1. Patsy Fulton-Calkins, Ph.D. Joanna Davis Hanks, Ed.S. South-Western Educational Publishing Copyright 2000 All Rights Reserved

2. Understanding Financial Documents Chapter 18

3. Your Goals  Become familiar with electronic technology used in the banking industry  Become knowledgeable of the basic financial statements and the various parts of these statements, and prepare the following types of banking documents:  Checks  Deposit slips  Bank statement reconciliation

4. Your Goals (cont.)  Become knowledgeable about payroll laws and other taxes  Become familiar with basic investment instruments and terminology

5. Electronic Banking  Automated teller machine (ATMs)  Sophisticated Kiosks  Debit card (bank card)  Smart cards (stored value cards)

6. Electronic Banking (cont.)  Direct withdrawals  Computer systems and software packages  Loss of EFT card

7. Direct Payroll Depositing  Advantages to employer  Eliminates the time and expense of writing paychecks  Lower security measures needed in processing and distributing vouchers as opposed to checks

8. Direct Payroll Depositing (cont.)  Advantages to employer (cont.)  Reduces postage by not mailing checks  Decreases the possible loss or theft of paychecks

9. Direct Payroll Depositing (cont.)  Advantages to employee  Convenience--does not have to drive to bank or wait in line to make a deposit  Provides for the payroll check to be deposited in the bank even when the employee is on vacation or on a business trip

10. Procedures for Writing Checks  Complete the check voucher, stub, or register first with the date, amount, and purpose of the check  Enter the current date

11. Procedures for Writing Checks (cont.)  The full name of the payee should be written as far to the left as possible in the space provided  Write the amount of the check twice--first in figures and then in words

12. Endorsements

13. Deposits

14. Bank Reconciliation Procedures  Check register to see that all checks have been deducted and all deposits added  Verify the number of the check on the bank statement with the check register or check stub

15. Bank Reconciliation Procedures (cont.)  List the numbers and amounts of the checks that are outstanding and total the amount  Add the total unlisted deposits to the bank balance

16. Bank Reconciliation Procedures (cont.)  Deduct the total amount of the outstanding checks from the balance shown on the bank statement  Add interest earned or any items collected by the bank to the checkbook balance  Deduct any service charges or special fees from the checkbook balance

17. Special Bank Services  Certified checks  Cashier’s check  Bank money orders  Traveler’s checks  Safe-deposit boxes

18. Balance Sheet

19. Income Statement

20. Financial Statement Analysis Current ratio = current assets ($173,865) current liabilities ($56,915) = 3.05:1 Quick ratio= quick assets ($61,240) current liabilities ($56,915) = 1.08:1

21. Payroll Laws  Fair Labor Standards Act  Federal Insurance Contribution Act (Social Security)  Federal, state, and local income tax  Unemployment compensation tax

22. Other Taxes Property tax License taxes Sales tax

23. Stocks  Kinds of stock  Common stock  Preferred stock  Stock exchanges  Over-the-counter market  Stock quotations

24. Other Investments  Mutual Funds  Bonds  IRAs