Presentation on theme: "Cash Control and also Banking Activities Chapter 11. Protecting Cash Cash dangers are ever present: loss, waste, theft, forgery, and also embezzlement Internal."— Presentation transcript:




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1 Cash Control and also Banking Activities Chapter 11

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2 Protecting Cash Cash risks are ever before present: loss, waste, theft, forgery, and embezzlement Internal Control Protection 1.Limiting the number of persons dealing with cash 2.Separating accounting work entailing cash (receipt, payments, records) 3.Bonding (insuring) employees that take care of cash or cash records 4.Using a cash register and also a safe 5.Depositing cash in the bank daily 6.Making all cash payments by inspect 7.Reconciling the financial institution statement External Control Protection – the steps and also steps provided outside the company to safeguard cash and other assets. Ex. Banking controls Pg 278

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3 The Checking Account A checking account allows a perchild or service to deposit cash/checks in a bank and to create checks versus the account balance. A check is a composed order from a depositor informing the bank to pay a proclaimed amount of cash to the perboy or organization named on the examine A depositor is a perboy or organization that has cash on deposit in a financial institution (account holder) Pg 278

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4 Opening a Checking Account *Shop roughly to find an account that fits your requirements and that is affordable Signature Card – all new account holders are compelled to sign a signature card. It contains the signatures of the person(s) authorized to compose checks on the account. It is offered to compare signatures on checks if tbelow is a question of fraud – *The signature card likewise acts as your contract via the financial institution regarding your individual indevelopment and also your agreement to follow the rules of the account Pg 279

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5 Checks The Checkbook – Using checks via preprinted numbers helps a service keep track of every check that is written The ABA Number – On all prepublished checks is a MICR encoded number at the peak and also bottom of each examine. It identifies the bank the account is drawn off of and enables for digital handling of checks to speed the process Pg 279

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6 Making Deposits A business provides continual deposits to safeguard the money, coins and also checks it receives. Deposit Slips are made and offered to the bank in addition to the items being deposited. It details what is being deposited, variety of items, and quantities. (one more way to regulate cash flow) Deposit slips consist of 1.The Date 2.The amount of Cash 3.A list of Checks 4.A complete for the deposit

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7 Endorsing Checks Endorsement is an authorized signature composed or stamped on the ago of a examine that transfers ownership of the inspect. A company deserve to use 3 kinds of endorsements 1.Blank Endorsement – consists of just the signature or stamp of the depositor. It transfers ownership of the inspect, however it doesn’t not indicate that the new owner is. This is not a safe endorsement bereason the check have the right to be cashed by anyone that presents it for payment. 2.Special Endorsement – transfers ownership of the examine to a details person or business 3.Restrictive Endorsement – transfers ownership to a specific owner and then boundaries, or restricts, exactly how a examine might be handled even after ownership is moved. To protect checks being camelted by anyone else, Roadrunner uses a restrictive endorsement that reads “For Deposit Only”. It is stamped on the ago of each check as soon as it is got.

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8 3 Endorsements Pg 281

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9 Recording Deposits The inspect stubs in the check book are a document of the Cash In Bank account. The completed stub mirrors all checking account transactions: payments, deposits, and also bank organization charges Process of recording deposits: 1.Get in the day of the deposit on the examine stub of the next unsupplied inspect on the deposit line 2.Get in the total amount of the deposit on the very same line in the dollars and cents column 3.Add the deposit quantities to the amount on the Balance Brought Forward line and put that amount on the Total line. This is the brand-new checkbook balance. Pg 281

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10 Writing Checks Always create checks in ink Always fill out a inspect completely Complete the inspect stub BEFORE writing the check – Because the stub serves as a long-term record of the check, it must be finish and also precise – The top of the examine stub is dedicated for indevelopment about the check being composed – The bottom of the check stub is for maintaining track of existing balance and deposits made to the account

