Dishonored Checks and Electronic Banking

1. LESSON 5-3 Dishonored Checks and Electronic Banking Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School

2. Dishonored Checks • A check that a bank refuses to pay is called a dishonored check • Most banks charge a fee for handling dishonored checks that have been previously accepted for deposit • This fee is an expense of the business receiving the dishonored check, therefore, a NSF check is treated as a cash payment transaction NSF LESSON 5-3

3. 1. Write Dishonoredcheck $105.00 on the line under the heading “Other.” RECORDING A DISHONORED CHECK ON A CHECK STUB page 129 2. Write the total of the dishonored check (original amount of the check + any bank service charge) in the amount column. 3. Calculate and record the new subtotal on the Subtotal line. 1 2 3 LESSON 5-3

4. JOURNALIZING A DISHONORED CHECK • A business receives a notice of the dishonored check & the fee from the bank • The notice is attached to a memorandum, which is used as the source document • The amount of the dishonored check plus the service fee is journalized as an accounts receivable from the business who wrote the bad check LESSON 5-3

5. 2 3 JOURNALIZING A DISHONORED CHECK page 130 November 29. Received notice from the bank of a dishonored check from Campus Internet Café, $70.00, plus $35.00 fee; total, $105.00. Memorandum No. 55. 4 1 1. Write the date. 2. Write the title of the account debited. Write the debit amount. 3. Write the title of the account credited. Write the amount credited. 4. Write the source document number in the Doc. No. column. LESSON 5-3

6. JOURNALIZING AN ELECTRONIC FUNDS TRANSFER • A computerized cash payments system that transfers funds without the use of check, currency, or other paper documents is called electronic funds transfer (EFT) • A transfer of funds from the business’s account to the vendor’s account can be completed via the Internet or a telephone call • The journal entry for making payments on account through EFT is the same as when a check is written • A memorandum is used as a source document. A note is written on the memo to describe the transaction LESSON 5-3

7. 2 3 JOURNALIZING AN ELECTRONIC FUNDS TRANSFER page 131 September 2. Paid cash on account to Kelson Enterprises, $350.00, using EFT. Memorandum No. 10. 1 4 1. Write the date. 2. Write the title of the account debited. Record the amount debited. 3. Write the title of the account credited. Record the amount credited. 4. Write the source document number in the Doc. No. column. LESSON 5-3

8. JOURNALIZING A DEBIT CARD TRANSACTION • A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder is called a debit card • When a purchase is made with a debit card, the amount of the purchase is automatically deducted from the checking account • A debit card eliminates the need to write a check for the purchase • A memorandum is the source document for debit card purchases • A cash payment made with a debit card is recorded on the check stub as “Other” LESSON 5-3

9. 2 3 JOURNALIZING A DEBIT CARD TRANSACTION page 132 September 5. Purchased supplies, $24.00, using debit card. Memorandum No. 12. 1 4 1. Write the date. 2. Write the title of the account debited. Record the amount debited. 3. Write the title of the account credited. Record the amount credited. 4. Write the source document number in the Doc. No. column. LESSON 5-3

10. TERMS REVIEW page 133 • dishonored check • electronic funds transfer • debit card LESSON 5-3