MGAB01H3 Lecture : Use of a Bank

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ochretortoise616

3 Nov 2010

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MGAB01H3 Full Course Notes

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The use of a bank contributes significantly to a good internal control over cash. It acts as a safeguard for cash, a clearing for cheques, and a second set of records. To open a bank chequing account, the bank runs a credit check and requires the depositor to sign a signature card. The bank provides the depositor with a book of serially numbered cheques and deposit slips. Each deposit must be documented by a deposit slip. The duplicate is stamped by the bank to establish authenticity, and then kept by the depositor. To manually control and account for cash is an expensive and time-consuming process. Therefore, funds are more often transferred among parties as an electronic funds transfer. A cheque is a written order signed by the depositor that directs the bank to pay a specified sum to a designated recipient.

Related Questions

Sid Levine is in charge of registration for the November SalesSeminar, and you are assisting him.

On Tuesday, November 4, you received cheques from fourregistrants as follows:

Leroy McGovern, $75.00

Janet Temple, $75.00

Kevin Smythe, $75.00

Laura Cole, $75.00

Make out a deposit slip for the November Sales Seminar account(by William Wilson) for November 4. The account number is 09-04156.Also, record the amount of the deposit in the cheque register, andshow the balance. The account has a balance of $360.27.

During the week, you received cheques from the registrants forthe following amounts:

Nov. 5	$1500.00	20 registrants
Nov. 6	$3000.00	40 registrants
Nov. 7	$2250.00	30 registrants

On Monday, November 10, the first day of the seminar, eight morepeople registered; the total amount of cheques was $600.00.

Assume that you made out daily deposit slips, took the depositslips and the cheques to the bank, and entered the daily amounts inthe cheque register. (In an actual situation, you would also makeout a receipt and a name tag for each registrant.)

CHEQUE REGISTER
Cheque No.	Date	Cheque Issued to	Amount of Cheque	Anount of Deposit	Balance

browntrout537

The August 2014 bank statement for Allison Company and theAugust 2014 ledger account for cash follow:

BANK STATEMENT
Date	Checks and EFTs			Deposits		Balance
Aug. 1						$	17,610
2	$	390					17,220
3				$	11,750		28,970
4		475					28,495
5		300					28,195
9		790					27,405
10		250	EFT				27,155
15					4,850		32,005
21		255					31,750
24		19,500					12,250
25					7,100		19,350
30		850	EFT				18,500
30					3,050*		21,550
31		115	^â				21,435

*$3,050 interest collected.

^âBank servicecharge.

Cash (A)


Aug. 1Balance	16,445	Checkswritten and electronic funds transfers
Deposits		Aug. 2	EFT 250
Aug. 2	11,750	4	790
12	4,850	15	230
24	7,100	17	410
31	5,350	18	EFT 850
		20	255
		23	19,500

Outstanding checks at the end of July were for $300, $475, and$390. No deposits were in transit at the end of July.

Required information

Compute the deposits in transit at the end of August bycomparing the deposits on the bank statement to the deposits listedon the cash ledger account.

2. Compute the outstanding checksat the end of August by comparing the checks listed on the bankstatement with those on the cash ledger account and the list ofoutstanding checks at the end of July.

olivemole983

Consider a mutual savings bank (depositors are the owners of the bank) with 1000 depositors. In the beginning of a year, each depositor makes $100,000 deposit. The bank holds 10% of the total deposit in vault cash. The remaining deposit is invested in a project with a 10% rate of return at the end of the year. However, if the bank liquidates it investment, it only gets 50% of its initial investment back. For simplicity, we assume that this mutual saving bank does not have to comply to any reserve requirement.

a. Suppose the bank does not have to liquidate its investment project, what is the return after a year on each deposit account?

Suppose 10 depositors decide to withdraw all their deposit after a month. What is the return after a year on each remaining deposit account?

Suppose every depositor thinks that more than 20% of depositors will withdraw after a month, what should a depositor do? What is the return on each deposit account in this case?

MGAB01H3 Lecture : Use of a Bank

MGAB01H3 Full Course Notes

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