Accounting Part 2

A business can use three types of endorsements when transferring own- Blank Endorsement li
ership of a check. The types of endorsements are shown in Figure 11-5: Rita Jain :

. A blank endorsement includes only the signature or stamp of the I

depositor. It transfers ownership of the check, but it does not indicate ii
who the new owner is. This is not a safe endorsement because the check
can be cashed by anyone who presents it for payment. I

. A special endorsement transfers ownership of the check to a specific ii
:t
individual or business.
n
. A restrictive endorsement transfers ownership to a specific owner
-- ..,.u*ii!i!-
and then limits, or restricts, how a check may be handled even after
ownership is transferred. To protect checks from being cashed by Special Endorsement
anyone else, Roadrunner uses a restrictive endorsement that reads "For
Deposit Only." Roadrunner stamps the endorsement on the back of ;,,,-:,lri::: il1!lrii:ii..lil Ii!iL
each check as soon as it is received.
Pay to the Order of
Recording Deposits. The check stubs in the checkbook are a record
of the Cash in Bank account. That is, the completed stubs reflect all check- Restrictive Endorsement

ing account transactions: payments, deposits, and bank service charges. l-'l..llirll ilir)i.ifr:::.,ii::,r; il
To see how to record a deposit in the checkbook, refer to Figure 11-6
FOR DEPOSIT ONLY
and follow these steps:
Roadrunner Delivery i
1. Enter the date of the deposit on the check stub for the next unused

check. Use the Add deposits line.

2. Enter the total amount of the deposit on the same line in the

Dollars and Cents (amount) columns.

3. Add the deposit amounts to the amount on the Balance brought

forward line. Enter the result on the Total line. This total is the new

checkbook balance.

Writing Checks Figure 11-5

Writing a check is a simple procedure. You need to follow a few impor- Endorsements

tant rules, however, to ensure correct recordkeeping and proper handling of

the money represented by the check.

o Write checks in ink, or prepare typewritten or computer-generated

checks. Some businesses use a check-writing machine that perforates

the amount of the check in words on the Dollars line. These

perforations protect a check from alteration. Checks written in Date No. 103 ,li:
pencil are not acceptable because they can be easily altered. To
For .
. Complete the check stub before writing the check. This reduces
.,i:
the chance of forgetting to complete the stub.

Completing the Check Stub. Because the stub serves as a Dollars Cents

permanent record of the check, it must be complete and accurate. A Balance brought forward 21,650 00
check stub has two parts. The upper part summarizes the details of
Adddeposirs 1 10h4 200 002
the cash payment transaction. The lower part is a record of how the
transaction affects the checking account. To see how to complete the 10i15 1,200 00

check stub, refer to Figure I1-7 on page 282 and follow these steps: Total 23,050 oo3
Less this check
1. In the upper part of the stub, enter the amount of the Balance carried foruard ..r

check, the date, the name of the payee (on the To line), and

the purpose of the check (on the For line). A payee is the Figure 11-6 Recordinga

person or business to which a check is written. Deposit in the Checkbook

Section 1 Banking Procedures 281,

700.00 !N0.103 2. If it has not already been done, enter the balance on the
October 16 --zo l:.
Total line on the lower part of the stub.
t* Toolev & Co. Manaoement
3. Enter the amount of the check on the Less this check line.

This amount is the same as the amount shown on the first

Dollars Cents line in the upper part of the stub.

Balance broughl foMard 21,650 00 1, 4. Subtract the check amount from the total. Enter the new

Add deposits 10/14 200 00 .i: balance on the Balance carried forward line.
10/15
.i 5. Enter the new balance on the first line of the bottom part
Total
Less this check 1,200 00 of the next check stub, the Balance brought forward line.
Balance carried foruard 41.
Filling Out the Check. To see how to write a check, refer
23,050 00 -'-+2
Figure 11-8 and follow these steps:
700 00*-3

22,350 00**--+4

No. 104 1. Write the date on which the check is being issued.

20_
2.Dale Write the payee's name on the Pay To The Order Of line.

To Start the payee's name as far left as possible.

