Banking and Banking and BookkeepingBookkeeping

Unit 1Unit 11-1 Writing Checks1-1 Writing Checks

1-2 Posting to a Cashbook1-2 Posting to a Cashbook

1-3 Making Bank Deposits1-3 Making Bank Deposits

1-4 Reconciling a Bank Statement 1-4 Reconciling a Bank Statement

OVERVIEWOVERVIEW

Banking and bookkeeping is one Banking and bookkeeping is one of the most critical units in this of the most critical units in this Reference Guide. Reference Guide.

Each business manager will be Each business manager will be actively involved in actively involved in – writing checkswriting checks– making weekly depositsmaking weekly deposits– posting to the cashbookposting to the cashbook

OVERVIEWOVERVIEW

The managers of Pettisville Bank The managers of Pettisville Bank will post to the cashier’s check will post to the cashier’s check register, which is similar to the register, which is similar to the cashbook.cashbook.

The balance in the cashbook and The balance in the cashbook and the balance in the check register the balance in the check register should be the same should be the same – unless the manager has recorded an unless the manager has recorded an

incoming check or cash receipt that incoming check or cash receipt that has not yet been deposited has not yet been deposited

OVERVIEWOVERVIEW

Managers who keep careful Managers who keep careful financial records will make financial records will make reconciling the bank statement an reconciling the bank statement an easy taskeasy task

TIMINGTIMING

Pettisville Bank will mail bank Pettisville Bank will mail bank statements on July 30statements on July 30– which is at the end of the simulation. which is at the end of the simulation.

BUSINESS FORMSBUSINESS FORMS

Bank statementsBank statements CashbookCashbook Cashier’s check register (bank)Cashier’s check register (bank) Cashier’s check (bank)Cashier’s check (bank) Check registerCheck register ChecksChecks Deposit receiptsDeposit receipts Deposit slipsDeposit slips

1.1 Writing Checks1.1 Writing Checks

Helping ManagersHelping Managers– The managers of Pettisville Bank will The managers of Pettisville Bank will

come to the instructor from time to come to the instructor from time to time to ask for the checks that have time to ask for the checks that have been received. been received.

– They are stored in the file folder They are stored in the file folder labeled labeled ChecksChecks. .

1.1 Writing Checks1.1 Writing Checks

When using an electronic check When using an electronic check register, you are to keep a “paper register, you are to keep a “paper and pencil” version too. and pencil” version too.

This will provide verification for This will provide verification for the accuracy of work and also the accuracy of work and also alleviate problems that occur alleviate problems that occur when employees are absent.when employees are absent.

1.1 Writing Checks1.1 Writing Checks

Managers will use the (check Managers will use the (check column) when reconciling the column) when reconciling the bank statement at the end of the bank statement at the end of the month that “C” stands for month that “C” stands for “cleared”“cleared”

Maintain the check register in Maintain the check register in pencil so corrections can be made pencil so corrections can be made easily.easily.

1.1 Writing Checks1.1 Writing Checks

Checks must be written in ink. Checks must be written in ink. Business managers are not to Business managers are not to

accept checks written in pencil.accept checks written in pencil. When a check is for an even When a check is for an even

amount of money, it must include amount of money, it must include the decimal and two zeros.the decimal and two zeros.

1.1 Writing Checks1.1 Writing Checks

There are serious consequences There are serious consequences for “bouncing” a check. for “bouncing” a check.

Banks charge substantial fees for Banks charge substantial fees for insufficient funds.insufficient funds.

The payee may also assess a The payee may also assess a returned check fee.returned check fee.

1.1 Writing Checks1.1 Writing Checks

A person’s credit rating and A person’s credit rating and reputation in the community reputation in the community suffers too.suffers too.

When a company bounces checks When a company bounces checks within the business community, within the business community, suppliers are reluctant to sell on suppliers are reluctant to sell on credit and will insist on cash credit and will insist on cash payments.payments.

1.2 Posting to a 1.2 Posting to a CashbookCashbook When using an electronic When using an electronic

cashbook keep a “paper and cashbook keep a “paper and pencil” version.pencil” version.

This will provide verification for This will provide verification for the accuracy of work and also the accuracy of work and also alleviate problems that occur alleviate problems that occur when employees are absentwhen employees are absent

1.2 Posting to a 1.2 Posting to a CashbookCashbook Recording a check for a Recording a check for a

promissory note requires the use promissory note requires the use of two lines in the cashbook of two lines in the cashbook rather than one. rather than one.

All managers will make this type All managers will make this type of entry when you complete of entry when you complete Activity 1.2 on page 87Activity 1.2 on page 87

1.2 Posting to a 1.2 Posting to a CashbookCashbook The “incoming cash slip” for each The “incoming cash slip” for each

business represents the cash sales business represents the cash sales for the week in addition to cash for the week in addition to cash receipts from businesses within the receipts from businesses within the community. community.

