Chapter 4

1. Chapter 4 Checking Accounts

2. 4.1 Deposits • A deposit consists of checks, currency, or coins put into a bank account. The phrase “For Deposit Only” and the account number should be written on the back of the check. This ensures the check cannot be cashed by someone else if it is lost or stolen. Your employer can also make a direct deposit of your check. This is a deposit electronically transferred from your employer’s checking account to your checking account.

3. Another way to make a deposit is to use an automated teller machine (ATM), which performs basic banking functions (such as handing check deposits or issuing cash withdrawals). To use an ATM, you will need an ATM card and a personal identification number (PIN). The card allows you to access your bank account and deposit your check into the machine.

4. Business owners should always deposit all of the money received in order to establish what accountants call a “money trail.” They should always deposit all of the money received-currency, coin, and checks- and then separately withdraw cash for the business.

5. Formula • Total Deposit= (Currency +Coins+ Checks)- Cash Received

6. Example 1 • Manuel Romeo is making a deposit to his checking account. He has checks for $435.20, $271.19 and $327.96. His cash consists of 15 one-dollar bills, 7 five-dollar bills, 3 ten-dollar bills, 24 quarters, 5 dimes, 15 nickels, and 14 pennies. He also withdraws $75.00 in cash. What is his total deposit?

7. 11/15/2013 87 39 Manuel Romeo 435 20 85-40 116-25 271 19 4853925612 327 96 897-32 1121 74 75 00 Sign Here if Cash Received from Deposit 1046 74 Manuel Romeo

8. 4.2 The Check writing process • When you open a checking account at a bank, you deposit checks and currency into the account. Then you can write checks on this account. A check is a paper document directing a bank to deduct money from your checking account and make a payment.

9. Your account must contain as much money as the amount on the check you are writing so that you do not overdraw you account. If you overdraw, your account does not have enough funds to pay a check you wrote. A returned check is sometimes called an overdraft. To write checks, you need to be able to write dollar amounts in word form with the decimal portion expressed as a fraction.

10. Example 1: • Write the amounts in word form or as a numeral • $65.29 • Twenty-three and 42/100 dollars

11. Example 2: • Margaret Miller is buying a gift at the Department Store on March 23, 2013. The cost of the gift is $45.78, and she pays by check. Using the picture of a check, how should she write the check? • Step 1: Write the date • Step 2: Write the name of the person or organization to whom payment will be made • Step 3: Write the amount of the check as a numeral. • Step 4: Write the amount of the check in words with cents as a fraction of a dollar. • Step 5: Make a notation on the memo line to indicate the check’s purpose. • Step 6: Sign the check.

13. Completed check example

14. 4.3 Check registers • You use a check register to keep a record of your deposits, electronic transfers (or automatic transfers), checks you have written and any ATM deposits or withdrawals. The balance is the amount of money in your account. When you write a check or electronically transfer funds out of your account, you subtract the amount from the previous balance. When you make a deposit, you add the amount of the deposit to the previous balance.

15. Formulas: • New Balance= Previous Balance –Check Amount- Automatic Transfers • New Balance= Previous Balance + Deposit Amount

16. example • Use the check register on the back for Margaret Miller’s checking account. It had a balance of $313.54. She wrote a check for $45.78 on March 2. The bank made an automatic transfer (AT) of $52.55 on March 5 to pay her phone bill. She made a deposit of $240.32 on March 10. What is the new balance in Margaret’s account? • Step 1: Complete the check register. Calculate the new balance. • Step 2: New Balance= Previous Balance –Check Amount- Automatic Transfers • Step 3: New Balance= Previous Balance + Deposit Amount

17. 4.4 Bank statements • Your bank may send you a monthly bank statement for you checking account. It lists all activity in your account since your last statement including your checks that the bank has cleared and recorded. It also reports any automatic transfers, ATM transactions, and deposits that the bank has recorded. Instead of sending a statement by mail, the bank may send it through its Internet connection. The bank might add a service charge, a charge for services rendered, to your statement. Other terms for service charge are basic monthly charge, fee, new charge/fees, basic fee, service fee, and basic charge. A service charge can be composed of individual fees for services such as making ATM withdrawals from a bank not in your bank’s network and paying bills automatically.

18. formula • Present Balance= Previous Balance + Deposits – Withdrawals- Service Charges + Interest

19. Example 1 • Margaret Miller received her bank statement for March. ( look at statement in notes) She checks the statement. Verify her present balance. • Calculate the balance in the account.

20. 4.5 Bank statement reconciliation • When you receive your bank statement, you reconcile or compare it with your check register to be sure they coincide or agree. You may find some deposits or outstanding checks in your register that are no listed in the statement. • This happens because the bank had not posted (recorded, processed, or cleared) them by the statement date. It is important for you to keep your bank account records accurate and up to date. • You do not want to write a check for more money than you have in your account. If you do, you will overdraw the account and will be charged a penalty.

21. formula • When comparing the check register with the bank statement the formula is: • Adjusted Balance= Statement Balance- Outstanding Checks, Payments and/or Debits + Outstanding Deposits

22. Example • Your statement balance is $598.67. You have an outstanding check for $125.44 and an outstanding debit of $253.42. You also have an outstanding deposit of $231.98. What is your adjusted balance? • Calculate the adjusted balance (AB) • AB= Statement Balance – Outstanding Checks, Payments or Debits + Outstanding Deposits

23. 4.6 Online banking • It is 1 AM, and you need to monitor your bank account. You can do this by using online banking, or Internet banking. It allows you to bank from anywhere. Internet banking is very popular because all you need is an electronic connection to the Internet to view your account, pay bills and transfer money around the clock (24/7). • When you bank online, you need to maintain a record of your activities in your check register. One feature of online banking is that you can download your current transactions and out the information into a computer program (such as Excel spreadsheet, Microsoft Money, or Quicken®) that will contain a check register.

24. Example 1 • Alyssa uses online banking for her business, Alyssa’s Personal Shopping. She pays the service charge and 7 bills, and she requests a printed statement. She also has ATM transactions, including 1 out of network, and a cash advance of $400. What is her total service charge including fees for the month? • Add all the service charge fees.