Student Handout and Activities
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4.1 Prepare bank account documents (e.g., checks, deposit/withdrawal slips, endorsements, etc.)
4.2 Read and reconcile bank statements
4.3 Explain cash control procedures (e.g., signature cards, deposit slips, internal/external controls, cash clearing, etc.)
4.4 Explain the purpose of internal accounting controls
Activity:
Using the practice checks (Page 2) and deposit slips (page 3) of your jam board that you copied for the 9 transactions.1. On October 14, 20XX, you write a check for $39.95 to AT&T for your cell phone bill.2. On October 17, 20XX, you write a check for $68.34 to Aéropostale for new clothes.3. On October 17, 20XX, you deposit two checks into your bank account. One check is from your employer, T.G.I. Friday’s, for $212.38, and the other is from your aunt, Dixie Sweet, for $17.00.4. On October 21, 20XX, you write a check for $45.22 to Best Buy for new DVDs.5. On October 22, 20XX, you write a check for $65.46 to American Family Insurance for your monthly car insurance payment.6. On October 23, 20XX, you deposit $87.21in cash into your bank account. Your cash consists of two twenty-dollar bills, six five-dollar bills, eight one-dollar bills, and $9.21 in change.7. On October 24, 20XX, you write a check for $15.00 to your school for Spanish Club dues.8. On October 28, 20XX, you write a check for $20.00 to your best friend to pay him/her back for the money that s/he lent you.9. On October 31, 20XX, you deposit another check from your employer. The check amount is $198.89, but you withdraw $20.00 from your account at the same time that you deposit your paycheck.Bank Account Documents—Discussion Guide
THINK ABOUT IT
Most banking is done online these days. Due to technology, there are fewer reasons all the time to visit a bank branch. Nonetheless, it is important to know what bank documents are and how they are used in accounting.
KEY CONCEPTS
Slide #1 Even in today’s computerized world, accountants still regularly prepare and use a number of bank account documents. Two of the most common bank documents are: Checks & Deposit slips
Slide #2 A check is a document that authorizes a person or organization to withdraw money from of a bank account.
It is dated, written, and signed by a payer and provided to a payee.There are a number of different kinds of checks including:For a practice check, make sure every student has a copy of this Jam Board
For a video on how to properly write a check, click here: How to write a check.
Slide #3 An endorsement is the signature on the back of a check that is completed by the payee and indicates that the check has been received.
In some cases, the payee will write “For Deposit Only” in the endorsement area on the back of the check to designate that s/he intends for the amount on the check to be deposited into a bank account.If a payee chooses to transfer the check to another person or organization, s/he can endorse the check with her/his signature, and transfer the check to a new payee, who becomes the new owner of the check and can deposit it or transfer it as s/he chooses.Slide #4 A deposit slip is a document that provides information on the amount of money a customer wants added to her/his account at the financial institution.
A completed deposit slip includes:Objectives:
a. Define the following terms: reconcile, bank statement, transaction, transaction fee, balance, and overdraft protection.b. Explain the components of a bank statement.c. Identify problems that may occur when bank statements are not reconciled.d. Discuss actions to take if a bank statement is incorrect.e. Explain procedures for reading and reconciling bank statements.f. Demonstrate how to read and reconcile a bank statement.Activity:
Using the checkbook guide (Checkbook Guide), complete January's monthly transactions on this Checkbook Register (make a copy) CHECK with your instructor before you move on.
Make sure the bank balance agrees with the checkbook before you proceed to February. Don't forget the service charge.
Do the Following Months
Ethics Case for Students:
You recently purchased a new laptop for school with your debit card. When you receive your bank statement at the end of the month, you notice that the purchase is not listed on your statement and the money was never removed from your account. You are hesitant to inform your bank of the discrepancy, considering how much extra money you now have. It was the bank’s mistake anyway, right? What should you do?
Student (Checkbook Guide)
Student Checkbook Register Teacher Checkbook Key Teacher Guide
Reconciling Bank Statements—Discussion Guide
Slide #6 THINK ABOUT IT
One way that companies double-check aspects of their own internal accounting is to compare the transactions they have recorded in their books with the ones listed on their monthly bank statement. Sometimes, discrepancies between the bank statement and a company’s records are the results of accounting errors either at the bank or in the company’s books. Sometimes, however, a discrepancy could point to an instance of fraud.
KEY CONCEPTS
Slide #7 Each month, banks issue a monthly bank statement to their customers.
