuses to pay – Insufficient funds to pay the check – Check appears to be altered – Signature does not match – Figures and words do not agree – Postdated – Person stopped payment Illegal/ credit Fee

Section 5:3 Journalizing Dishonored Check, Electronic Funds Transfer, & Debit Card Transactions Make the book up to date See page 130 Working Together Electronic Funds Transfer – transfers funds without the use of checks – Password / cash control Debit Card

Petty Cash Amount of cash left on hand – Used for making small payments – Assets – Normal balance = debit Petty cash slip – from showing the purpose and amount of payment – PROOF – Slip number, date, to whom, reason, amount, account and signature

Replenishing Petty Cash Working Together Applications 3-5 Homework Challenge Problem