The amount shown on the slip is The amount shown on the slip is added to any additional cash added to any additional cash receipts and recorded as currency on receipts and recorded as currency on the deposit slip.the deposit slip.

1.2 Posting to a 1.2 Posting to a CashbookCashbook Recording a deposit will take only Recording a deposit will take only

one line in the check register but one line in the check register but many take several lines in the many take several lines in the cashbook. cashbook.

For example, a business that For example, a business that received three incoming checks in received three incoming checks in addition to it’s “incoming cash slip” addition to it’s “incoming cash slip” will make four entries in the will make four entries in the cashbookcashbook

1.2 Posting to a 1.2 Posting to a CashbookCashbook The checks will be listed on three The checks will be listed on three

separate lines, and the “incoming separate lines, and the “incoming cash slip” will be listed as cash cash slip” will be listed as cash receipts on a fourth line.receipts on a fourth line.

Only the total of the deposit will Only the total of the deposit will be recorded in the check register. be recorded in the check register.

The word deposit is never written The word deposit is never written in the cashbook.in the cashbook.

1.2 Posting to a 1.2 Posting to a CashbookCashbook The last entry in the cashbook at The last entry in the cashbook at

the end of July should be the bank the end of July should be the bank service charge.service charge.

When posting to manual When posting to manual cashbooks use a ruler when cashbooks use a ruler when balancing the cashbook.balancing the cashbook.

1.2 Posting to a 1.2 Posting to a CashbookCashbook The total of the RECEIPTS column The total of the RECEIPTS column

equals the total of the CASH IN equals the total of the CASH IN column and that the total of the column and that the total of the PAYMENTS column equals the PAYMENTS column equals the total of the CASH OUT column.total of the CASH OUT column.– Receipts Receipts = = Cash INCash IN– Payments Payments = = Cash OUTCash OUT

1.2 Posting to a 1.2 Posting to a CashbookCashbook Balancing an electronic cashbook Balancing an electronic cashbook

is a simple procedure – just click is a simple procedure – just click on the checkbox titled on the checkbox titled Click here Click here to balance to balance

1.2 Helping Managers1.2 Helping Managers

Manger 1 at Pettisville BankManger 1 at Pettisville Bank Do NOT accept “Do NOT accept “For DepositFor Deposit” ”

checks that have not been checks that have not been properly endorsed.properly endorsed.

1.2 Career Paths1.2 Career Paths

The concepts and skills taught in The concepts and skills taught in Unit 1 would be essential for Unit 1 would be essential for success in the following careerssuccess in the following careers– AuditorAuditor– Bank tellerBank teller– Bookkeeper cashierBookkeeper cashier– Credit authorizerCredit authorizer– Financial adviserFinancial adviser– Loan counselorLoan counselor– Loan officerLoan officer

1.2 Career Paths1.2 Career Paths

Identify a minimum of three other Identify a minimum of three other careers where these concepts careers where these concepts and skills would be important.and skills would be important.

1.3 Making Bank 1.3 Making Bank DepositsDeposits Manager TipsManager Tips

– The ABA number on checks The ABA number on checks deposited is always 56-25 because deposited is always 56-25 because all checks are drawn on Pettisville all checks are drawn on Pettisville Bank. Bank.

– List the payee’s name on the deposit List the payee’s name on the deposit slip rather than the ABA number.slip rather than the ABA number.

  

1.3 Helping Managers1.3 Helping Managers

By July 9, all businesses will have By July 9, all businesses will have made the first deposit. made the first deposit. – Managers should double check to Managers should double check to

see that the deposit in the check see that the deposit in the check register and that the balance in the register and that the balance in the check register equals the balance in check register equals the balance in the cashbookthe cashbook

1.3 Helping Managers1.3 Helping Managers

Pettisville Bank Pettisville Bank – Manager 1 should use a calculator to verify Manager 1 should use a calculator to verify

the total on each deposit slip before writing the total on each deposit slip before writing the receipt. the receipt.

– All checks for deposit should be properly All checks for deposit should be properly endorsed and be listed on the back of the endorsed and be listed on the back of the deposit slip. deposit slip.

– Only the total of the checks is listed on the Only the total of the checks is listed on the front of the deposit slip.front of the deposit slip.

  

1.4 Reconciling a Bank 1.4 Reconciling a Bank Statement: Helping Statement: Helping ManagersManagers If there are no customers to serve at the If there are no customers to serve at the

drive-in window, Manager 1 should be drive-in window, Manager 1 should be recording checks and deposits on bank recording checks and deposits on bank statements and in the checking account statements and in the checking account register. register.

The DAILY ACTIVITIES will not tell the The DAILY ACTIVITIES will not tell the manager to do this. manager to do this.