This document includes a list of all the transactions that affected the customer’s bank account for the previous month. Typically, a bank statement contains the following information about the customer’s bank account:The balance at the end of the month
Slide #7 When the bank statement is received, someone at the company compares the list of transactions in the statement to the list of transactions in the company’s books.
This process is called a bank reconciliation, and it is a very important step to ensuring that the company’s accounting practices are accurate and free of suspicious activity.Objectives:
a. Define the terms: cash, cash receipts, cash disbursements, cash control, and separation of duties. b. Explain reasons for recording cash transactions.c. Explain reasons for restricting access to cash. d. Explain reasons for separating responsibilities for cash transactions. e. Discuss the impact of volume on the types of controls a business may implement over cash transactions. f. Explain ways that a business can maintain control of its cash.4.3 Activity
Get into pairs or Individuals. Each group of students should interview a local business or individuals within the school or school district(may include the school secretary, athletic director, school district treasurer, small business enterprise manager and/or supervisor, etc). What are the similarities and differences among the cash controls used by these local businesses or school Administrators. Be sure to contrast cash controls used by businesses with many employees with those that only have a handful of workers, cash controls used by businesses generating lots of income versus those that generate just a small amount of income, etc.Alternative Assignment
Read the Accounting in the Headlines blog post What Internal Controls Might Have Prevented a SeaWorld Guest Relations Supervisor from Voiding Tickets and Pocketing More Than $116,000?, available at Internal Controls Might Have Saved Thousands. Use the instructor resources and questions on the same to explain what could have prevented the fraud.Cash Control Procedures—Discussion Guide
Slide # 9 THINK ABOUT IT
Cash is commonly referred to as “a company’s most important liquid asset.” An asset is “liquid” if it can be exchanged for another asset without first having to undergo a separate transfer or transaction. For all non-cash assets, being “liquid” usually means that they can be readily exchanged for cash. Because cash is the most basic medium of exchange, it is used in all companies and forms of business. This simple fact means that it must be carefully monitored and managed.
KEY CONCEPTS
Slide #10 The first step in understanding cash controls is understanding what is meant by the term “cash” because, in accounting, cash is more than just paper money and coins.
Cash refers to a range of forms of financial exchange including currency and coin, bank account balances, money orders, and checks.Anything that can be exchanged for other assets in an immediate transaction is considered cash.Slide #11 By definition, cash is valuable and easily/quickly exchanged.
This makes cash very desirable, which can lead to the temptation and risk of fraud or theft.Companies must, therefore, put procedures into place to protect themselves from this kind of misuse.Slide #12 Depending on the size and function of the company, the following duties should either be handled by different people or, at minimum, be reviewed and approved by a person other than the bookkeeper/accountant:
Authorizing4.4 Activity
Watch the Video(Rita Crundwell - Fraud in Dixon Illinois : Small Town Shakedown - the fifth estate).
List what internal accounting controls you would create for an organization.
BE Prepared to discuss the internal accounting controls with your class.
Alternative Activity
Read the Accounting in the Headlines blog post Accounting in the Headlines blog post What Internal Controls Might Have Stopped a Cargill Accountant from Embezzling $3.1
Answer the discussion questions about procedures that allowed the Cargill accountant to embezzle the funds, as well as internal controls that might have prevented the theft
Internal Accounting Controls—Discussion Guide
Slide #13 THINK ABOUT IT
Cash controls are just one example of the broader internal accounting controls that companies put in place to protect themselves. Many of the policies and procedures involved in cash controls can be applied to other areas of a business’s accounting practices.
KEY CONCEPTS
Slide #14 Internal accounting controls are policies and procedures that are created and enforced to ensure the reliability of accounting systems.
They are safeguards meant to protect a business’s financial assets and information.Slide #15 Internal controls are like a system of checks and balances for a business.
Some control measures are preventative (aimed at keeping fraud or mistakes from happening), and some are detective (aimed at discovering fraud or mistakes that have already happened).Slide #16 In accounting, fraud refers to a willful or intentional act to deceive through the misrepresentation or falsification of records. For fraud to occur, the three elements that must exist are:
Perceived needPerceived opportunity
Slide #17 In addition to fraud, the lack of internal controls can cause a business’s financial information to be unreliable.
Unreliable financial information is a big enough problem on its own, but the additional problems that could result from it can be significant and long-lasting, including: