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Chapter 3 Banking Services

Chapter 3 Banking Services. 3.1 Checking Accounts. Deposit Slip. A deposit slip is used to deposit their paychecks and other monies. Cash Including Coins: 285.85 Check: 322.94 Check: 1.45 Subtotal 610.24 Less Cash: 0 Total Deposited: 610.24.

emma-levine
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Chapter 3 Banking Services

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  1. Chapter 3 Banking Services

  2. 3.1 Checking Accounts

  3. Deposit Slip • A deposit slip is used to deposit their paychecks and other monies. • Cash Including Coins: 285.85 Check: 322.94 Check: 1.45 Subtotal 610.24 Less Cash: 0 Total Deposited: 610.24

  4. B. Cash Including Coins: 615.45 Check: 39.86 Check: 3.83 Subtotal 659.14 Less Cash: 0 Total Deposited: 659.14

  5. Check Register • When you write a check you are telling the bank to take money from your account. • Check register is where deposits and checks are written. • Calculate a running balance or new balance • Deposits + • Checks (-) • Balance is the amount of money in account

  6. C. 2,583.45 +1,220-825-96.40-12.78 = D. 129.74+500+1,236-196-950-87.83=

  7. 3.2 Electronic Banking

  8. Electronic Banking • Use telephone, computer, other technology • Banks use computers to transfer deposits and checks, or “funds” from person to person and bank to bank called EFT • Bank Identification Number

  9. Automatic Teller Machine-ATM • What can you do with an ATM? • Personal Identification Number – PIN • Direct Deposit-Have paychecks automatically transferred from work to employee bank account • Debit Card- Allows you to pay for purchases without using cash or check-automatically withdrawn from checking account

  10. 782.88-85-86.54-50= • 1,248.40+890.50-200-12.87-118.94=

  11. 3.3 Online Banking

  12. Online Account Access • Online banking allows you to do your banking online. • Available balance is the amount available to spend • 100+690-35-312.40-150-280 = 100-12.60 = B. 67+728-36.90-112.85-270-15-128-89.23-45.50 =

  13. 3.4 Check Register Reconciliation

  14. Reconcile the Bank Statement • Banks keep track of checking accounts and send the monthly report or bank statement to customers. • Interest earned is $ paid to customers for the use of their $ • Service charge is a deduction made by the bank for handling the checking account.

  15. A canceled check is one that the bank has paid and then marked so it can’t be used again • Outstanding checks means that the checks have been written but not yet received or paid by the bank • Outstanding deposit is deposit made after the closing date of the bank statement. – not on the statement but in your register

  16. Bank Statement Balance + Outstanding deposi - Outstanding checks New Bank Balance 1,383.53 --29.45 -87.39 +312.09 B. 793.57 +312.09 -174.85 -32.78

  17. Reconcile the Check Register • Check Register Balance + Interest Earned • Service Charge • + Any Errors New Check Register Balance *CHECK REGISTER AND BANK STATEMENT MUST BALANCE TO RECONCILE

  18. C. 727.92 -18.90 +1.60 D. 457.38 -7.68

  19. 3.5 Other Reconciliation Problems

  20. Reconcile the Checking Account • Sometimes there are errors when calculating your checking account • Compare checkbook register to bank statement item by item

  21. S1: Compare the bank statement to the check register and note any differences between them. S2: Prepare a reconciliation form to reconcile the bank statement. S3: Reconcile the check register.

