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Chapter 29-Checking Acct.
Why do we need a checking account?
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Checks are the most common medium of exchange
About 85% of U.S. households have checking accounts
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How does it work? Money is deposited into an account
Checks are written to make purchases or pay bills
Money is released from the account and paid to the person on the check
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• Demand deposit
• a check is an order for the bank to release that particular amount of money
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Types of Accounts
Regular Account Designed for customers who write a few
checks each month and don’t keep a minimum amount of money in the account.
Usually have to keep minimum balance Can be between $50 and $500
Withdrawals include: Checks you write
Automatic withdrawals (examples?)
ATM withdrawals
May have to pay service charge if account falls below the minimum balance.
Types of Accounts cont’d
Interest-Bearing Account A checking account that earns interest on
your account’s balance.
It usually has a minimum balance requirement with an unlimited number of checks allowed each month. Ex: $25 or $50 minimum balance
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Joint Account
An account shared by two people who are equally responsible for the account.
Who would use a joint checking account?
Either person can write checks on the account.
Signature Card
Record of your signature to verify your identity
Types of Accounts cont’d
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Account Services
Overdraft Protection A line of credit for overdrawn checks.
If you write a check for more than you have in the account, the bank will cover the check up to a certain amount.
Stop Payment An order for a bank not to cash a particular check
Why would you need to use this?
Account Services cont’d
Debit Cards Looks similar to a credit card but money is taken
directly from your checking account
Doubles as your ATM card
Online Banking Allows you to check your accounts, transfer
money, or pay bills at any time of the day.
Available 24 hours a day 7 days a week
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Account Records
Writing a check
3 parties involved Payee – person who the check is written to
Drawer – person who wrote the check
Drawee – the bank
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Parts of a Check
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1. Check Number2. Date line3. Payee
4. Dollar Amt. in numbers5. Dollar amt. in words6. Drawee (the bank)
7. Signature Line8. Routing number/bank number9. Account Number10.Memo Line
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Writing a Check
Write all checks in ink why?
Always start writing at the far left of the line why?
Write legibly. If the numbers are not clear or they differ from the
written dollar amount, the written amount applies
Sign your name last and sign it the same way every time.
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Writing Dollars and CentsWhen writing a check, you must write the amount of the check in numbers and words.
Examples:
• $10.21 • Ten and 21/100
• $1,500.00 • One thousand five hundred and 00/100
• $125.46 • One hundred twenty-five and 46/100
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Practice Writing
Checks
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Write the following checks:On 04/19/2016 you wrote check number 101 for $755.55 to Apartment Mart for rent.
On 04/19/2016 you wrote check number 102 for $56.87 to Jewel for groceries.
On 04/19/2016 you wrote check number 103 for $49.25 to Jiffy Lube for an oil change.
Account Records cont’d
Check Register
Checkbook log where you keep track of all your checking transactions
Should include
Check number or “DC” for debit card transaction
Amount of check
Date of check
Name of payee
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Check Register
Where you keep track of all your checking transactions
Posting to the Check Register
For the checks you just completed – fill out your checkbook register accordingly
Assume that you have a starting balance of $905.25
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Depositing a CheckEndorsements
Your signature on the back of a check
Use pen
Sign your name exactly as it is written on the front of the check
If you are depositing a check rather than cashing it, write “For Deposit Only” above the signature.
What does this prevent?
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To deposit into your checking account:
For Deposit Only
Brad Neubauer
0123456789
Called a restrictive endorsement –entire check is deposited. No cash back.
Types of Endorsements
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Types of Endorsements
To receive as cash:
Brad Neubauer
Called a blank endorsement
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Sign the check over to a third party:
Pay to the order of:
Jane Doe
Brad Neubauer
Special endorsement/endorsement in full
– check is signed over to someone else who then cashes the check.
Types of Endorsements
19Slide 3 - Making a Deposit - Completing a Deposit Slip
MAKING A DEPOSIT -COMPLETING A DEPOSIT SLIP
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Need to fill out deposit slip
Record any deposits you make in your check register
Depositing a Check
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Deposit #1 – You will deposit the following on 04/16/12: $50.00 in cash
Check #4568 for $145.00
Check #4565 for $150.00
Once deposit slip is complete, record the deposit in your check register
What is your Net Deposit?
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• Bank Statement• the bank’s record of all the transactions in your
checking account. It includes a record of all withdrawals, deposits, interest, and fees.
Bank Statement Example
• Canceled Check• Checks you have written that have been
cashed.
• The money is no longer in your account
Balancing Your Checkbook
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Balancing Your Checkbook
• Bank Reconciliation -Balancing your account means matching the amount of money you say you have with the amount of money the bank says you have.
Checking account mistakes do occur.
The only way to catch any errors is to keep good records and regularly balance your account. What can happen if there are errors in your checking
account?
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Step One
In your checkbook, make a checkmark in the appropriate box for each check noted on your statement.
Make a checkmark in the appropriate box for each deposit made that is noted on your statement.
Make a checkmark in the appropriate box for each ATM/debit card transaction that is noted on your statement.
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Step Two
Record in your check register any transactions listed on your bank statement that you did not recorded in your check register.
Example: items you may have forgot to put in your check register, fees charged by your bank, etc.
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Step Three
Complete the Check Reconciliation Form Write the ending balance shown on your bank
statement
Subtract the total amount of checks that were recorded in your check register but not yet cleared by the bank referred to as checks outstanding.
Add the total amount of deposits made that were after the ending date of the bank statement referred to as deposits outstanding.
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Summary
Bank Account Statement Ending Balance + Deposits Outstanding
– Checks Outstanding
= Ending Balance in Checkbook Register
Finding ErrorsCheck your account records to make sure you wrote the correct amounts
Check your math
Check to see if you had the correct balance
Re-check that you’ve identified all outstanding checks and deposits
Check the bank’s math
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