Use of a Bank
¾ 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.
Making Bank Deposits
¾ Each deposit must be documented by a deposit slip. Deposit slips are normally
prepared in duplicate. The original is kept by the bank. The duplicate is stamped by
the bank to establish authenticity, and then kept by the depositor.
Electronic Funds Transfer
¾ 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
¾ A cheque is a written order signed by the depositor that directs the bank to pay a
specified sum to a designated recipient. Each cheque should clearly explain its
¾ $EDQNVWDWHPHQWVKRZVWKHGHSRVLWRU¶VEDQNWUDQVDFWLRQVDQGEDODQFH To the bank,
the cash in the bank account is a liability ± an amount that must be repaid upon
¾ Debit Memorandum: The bank charges monthly fees for their service called a bank
service charge. Other bank services that are cost associated include: printing cheques,
locations. Bounced cheques are also a fee that must be paid.
¾ Credit Memorandum: A depositor may have the bank collect its notes receivable.
interest is earned, it may be indicated as a credit memorandum.
Reconciling the Bank Account