1. How Businesses Use Cash Chapter 6 Cash Control Systems

2. Cash Most businesses refer to money as Cash Major Cash payments by check Minor Cash payments may be made EX: postage, some supplies Read pg 119- Answer Questions

3. 6.1 Checking Accounts Check- a business form ordering a bank to pay cash from a bank account Checking Account- a bank account from which payments can be ordered must have a signature on file

4. Checking Accounts Deposits: deposit slip- lists cash and checks to be placed in account has date, name of bank, account number, totals given a receipt after deposit is made Record Deposit on check stub

5. Endorsements: Endorsement- a signature or stamp on the back of the check transferring ownership Should be signed as it appears on front of check Blank Endorsement- only has endorser’s signature Special Endorsement- indicates a new owner (Pay to the order of and signatures) Restricative Endorsement- states restrictions Stamps/ Deposit Only

6. FYI The Federal Deposit Insurance Corporation (FDIC) protects depositors from banks that fail. Bank deposits are generally covered to $100,000 per depositor**** ****Some banks have increased this

7. Completed Check Stub Write the amount of check in the space with the $ Write the date Write to whom the check is to be paid Record Purpose Write check amount Calculate new account balance

8. Completed Check Write the date Future dated checks are called postdated checks. Banks will not accept these until the date on the check Write to whom the check is to be paid Write the amount in numerals Write the amount in words Write the purpose Sign the check

9. Recording a Voided Check IF you make a mistake, you must void the check and prepare a new check Since all checks are numbered, each check must be accounted for and recorded IN GENERAL JOURNAL Date, VOID, Ck # in Doc No, Check in Post Ref, Dash in both Debit and Credit columns

10. 6.1 Review Terms Review Audit Your Understanding #1-3 Work Together #4-7 On Your Own #8-11

11. 6.2 Bank Reconciliation Bank Statements- a report of deposits, withdrawals and bank balances that are sent to the depositor Checks- the amount of each check is deducted from depositor’s account *Copies of checks are sent with the statement Outstanding Checks- issued but not yet reported Outstanding Deposits- made to the bank but not yet shown on statement

12. Bank Statements, cont. When a bank statement is received- depositor should check for accuracy Bank records may differ from depositor’s records REASONS for the difference: Service charge may not have been recorded Outstanding deposits not on statement Outstanding checks not on statement Depositor math or recording error

13. Bank Statement Reconciliation To reconcile a bank statement- verify the info on the bank statement matches that in the checkbook Write the date on which the reconciliation is prepared, August 31, 20- In the left column- list the balance brought forward on Check Stub, the next unused check stub List any bank charges Write the adjusted check stub balance Write the ending balance shown on the bank statement Write the date and the amount of any outstanding deposits. Add, write subtotal List outstanding checks, add, calculate adjusted balance and compare

14. Recording a Service Charge The bank deducts service charges at the end of each month This must be recorded as a cash payment, even though a check is not written Write the service charge on the check stub under other Write the amount Calculate and record new balance

15. Journalizing a Bank Service Charge Service Charge is a cash payment with no check Encore prepares a memorandum as the Source Document These charges are small, therefore are listed as Miscellaneous Expense and is Debited, while Cash is credited

16. 6.2 Review p. 129 Audit Your Understanding #1-2 Work Together # 3-5 On Your Own # 6-8

17. 6.3 Dishonored Checks and Electronic Banking Dishonored Check- a bank refuses to pay a check check appears altered signature does not math person on file amount in figures doesn’t match words Post dated Stop Payment Insufficient funds

18. Dishonored Checks Checks written from accounts with insufficient funds is ILLEGAL! Altering or Forging a Check is Illegal May affect credit rating Will be charged a fee plus the amount of the dishonored check

19. Recording the Dishonored Check Dishonored check written under OTHER Amount of check PLUS service fee Calculate new balance

20. Journalize a Dishonored Check November 29. Received notice from bank of a dishonored check from Learn N’ Play, $35.00, plus $15.00 fee; total $50.00. Memorandum No. 55 DATE Debit A/R (Why?) Credit Cash (Why? Source Document

21. Electronic Funds Transfer Electronic Funds Transfer- computerized cash payment system Usually password protected in order to transfer funds (Why?) Journalized the same as cash (using a Memorandum instead of a check); Recorded as OTHER on Check Stub September 2. Paid Cash on account to Kelson Enterprises, $350.00, using EFT. Memorandum No. 10

22. Journalizing a Debit Card Transaction Debit Card- a bank card, that is used for making purchases, that automatically deducts amount from account September 5. Purchased supplies, $24.00, using debit card. Memorandum No. 12. Journalized as Cash; Memorandum used; Recorded on Stub as Other

23. 6.3 Review p. 134 Terms Review Audit Your Understanding #1-3 Work Together #4 Work Together #5

24. 6.4 Petty Cash Petty Cash- amount of cash kept on hand and used for making small payments To establish- Journalize the following way: Debit- Petty Cash (increase Petty Cash on hand) Credit- Cash (decrease cash in this account) Source Document is a check

25. Petty Cash Slip Petty Cash Slip- a form showing proof of a petty cash payment Includes: Petty Cash Slip #, Date of payment, to whom it was paid, Reason, amount, account that needs to be recorded and signature of who approved this Slips are held until amount is replenished No Journalizing for individual slips/payments

26. Replenishing Petty Cash As petty cash is paid out, amount in petty cash box decreases and eventually needs to be replenished Before it can be replenished, proof of fund must be completed The last line of the proof must show the same total as the original petty cash balance August 31. Paid Cash to replenish the petty cash fund, $12.00: miscellaneous expense, $7.00; advertising, $5.00. Check No 12

27. 6.4 Review p. 138 Terms Review Audit Your Understanding #1-2 Work Together #3 On Your Own #4