Banking and Accounting Procedures


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Banking and Accounting Procedures

  1. 1. Banking and Accounting Procedures
  2. 2. Banking and Accounting Procedures  Banking Procedures  Accounting Procedures  Ethics in Accounting Procedures  International Currency Exchange
  3. 3. Banking Procedures  Checks  Establish checking account at bank  Transfer of funds–ordinary checks  Check–written by depositor  Drawer–also called maker; person who writes a check  Drawee–bank from which check is drawn  Payee–person to whom the check is written
  4. 4. Banking Procedures  Cashier’s  Also (continued) Check known as treasurer’s check or official check  Written by an authorized officer of bank on its own funds  Guarantees payment to payee by drawer’s bank  Depositor obtains official check by writing bank a check on his/her funds for amount plus fee
  5. 5. Banking Procedures  (continued) Bank Draft  Check drawn by bank on its own funds in another bank located either in same city or another city  Made payable to third party, and upon endorsement, may be cashed at bank on which it is drawn
  6. 6. Banking Procedures  (continued) Bank Money Order  Requires endorsement of payee  May be cashed at any bank  Purchaser charged small fee  Amount of money may be limited
  7. 7. Banking Procedures  (continued) Traveler’s Check  Used in place of cash  Must obtain in person and sign in presence of selling agent  Purchased from banks and credit unions  If lost or stolen, will usually be refunded
  8. 8. Banking Procedures  (continued) Electronic funds transfer (EFT)  Delivery system for electronic transactions  No lost or stolen checks  Payment made quickly and on time  Major services—EFT, ATMs, centers for electronic funds transfers, payment by telephone
  9. 9. Banking Procedures  (continued) Automated teller machines (ATMs)  Many convenient locations  Customers can obtain cash or make deposits  Requires EFT card and personal identification number (PIN) or password
  10. 10. Banking Procedures  (continued) Debit card  Used in place of checks  Money is taken directly from the individual or company’s checking account  May be used as debit card or credit card  When used as a debit card, requires a pin number or password; when used as a credit card must sign sales slip
  11. 11. Banking Procedures  (continued) Direct Payroll Deposit  Organization pays employees without checks  Organization provides bank with magnetic tape description of payroll disbursements made to the employees  Employee receives statement from company or third party  Statement shows gross payment, type and amount of deductions, and net payment
  12. 12. Banking Procedures  (continued) Automatic deposits  Funds automatically deposited  Electronic routing number and account number are needed for deposit  Routing number and bank account number is usually printed on bottom of checks
  13. 13. Banking Procedures  (continued) Automatic debits  Preauthorized automated transfer of funds from one account to another account within same financial institution  For an individual or company  From checking or savings  Example: Payment of utilities  Copy of canceled check, account number and signature authorizing transfer is required
  14. 14. Banking Procedures  (continued) Web banking  Must have access to Internet  Primary functions  Easy online management of banking transactions  Ability to make electronic transfers  Provides real-time information  Software/password to access may be needed  Requires ID
  15. 15. Banking Procedures  (continued) Telephone transfers  Call the company, provide nine-digit routing number of bank, bank account number, check number, and amount  May be charged a fee  Company will draft the amount from your checking account and bank honors check  Payment can be made on exact due date, avoiding late charges
  16. 16. Banking Procedures  (continued) Bank checks  Stop-payment notification   Used when check is written for incorrect amount   Used when check is lost or stolen Conditions of agreement are not met Check endorsement
  17. 17. Banking Procedures  (continued) Endorsing Checks  Check presented for cash or deposit must be signed (endorsed)  By the payee  On reverse side of check  Bank will accept for deposit checks that have been endorsed by representative of payee  Endorsement can be rubber stamped or handwritten in ink
  18. 18. Banking Procedures  (continued) Three types of endorsements  Blank endorsement  Restrictive endorsement  Full endorsement
  19. 19. Banking Procedures  (continued) Blank endorsement  Consists only of signature of payee  Payable to bearer  Use with caution when depositing or cashing checks
  20. 20. Banking Procedures  (continued) Restrictive endorsement  Limits use of check  Words such as “For deposit only” or “Pay to” are written before organization’s name or depositor’s signature  Use when deposits are sent to bank by mail
  21. 21. Banking Procedures  (continued) Full endorsement  Also called a two-party check  Transfer check to specified person or organization  “Pay to the order of” followed by name of person/organization receiving funds is written on check preceding signature of endorser
  22. 22. Banking Procedures  (continued) Bank deposits  Preparing the cash/coin  Coin values per roll  Currency preparation   Arrange all president’s faces going in same direction  Strap all currency that meets required amounts   Separate by denomination Each strap must contain same denomination Preparing the deposit slip
