accounting chapter 5 1 cash transactions money = cash in accounting businesses have large volumes of...

Accounting Chapter 5

1

CASH TRANSACTIONSCASH TRANSACTIONS

Money = cash in accounting Businesses have large volumes of cash transactions

both paid out and received Large payments made/received by checks Small payments made/received by cash Recording errors occur with large volumes of transactions

Control systems needed to manage/track money, reduce errors Accounting records – ledgers and journals Checking Account Monthly bank statements

LESSON 5-1LESSON 5-1

Checking Accounts

CHECKING ACCOUNT CONTROL SYSTEMCHECKING ACCOUNT CONTROL SYSTEM

Checking account: a bank account from which payments can be ordered by a depositor

Check: a business form ordering a bank to pay cash from a bank account

Deposit slip: prepared each time cash or checks are placed in a bank account

All deposits are entered on the next unused check stub

RECEIVING PROCESSRECEIVING PROCESSYou receive an investment from owner for $5000•Step 1: You issue a receipt to the owner

• You keep the stub (tear along perforation)• Receipt given to Kim

receiptreceipt

6

• Step 2: Enter deposit on the next unused check stub• Step 3: Calculate a new Subtotal

THE PROCESSTHE PROCESS

• Step 4: Journalize the transaction in the journal• Step 5: Post it to the ledger of accounts


• Step 6: Take money (checks & cash) to the bank

At the Bank:• Complete a Deposit slip: prepared each time cash

or checks are placed in a bank account• Endorse (sign) the back of the checks being cashed• Bank issues a receipt for deposit

• Receipt not entered in journal (done step 5)


Deposit Slips, Completing Check Stubs, Endorsements and Completing a Check, Recording a Voided Check

STEP 7STEP 7

PARTS OF A CHECKPARTS OF A CHECK

CheckNumber

ABA Number

Maker’s Name and Address Date

Payee Numeric Amount

WrittenAmount

Signature

Routing Numbers

Memo

Account Number

MAKE DEPOSITSMAKE DEPOSITS

Deposit slip used to deposit or withdraw cash from account - Found in back of checkbook

Enter total cash, individual checks and sum for subtotal Checks being cashed must be “endorsed”

TechKnow ConsultingPhone: 701-746-5555

4567 West 17th AveGrand Forks, ND 58201

Date: 20 Sign here for less cash in Teller’s presence

Dollars Cents

MAKE DEPOSITSMAKE DEPOSITS



Date: 20 Sign here for less cash in Teller’s presence

Dollars Cents

Went to the bank on October 1, 2010. Deposited $400.00 check from ABA 24-174 $850.00 check from ABA 12-510 $1772.50 in cash (TOTAL = 3022.50)

123003175 43’’452119’’

RECORD DEPOSIT ON CHECK STUBRECORD DEPOSIT ON CHECK STUB



NO. 2 24-317 1230

Pay to TheOrder of $

Dollars

Memo

123003175 43’’452119’’

NO. 2 $Date 20 To

For

BAL BRO’T FOR’D …………

AMT DEPOSITIED ..

SUBTOTAL …………………

OTHER

SUBTOTAL………………….

AMT. THIS CHECK…………..

BAL. CAR’D FOR’D…………

Record Oct 1 deposit of $3022.50

4600 00

ENDORSEMENTENDORSEMENT::

Endorsement: A signature or stamp on the back of a check transferring ownership – cashing a check

Three types of endorsements: Blank endorsement - only of the endorser’s signature Special endorsement - indicating a new owner of the check

Transfer check from you to someone else to cash

Restrictive endorsement - restricting further transfer of a check’s ownership

Limits use of check Ex: for deposit only

ENDORSEMENTENDORSEMENT::

Blank endorsement: If lost with a blank endorsement, anyone can cash it Only done while standing at the bank ready to deposit Contains just a signature

Special Endorsement Transfer to new owner - known as endorsement in full Ex: Pay to the order of John Smith, Kim Parker. (check written

on front to Kim, Kim signs it over to John) Only the person named in the special endorsement can cash it

(only John Smith)

Restrictive endorsement Can only be used for what is stated on the back of the check EX: For deposit only to the account of TechKnow Consulting

ENDORSEMENTSENDORSEMENTS

Kim signs this check over to Eleanor Johnson

Blank EndorsementBlank Endorsement

Restrictive EndorsementRestrictive Endorsement

Special EndorsementSpecial Endorsement

Kim wants this for deposit only into TechKnow Consultings Account.

WRITING CHECKSWRITING CHECKS




NO. 1 24-317 1230


Dollars

Memo

123003175 43’’452119’’

NO. 1 $Date 20 To

For


AMT DEPOSITIED ..


OTHER




Aug. 3, wrote Check NO 1 to Port City Supply Company for $275.00 for supplies Complete check stub first for your records

00 005000 005000 00




NO. 1 24-317 1230


Dollars

Memo

123003175 43’’452119’’

NO. 1 $Date 20 To

For


AMT DEPOSITIED ..


OTHER




Aug. 3, wrote Check NO 1 to Port City Supply Company for $275.00 for supplies. Complete check stub for your records Complete Check

00 005000 005000 00

5000 00 275 004725 00

275.00 August 3 10Port City Supply Company

Supplies

8 1 10



NO. 1 24-317 1230


Dollars

Memo

123003175 43’’452119’’

NO. 1 $Date 20 To

For


AMT DEPOSITIED ..


OTHER




00 005000 005000 00

5000 00 275 004725 00

275.00 August 3 10Port City Supply Company

Supplies

8 1 10

Checks written in error/mistake must be tracked Checks are voided and journalized

Void is written across both the check and the check stub Check number entered as a transaction in the Journal

VOIDED CHECKSVOIDED CHECKS

Void

Void

1. Record the date.

2. Enter the word VOID in the Account Title column

3. Enter the check number for Doc NO.

4. Place a check mark in the Post. Ref. column

5. Place a dash in the Cash Credit column

RECORDING A VOIDED CHECKRECORDING A VOIDED CHECK

Checking Account FactsChecking Account Facts

Postdated check: a check with a future date on it. Most banks will not accept postdated checks

Most checks are only good for 6 months Checking Account Control Systems

Assist with ethical behaviors of employees Code of Conduct: a statement that guides the ethical behavior

of a company and its employees

TERMS REVIEWTERMS REVIEW

code of conduct checking account endorsement blank endorsement special endorsement restrictive endorsement postdated check

accounting chapter 5 1 cash transactions money = cash in accounting businesses have large volumes of...

Documents

time cash

cash total

check transfer check

money checks cash

cash transactionsmoney

blank endorsement

check stubrecord

checkbookenter total