Chapter 3 Banking Services

3.1 Checking Accounts

Deposit Slip

• A deposit slip is used to deposit their paychecks and other monies.

A. Cash Including Coins: 285.85 Check: 322.94 Check: 1.45

Subtotal 610.24Less Cash: 0Total Deposited: 610.24

B. Cash Including Coins: 615.45

Check: 39.86

Check: 3.83

Subtotal 659.14

Less Cash: 0

Total Deposited: 659.14

Check Register

• When you write a check you are telling the bank to take money from your account.

• Check register is where deposits and checks are written.

• Calculate a running balance or new balance• Deposits +• Checks (-)• Balance is the amount of money in account

Trans Type or Check #

Date Description of Transaction

Payment/ Debit (-)

Fee If Any

Deposit/ Credit (+)

Balance $ 1250.00

214 6/13 Tribune-Democrat 35.00 1215.00 Deposit 6/14 Deposit of Checks

#465 350.00 1545.00

Debit 6/14 Giant Eagle 36.79 1508.21 215 6/14 Verizon Wireless 57.95 1450.26 Deposit 6/18 Check #245 & 4567 658.89 2109.15

Sherry and Jamal Taylor (1) (2) Date __________ 20____ (3) 13 511 Ridge Road 2-0763

Syracuse, NY 13205 213 Pay to the order of _____(4)______________________________ $____(5)_____ _________(6)_______________________________________ Dollars Apex National Bank (7) For Classroom Use Only Memo ______________(8)_______ ____________(9)______________ (:021307630:)(10) 115” 7963(11) 13(12)

C. 2,583.45 +1,220-825-96.40-12.78 =

D. 129.74+500+1,236-196-950-87.83=

3.2 Electronic Banking

Electronic Banking

• Use telephone, computer, other technology

• Banks use computers to transfer deposits and checks, or “funds” from person to person and bank to bank called EFT

• Bank Identification Number

• Automatic Teller Machine-ATM– What can you do with an ATM?

• Personal Identification Number – PIN

• Direct Deposit-Have paychecks automatically transferred from work to employee bank account

• Debit Card- Allows you to pay for purchases without using cash or check-automatically withdrawn from checking account

A. 782.88-85-86.54-50=

B. 1,248.40+890.50-200-12.87-118.94=

3.3 Online Banking

Online Account Access

• Online banking allows you to do your banking online.

• Available balance is the amount available to spend

A. 100+690-35-312.40-150-280 =

100-12.60 =

B. 67+728-36.90-112.85-270-15-128-89.23-45.50 =

3.4 Check Register Reconciliation

Reconcile the Bank Statement

• Banks keep track of checking accounts and send the monthly report or bank statement to customers.

• Interest earned is $ paid to customers for the use of their $

• Service charge is a deduction made by the bank for handling the checking account.

• A canceled check is one that the bank has paid and then marked so it can’t be used again

• Outstanding checks means that the checks have been written but not yet received or paid by the bank

• Outstanding deposit is deposit made after the closing date of the bank statement. – not on the statement but in your register

• Bank Statement Balance

+ Outstanding deposi

- Outstanding checks

New Bank Balance

A. 1,383.53--29.45

-87.39

+312.09

B. 793.57

+312.09

-174.85

-32.78

Reconcile the Check Register

• Check Register Balance

+ Interest Earned- Service Charge- + Any Errors

New Check Register Balance

*CHECK REGISTER AND BANK STATEMENT MUST BALANCE TO RECONCILE

C. 727.92

-18.90

+1.60

D. 457.38

-7.68

3.5 Other Reconciliation Problems

Reconcile the Checking Account

• Sometimes there are errors when calculating your checking account

• Compare checkbook register to bank statement item by item

S1: Compare the bank statement to the check register and note any differences between them.

S2: Prepare a reconciliation form to reconcile the bank statement.

S3: Reconcile the check register.

