After completing Unit 14, you will be able to:
• Compute the balances on check stubs and registers.
• Adjust a checkbook balance.
• Adjust a bank statement balance.
• Prepare a bank reconciliation statement.
PREPARATION OF DEPOSIT SLIPS
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 AND DEBIT CARDS (MONEY CARDS)
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? _____________
PREPARATION OF CHECK STUBS AND REGISTERS
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.
RECONCILIATION OF A BANK STATEMENT
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.
(b) By how much? __________
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? ____________
RECONCILIATION OF CHECKBOOK BALANCE
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? ____________
(c) What is the amount of Check 869? ____________
(d) What is the checkbook balance after Check 869 was written? ________________
(e) If the bank statement shows $12.30 for interest earned, what is the checkbook balance after taking this into account? ___________
(b) Is interest earned added to or subtracted from the 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.
(b) Interest earned? ___________
ADJUSTING THE BALANCES
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.
(b) On what date was the statement prepared? _________
(c) What is the beginning bank balance? ________
(d) How much is the bank service charge? _______
(e) What is the ending bank balance? __________
(f) How many deposits were made? ___________
(g) What is their total? _________
(h) How many checks were deducted? _______
(i) What is their total? _____________________
(j) Verify the balance of the bank statement by means of the following formula. Ending bank statement balance = Beginning balance + Deposits – Withdrawals – Service charge. _________________
(b) Does it appear that the bank statement balance should be adjusted? __________
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.
(b) What is the total of the outstanding checks? ____________________
(c) What is the difference between the bank balance and the total of the outstanding checks? __________________
(d) Is the difference between the bank balance and the total of the outstanding checks equal to the adjusted checkbook balance of $5,234.85? __________
31. Examine the following information from E. C. Rainey and Son's reconciliation statement. Answer the questions that follow.
(b) From which balance should the total outstanding checks be deducted? ______________
(c) From which balance should the service charge be deducted? __________
(d) Have all the computations been made correctly? ______________
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? ________
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
The following deposits were also made.
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.
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? __________