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
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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