Accounting for Cash
Certified check
A check that carries the guarantee of the bank that sufficient funds are available to pay the check when it is presented.
Canceled checks
A check that has been paid by the bank and returned to the drawer for record keeping.
Voucher check
A check with space for entering data about the voucher being paid.
Travelers check
A check paid for in advance that is signed when bought and signed again when cashed.
Establishing a petty cash fund:
1. A check is written to the petty cash custodian for the amount to be set aside in the fund (varies by company). 2. The journal entry is to Debit 'Petty cash' and Credit 'Cash' with a note "Establish petty cash fund". 3. Petty cash is an asset that is listed immediately below Cash on the balance sheet. 4. The custodian cashes the check and places the money in a petty cash box (locked).
Types of Endorsements:
1. Blank Endorsement 2. Restrictive Endorsement
Types of Checks
1. Cashiers check 2. Certified check 3. Voucher check 4. Bank Draft 5. Travelers check 6. Postdated check
Banking Procedures:
1. Deposit Ticket 2. Checks 3. Endorsements 4. Bank Statements 5. Bank Statement Reconciliation
Parties to a Check:
1. Drawee 2. Drawer 3. Payee
Miscellaneous Banking Terms:
1. Stop Payment Order 2. NSF Checks 3. Overdraft 4. Transportation Error
Deposit Ticket
A bank form that lists those cash items (currency & coin) and individual checks to be deposited.
Postdated check
A check dated subsequent to (following) its date of issuance.
Cashiers check
A check drawn by a bank on its own funds and signed by an officer of the bank.
Bank Draft
A check drawn by one bank on another bank in which it has funds on deposit.
Dishonored Checks
A check not paid by the bank when properly presented.
Petty Cash Voucher
A form used to reflect payments from the petty cash fund.
Petty Cash Fund
A fund of currency and coin established for the payment of small amounts of money.
Records of Cash Receipts and Disbursements (payments):
A payment
Drawer
A person (depositor) who signs a check, ordering a payment to be made.
Payee
A person or company who will receive payment on a promissory note, check, draft or money order.
Drawee
A person or concern, usually a bank, which has been ordered to make a payment on a check or draft.
Checks
A piece of commercial paper drawn on funds in a bank account and payable on demand.
Transportation Error
An amount written with the digits in incorrect order.
Restrictive Endorsement
An endorsement that limits the use of funds to the purpose stated, ex. "For Deposit Only".
Bank Statements
An itemized listing prepared by the bank of additions to or subtractions from a depositor's account.
Stop Payment Order
An order by a depositor requesting a bank not to pay on a check previously issued.
Outstanding Checks
Checks that have been drawn and subtracted from the depositor's checkbook, but which have not yet been presented to the bank for payment.
Cash
Coins Currency Checks Credit card receipts Any money orders received from others Any money deposited in the bank
Deposits in Transit:
Deposits that have been made and added to the depositor's checkbook, but which have not yet been listed on the bank statement.
NSF Checks
Not sufficient funds. There is not enough money in the account.
Cash Short & Over:
The cash short & over account is used to accumulate cash shortages and averages throughout the accounting period. At the end of the period, a debit balance in the account (a net shortage) is treated as an expense. A credit balance in the account (a net overage) is treated as revenue.
Blank Endorsement
The handwritten signature of the payee on the back of the check.
Overdraft
The issuance of a check without sufficient funds in the account when it is presented for payment.
Bank Reconciliation
The process by which the depositor attempts to reconcile the bank statement balance with the checkbook balance.
Endorsements
The signature of the payee or other holder placed on the back of a check or other negotiable instrument.