For 3. Enter the amount of the check in numbers. Write clearly,

and begin the first number as close to the printed dollar

Balance brought fomard sign as possible.
Add deposits 4. On the next line, write the dollar amount of the check in

words. Start at the left edge of the line. Write any cents as

a fraction. For example, write 22 cents as22ll00. Draw a

Less this check line from the cents fraction to the word Dollors.
Balance carried loruard
5. Sign the check. Only an authorized person-one who has

signed the signature card for the account-may sign the

Figure 11-7 FillingOut check. The person who signs a check is the drawer . The
bank on which the check is written is the drawee .
the Check Stub

The checkbook is now ready for the next transaction.

Voiding a Check. If an error is made while writing a check, the

check is marked "Void" in large letters across the front (in ink). This is

known as voiding a check. A new check is then prepared. When a check

is voided, the stub is also voided.

Since a business needs to account for each check used, a voided check

is never destroyed. Instead it is filed with the business records. A voided

check may be placed in a special file, or it may simply be folded and stapled

to the check stub.

700.00 No. 103 l,\ IRoadrunner Delivery Service 103

pu1" October 16 20" Sarc5ra5mGentao, rCeA 9w4a2y3B0rvoY /7 71-627
I DATE Oct. 16 51ZZ
1o Tooley & Co. Management
For Rent eH?}eE Tooley & Co.Manase 700.00

Dollars Cents Seven hundred and no/roo DOLLARS
c$ame*ann@tionatBanL
Balance brought forward 21,650 00

Add deposits 1 0/1 4 200 00
10/15
1,200 00

Total 23,050 00 Mavi^a,Saru.h*,2
/
Less this check 700 00 r:12 e 2 ? lE e ?r: l0lLt ]il IO I
I
Balance carried foMard 22,350 00 4
I
llr::a,ll1rrf,rtrrt,iriprir;::iiljit:ii:!,arilirlsiiilliii![rir:rifri.]rilliai!!]l
5

Figure 1L-8 Completed Stub and Check

282 Chapter 11 Cash Control and Banking Activities

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FersmreaE Ffrr,nemceffi&&

Q: "JUhy sE:ouEd 3 learn ab*ut payroEE?
&: Payroll is important to everyone.

Wllen vou are paid at yotrr job, you
want to be sure the amor.rnts are
correct. The business also wants to
be sure that all employees are praid
in a legal and correct manner.
Q: Wha€ is th* siinEmurc avage?
A: Thc current federal mininrum wage
is S5.15 per hour. A business must
also meet its state's minirnum wage
requirernent, which is sornetimes
higher.

Tl*r.rx i; *vrl

I)o you agree with the law requiring
emplovees to pay taxes on their
calnings? Why or why not?

:to6

CHART OF ACCOUNTS Peaclilree'
Fast Track Tutoring Service
Step-by-Step lnstructions:
ASSETS 305 Jennifer Rachael, Withdrawals
510 lncome summary l. Select the problem set
lol cash in Bank
I l0 Accts. Rec.-Carla DiSario REVENUE for Fast Track Tutoring
12O Accts. Rec.-George McGarty Service (MP-2).
14o office Suppliet 4U Group Lessons Fees 2. Rename the company
and set the system
150 Office Equipment 405 private Lessons Fees date.
5. Record all of the
I55 lnstructionalEquipment EXPENSES transactions.
4. Reconcile the bank
tlABltlTIES 505 Maintenance Expense statement.
il;;r -2'lo Accts. Pay.-Educational software 5. Print a General Journal
2't5 Accts. pay.-T & N Eq,ip. ;f:'o Miscellaneous Expense report and proof your
work.
ffill,:yril:""* 5. Print the Account
Reconciliation reports.
OWNERrS EQUITY 7. Print a Ceneral Ledger
and a Trial Balance.
301 Jennifer Rachael, Capital 8. Print the financial
statements.
Date Transactions 9. Close the fiscal year.
IO. Print a post-closing
Dec. 1 Jennifer Rachael invested $25,000 in the business, Memo 1. trial balance.
2 Bought a cash register (Office Equipment) for $525, Check 101.
2 Purchased $73 in office supplies, Check 102. I I. Complete the Analyze
Purchased instructional computers for $13,924, Check 103.
5 Received $950 for private instruction, Receipt 1. activity and complete
5 Bought $8,494 of instructional materials, Invoice 395, from the Audit Test.
6 Educational Software on account. 12. End the session.
Billed Carla DiSario for two group classes, $36, Invoice 101.
8 Wrote Check 104 for $850 for the December rent. QrrickBooks
9 Billed George McGarty $27 5 for special group classes, Invoice 102.
10 Received Invoice 5495 for a $2,37 5 microcomputer system, for office Step-by-Step lnstructions;
10 use, bought on account from T & N School Equipment.
Prepared Receipt 2 for $695 for 20 private lessons given befi,veen I. Restore the Mini
11 December 1 and December 10.
Received $36 from Carla DiSario on account, Receipt 3. Practice Set 2.QBB file.
13 Sent Check 105 for $200 to Educational Software on account. 2. Record all of the
Wrote Check 106 for $750 to repaint two classrooms.
l4 Jennifer Rachael withdrew $500 for personal use, Check 107. transactions.
Sent Check 108 for the electric bill of $183. 5. Reconcile the bank
15 Issued Check 109 for $45 for stamps (Miscellaneous Expense).
18 statement.
20 4- Print a Detail
24
Reconciliation report.
5- Print a lournal report.
6- Print the register for the