  22. 107.87 +0.43 -56.00 +32.95 -35.29 B. 812.45 -200 -80.17 624.77 -92.49

  23. 3.6 Savings Accounts

  24. Simple Interest • Interest-$ paid to an individual or institution for the privilege of using their $ • Same as checking • Deposit $ • Withdrawal $ • Record transactions

  25. Interest can be added to your savings account • Quarterly – 4x a year every three months • 0.25 = ¼ = 3/12 • Semiannually – 2x every six months • 0.5 = ½ = 6/12 • Annually – 1x a year • 1 = 1/1 = 12/12 • Monthly – 12 a year every month • 0.083 = 1/12

  26. Principal x Rate x Time = Interest P x R x T = I Time must be calculated out of one year Ex quarterly = ¼ or 0.25 semiannually = ½ or 0.5 annually = 1 monthly = 1/12 or 0.083 Change percent to decimal

  27. 2 ¼% = 2.25% = 0.0225 860 x 0.0225 x 0.25= P R T B. 3.1% = 0.031 350 x 0.031 x 0.5 = P R T

  28. Compound Interest • Interest is added into balance. – Becomes new principal P x R x T = I (Principal x Rate x Time = Interest) I + P = NP (Interest + Principal = New Principal) NP x R x T = I (New Principal x Rate x Time = Interest)

  29. C. 700 x 0.03 x 0.25 = 5.25 + 700 = 705.25 705.25 x 0.03 x 0.25= 5.29 + 705.25 = 710.54 D. 400 x 0.025 x 0.5 = 5 + 400 = 405 405 x .025 x 0.5 =5.06 405 + 5.06 = 410.06 410.06 – 400 = 10.06

  30. Compound Interest Tables • Instead of formula can use a table • Pg. 113 E. Annual 3 1 ¼% 1.037971 x 1,100 = 1,141.77 1,141.77 – 1,100 = 41.77

  31. F. Annual 7 1% 1.072135 x 720 =771.94 771.94 – 720 = 51.94

  32. What if not for full year? Interest x ¼ for quarterly Interest x ½ for semiannually Periods x 4 for quarterly Periods x 2 for semiannually

  33. G. 5% x 0.25 = 1.25% 2 years x 4 periods a year = 8 1.104486 x 850 = 938.81 938.81-850 = 88.81 H. 2.5% x .5 = 1.25% 2 years x 2 periods a year = 4 1.050945 x 1,600 = 1,681.51 1,681.51 – 1,600 = 81.51

  34. 3.7 Money Market and CD Accounts • Some special savings paid higher rate than regular savings

  35. Certificate of Deposit • CD – A time deposit or savings certificate • Deposit a minimum amount • Leave the money for minimum time or term • End of term is maturity date • Pay a penalty if withdrawal before term

  36. Money Market Accounts • Higher interest rates but more like a checking • Minimum balance requirements • Interest rate is fixed • A small # of checks may be written

  37. P x R x T = I • A. 10,000 x 0.054 x 3 = 1,620 • B. March 2,000 x 0.014 x 0.083 = 2.32 April 2,000 x 0.0132 x0 .083 = 2.19 2.32 + 2.19 = 4.51

  38. Penalties on Certificates of Deposit • By law charged a penalty for early withdrawal • Penalty calculated on amount of $ withdrawn from CD • Amount Withdrawn x Rate x Time = Penalty

  39. C. 500 x 0.02 x 0.25 = 2.5 D. 1,000 x 0.047 x 1 = 47 1,000 – 47 = 953

  40. Compare Savings Accounts E. Time Deposit 1,400 x 0.0235 x 0.5 = 16.45 16.45 – 15.13 = 1.32 F. 1,500 x 0.0326 x 0.25 = 12.23 x 3 = 36.68 36.68 - 31.37 = 5.31

  41. Effective Rate of Interest • Rate you actually earn by keeping money on deposit • Also called Annual Percentage Yield (APY) Amount of Interest Earned for One Year = Amount of Money on Deposit

  42. G. 4% x 0.25 = 1% 1 x 4 = 4 Periods 1.040604 x 2,000 = 2081.21 2,081.21 – 2,000 = 81.21 81.21 / 2,000 = 0.0406 4.06%

  43. H. 5% x 0.5 = 2.5% 1 x 2 = 2 Periods 1.050625 x 6,000 = 6303.75 6303.75 – 6,000 = 303.75 303.75 / 6,000 = 0.0506 5.06%

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