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Checking Accounts

Prepare a deposit slip
Record entries in a check register
Checking Account
 Many people deposit their cash receipts in a
checking account at a bank and make their
payments by check.
 A checking account is safe and easy to use.
 The canceled checks returned to you by the
bank provide you with a record of your
Deposit Slip
 A deposit slip is used to deposit paychecks and
other monies.
Prepare a Deposit Slip
 List cash deposits of bills and
coins on the line labeled CASH.
 List each check on a separate line.
 List additional checks on the back.
 Enter total of additional checks on the Total
from Other Side line.
 Add all the amounts and write the sum on the
Subtotal line.
 To receive cash back from the bank, write
the amount wanted on the Less Cash
Received line.
 Subtract the cash received from the subtotal
to find the Total Deposit.
 When you write
a check you
direct the bank to make a payment from your
checking account.
 Checks are numbered to make it easy to keep
track of checks.
Check Register
 The check register is part of the checkbook in
which deposits and checks are recorded.
 A new balance, called a running balance, is
calculated after each entry.
 Each deposit is added to the previous balance.
 Each check is subtracted from the previous
 The balance is the amount of money in the
Sample Check Register
3.2 Electronic Banking
Record electronic banking
Find account balance when banking
Electronic Banking
 All banks use computers to process
transactions electronically.
 Electronic banking allows bank customers to
use telephones, computers, and other
technologies in place of paper transactions
such as writing checks and making loan
Electronic Funds Transfer
 Banks use computers to transfer deposits and
checks, or “funds,” from person to person and
bank to bank.
 This process is called Electronic Funds
Transfer, or EFT.
Customer Account Numbers and
Bank Identification Number
 Banks print the account numbers of customers
and the bank identification number in
Magnetic Ink Character Recognition, or
MICR, form at the bottom of deposit slips and
Automatic Teller Machine
 Individuals can also transfer funds
electronically when they use an Automatic
Teller Machine, or ATM.
 By using an ATM card issued by your bank,
you can withdraw or deposit money, see
account balances, or make transfers between
your accounts.
Personal Identification Number
 A Personal Identification Number, or PIN, that
is known only to you is entered into the ATM
before your transaction is processed.
 The PIN provides protection against
unauthorized use of your ATM card.
Paying Bills with EFT
 EFTs may also be used to pay your monthly
bills, such as utility bills.
 You can instruct your bank to transfer funds
automatically each month from your bank
account to the account of your utility provider.
 No checks are written or mailed.
Direct Deposit
 Some companies use EFT to pay their
employees by transferring funds directly into
their employees’ bank accounts without
writing any checks to the employees.
 This is called direct deposit.
Debit Card
 Many people use a special form of EFT called
a debit card.
 Debit cards allow you to pay for your
purchases without using cash.
Using a Debit Card
 You insert your debit card into a special
computer terminal at stores.
 The computer system subtracts the amount of
each purchase automatically from your
checking account and adds the same amount to
the store’s bank account.
 You may also use your debit card to withdraw
cash from your account.
 Fees may be charged for using this card.
Recording Electronic
 When you use a debit card you get a receipt of the
 Save the receipt and immediately record the payment
or cash withdrawal in your check register.
 Record the payment by writing the word “Debit”

and adding a short description as well.
 Record an ATM withdrawal by writing ATM-WD.

 Record an ATM deposit by writing ATM-DEP.
Online Banking
Calculate account balance needed to
make online payments
Online-Account Access
 Online banking allows you to do your banking
by using your personal computer and the
 Each bank designs its own Internet website.
 What you see on your screen and how you use
an online banking system differs among banks.
Examples of
Online Banking Services
 Access accounts 24 hours day, 7 days a week
 Transfer money between accounts
 Receive bills electronically
 Make payments
 Reorder checks
 Communicate with bank staff
 View account history
Sample Online Banking Screen
Making Decisions
About Online Accounts
 When selecting a bank at which to do online
banking, the most convenient choice is the
bank you now use.
 You should also evaluate the systems at other
 Select the system that best meets your needs,
is easiest to use, and does so at the least cost.
Using Online Accounts
 You must identify sources of deposits to the
account and decide who will be paid online.
 You will also have to determine the dates on
which bills are due and the usual amount of
the bill if it changes from month to month.
 Online banking simplifies the banking process,
yet is very similar to using a regular checking
3.4 Check Register
Reconcile a bank statement
Reconcile and correct a check register
Reconcile the Bank Statement
 Banks keep track of checking account
transactions and send a monthly report, called
a bank statement, to depositors.
Sample Bank Statement
Bank Statement
 Typical items on a bank statement
 Checks paid by the bank
 Deposits, including interest earned
 ATM withdrawals
 Service charges
 Interest earned is money paid to customers for
the use of their money.
 A service charge is a deduction made by the
bank for handling the checking account.
Canceled Check
 A canceled check is a check that the bank has
paid and then marked so it can’t be used again.
Transactions Outstanding
 Checks that are not returned by the bank are
called outstanding checks.
 This means that the checks have not yet been
received or paid by the bank.
 An outstanding deposit occurs when a deposit
is made after the closing date of the bank
statement and the deposit is recorded in the
check register.
 The difference in the checkbook balance and
the bank statement balance is the result of the
outstanding transactions, interest earned, and
the service charge.
 To bring both balances into agreement and to
make sure the bank’s records are correct, both
records must be reconciled.
Reconcile the Bank Statement
 Follow the steps on the reconciliation form on
the back of the bank statement.
 Enter Closing Balance from Statement
 Add any deposits outstanding
 Add lines 1 and 2
 Enter total of Checks Outstanding
 Subtract line 4 from line 3. This amount should
equal your check register balance.
Sample Bank Reconciliation
 Outstanding items (checks and deposits) are
items that you have recorded in your check
register but the bank has not yet received.
 That means they have not subtracted
outstanding checks from the bank balance nor
added outstanding deposits to the bank
 These are two reasons why your balance
doesn’t match the bank’s balance.
Reconcile the Check Register
 Add interest to the balance in the check
 Deduct service charges from the check
Other Reconciliation
Reconcile a checking account with
outstanding transactions and other
If OOB by number divisible by 9 then
you have transposed numbers or put
decimal point in wrong place
Reconcile the Checking Account
 Sometimes you must reconcile a bank
statement and check register balances when
deposits, checks, and EFT transactions are not
recorded and when other errors are made.
Savings Accounts
Calculate simple interest on savings
Calculate compound interest on
savings deposits
Calculate interest using a compound
interest table
 One reason people open savings accounts is to
keep their money safe.
 Another reason is that they earn interest on
their money.
 Interest is money paid to an individual or
institution for the privilege of using their

