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Banking and Accounting Procedures
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- 2. Banking and AccountingProcedures Banking Procedures Accounting Procedures Ethics in Accounting Procedures International Currency Exchange
- 3. Banking Procedures Checks Establish checkingaccount 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. 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. Banking Procedures (continued) Bank Draft Checkdrawn 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. Banking Procedures (continued) Bank MoneyOrder Requires endorsement of payee May be cashed at any bank Purchaser charged small fee Amount of money may be limited
- 7. Banking Procedures (continued) Traveler’s Check Usedin 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. Banking Procedures (continued) Electronic fundstransfer (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. Banking Procedures (continued) Automated tellermachines (ATMs) Many convenient locations Customers can obtain cash or make deposits Requires EFT card and personal identification number (PIN) or password
- 10. Banking Procedures (continued) Debit card Usedin 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. Banking Procedures (continued) Direct PayrollDeposit 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. Banking Procedures (continued) Automatic deposits Fundsautomatically 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. Banking Procedures (continued) Automatic debits Preauthorizedautomated 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. Banking Procedures (continued) Web banking Musthave 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. Banking Procedures (continued) Telephone transfers Callthe 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. Banking Procedures (continued) Bank checks Stop-paymentnotification Used when check is written for incorrect amount Used when check is lost or stolen Conditions of agreement are not met Check endorsement
- 17. Banking Procedures (continued) Endorsing Checks Checkpresented 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. Banking Procedures (continued) Three typesof endorsements Blank endorsement Restrictive endorsement Full endorsement
- 19. Banking Procedures (continued) Blank endorsement Consistsonly of signature of payee Payable to bearer Use with caution when depositing or cashing checks
- 20. Banking Procedures (continued) Restrictive endorsement Limitsuse 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. Banking Procedures (continued) Full endorsement Alsocalled 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. Banking Procedures (continued) Bank deposits Preparingthe 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. 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. Bank Statement Reconciliation (continued) Stepsto 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. 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. 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. Bank Statement Reconciliation (continued) Ifthe 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. Accounting Procedures Petty cashfund 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. Accounting Procedures (continued) Replenish thepetty 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. Accounting Procedures (continued) Payroll Payroll registerused to summarize each employee’s pay for a particular period Summarizes each employee status Wages earned Payroll deductions Final take-home pay
- 31. Accounting Procedures Completing (continued) apayroll 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. Accounting Procedures Calculate (continued) socialsecurity (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. Accounting Procedures (continued) Financial statements IncomeStatement 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. Accounting Procedures (continued) Budgeting Process ofplanning 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. Accounting Procedures (continued) Budget reports Providesthe 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. Accounting Procedures (continued) Office suppliesinventory 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. 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. Ethics in AccountingProcedures 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. International Currency Exchange Necessarywhen 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