LESSON 5-3

1. LESSON 5-3 Dishonored Checks and Electronic Banking

2. Terms • Dishonored check: a check that a bank refuses to pay • Electronic funds transfer: a computerized cash payments system that uses electronic impulses to transfer funds • Debit card: a bank card that automatically deducts the amount of a purchase from the checking account of the cardholder

3. Dishonor checks Banks will dishonor a check when: • The person who wrote the check has insufficient funds • Check appears to be altered • Signature on check does not match bank records • Written amount in figures does not agree with numeric amount • The check is postdated • The person who wrote the check has stopped payment

4. Dishonored Checks Continued • When the dishonored check is uncollectable: • Bank charges a dishonored check fee to the business receiving the check • Dishonored check value + check fee = expense to the business that received the check • The business receiving the check will attempt to collect the check amount + the fee from the business that wrote the check • Example: Your business received a check for $40 and it is uncollectable. The bank fee is $35. What is the amount your business will try to recover from the other business? • $75

5. You work for TechKnow Consulting. You receive notice of a Dishonored check from your bank. Tables of two groups get together and discuss the process that you will need to take to record the dishonored check?

6. Recording a Dishonored Check: 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 • Step 1: Write a Memorandum • “Received a dishonored check from Campus Internet Café, $70.00, plus $35.00 fee; total, $105.00. • Attach Notice from the bank to memorandum and given to accountant • Step 2: Enter $105 onto next unused Check Stub under “Other” • Step 3: Journalize the transaction • The original transaction = received a payment of $70 on Account • Increased cash, decreased amount the business owed you • To reverse this, What two accounts are impacted? • Reduces your Cash • Increases the amount of money someone owes you – What account?

7. 1. Enter Dishonoredcheck on the line under the heading “Other.” on the next unused check stub RECORDING A DISHONORED CHECK ON A CHECK STUB 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 2. Enter total of the dishonored check & fee 3. Record new Subtotal

8. Complete the memorandum 55 Received a dishonored check from Campus Internet Café, $70.00, plus $35.00 fee; total, $105.00. Nov 29, 2010

9. JOURNALIZING A DISHONORED CHECK 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. What two accounts are affected and how?

10. ELECTRONIC FUNDS TRANSFER • Electronic funds transfer: a computerized cash payments system that uses electronic impulses to transfer funds • Businesses may use EFT to pay vendors instead of checks • Same accounts impacted as when a check is written • Uses a different source document than a check. What source document is used? • Memorandum • How do you keep the checkbook in balance for ETF? • Recorded on check stub under “Other” and subtracted from balance

11. RECORDING AN EFT: December 2. Paid cash on account to Kelson Enterprises, $350.00, using EFT. Memorandum No. 56. • Step 1: Write a Memorandum • Step 2: Written on next unused Check Stub under “Other” • Step 3: Journalize the transaction 56 EFT Payment on Account to Kelson Enterprises for $350.00 Dec. 2, 2010

12. 1. Write EFT Paymenton the line under the heading “Other.” RECORDING AN EFT PAYMENT ON A CHECK STUB December 2. Paid cash on account to Kelson Enterprises, $350.00, using EFT. Memorandum No. 56. 2. Write the total of $350.00 on the other amount column. 6023.00 3. Subtract the payment and record the new subtotal EFT payment – Kelson Enterprises 350 00 5673 00

13. JOURNALIZING AN EFT December 2. Paid cash on account to Kelson Enterprises, $350.00, using EFT. Memorandum No. 56. What two accounts are affected and how? M56

14. DEBIT CARD PAYMENTS • Debit card: a bank card that automatically deducts the amount of a purchase from the checking account of the cardholder • Eliminates the need for a checkbook • Chance of recording errors increase • Same process as an EFT payment • Same accounts impacted as a check, in the journal and posting except different source document

15. RECORDING AN DEBIT CARD PAYMENT: September 5. Purchased supplies, $24.00, using debit card. Memorandum No. 12. • Step 1: Write a Memorandum • Step 2: Enter onto next unused Check Stub under “Other” • Step 3: Journalize the transaction. 12 Debit Card Payment to purchase supplies for cash for $350.00 Sep. 2, 2010

16. 1. Write Debit Card Paymenton the line under the heading “Other.” RECORDING AN EFT PAYMENT ON A CHECK STUB September 5. Purchased supplies, $24.00, using debit card. Memorandum No. 57. 2. Write the total of $24.00 on the other amount column. 5673.00 3. Calculate and record the new subtotal on the Subtotal line. Supplies purchased for cash – debit card 24 00 5649 00

17. JOURNALIZING A DEBIT CARD TRANSACTION September 5. Purchased supplies, $24.00, using debit card. Memorandum No. 57. What two accounts are affected and how? M57

18. TERMS REVIEW • dishonored check • electronic funds transfer • debit card

19. NO. 119 $ Date 20 To For BAL BRO’T FOR’D ………… 1867 00 AMT DEPOSITIED .. SUBTOTAL ………………… OTHER SUBTOTAL…………………. AMT. THIS CHECK………….. BAL. CAR’D FOR’D………… 121

20. 122 NO. 119 $ Date 20 To For BAL BRO’T FOR’D ………… 4567 00 AMT DEPOSITIED .. SUBTOTAL ………………… OTHER SUBTOTAL…………………. AMT. THIS CHECK………….. BAL. CAR’D FOR’D………… NO. 119 $ Date 20 To For BAL BRO’T FOR’D ………… 9379 00 AMT DEPOSITIED .. SUBTOTAL ………………… OTHER SUBTOTAL…………………. AMT. THIS CHECK………….. BAL. CAR’D FOR’D………… 123