Transcript No Slide Title

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?
Section 1 Banking Procedures
What You’ll 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.
Section 1 Banking Procedures (con’t.)
Why It’s 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
Section 1 Banking Procedures (con’t.)
Protecting Cash
It is important to protect cash
from loss, waste, theft, forgery,
and embezzlement.
INTERNAL CONTROLS
Steps the business itself takes
to protect cash and other assets.
Section 1 Banking Procedures (con’t.)
Protecting Cash
(con’t.)
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.
Section 1 Banking Procedures (con’t.)
Protecting Cash
(con’t.)
EXTERNAL CONTROLS
Measurements and procedures
provided outside the business to
protect cash and other assets.
1. Verify signatures on checks.
2. Maintain records of
transactions.
Section 1 Banking Procedures (con’t.)
Opening a Checking Account
 Allows a person or business to deposit
cash in a bank and to write checks against
the account balance.
 A check is a written order from a depositor
telling the bank to pay a stated amount of
cash to the person or business named on
the check.

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 (con’t.)
Opening a Checking Account
 American Bankers
Association (ABA) number
is the code that identifies
the bank.
 The number above the line
and to the left of the
hyphen represents the city
or state where the bank is
located.
 The number to the right of
the hyphen indicates the
specific bank.
 The number below the line
is the code of the Federal
Reserve District where the
bank is located.
Section 1 Banking Procedures (con’t.)
Opening a Checking Account (con’t.)
The ABA #, the depositor’s account #, and the
check # is in special ink and typeface at the bottom of
the check. These specially printed numbers are
called MICR (magnetic ink character recognition)
numbers.
MICR is used for electronic sorting.
Section 1 Banking Procedures (con’t.)
Making Deposits to a Checking
Account
Businesses make regular deposits to protect the currency,
coins, and checks received.
Deposits are accompanied by a deposit slip.
List Checks separately by their ABA#’s. Only the two #’s
above the line.
The checks are to be arranged in the order listed on the
deposit slip.
Section 1 Banking Procedures (con’t.)
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.
A restrictive endorsement
limits, or restricts, how a
check may be handled.
Section 1 Banking Procedures (con’t.)
Recording Deposits in the
Checkbook
Date
Deposits
New Balance
Section 1 Banking Procedures (con’t.)
Writing Checks
Write checks in ink, or prepare
typewritten or computer-generated
checks. Fill out the check stub first.
Enter amount
Enter date
Enter payee
Enter payee
Enter date
Enter purpose
Enter amount
Enter new balance
Enter amount
Sign the check
Enter dollar amount in words
Section 1 Banking Procedures (con’t.)
Drawer is the person who signs the
check. The bank on which the check is
written is the drawee.
Voiding a Check
Writing the word “Void” in
large letters across the front of a
check (in ink) is known as voiding
a check.
Section 1 Banking Procedures (con’t.)
Demonstration Problems
Problems 11-1 and 11-2.
April 10
----
44-9876
21-4682
17-4141
698.00
23.45
39.80
361.90
80.69
1,203.84
Payee
$115.86
May 8,
---Valley Utilities
April electric bill
115.86
1,758.36
Code for the
federal
reserve
district were
the bank is
located
Drawee
Drawer
May 8,
--Valley Utilities
$115.86
One hundred fifteen and 86/100--------------Susan Y. Rucker
April electric bill
ABA#
64-505
610
City or
state were
bank is
located
Identifies the specific bank
Section 1 Banking Procedures (con’t.)
Assignment:
Check Your Understanding p264
Thinking Critically 1&2
Problem 2 is worth 6 points
(be descriptive)
Problem 11-1