Cash in Bank account.
7- Print a General Ledger.
8. Print a Trial Balance.
9. Print a Profit and Loss

report and Balance
Sheet.
t O- Close the fiscal year.

I l. Print a post-closing Trial

Balance.
12. Complete the Analyze

activity and the Audit

Test.

13. Back up your work.

Mini Practice Set 2 305

IHAPTII{ II

7. A bank statement balance generally reflects any fees that a bank charged during the statement
period. These service charges are for maintaining bank records and processing bank statement
items. The depositor usually is not notified about the service charge or other bank fees until the

statement arrives.

The bank statement is the source document for service charges. Write the bank service charge on
the check stub. AIso journalize and post the service charge:

GENERAL JOURNAT peoe I

lrDEBIT II
'f
lt_ 11 x-tx32

+ I

+t +. I

8. The electronic funds transfer system (EFTS) allows banks to transfer funds without the exchange
of checks. EFTS makes the following services available to individuals:

. direct payroll deposit
. automated bill paying
. bankcards
. bank-by-phone service
. online banking

Key Terms (p.zet) endorsement (p.280)
(p.286) external controls (p.278)
automated teller machine (ATM) (p.284) imaged check (p.28s)
bank service charge (p.2e1) internal controls (p.278)
bank statement NSF check (p.28e)
bankcard (p.281) outstanding checks (p.286)
blank endorsement (p.28s) outstanding deposits (p.286)
canceled check (p.278) payee (p.281)
check (p.28e) postdated check (p.z9e)
Check 21 (p.278) reconciling the bank statement (p.28s)
checking account (p,279) restrictive endorsement (p.281)
deposit slip (p.278) signature card (p.27e)
depositor (p.282) special endorsement (p.281)
drawee (p.282) stop payment order (p.28e)
drawer voiding a check (p.282)
electronic funds transfer (p.zeo)

system (EFIS)

Chapter 11 Summary 295

ItlAPTttt II

Check Your Understanding

l. lnternal Controls

a. Why do businesses need internal controls?
b. What internal controls can a business use to protect cash?

2. Checking Account Forms

a. What is the purpose of a signature card?
b. ln addition to a signature card, what other forms are involved in using a checking account?

5. Check Stubs

a. What is the purpose of a check stub?
b. Why should you complete the check stub before writing the check?

4. Writing a Check

a. How should the amount be written on the check?
b. Why should checks be written in ink or by typewritel computel or check-writing machine?

5. Bank Deposit

a. How often should a business deposit cash as part of its internal controls?
b. What information should you include on a deposit slip?

6. Bank Reconciliation

a. What information does a bank statement contain?
b. List the steps to reconcile a bank statement.

Bank Service Charges

a. What is a bank service charge?
b. How does a business record bank service charges in its checkbook and in its accounting records?

8. Electronic Funds Transfer System

a. How do banks use the electronic funds transfer system (EFTS)?
b. What are some of the ways customers make electronic purchases?

