Unit 14: Bank Records

Performance Objectives

After completing Unit 14, you will be able to:

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A deposit slip is a form that is used when making deposits in a bank or savings and loan association. When filling out a deposit slip, you must list the total amount of currency, coins, and checks that you are depositing. You must list each check you are depositing individually. Also, alongside each check you list its ABA (American Bankers Association) code. The ABA code is found in the upper right corner of each check. Only the first two numbers are required. The illustration below shows how checks are listed on deposit tickets.

1. Can the total of checks for deposit be entered on a deposit slip as a single amount? _________

2. What must be listed at the left of each check amount on a deposit slip? _____________

3. Which numbers of the ABA code are listed on a deposit ticket beside each check amount? __________

4. Fill in the deposit slip shown below, using the following information: currency, $25; coins, $2.50; and a check, $150 (with an ABA code 73-21, which is written at the left of the line).

5. Fill in the deposit slip below, using the following information: 6 twenties, 2 fives, 6 quarters, a check for $162.35 (with an ABA number of 1-3), and a check for $16.50 (with an ABA number of 15-78).

Checking accounts may be established at banks and savings and loan associations. Regulations for writing checks, the balances required to be on deposit, and the processing charges vary from one institution to another. Special checking accounts pay interest on the daily or average balance on deposit. Some banks issue debit cards, sometimes called money cards, which often look like a credit card. A debit card functions just like a check. For example, when the debit card is used, the amount of the purchase is deducted from the bank balance, just as if it were a check. The use of a credit card, on the other hand, permits you to pay only when billed by the bank or credit card company.

6. Is it possible to earn interest on the balance of a checking account? __________

7. Checking accounts with interest paid on the balance on deposit may be opened at both banks and _____________.

8. Does a debit card look like a credit card? __________

9. Do a debit card and a checking account serve about the same purpose? _____________

Check stubs or check registers are supplied by a bank or savings and loan association to keep track of the balance of the checking account. Lines on these forms provide spaces for the beginning balance, deposits, amounts of checks, and the ending balance. Check stubs permit the vertical addition of deposits and subtraction of the checks. Many check registers require the horizontal addition of deposits and subtraction of checks.

10. The balance of a checking account is kept on a _______(a)_______ or in a  _______(b)_______.

11. What kind of addition and subtraction is used on check stubs? ___________

12. What kind of addition and subtraction is used in many check registers? ____________

13. Compute the balances of the following check register by horizontal addition for deposits and horizontal subtraction for checks.

14. Compute the balances on the following check stubs by vertical addition and subtraction.

A bank statement shows a depositor's beginning balance, deposits, checks, charges, interest earned, and ending balance. A reconciliation statement verifies that the true, or adjusted, checkbook balance equals the true, or adjusted, bank statement balance. In other words, by means of a reconciliation statement, you can compare your balance with the bank's balance. If these balances do not agree, then one or both must be adjusted to make them agree. The true, or adjusted, checkbook balance should equal the true, or adjusted, bank balance.

15. What bank record shows the depositor's beginning balance, deposits, amount of checks, interest earned, and charges? __________

16. If the checkbook balance is $5,236.85 and the bank statement balance is $6,386.50, it would appear that at least one of the balances has not been ____________.

17. Assume that your checkbook balance is $638.65 and the bank statement balance is $438.65. You just made a deposit of $200 that does not yet appear on the bank statement.

18. The true, or adjusted, checkbook balance should equal the ___________________.

19. Do the true balances refer to the actual amount for which you can write checks that will not be returned because of insufficient funds? ____________

In summary, the checkbook balance should be adjusted by adding interest earned, if any, and subtracting the service charge.

Example: Assume that the checkbook balance is $525, the service charge is $4, and the interest earned on the account is $12. The adjusted balance is $525 $4 + $12 = $533. Note that these computations are required in Problem 20.

20. One of the two steps in preparing a bank reconciliation statement is to determine the adjusted checkbook balance. Check Stub 869 below is a record of the last check written on November 5. Refer to it as you answer the following questions.