  23. 23. Bank Statement Reconciliation  Statement  issued by bank to depositor Shows previous month’s balance, deposits, checks paid, bank charges, and ending balance  Comparison of bank balance on the statement with the checkbook balance  To make comparison, checks listed on statement are checked off in check register
  24. 24. Bank Statement Reconciliation  (continued) Steps to reconcile bank statement  Record in the company’s checkbook all automatic transactions not previously entered  + any interest earned  + automatic deposits  - service charges  - automatic payments  - telephone transfers and charges
  25. 25. Bank Statement Reconciliation  Enter (continued) in company’s checkbook register a check mark for each canceled check and all deposits received by the bank listed on the bank statement  Total all outstanding checks (not paid by bank)  Total all deposits shown in checkbook register that are not on bank statement
  26. 26. Bank Statement Reconciliation  Adjust (continued) the bank statement balance  Enter the checking account balance shown on front of bank statement  Add any deposits not yet shown on statement  Subtract  The the total of outstanding checks adjusted bank statement balance from the reconciliation should agree with the adjusted checkbook balance
  27. 27. Bank Statement Reconciliation  (continued) If the adjusted bank statement balance and checkbook balance do not agree, follow these steps:  Find the difference between the two  Check the bank statement balance for errors  Look for omission of checks and deposits  Check for a math error in the check stubs
  28. 28. Accounting Procedures  Petty cash fund  Established for small office expenditures  Used for things such as  Messenger service, postage due on a package, or emergency purchase of office supplies  All expenses must be accounted for  Balance petty cash fund regularly  Keep the cash and completed vouchers in a box or envelope and put them in a safe place  Prepare a petty cash voucher for each expenditure made  Keep an accurate petty cash record, book, or distribution sheet for each period; record each transaction in this record
  29. 29. Accounting Procedures (continued)  Replenish the petty cash fund periodically or soon enough to keep an adequate supply of cash on hand  To replenish the petty cash fund, balance the petty cash record, formally request a check for the amount needed to bring the fund amount back to its beginning balance  Submit records called for by the accounting department  Cash the check and enter the beginning amount on the first line of the “Explanation” column of the petty cash record
  30. 30. Accounting Procedures  (continued) Payroll  Payroll register used to summarize each employee’s pay for a particular period  Summarizes each employee status  Wages earned  Payroll deductions  Final take-home pay
  31. 31. Accounting Procedures  Completing (continued) a payroll register  In the payroll register, enter the employee’s information—name, marital status, number of withholding allowances, hourly rate, regular hours worked and overtime hours worked  Calculate regular earnings  Calculate overtime earnings  Add regular and overtime earnings to determine gross earnings
  32. 32. Accounting Procedures  Calculate (continued) social security (OASDI) by multiplying gross earnings by 6.2%  Calculate Medicare by multiplying gross earnings by 1.45%  Look up federal income tax in tax tables obtained from Circular E Employer’s Tax Guide if not provided for you  Enter any other deductions in the payroll register  Total all deductions  Subtract deductions from gross pay to determine net pay  Checks are written for the net pay amount to each employee
  33. 33. Accounting Procedures  (continued) Financial statements  Income Statement   Operating statement also called profit and loss statement showing money earned and expenses incurred Balance Sheet  Summarizes the balances of the assets  Reports what a company is worth on any one given day  Assets, liabilities, and owner’s equity
  34. 34. Accounting Procedures  (continued) Budgeting  Process of planning future business operations and defining those plans, expressed in financial terms in a formal report  Estimate of income and expenses of all areas of organization for a certain period of time (month or year)
  35. 35. Accounting Procedures  (continued) Budget reports  Provides the basis for analyzing and revising spending activities  Compares actual sales or costs with figures budgeted  Follow the budget by not overspending the budgeted amount
  36. 36. Accounting Procedures  (continued) Office supplies inventory  Record of supplies on hand  Perpetual inventory record  Inventory each item  Keep balance accurate    Add to item when ordering more Subtract from item when removing Decide if balance on hand is sufficient or if time to replenish
  37. 37. Accounting Procedures  Accounting  Handles  Typically,  How department cost control for company  Budgets  Which (continued) have account titles and numbers managers are responsible for their area accounts are used most often? accounts may be used?  Correct procedures for ordering and spending  Allowable expenses  Department code to use
  38. 38. Ethics in Accounting Procedures  Auditors and accountants create the financial statements and must be the watch-dogs for accurately reporting information  Ethics is stressed in the accounting field by requiring CPAs to take an ethics course once every three years  High ethical standards are required in every phase of the office professional’s job
  39. 39. International Currency Exchange  Necessary when manager travels abroad  Locate current exchange rate   Call local banks   Available via Internet At airports with international flights Exchange rates are quoted per $1 U.S