A. 107.87

+0.43

-56.00

+32.95

-35.29

B. 812.45

-200

-80.17

624.77

-92.49

3.6 Savings Accounts

Simple Interest

• Interest-$ paid to an individual or institution for the privilege of using their $

• Same as checking– Deposit $– Withdrawal $– Record transactions

• Interest can be added to your savings account– Quarterly – 4x a year every three months

• 0.25 = ¼ = 3/12

– Semiannually – 2x every six months• 0.5 = ½ = 6/12

– Annually – 1x a year• 1 = 1/1 = 12/12

– Monthly – 12 a year every month• 0.083 = 1/12

Principal x Rate x Time = Interest

P x R x T = I

Time must be calculated out of one year

Ex

quarterly = ¼ or 0.25

semiannually = ½ or 0.5

annually = 1

monthly = 1/12 or 0.083

Change percent to decimal

A. 2 ¼% = 2.25% = 0.0225

860 x 0.0225 x 0.25=

P R T

B. 3.1% = 0.031

350 x 0.031 x 0.5 =

P R T

Compound Interest

• Interest is added into balance. – Becomes new principal

P x R x T = I(Principal x Rate x Time = Interest)I + P = NP(Interest + Principal = New Principal)NP x R x T = I(New Principal x Rate x Time = Interest)

C. 700 x 0.03 x 0.25 = 5.25 + 700 = 705.25705.25 x 0.03 x 0.25=5.29 + 705.25 = 710.54

D. 400 x 0.025 x 0.5 = 5 + 400 = 405405 x .025 x 0.5 =5.06405 + 5.06 = 410.06410.06 – 400 = 10.06

Compound Interest Tables

• Instead of formula can use a table

• Pg. 113

E. Annual 3

1 ¼%

1.037971 x 1,100 = 1,141.77

1,141.77 – 1,100 = 41.77

F. Annual 7

1%

1.072135 x 720 =771.94

771.94 – 720 = 51.94

What if not for full year?

Interest x ¼ for quarterly

Interest x ½ for semiannually

Periods x 4 for quarterly

Periods x 2 for semiannually

G. 5% x 0.25 = 1.25%

2 years x 4 periods a year = 8

1.104486 x 850 = 938.81

938.81-850 = 88.81

H. 2.5% x .5 = 1.25%

2 years x 2 periods a year = 4

1.050945 x 1,600 = 1,681.51

1,681.51 – 1,600 = 81.51

3.7 Money Market and CD Accounts

• Some special savings paid higher rate than regular savings

Certificate of Deposit

• CD – A time deposit or savings certificate• Deposit a minimum amount• Leave the money for minimum time or term• End of term is maturity date• Pay a penalty if withdrawal before term

Money Market Accounts

• Higher interest rates but more like a checking– Minimum balance requirements– Interest rate is fixed– A small # of checks may be written

• P x R x T = I

• A. 10,000 x 0.054 x 3 = 1,620

• B. March

2,000 x 0.014 x 0.083 = 2.32

April

2,000 x 0.0132 x0 .083 = 2.19

2.32 + 2.19 = 4.51

Penalties on Certificates of Deposit

• By law charged a penalty for early withdrawal

• Penalty calculated on amount of $ withdrawn from CD

• Amount Withdrawn x Rate x Time = Penalty

C. 500 x 0.02 x 0.25 = 2.5

D. 1,000 x 0.047 x 1 = 47

1,000 – 47 = 953

Compare Savings Accounts

E. Time Deposit

1,400 x 0.0235 x 0.5 = 16.45

16.45 – 15.13 = 1.32

F. 1,500 x 0.0326 x 0.25 = 12.23 x 3 = 36.68

36.68 - 31.37 = 5.31

Effective Rate of Interest

• Rate you actually earn by keeping money on deposit

• Also called Annual Percentage Yield (APY)

Amount of Interest Earned for One Year =

Amount of Money on Deposit

G. 4% x 0.25 = 1%

1 x 4 = 4 Periods

1.040604 x 2,000 = 2081.21

2,081.21 – 2,000 = 81.21

81.21 / 2,000 = 0.0406 4.06%

H. 5% x 0.5 = 2.5%

1 x 2 = 2 Periods

1.050625 x 6,000 = 6303.75

6303.75 – 6,000 = 303.75

303.75 / 6,000 = 0.0506 5.06%