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Chapter Six Chapter Six

Chapter Six - PowerPoint Presentation

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Chapter Six - PPT Presentation

Banking and budgeting Copyright 2014 by The McGrawHill Companies Inc All rights reserved McGrawHillIrwin Learning unit objectives 6 2 LU 61 The Checking Account Define and state the purpose of signature ID: 184488

check bank statement step bank check step statement banking deposit balance checks checkbook money expenses budget total trends reconciliation

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Slide1

Chapter Six

Banking and budgeting

Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/IrwinSlide2

Learning unit objectives

6-

2LU 6-1: The Checking Account

Define and state the purpose of signature

cards, checks, deposit slips, check stubs,

check registers, and endorsements.

Correctly prepare deposit slips and write checks.

LU 6-2: Bank Statement and Reconciliation Process; Latest Trends in Mobile Banking

Explain trends in the banking industry.

Define and state the purpose of the bank statement.

Complete a check register and a bank reconciliation.

Explain the trends in mobile banking.

LU 6-3:

The

Budgeting Process

Understand the value of a budget

.

Create a

budget

.Slide3

Checks/Drafts

6-

3

Check/Drafts

– A written order instructing a bank, credit union, or savings and loan institution to pay a designated amount of your money on deposit with the bank to a person or organization.

Drawee – Bank

ordered to pay

Payee - To whom check is payable

Drawer - One who writes the checkSlide4

Deposit Slip

Figure 6.1

6-4Slide5

The structure of a check

Figure 6.2

6-5Slide6

Types of common Endorsements

Figure 6.3

6-6

Gracie’s Natural Superstore 88190662

Pay to the order of

Ipswich Bank

For deposit only

Gracie’s Natural Superstore 88190662

Blank

Full

Restricted

Pay to the order of

Ipswich Bank

Gracie’s Natural Superstore 88190662

Can be further endorsed

Only person or company named in the endorsement can transfer the check to someone

Limits any further negotiation of the checkSlide7

Using the checking account

The check stub should be completed before the check is written.

6-7Slide8

Trends in Banking Industry

6-

8

More businesses and people are using smartphone apps from lenders to do their banking transactions.

Electronic banking is convenient and usually charges significantly lower fees, but does carry some risk.

Check

textbook website for the latest updates on banking bailouts and government intervention:

www.mhhe.com/slater2014.Slide9

Bank Statement

6-9

Bank Statement – A statement listing different types of activity that have taken place during the month.

Debit: decreases the account

Credit: increases the account

+

Slide10

Bank Statement

Figure 6.4

6-10Slide11

Bank Reconciliation

6-11

Reconciles the difference between the bank statement and the checkbook.

Differences in timing

Transactions not entered in checkbook

Checkbook

Bank Statement Slide12

Reconciling checkbook with bank statement

6-

12

Checkbook Balance

+EFT

(electronic funds transfer)

+Interest earned

+Notes collected

+Direct deposit

-ATM withdrawals

-Automatic withdrawals

-NSF check

-Online fees

-Automatic payments

-Overdrafts

-Service charges

-Stop payments+/-Book errors

Bank Balance

+Deposit in transit

-Outstanding checks

+/-Bank errors

Bank Statement

Checkbook Slide13

Reconciling a bank statement

6-

13

Step 1. Identify outstanding checks.

Step 2. Identify deposits in transit.

Step 3. Analyze bank statement for transactions not recorded in check register.

Step 4. Check for recording errors in checks, deposits, addition, or subtraction.

Step 5. Compare the adjusted balances; if different, repeat Steps 1-4.

5 StepsSlide14

Check Register

figure 6.6

6-14

Used to track written checksSlide15

Completing the bank reconciliation-- figure 6.7

6-

15Slide16

Bank Reconciliation

figure 6.8

6-16

GRACIE’S NATURAL SUPERSTORE

Bank Reconciliation as of March 31, 2013

Checkbook Balance Bank Balance

Gracie’s checkbook balance $6,588.42 Bank Balance $11,863.02

Add: Add:

EFT leasing: Bakery dept. $1,808.06 Deposit in transit

3,383.26

EFT leasing: Meat dept. 4,228.00 $15,246.28

Interest 56.02

Error: Overstated ck # 634 720.00

6,812.08 $13,400.50

Deduct: Deduct:Service charge $28.50 Outstanding checks:

NSF 104.00 No. 638 $572.00EFT health insurance payment

722.00 854.50

No. 639 638.94 No. 640 166.00 No. 641 406.28

No. 642 917.06 2,700.28

Reconciled balance $12,546.00 Reconciled balance $12,546.00Slide17

Trends in mobile Banking

6-

17

Hottest Trend

Use of bank apps.

Free app to use with an

iPad

, iPhone, Android, Blackberry, or Kindle.Slide18

A budget

is a plan for spending that allows you to manage and guide where money goes to maximize income and wealth.Because money can be spent only one time, it has an

opportunity cost, the cost associated with all other possible uses of that money, including saving and investing.A line item is an element of a budget separately identified, such as income or utilities.

The budgeting process

6-

18Slide19

The totals for income, fixed expenses, nonfixed expenses, total expenses, and net profit (loss) assist with the analysis of the budget whether it is for business or personal use.

Software programs such as Microsoft Excel, Microsoft Money, or Quicken can create budgets.

The budgeting process

6-

19Slide20

How to create a budget

6-20

4 Steps

Step 1. Record all sources of revenue (income); total.

Step 2. Create a list of monthly fixed cash outflows (expenses) and monthly variable cash outflows (expenses); total.

Step 3. Determine whether there is a surplus or deficit by subtracting the total in Step 2 from the total in Step 1.

Step 4. If there is a deficit, adjust the variable expenses accordingly. If there is a surplus, determine the best use of that money, such as research and development, investing, or saving.Slide21

Personal monthly budgetfigure 6.9

6-

21