Check Out the Account Chapter 2

1. Check Out the AccountChapter 2 2-1 Choosing a Bank 2-2 Using Checks 2-3 Reconciliation

2. Check Out the AccountChapter 2 After completing this chapter, you should be able to • calculate interest or charges on checking accounts • compare different types of checking accounts and banking services • assess pros and cons of electronic banking • maintain and reconcile a checking account

3. 2-1Choosing a Bank: Is There a Difference? Warm-up Word Definition Symbol/Formula • Average-balance Account • Checks • Cost-per-check Account • Demand Deposits • Free Checking Account • Interest • Low-balance Account • Minimum-balance Account • NOW Account

4. 2-1Choosing a Bank: Is There a Difference? Skill 1: Interest and charges Amount Earned/Charged = Interest – Charge for Checks A = br – cn where A = amount earned/charged b = monthly average balance r = monthly interest rate n = number of checks c = charge for each check

5. 2-1Choosing a Bank: Is There a Difference? Example Presto checking accounts pay 0.45% interest per month and charge $0.05 per check. What is the amount earned or charged if 17 checks are written during one month and the average balance is $620? A = br – cn A = 620(0.45%) – 0.05(17) A = $1.94 earned

6. 2-1Choosing a Bank: Is There a Difference? Skill 2: Service charges Amount Earned/Charged = Interest – Charge for Checks - Service Charge A = br – cn - s where A = amount earned/charged b = monthly average balance r = monthly interest rate n = number of checks c = charge for each check s = service charge

7. 2-1Choosing a Bank: Is There a Difference? Example Super checking accounts earn interest of 0.4% per month and have the following service charges. • For balances of $500 or more , there is no service charge and no charge for checks. • For balances under $500, there is a charge of $0.025 per check. • For balances under $200, the service charge is $6 per month.

8. 2-1Choosing a Bank: Is There a Difference? Example cont. What amount will be earned or charged for the following average balances? • $650 with 20 checks A = br – cn - s A = 650(0.4%) – 0(20) – 0 A = $2.60 earned

9. 2-1Choosing a Bank: Is There a Difference? Example cont. What amount will be earned or charged for the following average balances? • $400 with 18 checks A = br – cn – s A = 400(0.4%) – 0.025(18) – 4 A = -2.85 A charge of $2.85

10. 2-1Choosing a Bank: Is There a Difference? Example cont. What amount will be earned or charged for the following average balances? • $150 with 16 checks A = br – cn - s A = 150(0.4%) – 0.025(16) – 6 A = -5.8 A charge of $5.80

11. 2-2Using Checks: Write it Down Warm-up Word Definition Symbol/Formula • Bank Endorsement • Check Register • Drawer • Endorsement • Full Endorsement • Payee • Restrictive Endorsement

12. 2-2 Using Checks: Write it DownEndorsing a check • Blank Endorsement • anyone can cash check • Restrictive Endorsement • more secure than blank endorsement • Full Endorsement • transfer check to another party

13. 2-2 Using Checks: Write it DownDeposit ticket • Step 1 – Write today’s date. • Step 2 – Write down any currency, coins and checks deposited • Step 3 – Total deposits • Step 4 – If cash is withdrawn, sign and write the amount • Step 5 – Subtract cash received from subtotal for final deposit Step 2 Step 1 Step 4 Step 3 Step 4 Step 5

14. 2-2 Using Checks: Write it Down Skill 1: Balance a checking account To find each new balance on a check register • payments, fees and withdrawals are subtracted • deposits and credits are added

15. 2-2Using Checks: Write it Down Example You are about to mail out checks to pay the following bills: Central Telephone Co., $43.78; Harvey’s Computer Store, $102.05; Downtown Music, $18.75. The checks you are using begin with number 101. The date is October 6. Your initial balance is $201.68.

16. 2-2 Using Checks: Write it Down Skill 2: Write a check • Step 1 – Current date • Step 2 – Payee (person or organization) • Step 3 – Dollar amount (numbers) • Step 4 – Dollar amount (words) • Step 5 – Purpose of the check • Step 6 – Sign your name Step 1 Step 2 Step 3 Step 4 Step 6 Step 5

17. 2-2 Using Checks: Write it Down Example Latoya read in the paper about the Eldorado Golf Tournament played in her city on March 4. She imagined what it would be like to write checks to the prize winners. The paper listed the top five as follows: Cynthia Alvarez $352,000 Mark Louis $240,000 Peggy Race $150,000 Pablo Chosa $ 75,000 Tina Marin $ 50,000

18. 2-2 Using Checks: Write it Down Example How would Latoya make out the largest check? March 4, 2009 Cynthia Alvarez 352,000.00 Three hundred fifty-two thousand and no/ 100 _______________________ Tournament Winner Latoya s. Marshall

19. 2-3Reconciliation: Do the Bank and I Agree? Warm-up Word Definition Symbol/Formula • Automated Teller Machine • Canceled Checks • Outstanding Checks • Reconciliation • Statement

20. 2-3Reconciliation: Do the Bank and I Agree?Reading a bank statement • Account balance at the beginning of the statement period • Balance at the close of the statement period • Service charges • Record of debits • Record of credits 1 3 2 4 5

21. 2-3Reconciliation: Do the Bank and I Agree?Reconciliation form