Cash Control and Banking Activities

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Chapter 11

Cash Control and Banking Activities

Making Accounting Relevant Businesses deposit all
cash and checks into a bank account and make
payments using checks. This policy helps to
protect cash from loss or theft.


What other benefit does a business gain from the
use of a checking account?
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Chapter 11

Section 1 Banking Procedures

• What Youll Learn
• What controls a business uses to protect cash and
  why these controls are needed.
• To complete forms used to open a checking
  account.
• To record information on check stubs.
• To prepare a check correctly.

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Section 1 Banking Procedures (cont.)
Chapter 11

Why Its Important Cash is a valuable asset. It
must be protected and processed properly.

• Key Terms
• internal controls
• external controls
• checking account
• check
• depositor
• signature card
• deposit slip

• endorsement
• restrictive endorsement
• payee
• drawer
• drawee
• voiding a check

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Section 1 Banking Procedures (cont.)
Chapter 11

Protecting Cash It is important to protect cash
from loss, waste, theft, forgery, and
embezzlement.



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Section 1 Banking Procedures (cont.)
Chapter 11

Protecting Cash (cont.)
INTERNAL CONTROLS

1. Limit the number of persons handling
cash. 2. Separate accounting tasks involving
cash. 3. Bond (insure) employees who handle cash
or cash records. 4. Use a cash register and a
safe. 5. Deposit cash receipts in the bank
daily. 6. Use checks to make all cash payments.


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Section 1 Banking Procedures (cont.)
Chapter 11

Protecting Cash (cont.)

EXTERNAL CONTROLS
1. Verify signatures on checks. 2. Maintain
records of transactions.


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Section 1 Banking Procedures (cont.)
Chapter 11

Opening a Checking Account

• Allows a person or business to deposit cash in a
  bank and to write checks against the account
  balance.
• A signature card contains the signature(s) of
  the person(s) authorized to write checks on the
  account.
• Printed checks are packaged together in
  checkbooks.

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Section 1 Banking Procedures (cont.)
Chapter 11

Making Deposits to a Checking Account
Businesses make regular deposits to protect the
currency, coins, and checks received.



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Section 1 Banking Procedures (cont.)
Chapter 11

Endorsing Checks
To deposit the check in a checking account, the
depositor endorses the check to transfer
ownership to the bank. An endorsement is an
authorized signature written or stamped on the
back of a check representing a promise to pay.



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Section 1 Banking Procedures (cont.)
Chapter 11

Recording Deposits in the Checkbook


Deposits New Balance

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Section 1 Banking Procedures (cont.)
Chapter 11

Writing Checks
Enter amount Enter date Enter payee Enter
payee Enter date Enter purpose Enter
amount



Enter new balance Sign the check Enter
amount Enter dollar amount in words
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Section 1 Banking Procedures (cont.)
Chapter 11

Voiding a Check

Writing the word Void in large letters across
the front of a check (in ink) is known as voiding
a check.


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Section 1 Banking Procedures (cont.)
Chapter 11

Check Your Understanding

Cash is protected through internal controls and
external controls. Describe controls over cash.


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Chapter 11

Section 2 Reconciling the Bank Account

• What Youll Learn
• Why a business reconciles a bank statement.
• How to journalize and post entries relating to
  bank service charges.
• The accounting procedure for stopping payment on
  a check.
• How to record an NSF check.
• How electronic funds transfer systems enable
  banks to transfer funds quickly and accurately.

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Section 2 Reconciling the Bank Account (cont.)
Chapter 11

Why Its Important Reconciling the bank account
ensures that a business owner is aware of all
transactions that affect cash.

• Key Terms
• bank statement
• canceled checks
• reconciling the bank statement
• outstanding checks
• outstanding deposits

• bank service charge
• stop payment order
• NSF check
• electronic funds transfer system (EFTS)

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Section 2 Reconciling the Bank Account (cont.)
Chapter 11

Proving Cash

General Ledger Cash in Bank account
Checkbook Balance



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Section 2 Reconciling the Bank Account (cont.)
Chapter 11

The Bank Statement
A bank statement is an itemized record of all
the transactions in a depositors account over a
given period, usually a month.



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Section 2 Reconciling the Bank Account (cont.)
Chapter 11

The Bank Statement (cont.)
Ending balance
Beginning balance



Checks paid by bank (cancelled checks)
Other deductions
Deposits into the account
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Section 2 Reconciling the Bank Account (cont.)
Chapter 11

Reconciling a Bank Statement
Documents the differences between the bank
balance and the checkbook balance.



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Section 2 Reconciling the Bank Account (cont.)
Chapter 11

Recording Bank Service Charges
A bank service charge is an expense that is
recorded in the accounting records.

Closing Entry (cont.)
On November 1 Roadrunner received the bank
statement. A bank service charge of 8 appeared
on the statement.

JOURNAL ENTRY

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Section 2 Reconciling the Bank Account (cont.)
Chapter 11

Check Your Understanding

Cash is protected through internal controls and
external controls. Describe controls over cash.