Chapter 6 - Banking and Control of Cash

Cancelled check

A check that has been process by a bank and is no longer negotiable.

Deposit slip

A form provided by a bank for use in depositing money or checks into a checking account.

Signature Card

A form signed by a bank customer that the bank uses to verify signature authenticity on all checks.

Check

A form used to indicate a specific amount of money that is to be paid by the bank to a named person or company. A written order signed by a drawer (the person who writes the check) instructing a drawee (the person who pays the check) to pay a specific sum of money to the payee (the person who the check is payable).

Petty Cash Voucher

A petty cash form to be completed when money is taken out of petty cash.

Bank Statement

A report sent by a bank to a customer indicating the previous balance, ATM transactions, nonsufficient funds, individual checks processed, individual deposits received, service charges, and ending bank balance.

Three Types of Endorsement - Blank

A signature on the back left-side of a check of the person or firm the check is payable to. This check can be further endorsed by someone else. Doesn't specify that a particular person or firm must endorse it; can be further deposited by someone else. The bank will give the money to the last person who signs the check. This type of endorsement is not very safe. If the check is lost, anyone who picks it up can sign it and get the money. • Could be further endorsed.

Auxiliary Petty Cash Record

A supplementary record for summarizing petty cash information.

Electronic Funds Transfer (EFT)

An electronic system that transfers funds without the use of paper checks

ATM

Automatic teller machine that allows for depositing, withdrawal, and advanced banking transactions.

Drawee

Bank that drawer has account with.

Outstanding Checks

Checks written by a company or person that were not received or not processed by the bank before the preparation of the bank statement.

Debit Memorandum

Decrease in depositor's balance.

Deposits in Transit

Deposits that were made by customers of a bank but did not reach, or were not processed by, the bank before the preparation of the bank statement.

Phishing

Fake e-mails that attempt to obtain information about online banking customers

Petty Cash Fund

Fund (source) that allows payment of small amounts without the writing of checks.

Change Fund

Fund made up of various denominations that are used to make change for customers

Credit Memorandum

Increase in depositor's balance

NSF (nonsufficient funds)

Notation indicating that a check has been written on an account that lacks sufficient funds to back it up.

Drawer

Person who writes the check

Check truncation (safekeeping)

Procedure whereby checks are not returned to the drawer with the bank statement but are instead kept at the bank for a certain amount of time before being first transferred to microfilm and then destroyed.

Internal Control System

Procedures and methods to control a firm's assets as well as monitor its operations.

Cash Short and Over

The account that records cash shortages and overages. If the ending balance is a debit, it is recorded on the income statement as a miscellaneous expense. It if is a credit, it is recorded as miscellaneous income.

Payee

The person or company to who the check is payable.

Bank Reconciliation

The process of reconciling the checkbook balance with the bank balance given on the bank statement.

Endorsement

The signing or stamping of one's name on the back left-hand side of the check before it can be deposited or cashed; which means that the payee has transferred the right to deposit or cash the check to someone else (the bank) granting the bank permission to collect the money from the person or company that issued the check

Three Types of Endorsement - Restrictive

This endorsement safest for business. A company can stamp the back of the check so that it must be deposited in the firm's account limiting any further use of the check (it can only be deposited in the specified account). • Restricts any further endorsement.

Three Types of Endorsement - Full

This type of endorsement is safer than a simple signature, because the person or company signing (or stamping) the back of the check indicates the name of the company or person to who the check is to be paid. Only the person or company named in the endorsement can transfer the check to someone else. • Restricts further endorsement to only the person or company named.