Chapter 7 - Banking Monies Revceived

CHAPTER 7 Banking monies received

Contents     

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The banking system The banker/customer relationship Procedures for banking cash Procedures for banking cheques Procedures for banking plastic card transactions Banking other receipts

The banking system 

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Central Bank: The Bank of England - controls the banking industry Clearing or retail banks    

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Smaller retail banks   

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Barclays Lloyds – TSB HSBC NatWest Co-operative Bank Yorkshire Bank Abbey National

Clearing is the mechanism for obtaining payment for cheques E.g. of the cheque clearing system

Clearing system principles Step 1 Receiving bank branches stamp their names and addresses in addition to the crossings on the cheques Step 2 Cheques from receiving bank branches sent to the head office Step 3 The head office delivers to the Bankers Clearing House Step 4 The Bankers Clearing House distributes these cheques to the head offices of the relevant paying banks. Step 5 The paying banks' head offices process the cheques using computers and distribute the cheques to the various branches

The banker/customer relationship Banker 

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Put money and cheques received on a customer's behalf into his account. Take out all cheques and orders paid from the account by the customer. Keep accounts on the customer's behalf.

Customer 

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Bank opens an account for him in his name. Bank accepts his instructions and undertakes to provide a service

Contractual relationship

Procedures for banking cash Procedures for preparing a paying-in slip Step 1 Count the cash Step 2 Add up, on a separate piece of paper Step 3 Compare: calculated total vs. cash register Step 4 Calculate any discrepancy Step 5 Enter the total for each denomination of note in the appropriate place on the paying in slip. Step 6 Add up the numbers again to check the total and enter it in the 'total cash' box.

Example You are preparing the day's takings for banking. When you have sorted and counted the notes you find you have the following. (a) Five $50 notes (b) 110 $20 notes (c) 560 $10 notes (d) 40 $5 notes (i) Bronze worth 93

(e) Six bags 20 $1 coins (f) Two bags 10 50 cent coins (g) Ten bags 50 20 cent coins (h) Other silver worth $32.20 cents

The float left in the till was $34.90 at the end of yesterday and $43.62 at the end of today. The till summary states that $8,517.41 was received today. Prepare the paying in slip and reconcile cash banked to the till records.

Solution

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Reconcile

Procedures for banking cheques 

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You are employed by Easter Co and have the following amounts to pay in to the bank.

Complete the paying-in slip and counterfoil below for presentation to the

Solution – the front

Solution – the back

Returned/dishonoured cheques 

Insufficient funds: not be enough money in the customer's account to cover the cheque. Banks will honour a cheque in the following circumstances Cheque amount lower than the cheque guarantee card limit  There is evidence that a check was made between the cheque and the guarantee card 

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Stolen cheques and cheque guarantee cards: 

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Invalid and worthless even if a cheque is accepted with a cheque guarantee card and all details appear to agree

Wrongly completed or out of date cheques

Cheque returned to you marked 'refer to drawer‘ and You will return the

Procedures for banking plastic card transactions 

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The card issuers require the business receiver of card transactions to summarise all transactions on a summary voucher. The summary voucher consists of an original or 'top copy' and two copies with carbon paper in between. The bottom copy is the processing copy, on the back of it is a place to list the vouchers. The summary voucher has to be imprinted with the retailer's plastic card.

Procedures for banking plastic card transactions 

You are asked to bank all card transactions at the end of a working day. You receive all the card vouchers for the day and you obtain a summary voucher. The transaction vouchers are as follows

Sale Sale Sale Sale Sale Sale Sale Sale

$ 26.41 32.99 32.99 100.4 22 46.99 37.8 12.95

Sale Sale Sale Sale Sale Sale Sale Refund

$ 12.95 14.48 136.48 12.95 112.95 11.8 56.71 22

Solution – back of processing copy

Solution – front of processing copy

Queries arising from card transactions

Banking other receipts     

Direct debits Standing orders Automated payments Telegraphic transfers Banker's drafts 

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same manner as cheques

Bank giro credits 

paid into a bank account by the customer of the business, in which case the amounts will appear automatically on the business's bank

Banking and EFTPOS  Credit, charge or debit card receipts via EFTPOS are credited directly to the retailer's bank account. He can agree the amounts received to the 'End of day' reconciliation produced by the terminal

1 What is 'clearing' in banking terms? 2 How long does a cheque take to clear? 3 What are the four types of relationship which may exist between a banker and customer? 4 What is a 'fiduciary relationship'? 5 How should coins be banked? 

1 Clearing is the mechanism for obtaining payment for cheques. 2 Cheques take three working days to clear. 3 The relationships are: receivable/payable, bailor/bailee, principal/agent, mortgagor/mortgagee. 4 A fiduciary relationship is one in which the superior 

QB 15 A fiduciary relationship is A A contractual relationship B A special relationship recognized in law even though it may not be contractual where one party is in a position to exert undue influence on another and must therefore be shown to act in good faith C Not recognized in law unless it is contractual D Between principal and agent

Answer: B