CHAPTER 4
Banking
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4-1 Learning Outcomes
Make account transactions.
Record account transactions.
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4-1-1 Make account transactions
Section 4-1 Checking Account Transactions
– A transaction is a banking activity that changes the
amount of money in a bank account.
– Funds going into the account are deposits and are
recorded as a credit to the account.
– A deposit ticket is needed to support the transaction.
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HOW TO: Make an account deposit
Section 4-1 Checking Account Transactions
STEP 1
Record the date.
STEP 2
Enter the amount of currency and/or coins being
deposited.
STEP 3
List the amount of each check to be deposited
including an identifying name or company.
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HOW TO: Make an account deposit
Section 4-1 Checking Account Transactions
STEP 4
Add the currency, coins and checks.
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HOW TO: Make an account deposit
Section 4-1 Checking Account Transactions
If there is a mistake in the deposit:
The bank will issue a bank memo.
– An increase in the balance (or in your favor) is called
a credit memo.
– A decrease in the balance (or in the bank’s favor) is
called a debit memo.
Automatic teller machine (ATM):
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Section 4-1 Checking Account Transactions
Businesses that permit customers to use credit
cards to charge merchandise ordinarily receive
payment through electronic deposit from the
credit card or check processing company.
– Sometimes called point-of-sale transactions.
Visa®, MasterCard® and Discover® are examples
of major credit card companies that electronically
transmit funds to business accounts.
– Electronic funds transfers (EFTs).
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Section 4-1 Checking Account Transactions
Another type of electronic deposit is direct
deposit for payroll.
– Employees can access their paycheck funds directly
from their accounts.
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Section 4-1 Checking Account Transactions
A withdrawal is a transaction which reduces
the amount of funds in the account.
– These transactions are called debits.
One bank record for withdrawals is a check or
bank draft.
– Another type of debit is through the use of a debit
card to pay for goods and services.
Withdrawing funds from an ATM will also
result in a debit to the account.
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Key Terms…
Section 4-1 Checking Account Transactions
Key Terms
Payee
– The one to whom the money on a check is paid.
Payor
– The bank or institution that pays the amount of the
check to the payee.
Maker
– The one authorizing the payment of the check.
Automatic Drafts
– Regular withdrawals that the owner of an account
authorizes to be made electronically.
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Key Terms…
Section 4-1 Checking Account Transactions
Key Terms
Signature card:
– Signature of those authorized to sign the checks for
a given account.
Personal identification number (PIN)
– A private code that is used to authorize a
transaction on a debit card or ATM card.
Check stub
– A form attached to the check for recording account
transactions that show the account balance.
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Endorsements
Section 4-1 Checking Account Transactions
Banks will require payees who are not account
holders to present identification before cashing a
check from their bank.
Account holders will be required to sign the
check and also record their account number
on the back of the check.
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Key Terms…
Section 4-1 Checking Account Transactions
Endorsement
– A signature, stamp or electronic imprint on the back
of a check that authorizes payment in cash or directs
payment to a third party or account.
Simple endorsement
– The payee signs or stamps the back of the check to
deposit the amount in an account or to cash the check.
Restricted endorsement
– A type of endorsement that reassigns the check to a
different payee, or directs the check to be deposited
in a specified account.
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4-2 Learning Outcome
Reconcile a bank statement with an account
register.
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Bank reconciliation
Key Terms…
Section 4-2 Bank Statements
Bank reconciliation
– The process of making the account register agree
with the bank statement.
Bank statement
– An account record provided by the bank periodically
designed to match your records to the bank’s records.
Service charge
– A fee the bank charges for maintaining the checking
account or for other banking services.
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Key Terms…
Section 4-2 Bank Statements
Returned check
– A deposited check that was returned because the
maker’s account did not have sufficient funds.
Returned check fee
– Bank charges to the depositor for returned checks.
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Key Terms…
Section 4-2 Bank Statements
Outstanding checks
– Checks that have been written, but have not yet been
posted to the maker’s account.
Outstanding deposits
– Deposits that have been made, but have not yet been
posted to the maker’s account.
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HOW TO: Reconcile a bank statement
Section 4-1 Checking Account Transactions
Calculate the adjusted statement balance by adding
the statement balance and total outstanding deposits
& credits, and then subtracting total outstanding
checks and other debits.
Statement balance
+ Total outstanding credits
- Total outstanding debits
Adjusted statement balance
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End Chapter 4
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