Apply Key Terms automated teller drawee payee
machine (ATM) drawer postdated check
The manager of Valley View electronic funds reconciling the bank
Bowling Center is concerned bank service charge
about cash control and banking bank statement transfer system statement
procedures for the business. On bankcard (EFrS) restrictive
a separate sheet of paper, write a blank endorsement
memo explaining how the terms canceled check endorsement endorsement
here relate to protecting cash. check external controls signature card
imaged check special endorsement
%gl: Check 21 internal controls stop payment order
checking account NSF check voiding a check
deposit slip outstanding checks
depositor outstanding deposits

296 Chapter 11 Review and Activities

ItlAPTEt{ II

Reconciling the Bank Statement

Making the Transition from a Manual to a Computerized System

Task Manual Methods Computerized Methods

Reconciling the Using the form on the back of the bank . Before attempting to reconcile the bank
bank statement statement or accounting stationery,
follow the steps on page 287 to statement, make sure all transactions
reconcile the bank statement. for the month have been posted.

o A computerized system will list all cash

transactions and allow you to check off
the appropriate cleared items.

o You may enter adjustments such as

bank fees. These will be posted to the

general ledger.

Peachtree Question Q&A

How do I reconcile Answer

the cash account in 1. Select Account Reconciliation from the Tasks menu.
2. Select the cash account to be reconciled.
Peachtree? 3. Type the bank statement date.
4. Type the ending bank statement balance.
5. Click the Clear box for all items that appear on the bank statement.
6. When the unreconciled difference is $0.00, the account has been reconciled.
7. Click OK to save the reconciliation.

EQuickBooks e&A

QuickBooks Question Answer

How do I reconcile 1. Choose Reconcile from the Bankingmenu.
2. Select the bank account in the Account fieId.
the cash account in 3. Type the bank statement date.
4. Type the ending balance and click Continue.
QuickBooks? 5. Click each line for each item that appears on the bank statement to mark it as

cleared.

6. When the Difference field shows 0.00, the account has been reconciled.
7. Click Reconcile Now to save the reconciliation.

Chapter L1 Computerized Accounting 297

I1.lAPTIt{ II

Peachtrce' Problem I I -5 Handling Deposits

Step-by-Step lnstructions: i On October 4 the owner of Wilderness Rentals deposited the following
in the business checking account at First National Bank. The beginning
Problems II-4 balance in the account is $3,306.54 before these transactions.
l. Select the problem set
Cash: Currency, $374.00; Coins, $7.42
for Hot Suds Car Wash
(Prob. r r-4). Checks: Bob Warner, drawn on Consumers

and set the system date. Bank, ABA No. 63-706; $64.98
5. Use the Payments Joan Walkman, drawn on Mountain

checks issued. Bank, ABA No. 63-699; $349.81
Ernesto Garcia, drawn on Progressive
4. Record the deposits !
Savings and Loan, ABA No. 63-7L0; $29.44
using the General
Journal Entry option. lnstructions In your working papers:

5. Print an Account : 1. Place a restrictive endorsement on each check. Use "Wilderness

Register report using the Rentals."
AciountReconciliaiion i
option from the Reports 2. Flll out a deposit slip. Use the ABA number to identify each check.
menu. 3. Record the deposit in the checkbook on Check Stub 651.
6. Complete the Analyze
activity. Problem I l -4 Maintaining the Checkbook
7. End the session.
As the accounting clerk for Hot Suds Car Wash, you write checks and make
Peachtrce' deposits. The current checkbook balance is $3,486.29.

Step-by-Step lnstructions: lnstructions For each transaction:

Problem ll-5 1. Record the necessary information on the check stub. Determine

l. Select the problem the new balance and carry the balance forward.

set for Kits & Pups 2. Prepare the necessary checks and sign your name as drawer.

Crooming (Prob. I l-5). Date Transactions

2. Rename the company Oct. 3 Issued Check 504 for $868.45 to Custom Construction for
and set the system date. construction supplies.
3 Deposited $601.35 in the checking account.
5. Reconcile the bank 6 Issued Check 505 for $299.60 to CP Lumber for paint.
statement. 7 Issued Check 506 to Laverne Brothers for $1,000.00 for
completing a painting job.
4. Print the Account 10 Deposited $342.80 in the checking account.
Reconciliation reports: 10 Issued Check 507 to Union Utilities for the September
Account Register, electricity bill of $175.50.
Account Reconciliation,
Deposits in Transit, and
Outstanding Checks.