(a) What was the final balance on Check Stub 868? ____________
21. 22. To obtain the new balance, is a new check added to or subtracted from the present checkbook balance? ___________

23. If the bank has a service charge for handling a checking account, the exact amount of the service charge is computed by the _________ and recorded on the bank statement.

24. Assume that the computations on all the check stubs have been verified and that all the deposits have been recorded. Also assume that there are a service charge and interest earned.

25. Assume the final checkbook balance is $5,236.85. The bank statement shows a service charge, $3, and interest earned, $5. What adjustment should be made to the checkbook balance? _____________

One step in completing a bank reconciliation statement is to determine the adjusted checkbook balance. Common adjustments to the checkbook balance are (a) to subtract the bank service charge and add any interest earned that appears on the bank statement and (b) to verify and correct any computations made in the register or on the check stubs. The other step is to compute the adjusted bank statement balance. Common adjustments are (a) to subtract the total of outstanding checks and (b) to add any recent deposits that have not yet been recorded by the bank.

26. Use the bank statement for E. C. Rainey and Son shown above.

27. Erwin Rainey received a statement from the bank showing a balance of $6,167.85 for his business account. He compared it with a checkbook balance of $5,236.85, noted a $2 service charge on the statement, and subtracted the service charge from the checkbook balance to determine the adjusted checkbook balance of  $5,234.85. OUTSTANDING CHECKS
Checks that have been written but that have not yet been received by the bank are known as outstanding checks.

28. What term is applied to checks that you have written but that have not yet been received by the bank? __________

29. Rainey and Son's bank balance is $6,167.85, and the adjusted checkbook balance is $5,234.85. The difference between the balances is based on the transactions described below.

30. To reconcile the bank balance with the checkbook balance, it is necessary to
subtract the service charge from the  _____(a)_____ balance and to subtract the outstanding checks from the _____(b)_____ balance.

31. Examine the following information from E. C. Rainey and Son's reconciliation statement. Answer the questions that follow.

32. On a bank statement for March 31, the balance was $1,260.35. Look at the information below.

The adjusted bank statement balance is _________.

33. The balance in a checkbook on July 31 was $5,371.50. A check for $20 was written in July, but it was not deducted from the checkbook balance. The service charge for the month was $3.00.

The adjusted checkbook balance is __________.

34. The balance in a checkbook on April 30, was $8,142.60. A deposit of $500 was made on April 13, but it was not recorded in the checkbook. An error was made on Check Stub 62; the check was written for $263.05 but recorded as $363.05.

The adjusted checkbook balance is _________.

35. A bank statement balance was $5,265.54. The outstanding checks were Check 1013, $150; Check 1015, $200; and Check 1016, $60. A deposit in transit (deposit made but not yet recorded on the bank statement) was for $500.

What is the adjusted bank balance? ________

Business Applications

36. Below is Amanda Marshall's bank statement and her last check stub for her interior decoration business. On the following page is a reconciliation form that appears on the back of the statement shown below. Complete the reconciliation for Amanda using the information given on this and the following page.

Below is the last completed check stub for the month of May.

The following list includes all checks written against the Marshall Interiors account in May
1787 $85.00 1791 $107.00 1794 $108.07
1788 $66.77 1792
1789 $35.00 1793
1790 $64.33

The following deposits were also made.
May 5 $638.19
May 16 $155.10

When Amanda Marshall referred to the bank statement of last month, April 30, she found that the following checks were outstanding at that time. Check to see whether they have been received by the bank or whether they are still outstanding.
1780 $69.75 1785 $152.40
1784 $18.04 1786

When preparing the reconciliation, be sure to watch for the service charge and for deposits in transit. Use the form below to prepare the reconciliation (you might want to print it out first). What amounts should both the adjusted checkbook balance and the adjusted bank balance be? __________

You have finished Unit 14. Please select one of the choices below.