1. Banking and Bookkeeping Unit 1 1-1 Writing Checks 1-2 Posting to a Cashbook 1-3 Making Bank Deposits 1-4 Reconciling a Bank Statement

2. OVERVIEW Banking and bookkeeping is one of the most critical units in this Reference Guide. Banking and bookkeeping is one of the most critical units in this Reference Guide. Each business manager will be actively involved in Each business manager will be actively involved in –writing checks –making weekly deposits –posting to the cashbook

3. OVERVIEW The managers of Pettisville Bank will post to the cashier’s check register, which is similar to the cashbook. The managers of Pettisville Bank will post to the cashier’s check register, which is similar to the cashbook. The balance in the cashbook and the balance in the check register should be the same The balance in the cashbook and the balance in the check register should be the same –unless the manager has recorded an incoming check or cash receipt that has not yet been deposited

4. OVERVIEW Managers who keep careful financial records will make reconciling the bank statement an easy task Managers who keep careful financial records will make reconciling the bank statement an easy task

5. TIMING Pettisville Bank will mail bank statements on July 30 Pettisville Bank will mail bank statements on July 30 –which is at the end of the simulation.

6. BUSINESS FORMS Bank statements Bank statements Cashbook Cashbook Cashier’s check register (bank) Cashier’s check register (bank) Cashier’s check (bank) Cashier’s check (bank) Check register Check register Checks Checks Deposit receipts Deposit receipts Deposit slips Deposit slips

7. 1.1 Writing Checks Helping Managers Helping Managers –The managers of Pettisville Bank will come to the instructor from time to time to ask for the checks that have been received. –They are stored in the file folder labeled Checks.

8. 1.1 Writing Checks When using an electronic check register, you are to keep a “paper and pencil” version too. When using an electronic check register, you are to keep a “paper and pencil” version too. This will provide verification for the accuracy of work and also alleviate problems that occur when employees are absent. This will provide verification for the accuracy of work and also alleviate problems that occur when employees are absent.

9. 1.1 Writing Checks Managers will use the (check column) when reconciling the bank statement at the end of the month that “C” stands for “cleared” Managers will use the (check column) when reconciling the bank statement at the end of the month that “C” stands for “cleared” Maintain the check register in pencil so corrections can be made easily. Maintain the check register in pencil so corrections can be made easily.

10. 1.1 Writing Checks Checks must be written in ink. Checks must be written in ink. Business managers are not to accept checks written in pencil. Business managers are not to accept checks written in pencil. When a check is for an even amount of money, it must include the decimal and two zeros. When a check is for an even amount of money, it must include the decimal and two zeros.

11. 1.1 Writing Checks There are serious consequences for “bouncing” a check. There are serious consequences for “bouncing” a check. Banks charge substantial fees for insufficient funds. Banks charge substantial fees for insufficient funds. The payee may also assess a returned check fee. The payee may also assess a returned check fee.

12. 1.1 Writing Checks A person’s credit rating and reputation in the community suffers too. A person’s credit rating and reputation in the community suffers too. When a company bounces checks within the business community, suppliers are reluctant to sell on credit and will insist on cash payments. When a company bounces checks within the business community, suppliers are reluctant to sell on credit and will insist on cash payments.

13. 1.2 Posting to a Cashbook When using an electronic cashbook keep a “paper and pencil” version. When using an electronic cashbook keep a “paper and pencil” version. This will provide verification for the accuracy of work and also alleviate problems that occur when employees are absent This will provide verification for the accuracy of work and also alleviate problems that occur when employees are absent

14. 1.2 Posting to a Cashbook Recording a check for a promissory note requires the use of two lines in the cashbook rather than one. Recording a check for a promissory note requires the use of two lines in the cashbook rather than one. All managers will make this type of entry when you complete Activity 1.2 on page 87 All managers will make this type of entry when you complete Activity 1.2 on page 87

15. 1.2 Posting to a Cashbook The “incoming cash slip” for each business represents the cash sales for the week in addition to cash receipts from businesses within the community. The “incoming cash slip” for each business represents the cash sales for the week in addition to cash receipts from businesses within the community. The amount shown on the slip is added to any additional cash receipts and recorded as currency on the deposit slip. The amount shown on the slip is added to any additional cash receipts and recorded as currency on the deposit slip.

