Cash Control Systems

1. Cash Control Systems Accounting Chapter 5

2. Money = cash in accounting • Businesses have large volumes of cash transactions • both paid out and received • Large payments made/received by checks • Small payments made/received by cash • Recording errors occur with large volumes of transactions • Control systems needed to manage/track money, reduce errors • Accounting records – ledgers and journals • Checking Account • Monthly bank statements CASH TRANSACTIONS

3. LESSON 5-1 Checking Accounts

4. Checking account: a bank account from which payments can be ordered by a depositor Check: a business form ordering a bank to pay cash from a bank account Deposit slip: prepared each time cash or checks are placed in a bank account CHECKING ACCOUNT CONTROL SYSTEM • All deposits are entered on the next unused check stub

5. RECEIVING PROCESS You receive an investment from owner for $5000 Step 1: You issue a receipt to the owner You keep the stub (tear along perforation) Receipt given to Kim receipt

6. THE PROCESS • Step 2: Enter deposit on the next unused check stub • Step 3: Calculate a new Subtotal

7. THE PROCESS • Step 4: Journalize the transaction in the journal • Step 5: Post it to the ledger of accounts

8. THE PROCESS • Step 6: Take money (checks & cash) to the bank • At the Bank: • Complete a Deposit slip: prepared each time cash or checks are placed in a bank account • Endorse (sign) the back of the checks being cashed • Bank issues a receipt for deposit • Receipt not entered in journal (done step 5)

9. Deposit Slips, Completing Check Stubs, Endorsements and Completing a Check, Recording a Voided Check STEP 7

10. PARTS OF A CHECK CheckNumber Maker’s Name and Address Date ABA Number Payee Numeric Amount WrittenAmount Memo Signature Routing Numbers Account Number

11. MAKE DEPOSITS • Deposit slip used to deposit or withdraw cash from account - Found in back of checkbook • Enter total cash, individual checks and sum for subtotal • Checks being cashed must be “endorsed” Dollars Cents TechKnow Consulting Phone: 701-746-5555 4567 West 17th Ave Grand Forks, ND 58201 Date: 20 Sign here for less cash in Teller’s presence

12. MAKE DEPOSITS • Went to the bank on October 1, 2010. Deposited • $400.00 check from ABA 24-174 • $850.00 check from ABA 12-510 • $1772.50 in cash (TOTAL = 3022.50) Dollars Cents TechKnow Consulting Phone: 701-746-5555 4567 West 17th Ave Grand Forks, ND 58201 Date: 20 Sign here for less cash in Teller’s presence 123003175 43’’452119’’

13. RECORD DEPOSIT ON CHECK STUB • Record Oct 1 deposit of $3022.50 NO. 2 $ Date 20 To For BAL BRO’T FOR’D ………… AMT DEPOSITIED .. SUBTOTAL ………………… OTHER SUBTOTAL…………………. AMT. THIS CHECK………….. BAL. CAR’D FOR’D………… NO. 2 24-317 1230 TechKnow Consulting Phone: 701-746-5555 4567 West 17th Ave Grand Forks, ND 58201 Pay to The Order of 4600 00 $ Dollars Memo 123003175 43’’452119’’

14. Endorsement: A signature or stamp on the back of a check transferring ownership – cashing a check • Three types of endorsements: • Blank endorsement - only of the endorser’s signature • Special endorsement - indicating a new owner of the check • Transfer check from you to someone else to cash • Restrictive endorsement - restricting further transfer of a check’s ownership • Limits use of check • Ex: for deposit only ENDORSEMENT:

15. Blank endorsement: • If lost with a blank endorsement, anyone can cash it • Only done while standing at the bank ready to deposit • Contains just a signature • Special Endorsement • Transfer to new owner - known as endorsement in full • Ex: Pay to the order of John Smith, Kim Parker. (check written on front to Kim, Kim signs it over to John) • Only the person named in the special endorsement can cash it (only John Smith) • Restrictive endorsement • Can only be used for what is stated on the back of the check • EX: For deposit only to the account of TechKnow Consulting ENDORSEMENT:

16. ENDORSEMENTS Blank Endorsement Kim signs this check over to Eleanor Johnson Special Endorsement Kim wants this for deposit only into TechKnowConsultings Account. Restrictive Endorsement

17. WRITING CHECKS

18. RECORD DEPOSIT ON CHECK STUB • Aug. 3, wrote Check NO 1 to Port City Supply Company for $275.00 for supplies • Complete check stub first for your records NO. 1 $ Date 20 To For BAL BRO’T FOR’D ………… AMT DEPOSITIED .. SUBTOTAL ………………… OTHER SUBTOTAL…………………. AMT. THIS CHECK………….. BAL. CAR’D FOR’D………… NO. 1 24-317 1230 TechKnow Consulting Phone: 701-746-5555 4567 West 17th Ave Grand Forks, ND 58201 Pay to The Order of $ Dollars • 00 00 • 00 • 5000 00 Memo 123003175 43’’452119’’

19. RECORD DEPOSIT ON CHECK STUB • Aug. 3, wrote Check NO 1 to Port City Supply Company for $275.00 for supplies. • Complete check stub for your records • Complete Check NO. 1 $ Date 20 To For BAL BRO’T FOR’D ………… AMT DEPOSITIED .. SUBTOTAL ………………… OTHER SUBTOTAL…………………. AMT. THIS CHECK………….. BAL. CAR’D FOR’D………… NO. 1 24-317 1230 TechKnow Consulting Phone: 701-746-5555 4567 West 17th Ave Grand Forks, ND 58201 Pay to The Order of 275.00 August 3 10 Port City Supply Company Supplies $ Dollars • 00 00 • 00 • 5000 00 Memo 8 1 10 123003175 43’’452119’’ • 00 • 275 00 • 4725 00

20. VOIDED CHECKS • Checks written in error/mistake must be tracked • Checks are voided and journalized • Void is written across both the check and the check stub • Check number entered as a transaction in the Journal NO. 1 $ Date 20 To For BAL BRO’T FOR’D ………… AMT DEPOSITIED .. SUBTOTAL ………………… OTHER SUBTOTAL…………………. AMT. THIS CHECK………….. BAL. CAR’D FOR’D………… NO. 1 24-317 1230 TechKnow Consulting Phone: 701-746-5555 4567 West 17th Ave Grand Forks, ND 58201 Pay to The Order of $ Dollars 275.00 August 3 10 Port City Supply Company Supplies Void Memo Void 123003175 43’’452119’’ • 00 00 • 00 • 5000 00 8 1 10 • 00 • 275 00 • 4725 00

21. RECORDING A VOIDED CHECK 1. Record the date. 2. Enter the word VOID in the Account Title column 3. Enter the check number for Doc NO. 4. Place a check mark in the Post. Ref. column 5. Place a dash in the Cash Credit column

22. Checking Account Facts • Postdated check: a check with a future date on it. Most banks will not accept postdated checks • Most checks are only good for 6 months • Checking Account Control Systems • Assist with ethical behaviors of employees • Code of Conduct: a statement that guides the ethical behavior of a company and its employees

23. TERMS REVIEW • code of conduct • checking account • endorsement • blank endorsement • special endorsement • restrictive endorsement • postdated check