Learning Objectives

Notes

Students should realize the purposes of banking include the safekeeping of money, transfer of funds between individuals or businesses, lending of money to individuals and businesses, handling foreign currencies, and others.

Describe generic services provided by banking institutions. The costs associated with each of these services should be related to the service. Are the services provided to businesses or for personal banking (chequing or current account)? What are the similarities? Why do businesses prefer banking to cash transactions?

Students may complete forms that simulate opening a chequing or savings bank account (signature cards, and other banking forms). An activity where students role play customers and bank staff can be done.

Chart the kinds of accounts available for personal money management and those available for business money management.

Students may research types of accounts available in the financial institutions in their community, including chartered banks, credit unions and trust companies if possible.

The technological services may have been discussed in the generic services objective above. Items that students should be aware of may include:

• electronic transfer of funds
• automatic tellers
• bank cards
• a description of daily clearing procedures between financial institutions
• telephone banking
• internet banking.

A field trip to a financial institution may be arranged to witness some of the technological advances in banking.

Using the library and/or the Internet, students may research instances where crime has increased using electronic banking devices. If time does not permit a research project, a class discussion focused on values, demonstrating fairness, truthfulness, and sincerity in the workplace could take place.

The local RCMP may be a resource concerning computer crime related to banking or money scams.

These terms include: deposits, cheques, loans, money order, traveller's cheques, non-sufficient funds, stop-payments of cheques, certified cheques, post-dated articles, debit and credit memos, drawer, drawee, payee, blank and restrictive endorsements. The services of the safety deposit box, personal charge cards, and the function of magnetic ink character recognition (MICR) could be discussed.

From describing the differences in origin, in services and in rates, these definitions should be synthesized by the students.

• chartered bank
• credit union
• trust company
• other

The Internet could be useful in finding historical information on the beginnings of various financial institutions in Saskatchewan and Canada. Students should understand the differences among each of the institutions.

This section may include cheque details such as:

• definition
• procedures for writing cheques and cheque stubs
• balancing a cheque book
• realization that cheque stubs and deposit slips are source documents for journal entries
• blank and restrictive endorsements, the differences
• preparation of deposit slips
• preparation of deposits for business or for an organization (include preparing the money, rolling coins, sorting currency, listing cheques, etc.).

Discuss the processing of deposits by financial institutions. Students may examine the preparation for depositing funds after banking hours.

Some financial institutions have materials available for classroom use.

Discuss debit cards and how they work.

A bank reconciliation may determine why the bank statement from an independent source does or does not match the internal depositor's records on a certain date.

In explaining the preparation of the bank reconciliation as a process, it should be related to its placement on the accounting cycle. The bank reconciliation becomes the source document for journal entries; therefore, this procedure involves steps 1 and 2 in the accounting cycle.

The steps may include:

• Materials needed to begin: last bank reconciliation, bank statement with enclosures, general ledger cash account, cash journals and/or combination journal, and completed cheque stubs for the past period
• Terminology associated with the bank reconciliation may include: outstanding cheques, cancelled cheques, deposits in transit, dishonoured cheques, bank memo, and service charges, etc.
• A technique to assist in the formal preparation may be to prepare a rough draft by dividing a sheet of paper in half: one half for the bank's record, the other for the company's cash records. Divide each half into a "+" section and a "-" section and begin identifying discrepancy items. When the balances at the bottom of each column are equal, a formal bank reconciliation statement may be prepared following a recommended format.

Once the discrepancies are identified, students should decide what changes should be made to the depositor's accounts. When the accounts are identified, the journal entries will be made to correct the depositor's books.

Students should realize that the need for a personal reconciliation is as important as that for a business. Although the number of transactions would be reduced, the process would be the same.

Control procedures for cash receipts may include:

• depositing cash intact on a daily basis (deposit slip becomes source document, record deposit on cheque stub)
• separating the handling and recording of cash (one person may count the cash while another records the amounts in journals and ledgers)
• insuring the safekeeping and accountability for the cash (daily cash proof)
• using the cash register as a means of cash control (prepare a cash proof using the audit slip as a source document)
• using an expense account called Cash Short and Over to record daily differences
• when receiving cash in the mail, realize that cash discounts may be given for prompt payment
• using prenumbered source documents (sales slips, remittance slips, etc.)
• realizing the advantages of using restrictive cheque endorsements
• using proper procedure when receiving cash by mail (make list, supporting documents become source documents, cash received must be deposited daily, add deposit to cheque stub, etc.).

Control procedures for cash payments may include:

• making all payments by cheque (prenumber, fill out stub before cheque)
• each cheque must be authorized by a person other than the one completing the cheque;
• when paying an account, a cash discount may be deducted for prompt payment
• the person writing the cheque should not be the same as the one recording the entry into the journals and ledgers
• a petty cash imprest system should be used for small payments.

Guests or students may be invited to share their experiences with cash control principles at their work.

Students should be given opportunities to examine differing situations with teacher guidance. Students should know the values that are expected and accepted in handling cash in business practice.

If students have not had much experience in the "work world," they may be given case studies to discuss. For example: a case study involving an employee who is asked to perform an illegal or unethical procedure in the work place. Teachers may assess the content and application of student responses.

Students may be divided into groups to role play unethical or illegal practices. Students may then prepare a journal writing outlining what is "right". Situations students may be asked to role play may include: charge an amount to a wrong account to cover an unapproved purchase, remove a small amount of cash for a personal expenditure, and others.

Students may brainstorm or use focused imaging to generate ethical and unethical situations for discussion or to role play.

Cash Receipts and Cash Payments journals are introduced in a working manner in Module 2. However in this module, the special journals used to handle cash transactions should be introduced as an important element of cash control in a larger company. Students should realize, however, that cash receipts and cash payments may be handled quite adequately by having special columns in a synoptic/combination journal in a smaller business.

Learning Objectives

Notes

What is petty cash? To understand how the petty cash system is established, the students should understand that an imprest system is an amount of cash "borrowed" from the regular cash account. A cheque is written, cashed, and is set aside from which small cash payments may be taken.

Although all cash disbursements should be made by cheque, small payments such as postage, express charges, small supplies, etc. should be made from petty cash to avoid the expense of cheque writing.

The following steps may be followed to ensure control of the petty cash:

• establish the format of petty cash vouchers and prenumber vouchers
• establish format for petty cash book
• cash the cheque from the regular cash system
• record the initial amount of petty cash in the petty cash book and set the money in a safe place
• record information on voucher before disbursing cash when a small payment is necessary
• transfer information from vouchers to petty cash book at regular intervals
• replenish the fund when the balance of the petty cash fund is low or at pre-established regular intervals
• to replenish the fund: prove the petty cash book, verify total cash on hand with cash column in petty cash book, and verify total cash on hand with the total of the paid out vouchers
• issue a cheque from the regular cash account to replenish the fund to the original amount
• record the petty cash replenishment transaction in the general journal or in the cash payments journal (if Module 2 has preceded this module).

Students may establish a petty cash fund and role play transactions and the proper procedures of petty cash.

The important aspect of petty cash is its size. Suitable amounts of petty cash should be discussed. The limiting factors may include having too much cash on hand (encourages theft) to having too little cash on hand requiring frequent replenishment of the fund which may be time consuming. Petty cash funds should be large enough to last from two weeks to a month.

In this summary exercise, students should refer to:

A written report may be assigned and a performance test carried out.