16. 1.2 Posting to a Cashbook Recording a deposit will take only one line in the check register but many take several lines in the cashbook. Recording a deposit will take only one line in the check register but many take several lines in the cashbook. For example, a business that received three incoming checks in addition to it’s “incoming cash slip” will make four entries in the cashbook For example, a business that received three incoming checks in addition to it’s “incoming cash slip” will make four entries in the cashbook

17. 1.2 Posting to a Cashbook The checks will be listed on three separate lines, and the “incoming cash slip” will be listed as cash receipts on a fourth line. The checks will be listed on three separate lines, and the “incoming cash slip” will be listed as cash receipts on a fourth line. Only the total of the deposit will be recorded in the check register. Only the total of the deposit will be recorded in the check register. The word deposit is never written in the cashbook. The word deposit is never written in the cashbook.

18. 1.2 Posting to a Cashbook The last entry in the cashbook at the end of July should be the bank service charge. The last entry in the cashbook at the end of July should be the bank service charge. When posting to manual cashbooks use a ruler when balancing the cashbook. When posting to manual cashbooks use a ruler when balancing the cashbook.

19. 1.2 Posting to a Cashbook The total of the RECEIPTS column equals the total of the CASH IN column and that the total of the PAYMENTS column equals the total of the CASH OUT column. The total of the RECEIPTS column equals the total of the CASH IN column and that the total of the PAYMENTS column equals the total of the CASH OUT column. –Receipts = Cash IN –Payments = Cash OUT

20. 1.2 Posting to a Cashbook Balancing an electronic cashbook is a simple procedure – just click on the checkbox titled Click here to balance Balancing an electronic cashbook is a simple procedure – just click on the checkbox titled Click here to balance

21. 1.2 Helping Managers Manger 1 at Pettisville Bank Manger 1 at Pettisville Bank Do NOT accept “For Deposit” checks that have not been properly endorsed. Do NOT accept “For Deposit” checks that have not been properly endorsed.

22. 1.2 Career Paths The concepts and skills taught in Unit 1 would be essential for success in the following careers The concepts and skills taught in Unit 1 would be essential for success in the following careers –Auditor –Bank teller –Bookkeeper cashier –Credit authorizer –Financial adviser –Loan counselor –Loan officer

23. 1.2 Career Paths Identify a minimum of three other careers where these concepts and skills would be important. Identify a minimum of three other careers where these concepts and skills would be important.

24. 1.3 Making Bank Deposits Manager Tips Manager Tips –The ABA number on checks deposited is always 56-25 because all checks are drawn on Pettisville Bank. –List the payee’s name on the deposit slip rather than the ABA number.

25. 1.3 Helping Managers By July 9, all businesses will have made the first deposit. By July 9, all businesses will have made the first deposit. –Managers should double check to see that the deposit in the check register and that the balance in the check register equals the balance in the cashbook

26. 1.3 Helping Managers Pettisville Bank Pettisville Bank –Manager 1 should use a calculator to verify the total on each deposit slip before writing the receipt. –All checks for deposit should be properly endorsed and be listed on the back of the deposit slip. –Only the total of the checks is listed on the front of the deposit slip.

27. 1.4 Reconciling a Bank Statement: Helping Managers If there are no customers to serve at the drive- in window, Manager 1 should be recording checks and deposits on bank statements and in the checking account register. If there are no customers to serve at the drive- in window, Manager 1 should be recording checks and deposits on bank statements and in the checking account register. The DAILY ACTIVITIES will not tell the manager to do this. The DAILY ACTIVITIES will not tell the manager to do this. It is the manager’s responsibility to do this on a regular basis It is the manager’s responsibility to do this on a regular basis

28. 1.4 Reconciling a Bank Statement: Helping Managers The Denim Maker is the only business that will have an electronic funds transfer, and it should already have been recorded in the check register. The Denim Maker is the only business that will have an electronic funds transfer, and it should already have been recorded in the check register. The EFT is for payroll. The EFT is for payroll. Denim Maker: make sure that a manager has deducted gross pay from the check register and the cashbook. Denim Maker: make sure that a manager has deducted gross pay from the check register and the cashbook.