It is the manager’s responsibility to do It is the manager’s responsibility to do this on a regular basisthis on a regular basis

1.4 Reconciling a Bank 1.4 Reconciling a Bank Statement: Helping Statement: Helping ManagersManagers The Denim Maker is the only business The Denim Maker is the only business

that will have an electronic funds that will have an electronic funds transfer, and it should already have transfer, and it should already have been recorded in the check register. been recorded in the check register.

The EFT is for payroll. The EFT is for payroll. Denim Maker: make sure that a Denim Maker: make sure that a

manager has deducted gross pay from manager has deducted gross pay from the check register and the cashbook.the check register and the cashbook.

1.4 Reconciling a Bank 1.4 Reconciling a Bank Statement: Helping Statement: Helping ManagersManagers If Pettisville Bank is using a If Pettisville Bank is using a

manual bank statement, the manual bank statement, the TOTAL WITHDRAWL AMOUNT TOTAL WITHDRAWL AMOUNT does not include the service does not include the service charge.charge.

1.4 Reconciling a Bank 1.4 Reconciling a Bank Statement: Helping Statement: Helping ManagersManagers Plan to set aside extra time to Plan to set aside extra time to

balance the bank statement. balance the bank statement. The problem is usually a result of The problem is usually a result of

inaccurate entries in the check inaccurate entries in the check register rather than errors made register rather than errors made by the bank.by the bank.

1.4 Reconciling a Bank 1.4 Reconciling a Bank Statement: Manager Statement: Manager TipsTips A very common error manager’s make on A very common error manager’s make on

the bank reconciliation is recording the bank reconciliation is recording outstanding deposits on the wrong side of outstanding deposits on the wrong side of the form. the form.

If an outstanding deposit is listed on the If an outstanding deposit is listed on the line titled ADD DEPOSITS NOT ALREADY line titled ADD DEPOSITS NOT ALREADY ENTERED IN THE CHECKBOOK, the two ENTERED IN THE CHECKBOOK, the two balances at the bottom of the page will balances at the bottom of the page will equal but obviously will not be correct.equal but obviously will not be correct.

1.4 Reconciling a Bank 1.4 Reconciling a Bank Statement: Manager Statement: Manager TipsTips Record service charges and other Record service charges and other

bank charges in the check bank charges in the check register and the cashbook after register and the cashbook after the bank reconciliation is the bank reconciliation is complete. complete.

1.4 Reconciling a Bank 1.4 Reconciling a Bank Statement: Manager Statement: Manager TipsTips Bank service charges vary depending on the Bank service charges vary depending on the

balance in the drawer’s account and the balance in the drawer’s account and the number of checks written. number of checks written.

Some customers do not pay a fee for a Some customers do not pay a fee for a service charge. service charge.

For example, a bank may offer free checking For example, a bank may offer free checking to students, senior citizens, or customers to students, senior citizens, or customers who maintain a set minimum balance. who maintain a set minimum balance.

To simplify procedures at Pettisville Bank, all To simplify procedures at Pettisville Bank, all monthly service charges for all businesses monthly service charges for all businesses are $12.95.are $12.95.

1.4 Reconciling a Bank 1.4 Reconciling a Bank Statement: Manager Statement: Manager TipsTips At some banks customers earn At some banks customers earn

interest on their checking interest on their checking accounts. accounts.

When reconciling the bank When reconciling the bank statement, interest earned should statement, interest earned should be added to the checkbook be added to the checkbook balance.balance.

1.4 Reconciling a Bank 1.4 Reconciling a Bank Statement: Manager Statement: Manager TipsTips Pettisville Bank is a commercial Pettisville Bank is a commercial

bank. bank. A A commercial bankcommercial bank is also called is also called

a full-service bank because it a full-service bank because it offers a wide range of banking offers a wide range of banking services. services.

1.4 Reconciling a Bank 1.4 Reconciling a Bank Statement: Manager Statement: Manager TipsTips Credit unionCredit union: a financial institution : a financial institution

owned by employees of a business or owned by employees of a business or an organizationan organization

Savings and loanSavings and loan: a bank that : a bank that specializes in savings accounts and specializes in savings accounts and making mortgage loansmaking mortgage loans

Trust companyTrust company: : a bank that a bank that specializes in managing people’s specializes in managing people’s money and property for themmoney and property for them

1.4 Reconciling a Bank 1.4 Reconciling a Bank Statement: Manager Statement: Manager TipsTips Protection of DepositsProtection of Deposits. .

– The Federal Deposit Insurance Corporation The Federal Deposit Insurance Corporation insures deposits in commercial banks. insures deposits in commercial banks.

– Almost all commercial banks are members Almost all commercial banks are members of the FDIC. of the FDIC.

– The Federal Reserve System (Fed) The Federal Reserve System (Fed) regulates its member banks to assure the regulates its member banks to assure the safety of depositors’ money. safety of depositors’ money.

– All national banks are required to join the All national banks are required to join the FRS, and the state banks may join.FRS, and the state banks may join.