5. Complete the Analyze
activity.

6. EIn|(dI tuhle 5ses5s5itoonIl..

298 Chapter 11 Problems

IrlAPTTt{ II

Problem I t -5 Reconciling the Bank Statement QuickBooks

on october 31 George Flaum, the accountant for Kits & pups Grooming, l. Restore the Problem

received the bank statement dated October 30. After comparing the I I-5.QBB file.
company's checkbook with the bank statement, George found the
following: 2. Reconcile the bank

1. The checkbookbalance on October 31 is $960. statement using the
2. The ending bank statement balance is $ 1,380.
3. The bank statement shows a service charge of $10. Reconcile option in the
4. A deposit of $405 was made on October 30, but does not appear on the
Banking menu.
bank statement.
5. Print a Detail reconcilia-
5. Check 768for $529 and Check 772for $306 are outstanding.
tion report and the Cash
lnstructions In your working papen:
in Bank register.
1. Record the bank service charge in the checkbook.
2. Reconcile the bank statement. ji 4. aCocmtpilveteitythe. Analyze I
s. aack up your work.
3. Journalize the bank service charge in the general journal, page 4. i
1,-*.-.,..,"- ".-.- -*-',,._*--.._."
4. Post the bank service charge journal entry to the appropriate general

ledger accounts.

Problem I I -6 Reconciling the Bank Statement l. Select the spreadsheet
on october 3l Juanita ortega, owner of outback Guide Service, received a
template for Problem
bank statement dated October 30. Juanita found the following: r 1-6.
2- Complete the spread-
1. The checkbook has a balance of $2,551.34. sheet using the
instructions in your
2. The bank statement shows a balance of $2,272.36. working papers.
5. Print the spreadsheet
3. The statement shows a bank service charge of $20.00.
4. A check from Podaski Systems for $62.44, deposited on October 18, Peachtrce'

was returned by the bank. There is no fee for handling the NSF check. Step-by-Step lnstructions:

5. A deposit of $672.48 made on October 30 does not appear on the bank Problem ll-7

statement. I. Select the problem set

6. These checks are outstanding: for Showbiz Video

Check 872 for $726.84 Check BB3 for $192.30 (Prob. I I-7).
Check 881 for 87.66 Check BB7 for 68.64 2. Rename the company

Instructions Using the preceding information: and set the system date.
5. Reconcile the bank
1. Record the service charge and the NSF check in the checkbook.
2. Reconcile the bank statement. statement using the
Account Reconciliation
3. Record the service charge and NSF check on page 7 of the general option in the losks
menu.
journal. 4. Print the Account
Reconciliation reports.
4. Post the journal entries to the appropriate general ledger accounts.
j 5. Complete the Analyze
activity.

i s. rnd the session,

t.* **, .*_.-.._...."

Chapter 11 Problems 299

ItIAPTEI{ II Problem ll-7 Reconciling the Bank Statement

ckBooks On October 31 Showbiz Video received the bank statement dated October

l, Restore the Problem 30. The accountant reviewed it and found the following:

I l-7.QBB file. 1. The checkbook balance on October 3l is $73,462.96.
2. Reconcile the bank 2. The ending bank statement balance is $13,883.80.

statement. 3. The bank statement shows a service charge of $17.50.
5. Print a Detail reconcilia- 4. Deposits of $675.00 on October 28 and $925.00 on October 29 do not

tion report and the Cash appear on the bank statement.
in Bank register.
4. Complete the Analyze 5. The following checks are outstanding:

activity. Check 1766 $125.00 Check 1770 $1,462.19

5. Backupyourwork. Check 1768 69.42 Check 1771 381.73

,,.1 lnstructions In your working papers:

1. Record the bank service charge in the checkbook in your working papers.
2. Reconcile the bank statement.
3. Record the entry for the bank service charge on general journal page 13.
4. Post the bank serwice charge journal entry to the proper ledger accounts.

Problem I l -8 Reconciling the Bank

Statement Using the

t,, Account Form

Problem 1l-8 On October 20Job Connect received its bank statement dated October 18.