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11 Parts of a Check Date – This is the day you compose the examine – Blog post dating is creating a examine and also dating for a day in the future. Banks perform not have to honor the short article day. Once a inspect is signed, it is valid and can be processed. Payee – The Pay To The Order Of line – This is where the account holder designates who has the rights to the amount on the check Number Amount – The amount of the inspect signified in numeric fashion Legal Line – The amount of the inspect composed out in words. *If tright here is a difference between the number amount and also the legal line, the financial institution is obligated to take the amount created on the legal line. Memo Line – This is an optional area for maintaining track of notations about the examine Signature Line – Wright here the account holder indications their name authorizing the financial institution to pay the amount on the examine to the payee. Drawer – the person that indicators the examine Drawee – the perkid who the check is written to Pg 282

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12 Check and also Check Stub Pg 282

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13 Voiding A Check If an error is made while composing a check, the check is noted “Void” in huge letters throughout the front (in ink). The examine then cannot be used however is still maintained for document maintaining purposes. Never before throw ameans a voided examine. When a inspect is voided, the stub is likewise voided Pg 282

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15 Proving Cash – The balance in the Cash in Bank account in the general ledger is frequently compared through the balance in the checkbook. – This is part of interior control and will certainly offer an early indication if somepoint is wrong – Accountants need to take into consideration: outstanding checks, exceptional deposits, and financial institution fees *Outstanding implies not yet received *Bank fees/organization charges – Normally charged to the account when a month based upon the rules of the certain account

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16 Finding and Correcting Errors Possible errors – Faulty enhancement and/or subtraction – Faientice to document a examine or deposit – Mistake in copying the balance forward amount to the following inspect stub Correcting errors – If the error is in the checkbook, make the correction on the following unprovided examine stub Make notations on both the original check stub through the error as to where the correction is made and also then on the correction is made on the indicated check stub

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17 The Bank Statement Bank Statement – an itemized record of all transactions in a depositor’s account over a offered period-commonly a month. – Checking account balance at the beginning of the period – List of all deposits made throughout the duration – List of all checks passist by the financial institution throughout the period – List of any various other deductions from the depositor’s account – Checking account balance at the finish of the duration

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18 You get… Canceled Checks – The actual examine you created that has been processed by the bank and stamped Canceled. It can act as proof of purchase/payment Imaged Checks (Truncated) – duplicates of the original inspect, commonly printed smaller sized and a number of to a page Pg 285

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19 Reconciliation Form Also recognized as a reconciling the financial institution statement. A worksheet (typically printed on the ago of the financial institution statement) that the account holder uses to make sure their publications and the financial institutions records complement. The reconciliation form only has those transactions on it that have passed through the banks handling system. The user demands to account for outstanding items The reconciliation will include indevelopment not previously available to the account holder and must be added/subtracted to the business’ books – Service Fees – Interemainder Earned Pg 285

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21 Pg 287

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22 Journalizing Service Charges Fees are a part of doing organization and should be accounted for as an price. If fees are nominal, the majority of businesses account for them in a Miscellaneous Expense account Earning Interest – If a company has an account where they earn interest, they will certainly have actually an account put up to account for what they earn.

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Pg 286

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23 Special Banking Procedures Stop Payment on a Check – revokes the bank’s order to pay the payee of the check. – Typically has an extensive fee so this have to not be done lightly Pg 289

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24 Special Banking Procedures Recording NSF Checks – Non Sufficient Funds (dishonored or bounced check) – this is once a examine cannot be spanned by the funds accessible in the account – If your service bounces a examine, you will certainly sustain a huge fee and threat a report to your crmodify company and/or the financial institution cshedding your account – If your business deposits a check that is went back for non-enough funds then you must make note on the next unused check stub and subtract the amount from the present balance in the account

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25 Electronic Funds Transfer System Knvery own as EFT or EFTS These are digital transfers of money from one account to one more without the use of a paper document – Direct Payroll Deposit – Automated Bill Payments – Bankcards – Automated Teller Machines (ATMs) – Bank by Phone – Online Banking Businesses that use EFTs need to have actually actions in area for keeping track of and recording these tasks

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