Chapter 9 Checking Accounts and Other Banking Services
Checking Account Basics Checking Account - An account that allows depositors to write checks to make payments. Check - A written order to a bank to pay the stated amount to the person or business (payee) named on it. Also know as a Demand Deposit
Checking Account Basics n Maker n The person who writes and signs the front of the check. n Payee n The person to whom the check is made out to. n The person who cashes the check.
Checking Account Basics Canceled Check a check that bears the bank s stamp, indicating that it has cleared the bank.
Checking Account Basics Substitute Check A check that is exchanged electronically to make processing faster and more efficient between banks. An image of the check. Electronic Check Conversion Used by merchants to convert a check into a debit transaction instead of processing the check.
Checking Account Basics Advantages of A Checking Account Convenient way to pay your bills. Writing a check is often safer than using cash A checking account has a built-in record keeping system that you can use to track expenses and create budgets. As a checking account customer, you have access to other bank services, such as instant loans and 24 hour access to your money through ATM s.
Checking Account Basics Overdraft A check written for more money than your account contains. Not Sufficient Funds (NSF), Bounced Floating a Check Writing a check when there are insufficient funds in the account, hoping that a deposit will clear before the check is cashed.
Opening a Checking Account Fill out and sign a signature authorization form. This will be the official signature that the bank can compare to the signature on your checks. Make an initial deposit to open the account.
Parts of a Check Pay Andy Johnson 581 Phone: 555-0100 4250 West 18th Avenue Date JULY 15 2004 25-6 Chica go, IL 60601-2180 7103 Payee Maker s Pre- Printed Name and Address Date Written Amount ABA Number Numeric Amount To The Orde r of FOOD MART $ 36.12 Check Number THIRTY-SIX AND 12/100 Dolla rs DU B Daws o n Un ited B an k B er lin, NJ 08009 Memo Me m o GROCERIES ANDY JOHNSON 00000581 2505000052 58101205 Check Number Checking Account Number Bank s Identification Number Drawer or Maker
Using Your Checking Account Writing Checks Always use a Pen Write Legibly Sign Your Name As it Appears on the Preprinted and Signature Card Avoid Mistakes. When a mistake occurs cancel the check by writing Void across the front of it. Make sure proper funds are in the account to cover the amount of the check written.
Example #1 n Date: December 6, 2012 n Maker: You n Payee: Target n Amount: $ 267.98 n Bought School Supplies
Assignments n p. 207 Apply What You Know # 1 n Chapter 9 Vocabulary n Stock Market Project: Lesson 1 and 2
Using Your Checking Account (Cont d) Andy Johnson Dollars Cents Phone: 555-0100 Cash 20 50 4250 West 18th Avenue 2-51 200 00 2-74 Chicago, IL 60601-2180 710 Date July 15 20 04 Checks Be sure Subtotal 220 00 each item SIGN HERE FOR LESS CASH IN TELLER'S PRESENCE Less Cash Received is properly Net Deposit 220 00 endorsed DUB Dawson United Bank Berlin, NJ 08009 2505000052 58101205 Checks and Other Items are Received for Deposit Subject to the Terms and Conditions of this Institutions Collection Agreement Making Deposits Insert the date of the transaction In the Cash section, write in the amount of currency being deposited. In the Check section, write the amount and the ABA number being deposited. Total the currency, coin, and check amounts. Write this figure on the subtotal line. Then carry it down the Net Deposit row.
Example #2 n Date: April 7, 2012 n Cash: $ 48.52 n Checks: # 6-52 $ 56.38 # 2-86 $125.00
Assignments n p. 207 Apply What You Know # 2 n Chapter 9 Vocabulary n Stock Market Project: Lesson 1 and 2
Using a Checkbook Register Checkbook Register a booklet used to record checking account transactions Checkbook Register Guidelines Record the current amount in your account at the top of the Balance column. As soon as a check is written or a deposit is made, record the transaction in your checkbook register. Write the preprinted check number in the first column. Write the month, day, and year of the transaction in the Date column.
Using a Checkbook Register (Cont d) Checkbook Register Guidelines Enter the name of the payee on the first line of the Description section Enter the amount of the check, withdrawal, or service charge in the Amount of Payment. If the amount is a deposit, write the amount in the Amount of Deposit column. Repeat these amounts in the Balance column. If the amount is a check, withdrawal, or service charge, subtract it from the previous balance. If the amount is a deposit, add it to the previous balance. Write the new balance on the next line of the column.
