1. 1 Negotiable Instruments Unit B Business Law Objective 6.01 Part B

2. Rules Regulating Checking Accounts 1. Stale Check a. Check that is more than 6 months old b. Bank may refuse without liability 2. Avoiding Negligence a. Drawer is responsible if negligent in writing check b. Write figures close to $ sign and draw line through spaces not used c. Write close to “Pay to Order of” and draw line through spaces not used d. Figures and written amount should agree e. Sign name last f. Write “Void” on check if mistake is made and in check register

3. 3. Bad Checks a. Check issued against checking account with insufficient funds to cover it b. States have statutes making it a larceny c. Failure of drawer to make check good within certain period of time will serve as a presumption of guilt

4. 4. Forged Check a. Check signed by someone other than drawer and without authority b. If bank pays and drawer not negligent, bank bears loss c. Drawer has 1 year to discover and report to bank unauthorized signature or alteration on face of check d. Drawer has 3 years to discover and report to bank any unauthorized endorsement on check

5. 5. Stop Payment a. Bank has no right to cash check b. Bank liable if check is cashed c. Oral stop payment good for 14 days d. Written stop payment effective for 6 months e. Holder in due course f. Upon death, bank can cash checks for 10 days for those written prior to death

6. 6. Balancing Checkbook a. Should be done as soon as possible after receiving statement b. Balance after writing checks c. Subtract checks written from balance d. Add deposits to balance 7. Outstanding Check a. Has not cleared the bank b. Must be known in order to reconcile statement c. Find by comparing the bank statement with the checkbook register

7. 8. Reconciling a Checkbook a. Makes sure the bank’s records agree with your records b. Check for outstanding checks and deposits c. Check the checks, deposits, ATM activity on the bank statement to make sure that your records are correct d. Make adjustments to the bank statement and your records to ensure that you and the bank have the same amount of money e. Reconcile every statement when received