Use the source document 1. The checkbook balance on October 20 is $880.84.
in your working papers to
complete this problem. 2. The ending bank statement balance is $344.58.

ryPeachtree' 3. A $14.00 service charge appears on the bank statement.

j Step-by-Step lnstructions: 4. The following checks are outstanding:
{ Check 871
Problem II-8 Check 864 $ 88.41 $129.88
I. Select the problem 69.34 Check 873 14.25
set for Job Connect Check 869
(Prob. I l-a).
2. Rename the company 5. A $68.42 check from Tom McCrary deposited on October 13 was
and set the system date.
5. Reconcile the bank returned by the bank for insufficient funds. The bank chargedJob
statement.
4. Print the Account Connect's account $7.00 for the NSF check. No journal entry was made
Reconciliation reports.
5. Complete the Analyze for the NSF check.
activity.
6. End the session. 6. A $938.72 deposit on October 19 is not on the bank statement.
7. A check for $200.00 to Fontenot Inc. was lost in the mail and has not

been deposited. A stop payment order, which cost $10.00, was issued on

October 15. No new check was issued.

lnStrUCtiOnS Reconcile the bank statement using the account form in your

working papers.

300 Chapter 11 Problems

ItlAPTEtt II

/ Practice your test-taking skillsl The questions on this page are reprinted with permission
from national organizations:
FBL
r Future Business Leaders of America
o Business Professionals of America
Use a separate sheet of paper to record your answers.

Future Business leaders of America
Murrrpm Cnorcr
Use the following choices for questions 1-3.
Indicate whether the following items in a bank reconciliation should be

a. added to the checkbookbalance.
b. deducted from the checkbook balance.
c. added to the bank statement balance.
d. deducted from the bank statement balance.
L. Outstanding deposit of $1,200
2. An NSF check from customer Anne Campbell for $52
3. An outstanding check for $185 written to Cole Realty
4. The bank statement shows a checking account balance of $5,500. There are
outstanding checks totaling $600, an outstanding deposit of $400, and a bank
service charge of $15. The cash account balance should be
a. $5,300.
b. $5,700.
c. $5,285.
d. none ofthe above.

Business Professionals of America
Mumrprr Cnorcn
5. The first step in balancing a checkbook is

a. subtracting fees on the bank statement from the checkbook balance.
b. comparing checks in the check record with those on the statement.
c. adding interest earned to the checkbook balance.
d. adding recent deposits to the bank statement balance.

fL glencoeaccounting.glencoe.com Go to glencoeaccounting.glencoe.com and
click on Student Center, CIick on Winnlng

Competitive Events and select Chapter I l.

. Practice Questions and Test-Taking Tips
. Concept Capsules and Terminology

Chapter 11 Winning Competitive Events 3O1

IrlApTtt{ ll

Cash Control

1-. Define intemal controls.
2. F-xplain why the balance in the checkbook can differ from the balance on the

bank statement.
3. Your bank sent you a dishonored check. What should you do?
4. Contrast check processing before Check 21 to check processing after

Check 27.What are the differences?
5. Suppose you carry out all your transactions electronically. How do you

reconcile your bank statement?

6. Assess the value of the electronic funds transfer system.

tottSTIJDY Service Business: Entertainment

Dexter Shuman owns a bowling alley called Ten Pin Alley. Each night, Dexter
counts the cash in the two cash registers and makes a night deposit at the local
bank. For the month of May, Dexter made deposits totaling $6,400. During May,
Dexter wrote checks totaling $2,900. The last three checks he wrote were Check
1408 for $180; Check 1409 for $560; and Check 1410 for $212.The beginning
cash balance for the month was $13,840, which is the amount shown as the
beginning balance on the May bank statement. That statement also includes a
$12 service charge and an $18 charge for printing new checks.

INstnucrrons
1. Determine the ending bank statement balance if all checks written have

cleared.

2. Determine the ending bank statement balance if checks 1408, 1409, and

1410 are outstanding.

3. Calculate the balance of the Cash in Bank account.

Pocketing Differences

Imagine that you are a cashier at a grocery store like Ralphs. In a four-hour shift,

you handle thousands of dollars. At the end of your shift, you total receipts and

cash to see if they match. One day cash comes up short, and you report the

discrepancy to the manager. A few weeks later, cash is over by $2. You know a

couple of cashiers who pocket extra cash. You wonder who would miss $2.