Example #3 n Balance Brought Forward: $ 800.00 Item Payment Issued To Amount Amount of Balance Forward No. Date or Description of Deposit of Payment X Deposit $ 800.00 To: For: To: For: To: For: To: For: To: For: To: For: Deposit Balance Deposit Balance Deposit Balance Deposit Balance Deposit Balance Deposit Balance
Example #3 n July 1 st you write check #581 to Food Mart for $36.12 Item Payment Issued To Amount Amount of Balance Forward No. Date or Description of Deposit of Payment X Deposit $ 800.00 581 7/1 To: FOOD MART 36.12 Deposit (36.12) For: GROCERIES Balance 763.88 To: For: To: For: To: For: To: For: To: Deposit Balance Deposit Balance Deposit Balance Deposit Balance Deposit
Example #3 n July 15 th you deposit your pay check in the amount of $220.50 Item Payment Issued To Amount Amount of Balance Forward No. Date or Description of Deposit of Payment X Deposit $ 800.00 581 7/1 To: FOOD MART 36.12 Deposit (36.12) For: GROCERIES Balance 763.88 7/15 To: DEPOSIT $220.50 Deposit 220.50 For: PAYCHECK Balance 984.38 To: For: To: For: To: For: To: Deposit Balance Deposit Balance Deposit Balance Deposit
n July 16 th you go to the ATM and use your debit card to withdraw $20.00 n Example #3 Item Payment Issued To Amount Amount of Balance Forward No. Date or Description of Deposit of Payment X Deposit $ 800.00 581 7/2 To: FOOD MART 36.12 Deposit (36.12) For: GROCERIES Balance 763.88 7/15 To: DEPOSIT $220.50 Deposit 220.50 For: PAYCHECK Balance 984.38 7/16 To: DEBIT CARD 20.00 Deposit (20.00) For: ATM Balance 964.38 To: For: To: For: To: Deposit Balance Deposit Balance Deposit
Example #3 n July 20 th you pay your rent to Bellvue Apt. with check #582 in the amount $600.00 Item Payment Issued To Amount Amount of Balance Forward No. Date or Description of Deposit of Payment X Deposit $ 800.00 581 7/1 To: FOOD MART 36.12 Deposit (36.12) For: GROCERIES Balance 763.88 7/15 To: DEPOSIT $220.50 Deposit 220.50 For: PAYCHECK Balance 984.38 7/16 To: DEBIT CARD 20.00 Deposit (20.00) For: ATM Balance 964.38 582 7/20 To: BELLVUE APTS. 600.00 Deposit (600.00) For: RENT Balance 364.38 To: For: To: Deposit Balance Deposit
Example #3 n July 31 st the bank charges you a service fee of $5.00 Item Payment Issued To Amount Amount of Balance Forward No. Date or Description of Deposit of Payment X Deposit $ 800.00 581 7/1 To: FOOD MART 36.12 Deposit (36.12) For: GROCERIES Balance 763.88 7/15 To: DEPOSIT $220.50 Deposit 220.50 For: PAYCHECK Balance 984.38 7/16 To: DEBIT CARD 20.00 Deposit (20.00) For: ATM Balance 964.38 582 7/20 To: BELLVUE APTS. 600.00 Deposit (600.00) For: RENT Balance 364.38 7/31 To: SERVICE CHARGE 5.00 Deposit (5.00) For: JULY Balance 359.38 To: Deposit
Assignments n Keeping a Checkbook Worksheet n Stock Market Project: Lesson 1 and 2 n Chapter 9 Vocabulary
Endorsements n Blank Endorsement Anyone can cash the check
Endorsements n Special Endorsement Transfer the check to another party. Pay to the Order of
Endorsements n Restrictive Endorsement More secure than a blank endorsement. For Deposit Only
Reconciling Your Checking Account n Each month the bank will send a bank statement to every customer. n Listed on the bank statement will be all: checks received and processed by the bank other withdrawals deposits made services charges interested earned
Bank Statement Dawson Bank For the Month Ended March 31, 2011 Beginning Balance as of March 1, 2011 $100.00 Date Check Number Withdrawals Deposits Balance March 1, 2011 $ 100.00 March 7, 2011 101 $24.75 $ 75.25 March 8, 2011 $30.00 $ 105.25 March 10, 2011 102 $13.00 $ 92.25 March 12, 2011 103 $10.00 $ 82.25 March 20, 2011 104 $3.80 $ 78.45 March 30, 2011 $1.20 $ 77.25 Ending Balance as of March 31, 2011 $77.25
Reconciling Your Checking Account n Bank Reconciliation n The process of matching your checkbook register with the bank statement. n Usually a reconciliation form will be printed on the back of your bank statement.
