cash control and banking activities
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Cash Control and Banking ActivitiesMaking Accounting RelevantBusinesses deposit all cash and checks into a bank account and make payments using checks. This policy helps to protect cash from loss or theft.
Protecting Cash
It is important to protect cash
from loss, waste, theft, forgery,
and embezzlement.
Section 1 Banking Procedures (cont'd.)
Protecting Cash (cont'd.)
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.
Section 1 Banking Procedures (cont'd.)
INTERNAL CONTROLS
Protecting Cash (cont'd.)
1. Verify signatures on checks.
2. Maintain records of
transactions.
Section 1 Banking Procedures (cont'd.)
EXTERNAL CONTROLS
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.
Section 1 Banking Procedures (cont'd.)
Making Deposits to a Checking Account
Businesses make regular deposits to protect the currency, coins, and checks received.
Section 1 Banking Procedures (cont'd.)
Endorsing ChecksTo 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 checkrepresenting a promise to pay.
Section 1 Banking Procedures (cont'd.)
Endorsing a check• A check CANNOT be cashed until its been endorsed. • To endorse a check, the payee named on the face of the
check simply signs the back of the check in black/blue ink.– Must be signed in the area provided! You can’t just go crazy on
the back of the check.• There are three major types of endorsements.
– Blank Endorsement – just sign your name– Special Endorsement – used when you are signing over the check
to a third person– Restrictive Endorsement – used to limit the use of a check. For
example, you can say “for deposit only” above your signature. This means that the check cannot be cashed … only deposited.
• Examples of different endorsement types:– http://voc.ed.psu.edu/projects/CAPS/27CAPS.html
Endorsing Checks (continued)
Recording Deposits in the Checkbook
Section 1 Banking Procedures (cont'd.)
Deposits
New Balance
Writing Checks
Section 1 Banking Procedures (cont'd.)
Enter amount
Enter amountEnter date
Enter payeeEnter purpose
Enter payeeEnter date
Enter amount
Enter new balance Sign the checkEnter dollar amount in words
Voiding a Check
Section 1 Banking Procedures (cont'd.)
Writing the word “Void” in
large letters across the front of a
check (in ink) is known as voiding
a check.
Proving Cash
Section 2 Reconciling the Bank Account (cont'd.)
General Ledger
Cash inBank account
CheckbookBalance=
The Bank Statement
A bank statement is an
itemized record of all the
transactions in a depositor’s
account over a given period,
usually a month.
Section 2 Reconciling the Bank Account (cont'd.)
The Bank Statement (cont'd.)
Section 2 Reconciling the Bank Account (cont'd.)
Beginning balance
Checks paid by bank (cancelled checks)
Otherdeductions
Deposits intothe account
Ending balance
Reconciling a Bank StatementDocuments the differences between
the bank balance and the checkbook balance.
Section 2 Reconciling the Bank Account (cont'd.)
Business Transaction (cont’d.)
JOURNAL ENTRY
On November 1, Roadrunner received the bank statement. A bank service charge of $8 appeared on the statement.
Section 2 Reconciling the Bank Account (cont'd.)
Recording Bank Service ChargesA bank service charge is an expense
that is recorded in the accounting records.
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