FINANCIAL DOCUMENTS

Chapter 18

OBJECTIVES
Students should be able to: know the electronic technology used in the banking industry, know banking records and procedures, know payroll and other tax laws, understand investment terminology.

INTRODUCTION
All companies keep: - Banking - Accounting - Payroll - Investment and - Insurance records

ELECTRONIC TECHNOLOGY & THE BANKING INDUSTRY

The most important change in the banking industry in the last few years has been in the use of electronic technology.

ELECTRONIC BANKING
ELECTRONIC

(EFT) - Obtain money - Transfer funds from one account to another - Deposit money - Pay bills

FUNDS TRANSFER

MAIN FORMS OF EFT

Automated

Teller Machines (ATMs) Use EFT card and personal identification number (PIN). Kiosks May include interactive video, telephone, electronic capture of signatures, open accounts, and regular ATM services.

Sophisticated

MAIN FORMS OF EFT contd

Smart Cards (Stored Value Cards) May be disposable e.g. prepaid phone cards or reloadable e.g. student cards used for photocopies etc. Direct Withdrawals authorize banks or credit unions to automatically make payment on your behalf at prescribed times for mortgages, insurance premiums, utilities etc.

MAIN FORMS OF EFT contd

Direct

Payroll Deposits ie direct deposit of employees pay to their bank account. Advantages: eliminates the time and expense of writing cheques, reduce possible theft or loss of cheques, payroll cheques may be deposited in the bank even when employees are on leave.

MAIN FORMS OF EFT contd

Computer

systems and software packages e.g. online banking Allows users to transfer money between accounts, check savings and chequing account balances, determine what cheques have been cleared, make bill payments.

MAIN FORMS OF EFT contd

Debit

Cards a type of automated payment of bills. They may be used at ATMs to make deposits, withdrawals, transfer from one account to another, etc.

MAIN FORMS OF EFT contd

Debits

cards may be: i) online Require the use of a PIN to initiate the transaction. Online debit transactions are done real time. ii) offline The transactions are not real time and usually require a few days for the payment transfer.

DEBIT CARDS contd

Advantages: Consumer - a convenient and safe way to make purchases without having to carry cash or cheques, reduce bank charges, etc. Merchants - can access funds from sales earlier, reduced bank charges, reduced number of bad cheques, etc. Banks - a reduction in the number of cheques to be processed, can now provide a wider range of services to customers.

BANKING RECORDS AND PROCEDURES

Cheques

An order by the depositor (drawer) directing the bank to pay money to a designated person or firm (payee).

WRITING CHEQUES
Figures

to be written as close as possible to the printed dollar sign Start amount in words as far as possible to the left

WRITING CHEQUES contd

Draw

a line through any excess space on the line Never erase or change a cheque void it and the stub Fill out the cheque register and stub before writing the cheque

ENDORSEMENTS
An

endorsement is a written signature by the holder of a cheque for the purpose of transferring ownership. endorsement must be written at the back of the cheque.

The

TYPES OF ENDORSEMENTS

Blank requires only the signature of the payee ie. J. McKoy Full transfers ownership to another person or business. The name of the person to whom the cheque is to be transferred is written before the endorsers signature

e.g. Pay to the order of John Brown. The cheque cannot be cashed without the specified payees signature ie. J. McKoy

TYPES OF ENDORSEMENTS contd

Restrictive

transfers ownership for a specific purpose. Should be used when sending cheques through the mail for deposit. eg. For deposit J. McKoy

BANK RECONCILIATION
This

is completed to account for the difference between the bank statement balance and the cheque book balance to correct any errors that may have been made

Used

SPECIAL BANK SERVICES

Certified

cheques Business or personal cheque that is guaranteed by the bank on which it is drawn. Sufficient funds must be available in the drawers account.

CERTIFIED CHEQUES contd

Certified

is stamped on the face of the cheque and an official signature added. The drawers account is immediately charged with the amount on the cheque. A small fee is usually charged to certify a cheque.

SPECIAL BANK SERVICES contd

Cashiers cheques Issued by the bank and drawn on the banks own funds. A cashiers cheque is purchased by giving the bank cash or cheque for the amount of money desired. The cheque may be made to the purchaser of the cheque who endorses it to the person to whom payment is to be made or the cheque may be made payable directly to payee.

SPECIAL BANK SERVICES contd

Bank money orders Sold by the bank and states that a certain amount of money is to be paid to the person named on the money order

Travelers cheques Facilitates paying for expenses when traveling

Safe-Deposit Box Used to store articles of value or important papers for safekeeping at the bank

PAYROLL LAWS
Being

familiar with payroll laws and regulations will help the office professional understand: - the day-to-day operations of a business - the deductions that are taken from gross earnings

PAYROLL LAWS USA/Jamaica

Fair Labour Standards Act Federal Insurance Contribution Act (Social Security) Federal, State, and Local Income Tax Unemployment Compensation Tax PAYE (Income Tax) National Insurance Scheme (NIS) National Housing Trust (NHT) Education Tax

OTHER TAXES USA/Ja.

Property

Tax Sales Tax/ General Consumption Tax License Tax

INVESTMENTS
The

office professional needs to have an understanding of investment terminology. This knowledge will help when dealing with reports that contain investment terms.

INVESTMENTS contd
Investments include: - Stocks common, preferred - Bonds - Mutual Funds - Individual Retirement Arrangements (IRAs) - Etc.

SUMMARY
Electronic

Banking technology Advantages of Direct Payroll Deposit Types of cheque endorsements Special bank cheques Payroll Tax Laws USA/Ja. Other taxes USA/Ja. Investment instruments Stock classification