Ernrc-ql DncrsroN MlxrNc

1. What are the ethical issues? 4. How do the alternatives affect the

2. What are the alternatives? parties?

3. Who are the affected parties? 5. What would you do?

Making the (ase for Daily DePosits
Assume that you work for a sporting goods store that is open six days a week,
12 hours a day. A major promotion is resulting in record sales, and the manager
has been too busy to make daily cash deposits. Discuss with your classmates and
teacher the importance of taking time to make cash deposits every day.

302 Chapter 11 Real-World Applications and Connections

IHAPTEl.{ II

l-- Customer Service

I]'lTtl-{NATffi{ffi As a personal banker for citizen's First National Bank, your duties include

ACCOUNTING opening personal bank accounts, taking loan applications, and serving bank
customers. Today Ms. Kelley wants to open a checking account. what items
-'affil would you put in an information packet about opening her account? pair up with
another student and role-play teaching the new client to write a check and fill out
a deposit slip. Model the customer service principles of thoroughness, courtesy,

and respect.

Cash Management

Imagine how difficult it would be to control cash for hundreds of locations in the
United States, Europe, and Asia. Many international companies select one large
bank that can handle transactions in multiple currencies and countries.

rusrnucrroNs Identify reasons why you would prefer to work with one bank if

you were in charge of cash control for an international business.

Your Bank Statement

If you have a checking account, you know that the balances on the bank

statement and in the checkbook seldom agree. You recognize the importance of
reconciling the two balances so that you will know exactly how much money
you have in the account.

Pnnsou.r.r FrNaNcn Acrrvrrv Imagine that you just received your monthly bank
statement. when comparing it to the checkbook, you found a $200.00 deposit
that was not on the bank statement and two checks totaling $145.00 that were
outstanding. The bank statement balance was 91,370.00 and the checkbook

balance is $1,425.00. What is the reconciled balance?

PnnsoN,c.r FrNaNcr oNrrNn Log on to glencoeaccounting.glencoe"com and
click on Student center. click on Making It Personal and select chapter 11.

6\nalvzino Evaluating Working Capital
One measure of a company's ability to pay debts is its working capital.
h[hm'"'^,-
-Working Capital = Current Assets Current Liabilities

Curent assets are cash and assets that will be Bank Reconciliations
converted to cash within the next accounting
A big-name sports team must
period. Current liabilities are debts that must be reconcile its bank statements just
paid within the next accounting period. like your local batting cage business.

INsrnucrroNs Refer to Roadrunner's balance Visit glencoeaccounting
.glencoe.com and click
sheet on page 233.If Maria Sanchez had made
a $1,000 withdrawal, how would each of the on Student Center. Click on
following change? WebQuest and select Unit 2 to
continue your lnternet project.
L. Current assets

2. Current liabilities

3. Working capital

., Chapter 11 Real-World Applications and Connections 303
€ glencoeaceounting.glencoe,com

hlIl|I

rt{A[Tt[E

Main Task Fast Track

Set up the accounting records Tutoring Seruice
and complete the accounting
cycle for Fast Track Tutoring Company Background:
Service. Fast Track Tutoring Service is owned and

Summary of Steps managed by Jennifer Rachael. It has been
in business for one month. The business
Open general ledger accounts. is organized as a sole proprietorship and
Analyze, journalize, and post
transactions. provides tutoring services in a number
Reconcile the bank statement. of disciplines for students from pre-
Journalize and post the bank
service charge. kindergarten through high school. The
Prepare a trial balance, a
work sheet, and the financial business earns revenue from tuition
statements.
Journalize and post the closing charged for one-on-one instruction and
entries.
Prepare a post-closing trial special classes.
balance. Your Job Responsibilities: As the accounting clerk for this business,
use the accounting stationery in your working papers to complete the
Why Ifs lmportant
following activities.
This proiect pulls together (1) Open a general ledger account for each account in the chart of
all of the concepts and
procedures you have learned. accounts.

304 Mini Practice Set 2 (2) Analyze each business transaction.
(3) Enter each business transaction in the general iournal. Begin

on journal page 1.