Lesson 3.6 39
 As with a checking account, you may deposit
money into or withdraw money from your
savings account.
 The bank teller may give you a receipt, which
is an official record of the transaction.
 A transaction is something that happens that
has to be recorded, such as a deposit or
Simple Interest
 Simple interest is often figured quarterly, or
four times a year, on the balance of the
account at the end of each quarter.
 The interest is paid on the first day of the next
quarter, or on January 1, April 1, July 1, and
October 1.
 Sometimes interest is paid twice a year, or in
semiannual periods (six months, or one-half
Calculate Simple Interest
 To find the simple interest for any period, first
find the interest on the deposit for a full year.
 Then multiply that amount by the fraction of a
year, such as ¼ or ½ for which you want to
find interest.

Interest = Principal × Rate × Time (I=PRT)
Compounding Interest
 At the end of each interest period, the interest due is
calculated and added to the previous balance in the
savings account.
 The new balance then becomes the principal on
which interest is calculated for the next period, if no
deposits or withdrawals are made.
 When you calculate interest and add it to the old
principal to make a new principal on which you
calculate interest for the next period, you are
compounding interest.
Compound Interest
 Regardless of how interest is earned, the
total money in the savings account at the
end of the last interest period is called the
compound amount, assuming that no
deposits or withdrawals have been made.
 The total interest earned, called

compound interest, is the difference
between the original principal and the
compound amount.
Compound Interest Tables
 When you calculate compound interest for
several interest periods, you can use a
compound interest table.
 The table shows the value of one dollar ($1)
after it is compounded for various interest rates
and periods.
Sample Compound Interest
Using a Compound Interest
 To calculate annual interest, locate the column
and row where the interest rate and the number
of interest periods meet.
 The number you find is called the multiplier.
 Multiply the deposit amount by the multiplier
to find the compound amount.
 Subtract the original principal from the
compound amount to find compound interest.
Money Market
CD Accounts
Calculate interest earned on special
savings accounts
Calculate the penalty for early
withdrawals from CD accounts
Compare the interest earned on savings
Calculate the effective rate of interest
Special Savings Accounts
 In addition to regular passbook savings
accounts, many banks also offer special
savings accounts for long-term savers.
 The interest rates paid on these special savings
accounts are higher than the rates paid on
regular savings accounts.
 The certificate of deposit is widely referred to
as a CD.
 The CD is also known as a time deposit or a
savings certificate.
 Some government rules apply to certificate of
deposit accounts.

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 Most banks require depositors to meet certain
 Deposit a minimum amount.
 Leave the money on deposit for a minimum time.
The time may be specified in number of days,
months, or years. The minimum time is called the
term. The date that marks the end of the term is the
maturity date.
 Pay a penalty if money is withdrawn before the
end of the term.
 Money market accounts offer higher interest
rates than regular accounts.
 Special rules apply:
 A minimum balance must be kept in the account
for the term specified. More money may be added
to the account at any time.
 The interest rate paid is fixed for short periods of
 A small number of checks may be written against
the account.
Penalties on Certificates of
 By law, banks must charge depositors a
penalty for withdrawing money early from a
certificate of deposit.
 Each bank sets its own penalty for early
 The penalty usually varies with the term of the
Compare Savings Accounts
 Savings accounts are often compared by the
interest earned in each account.
 To compare, calculate the interest that would
be earned by each type of account for the same
time period.
Effective Rate of Interest
 The effective rate of interest is the rate you
actually earn by keeping your money on
deposit for one year.
 The annual rate and the effective rate you earn
can be different.
 The effective rate is sometimes referred to as
the annual percentage yield.
Amount of Interest Earned for One Year
= Effective Rate of Interest
Amount of Money on Deposit