Banking and Finance Business and Computer Science.

Banking and Banking and FinanceFinance

Business and Computer Business and Computer ScienceScience

The Purpose of MoneyThe Purpose of Money

Money – a standard of value and a Money – a standard of value and a means of exchange or paymentmeans of exchange or payment

Monetary system – the use in Monetary system – the use in modern society of coins, currency, modern society of coins, currency, checks and debit cards as the checks and debit cards as the standard of paymentstandard of payment

The Purpose of MoneyThe Purpose of Money

Money enables people and Money enables people and businesses to buy and sell goods and businesses to buy and sell goods and services more easily around the services more easily around the world.world.

Goods are services are directly Goods are services are directly exchanged using money.exchanged using money.

What kinds of money does modern What kinds of money does modern society use?society use?

The Functions of BanksThe Functions of Banks

A Financial institution is a firm that A Financial institution is a firm that manages money. manages money.

Banks are the main types of financial Banks are the main types of financial institutions.institutions.

Can you name some banks around Can you name some banks around town?town?

DefinitionsDefinitions

Bank account – is a record of the amount Bank account – is a record of the amount of money a customer has deposited into or of money a customer has deposited into or withdrawn from a bank.withdrawn from a bank.

Deposit-the money put in a bank account.Deposit-the money put in a bank account. Withdrawal-the money taken out of a bank Withdrawal-the money taken out of a bank

account.account. Interest-a rate that the bank pays Interest-a rate that the bank pays

customers for keeping their money.customers for keeping their money.

Storing MoneyStoring Money

To store money means to place or To store money means to place or leave it for preservation or later use.leave it for preservation or later use.

The two main types of bank accounts The two main types of bank accounts are checking accounts and savings are checking accounts and savings accounts.accounts.

Checking AccountsChecking Accounts

Checking accounts are used to store Checking accounts are used to store money in the short term.money in the short term.

Savings AccountsSavings Accounts

Savings accounts are used to store Savings accounts are used to store money over a period of time.money over a period of time.

An advantage of a savings account is An advantage of a savings account is that it earns more interest than most that it earns more interest than most checking accounts.checking accounts.

Transferring Money def.Transferring Money def.

Electronic funds transfer (EFT)-Electronic funds transfer (EFT)-allows money to be transferred from allows money to be transferred from one bank account to another one bank account to another through a network of computers.through a network of computers.

Direct deposit-is the electronic Direct deposit-is the electronic transfer of a payment directly from transfer of a payment directly from the payer’s bank account to that of the payer’s bank account to that of the party being paid.the party being paid.

Transferring MoneyTransferring Money

Banks use checks and electronic Banks use checks and electronic funds transfers to move money.funds transfers to move money.

Checks are primarily used to Checks are primarily used to transfer money from one party to transfer money from one party to another.another.

Deposit SlipsDeposit Slips

When you deposit money into your When you deposit money into your account, you first fill out a deposit account, you first fill out a deposit slip. On the deposit slip you indicate slip. On the deposit slip you indicate how much in cash and how much in how much in cash and how much in checks you are depositing. Also, on checks you are depositing. Also, on the deposit slip there is a space the deposit slip there is a space labeled “Less Cash Received”. This labeled “Less Cash Received”. This is the money you would like back is the money you would like back before the deposit.before the deposit.

Deposit SlipDeposit Slip

Writing ChecksWriting ChecksNow that you have money in your checking Now that you have money in your checking

account, you can write checks. There are account, you can write checks. There are some basic rules you should use when some basic rules you should use when doing so.doing so.

1.1. Always use ink so that no one can change Always use ink so that no one can change your numbersyour numbers

2.2. Print and write your numbers clearly so Print and write your numbers clearly so there are no misunderstandingsthere are no misunderstandings

3.3. Do not change the way you sign your nameDo not change the way you sign your name

4.4. If you make a mistake, write “VOID” on If you make a mistake, write “VOID” on the check and use the next check.the check and use the next check.

Writing ChecksWriting ChecksCheck

Number

Bank Routing Number

Account Number

Check Number

ACTIVITY 1ACTIVITY 1

Checkbook RegisterCheckbook Register

A checkbook register keeps a A checkbook register keeps a running total of how much money running total of how much money you should have available in the you should have available in the bank.bank.

EVERY TIME you make a deposit, EVERY TIME you make a deposit, withdrawal, write a check, or use withdrawal, write a check, or use your debit card, you must show the your debit card, you must show the entry on your checkbook register.entry on your checkbook register.

Checkbook RegisterCheckbook Register

For each transaction, you list the For each transaction, you list the datedate of the transaction, the of the transaction, the check check numbernumber if applicable, the if applicable, the descriptiondescription, the , the amount (debit or amount (debit or credit)credit) and calculate your new and calculate your new balance.balance.

DEBIT OR CREDIT??DEBIT OR CREDIT?? A DEBIT (-) is money that is coming out of A DEBIT (-) is money that is coming out of

your bank account.your bank account. ChecksChecks Debit card transactionsDebit card transactions WithdrawalsWithdrawals ATM withdrawalsATM withdrawals

A CREDIT (+) is money that is going into A CREDIT (+) is money that is going into your bank account.your bank account. DepositDeposit Direct DepositDirect Deposit ATM DepositATM Deposit

Checkbook RegisterCheckbook Register

ACTIVITY 2ACTIVITY 2

Bank Statement Bank Statement ReconciliationReconciliation

To balance your checkbook, follow To balance your checkbook, follow this eight-step method.this eight-step method.

1.1. Put a check mark beside every Put a check mark beside every transaction in the check register that transaction in the check register that matches to the entries on the matches to the entries on the statement.statement.

2.2. List in the check register and subtract List in the check register and subtract all fees charged to your account.all fees charged to your account.

3.3. List and total all checks written that List and total all checks written that have not cleared your accounthave not cleared your account

Bank Statement Bank Statement ReconciliationReconciliation

4.4. List and total all deposits not shown List and total all deposits not shown on the statement.on the statement.

5.5. List the ending balance shown on the List the ending balance shown on the statementstatement

6.6. Add deposits (step 4) to the ending Add deposits (step 4) to the ending balancebalance

7.7. Subtract outstanding checks (step 3) Subtract outstanding checks (step 3) from the balancefrom the balance

8.8. Check register total should match Check register total should match the reconciled amount.the reconciled amount.

What if it doesn’t What if it doesn’t balance?balance?

If you do not get the same total, go If you do not get the same total, go thru the eight steps again to see if thru the eight steps again to see if you made a mistake.you made a mistake.

Check List If Your Account Check List If Your Account Does Not BalanceDoes Not Balance

Have you correctly entered the amount Have you correctly entered the amount of each transaction (checks, deposits, of each transaction (checks, deposits, etc) in your register?etc) in your register?

Have you recorded all service charges Have you recorded all service charges and deducted them from your balance?and deducted them from your balance?

Have you checked your addition and Have you checked your addition and subtraction in your register?subtraction in your register?

Have you accounted for all outstanding Have you accounted for all outstanding checks (checks that have not cleared)?checks (checks that have not cleared)?