29. 1.4 Reconciling a Bank Statement: Helping Managers If Pettisville Bank is using a manual bank statement, the TOTAL WITHDRAWL AMOUNT does not include the service charge. If Pettisville Bank is using a manual bank statement, the TOTAL WITHDRAWL AMOUNT does not include the service charge.

30. 1.4 Reconciling a Bank Statement: Helping Managers Plan to set aside extra time to balance the bank statement. Plan to set aside extra time to balance the bank statement. The problem is usually a result of inaccurate entries in the check register rather than errors made by the bank. The problem is usually a result of inaccurate entries in the check register rather than errors made by the bank.

31. 1.4 Reconciling a Bank Statement: Manager Tips A very common error manager’s make on the bank reconciliation is recording outstanding deposits on the wrong side of the form. A very common error manager’s make on the bank reconciliation is recording outstanding deposits on the wrong side of the form. If an outstanding deposit is listed on the line titled ADD DEPOSITS NOT ALREADY ENTERED IN THE CHECKBOOK, the two balances at the bottom of the page will equal but obviously will not be correct. If an outstanding deposit is listed on the line titled ADD DEPOSITS NOT ALREADY ENTERED IN THE CHECKBOOK, the two balances at the bottom of the page will equal but obviously will not be correct.

32. 1.4 Reconciling a Bank Statement: Manager Tips Record service charges and other bank charges in the check register and the cashbook after the bank reconciliation is complete. Record service charges and other bank charges in the check register and the cashbook after the bank reconciliation is complete.

33. 1.4 Reconciling a Bank Statement: Manager Tips Bank service charges vary depending on the balance in the drawer’s account and the number of checks written. Bank service charges vary depending on the balance in the drawer’s account and the number of checks written. Some customers do not pay a fee for a service charge. Some customers do not pay a fee for a service charge. For example, a bank may offer free checking to students, senior citizens, or customers who maintain a set minimum balance. For example, a bank may offer free checking to students, senior citizens, or customers who maintain a set minimum balance. To simplify procedures at Pettisville Bank, all monthly service charges for all businesses are $12.95. To simplify procedures at Pettisville Bank, all monthly service charges for all businesses are $12.95.

34. 1.4 Reconciling a Bank Statement: Manager Tips At some banks customers earn interest on their checking accounts. At some banks customers earn interest on their checking accounts. When reconciling the bank statement, interest earned should be added to the checkbook balance. When reconciling the bank statement, interest earned should be added to the checkbook balance.

35. 1.4 Reconciling a Bank Statement: Manager Tips Pettisville Bank is a commercial bank. Pettisville Bank is a commercial bank. A commercial bank is also called a full- service bank because it offers a wide range of banking services. A commercial bank is also called a full- service bank because it offers a wide range of banking services.

36. 1.4 Reconciling a Bank Statement: Manager Tips Credit union: a financial institution owned by employees of a business or an organization Credit union: a financial institution owned by employees of a business or an organization Savings and loan: a bank that specializes in savings accounts and making mortgage loans Savings and loan: a bank that specializes in savings accounts and making mortgage loans Trust company: a bank that specializes in managing people’s money and property for them Trust company: a bank that specializes in managing people’s money and property for them

37. 1.4 Reconciling a Bank Statement: Manager Tips Protection of Deposits. Protection of Deposits. –The Federal Deposit Insurance Corporation insures deposits in commercial banks. –Almost all commercial banks are members of the FDIC. –The Federal Reserve System (Fed) regulates its member banks to assure the safety of depositors’ money. –All national banks are required to join the FRS, and the state banks may join.