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Chapter 29

CheckingAccounts

Section 29.2

Account Records

Read to Learn

Describe how checking account holders manage their bank transactions.

Describe the procedure for bringing your account into agreement with bank records.

The Main Idea

You must manage your checking account so that you have an accurate picture of your finances. A bank provides you with a bank statement showing all transactions. You should check your checkbook records against that statement regularly.

Key Concepts

Keeping Track of Financial Transactions

Reconciling Your Account Records

Key Terms

check registera checkbook log in which an account holder records checking account transactions

endorsementthe signature of the payee on the back of the check

Key Terms

bankstatement

the bank’s record of all the transactions in a checking account

canceledchecks

checks that have been cashed

Key Terms

bankreconciliation

the process of seeing whether an account holder’s records agree with the bank’s records for the account

Key Terms

outstandingchecks

checks that have been written but have not yet been cashed

Keeping Track of Financial Transactions

The different elements of a check provide information that can be used in financial record keeping.

Keeping Track of Financial Transactions

Financial institutions provide forms and reports that consumers can use to keep their checking account in order.

Checking Account StatementsFigure 29.2

The Parts of a Check

There are three parties named on a check.

Payee Drawer Drawee

The party to whom the check is written

The party who wrote the check and is paying the money

The financial institution where the drawer has an account

The Parts of a Check

A check must include a bank route number, which traces the check back to the account on which it was written.

The Parts of a Check

A check includes the name and location of the drawer’s bank, a check number, and security features.

The Parts of a Check

A check presented for payment must include a valid date, the drawer’s signature, the payee’s name, and matching numerical and written amounts.

Writing a Check

When you write a check, record the check number, the amount of the check, the date, and the payee’s name in a check register.

check registera checkbook log in which an account holder records checking account transactions

Making Deposits

A deposit slip lists the amount of cash and checks and the total amount of the deposit.

After you make a deposit, record it in your check register.

Making Deposits

To deposit or cash a check requires an endorsement.

endorsementthe signature of the payee on the back of the check

Do not sign a check until you are ready to deposit or cash it.

Making Deposits

When making a deposit, write “For Deposit Only” as part of the endorsement.

Bank Statements

A bank statement includes a record of all withdrawals, deposits, interest, and fees.

bank statementthe bank’s record of all the transactions in a checking account

Bank Statements

Canceled checks are proof that money has been paid to payees.

canceled checkschecks that have been cashed

A bank statement includes a record of canceled checks.

Handling Your Own Checks

Checks should be handled carefully.

There are precautions you should take to secure your financial safety.

Graphic Organizer

Handling Your Own Checks

Do not print sensitive information such as your Social Security number or driver’s license on your checks.

Keep checks, canceled checks, deposit slips, and bank statements in a safe place.

Never leave your checkbook in the open or in a car.

Graphic Organizer

Handling Your Own Checks

Check your bank statements for anything unusual.

Make sure your checks have security features.

Destroy old documents that contain your account number.

Never make a check payable to “Cash.”

Reconciling Your Account Records

Bank reconciliation is an important part of managing your checking account.

bank reconciliationthe process of seeing whether an account holder’s records agree with the bank’s records for the account

Balancing Your Checkbook

The first step to reconciling your accounts is to see whether the bank has processed all your checks and deposits.

Balancing Your Checkbook

By comparing your check register and your bank statement, you can identify outstanding checks.

outstanding checkschecks that have been written but have not yet been cashed

A Checkbook RegisterFigure 29.3

Balancing Your Checkbook

The total dollar amount of outstanding checks should be subtracted from the balance shown on the bank statement.

Balancing Your Checkbook

Other items to consider when balancing your checkbook include:

Bank fees

ATM deposits or withdrawals

Interest earned

Finding Errors

If your balance differs from the bank’s balance after you reconcile your account, double check the amounts in your records and all your additions and subtractions. Then check the bank’s additions and subtractions. If you find a mistake, report it immediately.

1. What kinds of financial records help people manage their checking accounts?

the checks themselves, a check register, ATM receipts, deposit slips, and bank statements

2. What are some guidelines to consider when ordering and handling personal checks?

Do not print or write your personal information on your checks. Store all financial papers in a safe place.

3. Describe the purpose of reconciling a bank statement and a check register.

to bring the two balances into agreement

Chapter 29

CheckingAccounts

Section 29.2

Account Records

End of