1. 7e Contemporary Mathematics FOR BUSINESS AND CONSUMERS Brechner PowerPoint Presentation by Domenic Tavella, MBA Checking Accounts ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2. 7e PERFORMANCE OBJECTIVES Section I Understanding and Using Checking Accounts 4-1:Opening a checking account and understanding how the various forms are used 4-2:Writing checks in proper form 4-3:Endorsing checks by using blank, restrictive, and full endorsements 4-4:Preparing deposit slips in proper form 4-5:Using check stubs or checkbook registers to record account transactions Section II Bank Statement Reconciliation 4-6:Understanding the bank statement 4-7:Preparing a bank statement reconciliation 2 ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

3. 7e 3 EXHIBIT 4-1 Preferred Banking Method – 2011 ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

4. 7e Understanding and Using Checking Accounts 4 deposits Funds added to a checking account.depositor A person who deposits money in a checking account. check or draft A written order to a bank by a depositor to pay the amount specified on the check from funds on deposit in a checking account. ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

5. 7e Understanding and Using Checking Accounts 5 payee The person or business named on the check to receive the money.payor The person or business issuing the check. deposit slip Printed forms with the depositor’s name, address, account number, and space for the details of the deposit. Used to record money, both cash and checks, being added to the checking account. ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. continued

6. 7e 6 EXHIBIT 4-2Check ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

7. 7e 7 EXHIBIT 4-3 Deposit Slip ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

8. 7e Understanding and Using Checking Accounts 8 check stub A bound part of the checkbook, attached by perforation to checks. Used to keep track of the checks written, deposits, and current account balance of a checking account. check register A separate booklet of blank forms used to keep track of all checking account activity. An alternative to the check stub. ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. continued

9. 7e 9 EXHIBIT 4-4 Check Stub with Check ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

10. 7e 10 EXHIBIT 4-5 Check Register ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

11. 7e STEPS 11 STEP 1 Enter the date of the check in the space provided. STEP 2 Enter the name of the person or business to whom the check is written, the payee, in the space labeled pay to the order of. STEP 3 Enter the amount of the check in numerical form in the space with the dollar sign, $. The dollar amount should be written close to the $ so additional digits cannot be added. The cents may be written as xx/100 or.xx. STEP 4 Enter the amount of the check, this time in written form, on the next line down, labeled dollars. As before, the cents should be written as xx/100 or.xx. A horizontal line is then drawn to the end of the line. STEP 5 The space labeled for is used to write the purpose of the check. Although this step is optional, it’s a good idea to use this space so you will not forget why the check was written. STEP 6 The space in the lower right-hand portion of the check is for the signature. FOR WRITING CHECKS IN PROPER FORM ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

12. 7e Endorsing Checks 12 endorsement The signature and instructions on the back of a check instructing the bank on what to do with that check. blank endorsement Used when the payee wants to cash a check. restrictive endorsement Used when the payee wants to deposit a check into his or her account. full endorsement Used when the payee wants to transfer a check to another party. ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

13. 7e 13 EXHIBIT 4-6 Endorsement Space ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

14. 7e 14 EXHIBITS 4-7, 4-8, and 4-9 Types of Endorsements ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

15. 7e 15 EXHIBIT 4-10 Completed Deposit Slip ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

16. 7e 16 EXHIBIT 4-11 Check with Filled-Out Stub ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

17. 7e 17 EXHIBIT 4-12 Filled-Out Check Register ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

18. 7e Understanding Bank Statements 18 bank statement A monthly summary of the activities in a checking account, including debits, credits, and beginning and ending balance. Sent by the bank to the account holder.credits Additions to a checking account, such as deposits and interest earned.debits Subtractions from a checking account, such as service charges. ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

19. 7e 19 EXHIBIT 4-13 Paper and Electronic Bank Statements ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

20. 7e 20 EXHIBIT 4-13 Paper and Electronic Bank Statements (continued) ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

21. 7e Understanding Bank Statements 21 ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. continued nonsufficient fund (NSF) fees A fee charged by the bank when a check is written without sufficient funds in the account to cover the amount of that check. returned item A check that you deposited but was returned to your bank unpaid because the person or business issuing the check had insufficient funds to cover the check.

22. 7e Bank Statement Reconciliation 22 ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. bank statement reconciliation The process of adjusting the bank and checkbook balances to reflect the actual current balance of the checking account. outstanding checks Checks that have been written but have not yet reached the bank and therefore do not appear on the current bank statement. deposits in transit Deposits made close to the statement date, or by mail, which do not clear in time to appear on the current bank statement.

23. 7e Bank Statement Reconciliation 23 ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. adjusted checkbook balance The checkbook balance minus service charges and other debits plus interest earned and other credits. adjusted bank balance The bank balance minus outstanding checks plus deposits in transit. continued

24. 7e 24 EXHIBIT 4-14 Bank Statement Reconciliation Form ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

25. 7e STEPS 25 STEP 1 Calculate the adjusted checkbook balance: a.Look over the bank statement and find any credits not recorded in the checkbook, such as interest earned or notes collected, and add them to the checkbook balance to get a subtotal. b.From the bank statement, locate any charges or debits such as service charges, NSF fees, or returned items that have not been recorded in the checkbook and subtract them from the subtotal from Step 1a. STEP 2 Calculate the adjusted bank balance: a.Locate all of the deposits in transit and add them to the statement balance to get a subtotal. b.Locate and total all outstanding checks and subtract them from the subtotal from Step 2a. STEP 3 Compare the adjusted balances: a.If they are equal, the statement has been reconciled. b.If they are not equal, an error exists that must be found and corrected. The error is either in the checkbook or on the bank statement. FOR PREPARING A BANK STATEMENT RECONCILIATION ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

26. 7e Bank Statement Reconciliation Example 26 ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. On October 3, Henry received his statement showing a balance of $358.97. His checkbook showed a balance of $479.39. There was a check printing charge of $13.95 and interest earned of $6.40. Outstanding checks were for $22.97, $80.36, $19.80, and $4.50. Deposits in transit totaled $240.50. Reconcile the balance.On October 3, Henry received his statement showing a balance of $358.97. His checkbook showed a balance of $479.39. There was a check printing charge of $13.95 and interest earned of $6.40. Outstanding checks were for $22.97, $80.36, $19.80, and $4.50. Deposits in transit totaled $240.50. Reconcile the balance. Checkbook Balance = 479.39 Interest earned = + 6.40 Check printing charge = - 13.95 471.84 Statement Balance = 358.97 Deposits in transit = + 240.50 Outstanding checks = - 127.63 471.84

27. 7e CHAPTER REVIEW PROBLEM 27 ©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. On May 2, Kara received her bank statement showing a balance of $1,637.93. Her checkbook showed a balance of $1,493.90. Outstanding checks were $224.15, $327.80, $122.42, $206.67, and $84.10. There was an $8.00 service charge and the deposits in transit amounted to $813.11. Reconcile Kara’s account.On May 2, Kara received her bank statement showing a balance of $1,637.93. Her checkbook showed a balance of $1,493.90. Outstanding checks were $224.15, $327.80, $122.42, $206.67, and $84.10. There was an $8.00 service charge and the deposits in transit amounted to $813.11. Reconcile Kara’s account. Checkbook Balance = 1,493.90 Service charge = - 8.00 1,485.90 Statement Balance = 1,637.93 Deposits in transit = + 813.11 Outstanding checks = - 965.14 1,485.90