KEY TERMS USED IN THIS CHAPTER Bank draft a written order addressed to the bank to pay an amount of money to the order of the maker. Bank overdraft a credit balance in Cash in Bank account resulting from checks being written for more than the cash amount on deposit. Bank service charge monthly fee charged by a bank to service the depositor’s account. Bank reconciliation report that explains the difference between the book (company) balance of cash and the cash balance reported on the bank statement. Bank statement bank report on the depositor’s beginning and ending cash balance, and a listing of its changes, for a period. Canceled checks checks that the bank has paid and deducted from the depositor’s account. Cash includes currency, coins and amounts on deposit in bank checking or savings accounts; an item acceptable for deposit at face value by a bank or other financial institution. In a limited sense, it includes currency and coins and demand credit instruments that are unrestricted and are immediately available for use in current operations. h equivalents short-term, investment assets that are readily convertible into a known cash amount or sufficiently close to their maturity date (usually within 90 days) so that the market value is not sensitive to interest rate changes. Cash over and short income statement account used to record cash overages and cash shortages arising from errors in cash receipts or payments. Check document signed by a depositor instructing the bank to pay a specified amount to a designated recipient. Compensating balances minimum amounts that a company agrees to maintain in a bank checking account as support for a loan by the depositor. Credit memos depositor’s depositor, depositor’s account. : ; Debit memos charges to the company's or depositor’s account made ‘directly by the bank such as returned checks, bank service charge, Sharge for the cost of check booklets and payment of bank loans. deposits or credits made directly by the bank to the ‘account such as notes collected by bank in favor of the proceeds of bank loan and interest earned on theDemand deposits _funds deposited in a bank that can be withdrawn upon demand. Deposit in transit deposit made near the end of the month and recorded on the depositor’s books but is not received by the bank in time to be reflected on the bank statement. i Drawn against insufficient fund (DAIF) check check drawn by a depositor but is subsequently returned by the bank to the payee because the amount of the deposit is not enough to cover the amount of the check. Imprest system method to account for petty cash; maintains a constant balance in the fund, which equals cash plus petty cash receipts. When used in relation to general cash control, it means a system of depositing cash collections intact to the bank and making payments through checks. Internal controls all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policie: Money order a demand credit instrument issued and payable by a post office. Not sufficient fund (NSF) check see Drawn against insufficient fund check Outstanding checks checks written by the company and issued to payees but have not been cleared or presented to the bank for payment Payroll bank account bank account used solely for paying employees’ salaries. Petty cash small amount of cash in a fund to pay minor expenses. Post-dated check check, which at the date of issuance, bears a future date; will be honored by the bank only on or after the date indicated on the face of the check. Proof of cash a four-column bank reconciliation, a reconciliation of beginning and ending balances of cash as well as of cash receipts and disbursements during the period. Voucher system a system that provides for the control of purchases ‘and cash disbursements. Business documents are used to prepare vouchers in support of all payments by check. The voucher identifies the person authorizing the expenditure, explains the nature of the transaction and names the affected accounts.