Bank Reconciliation 1. Ending Bank Balance as shown on the Bank Statement as of March 31, 2011 $ 2. Add Deposits not Shown on Bank Statement $ 3. Total Lines 1 and 2 $ 4. Subtract Checks Written but not shown on the Bank Statement $ Check Number Amount 5. Adjusted Balance (Should be the same as Ending Balance in Checkbook $
Item Payment Issued To Amount Amount of Balance Forward No. Date or Description of Deposit of Payment X Deposit $ 100.00 101 3/1 To: Grocery Mart 24.75 Deposit 24.75 For: Groceries Balance 75.25 102 3/3 To: Independent Phone Co. 13.00 Deposit 13.00 For: Feb. Charges Balance 62.25 3/5 To: Deposit $30.00 Deposit 30.00 For: Balance 92.25 103 3/8 To: Local High School 10.00 Deposit 10.00 For: Band Donation Balance 82.25 104 3/10 To: Alan's Bakery 3.80 Deposit 3.80 For: Bread Balance 78.45 105 3/15 To: Grocery Mart 18.20 Deposit 18.20 For: Groceries Balance 60.25 3/18 To: Deposit $42.00 Deposit 42.00 For: Balance 102.25 106 3/20 To: Acme Hardware 4.18 Deposit 4.18 For: Hammer Balance 98.07 To: Deposit For: Balance
Bank Statement Dawson Bank For the Month Ended March 31, 2011 Beginning Balance as of March 1, 2011 $100.00 Date Check Number Withdrawals Deposits Balance March 1, 2011 $ 100.00 March 7, 2011 101 $24.75 $ 75.25 March 8, 2011 $30.00 $ 105.25 March 10, 2011 102 $13.00 $ 92.25 March 12, 2011 103 $10.00 $ 82.25 March 20, 2011 104 $3.80 $ 78.45 March 30, 2011 $1.20 $ 77.25 Ending Balance as of March 31, 2011 $77.25
Reconciling Your Checking Account 1. Write ending balance from bank statement: 2. Add credits or deposits not on statement: 3. Total line 1 and 2: 4. Write total checks outstanding: Check No. Check Amount #105 $ 18.20 #106 $ 4.18 5. Subtract line 4 from line 3. (Should agree with checkbook balance) 77.25 42.00 119.25 (22.38) 96.87
Assignments n p. 207 Apply What You Know # 3 n Reconciling an Account Worksheet n Stock Market Project: Lesson 2
Checking Accounts n Standard Accounts n Set monthly service fee of between $5 and $12 but no per-check free. n If you keep a certain minimum balance you can avoid service fees all together. n Packaged services for this type of account Travelers checks ATM card Free safe deposit box
Checking Accounts n Joint Accounts n Opened by two or more people. n or Account-one or the other persons are required to sign checks. n and Account - Both persons on account are required to sign checks. n Survivorship Account Any person who signs on the account has the right to the entire amount deposited.
Checking Accounts n Special Accounts n Checking accounts to customers who write only a small number of checks per month. n Fee charged per transaction
Checking Accounts n Interest-Bearing Accounts n Must maintain a minimum balance. n Share Accounts n Checking accounts with low (or no) average daily balance requirements and no service fees. Credit Unions
Assignments n On Chapter 9 Website complete: p. 198 9.1 Assessment n Checkbook Register and Bank Reconciliation Worksheet (p. 92) n Stock Market Project: Lesson 1 and 2
n Certified Check Banking Services A personal check that the bank guarantees or certifies to be good n Cashier s Check A check written by a bank on its own funds. n Traveler s Check n A check forms in specific denominations that are used instead of cash while traveling.
n Money Order Banking Services n People who don t have cash or a checking account. They never bounce. n Debit Cards n A plastic card that immediately deductions from checking account to pay for purchases. n Bank Credit Cards n Visa or MasterCard n Will have to pay an annual fee and interest on unpaid account balance.
Banking Services n Overdraft Protection n Checks will be covered even if you have insufficient funds in your checking account. n Automated Teller Machines (ATM) n 24 hour banking services. n Electronic Funds Transfer (EFT) n Uses a computer-based system that enables you to move money from one account to another.
Banking Services n Stop Payment Orders n A request that a bank not cash a specific check. n Safe Deposit Boxes n To store valuable items or documents at the bank. n Loans and Trusts n Notary Public n Financial Services
Bank Fees n Month service fees n Overdraft fees n NSF check charges n ATM fees n Safe deposit box fees
Assignments n p. 205 9.2 Assessment n Checking Account Activity Worksheet