(4) Post each journal entry to the appropriate accounts in the

general ledger.

(5) Reconcile the bank statement that was received on December

31. The statement is dated December 30. The checkbook
has a current balance of $9,631. The bank statement shows
a balance of $9,844. The bank service charge is $15. These
checks are outstanding: Check 108, $183 and Check 109, $45.
There are no outstanding deposits.

(6) Make any necessary adlustments to the checkbook balance.
(7) Journalize ar.d post the entry for the bank service charge.
(8) Prepare a trial balance and complete the work sheet.
(9) Prepare an income statement, a statement of changes in

owner's equity, and a balance sheet.
(10) Journalize and post the closing entries.
(1L) Prepare a post-closing trial balance.

Business Transactio[sl Fast Track Tutoring Service began

business operations on December 1 of this year.

Fast Track Tutoring Seruice (continued)

,,,,:xl1|tlr* t Peachtrce'

CHART OF ACCOUNTS @

Fast Tlack Tutoring Service Step-by-Step lnstructions:

ASSETS 305 Jennifer Rachael, Withdrawals l. Select the problem set
l'l Cash in Bank
I l0 Accts. Rec.-Carla DiSario ilO lncome Summary for Fast Track Tutoring
120 Accts' Rec'-George Mccarty Service (MP-2).
REVENUE 2. Rename the company
140 Office Supplies and set the system
4or croup Lessons Fees
l5o office Eqlipment date.
155 Instructional Equipment 405 Private Lessons Fees
HABIIITIES 5. Record all of the
EXPENSES transactions.
-21o Accts. Pay.-Educational software
505 Maintenance Expense 4. Reconcile the bank
215 Accts. pay.-r & N scho;iiq;ir. statement.
;f:]9 Miscellaneous Expense
owNERrs EqUIY [i11,51ffi," 5. Print a Ceneral Journal
report and proofyour

50I Jennifer Rachael, Capital work.
6. Print the Account
Date Transactions
Reconciliation reports.
Dec. 1 Jennifer Rachael invested 925,000 in the business, Memo 1. 7. Print a Ceneral Ledger
2 Bought a cash register (Office Equipment) for 9525, Check 101.
2 Purchased $73 in office supplies, Check 102. and a Trial Balance.
5 Purchased instructional computers fot 913,924, Check 103. 8. Print the financial
5 Received $950 for private instruction, Receipt 1.
6 Bought $8,494 of instructional materials, Invoice 395, from statements.
Educational Software on account.
8 Billed Carla DiSario for two group classes, $36, Invoice 101. 9. Close the fiscal year.
9 Wrote Check 104 for $850 for the December rent.
10 Billed George McGarty $27 5 for special group classes, Invoice 102. I0. Print a post-closing
10 Received Invoice 5495 for a 92,37 5 microcomputer system, for office
use, bought on account from T & N School Equipment. trial balance.
11
Prepared Receipt 2 for $695 for 20 private lessons given betr,veen I l. Complete the Analyze
13 December 1 and December 10.
14 Received $36 from Carla DiSario on account, Receipt 3. activity and complete
15 Sent Check 105 for $200 to Educational Software on account. i,!l the Audit Test.
18 Wrote Check 106 for $750 to repaint two classrooms. 12. End the session. i
ZO Jennifer Rachael withdrew $500 for personal use, Check 107.
24 Sent Check 108 for the electric bill of $183. i
Issued Check 109 for $45 for stamps (Miscellaneous Expense).
.."."'.-*",.-".-.--.."**'-'*I

QuickBooks

Step-by-Step lnstructions: I
I
l. Restore the Mini

Practice Set 2.QBB file.
2. Record all of the

transactions.

5. Reconcile the bank

statement.

4. Print a Detail

Reconciliation report.

5. Print a Journal report.
5. Print the register for the

Cash in Bank account.

7. Print a Ceneral Ledger.
8. Print a Trial Balance.

9. Print a Profit and Loss

report and Balance

Sheet.

10. Close the fiscal year.

I l. Print a post-closing Trial

Balance.

12. Complete the Analyze

activity and the Audit

Test.

15. Backupyourwork.

Mini Practice Set 2 305