CHAPTER 7

Banking monies received

Contents

The banking system The banker/customer relationship Procedures for banking cash Procedures for banking cheques Procedures for banking plastic card

transactions Banking other receipts

The banking system

Central Bank: The Bank of England - controls the banking industry

Clearing or retail banks Barclays Lloyds – TSB HSBC NatWest

Smaller retail banks Co-operative Bank Yorkshire Bank Abbey National

Clearing is the mechanism for obtaining payment for cheques E.g. of the cheque clearing system

Clearing system principles

Step 1 Receiving bank branches stamp their names and addresses in addition to the crossings on the cheques

Step 2 Cheques from receiving bank branches sent to the head office

Step 3 The head office delivers to the Bankers Clearing House

Step 4 The Bankers Clearing House distributes these cheques to the head offices of the relevant paying banks.

Step 5 The paying banks' head offices process the cheques using computers and distribute the cheques to the various branches of the banks on which the cheques are drawn.

The banker/customer relationship

Put money and cheques received on a customer's behalf into his account.

Take out all cheques and orders paid from the account by the customer.

Keep accounts on the customer's behalf.

Bank opens an account for him in his name.

Bank accepts his instructions and undertakes to provide a service

Banker Customer

Contractual relationship

Procedures for banking cash

Procedures for preparing a paying-in slipStep 1 Count the cashStep 2 Add up, on a separate piece of paperStep 3 Compare: calculated total vs. cash

registerStep 4 Calculate any discrepancyStep 5 Enter the total for each denomination of

note in the appropriate place on the paying in slip.

Step 6 Add up the numbers again to check the total and enter it in the 'total cash' box.

Example

You are preparing the day's takings for banking. When you have sorted and counted the notes you find you have the following.(a) Five $50 notes (e) Six bags 20 $1 coins(b) 110 $20 notes (f) Two bags 10 50 cent coins(c) 560 $10 notes (g) Ten bags 50 20 cent coins(d) 40 $5 notes (h) Other silver worth $32.20(i) Bronze worth 93 cents

The float left in the till was $34.90 at the end of yesterday and $43.62 at the end of today. The till summary states that $8,517.41 was received today.

Prepare the paying in slip and reconcile cash banked to the till records.

Solution

Reconcile

Procedures for banking cheques You are employed by Easter Co and have

the following amounts to pay in to the bank.Cheques from $ Cash

B Wyman 940 2 × $50 notes Pacific 1,721.50 5 × $20 notes S McManus 94.26 97 × $10 notes A Singh 19.29 42 × $5 notes P L Ferguson 57.37 804 × $1 coins Dex 42.91 80 × 50 cent coins M Green 12.5 120 × 20 cent coins

$34.85 silver (10/5 cents) $9.28 bronze (2/1 cents)

Postal order from S R Sykes 15

Complete the paying-in slip and counterfoil below for presentation to the bank on 10 June 20X7

Solution – the front

Solution – the back

Returned/dishonoured cheques Insufficient funds: not be enough money in the

customer's account to cover the cheque. Banks will honour a cheque in the following circumstances Cheque amount lower than the cheque guarantee card limit There is evidence that a check was made between the

cheque and the guarantee card Stolen cheques and cheque guarantee cards:

Invalid and worthless even if a cheque is accepted with a cheque guarantee card and all details appear to agree

Wrongly completed or out of date cheques

Cheque returned to you marked 'refer to drawer‘ and You will return the cheque to the drawer and request a replacement

Procedures for banking plastic card transactions

The card issuers require the business receiver of card transactions to summarise all transactions on a summary voucher. The summary voucher consists of an original or 'top copy' and two copies with carbon paper in between. The bottom copy is the processing copy, on the back of it is a place to list the vouchers.

The summary voucher has to be imprinted with the retailer's plastic card.

Procedures for banking plastic card transactions

You are asked to bank all card transactions at the end of a working day. You receive all the card vouchers for the day and you obtain a summary voucher. The transaction vouchers are as follows

$ $ Sale 26.41 Sale 12.95Sale 32.99 Sale 14.48Sale 32.99 Sale 136.48Sale 100.4 Sale 12.95Sale 22 Sale 112.95Sale 46.99 Sale 11.8Sale 37.8 Sale 56.71Sale 12.95 Refund 22

Solution – back of processing copy

Solution – front of processing copy

Queries arising from card transactions

Banking other receipts

Direct debits Standing orders Automated payments Telegraphic transfers Banker's drafts

same manner as cheques Bank giro credits

paid into a bank account by the customer of the business, in which case the amounts will appear automatically on the business's bank statement

Banking and EFTPOS Credit, charge or

debit card receipts via EFTPOS are credited directly to the retailer's bank account. He can agree the amounts received to the 'End of day' reconciliation produced by the terminal

1 What is 'clearing' in banking terms?

2 How long does a cheque take to clear?

3 What are the four types of relationship which may exist between a banker and customer?

4 What is a 'fiduciary relationship'?5 How should coins be banked?6 Which details from cheques

should be included on the paying-in slip?

7 If you accept a stolen cheque in good faith, is it worth anything to you?

8 What happens if you accept a stolen credit card for an amount below your floor limit?

1 Clearing is the mechanism for obtaining payment for cheques.

2 Cheques take three working days to clear.

3 The relationships are: receivable/payable, bailor/bailee, principal/agent, mortgagor/mortgagee.

4 A fiduciary relationship is one in which the superior party (the bank here) acts in good faith.

5 Coins should be banked in the plastic paying-in bags supplied by banks, with the correct number of coins as shown on the bag.

6 The drawer and the account should be noted on the paying-in slip.

7 No, you must pursue the person who forged the cheque to honour the debt.

8 If all security procedures have been followed, the issuer will usually honour the transaction.

QB 15

A fiduciary relationship isA A contractual relationshipB A special relationship recognized in law even

though it may not be contractual where one party is in a position to exert undue influence on another and must therefore be shown to act in good faith

C Not recognized in law unless it is contractualD Between principal and agent

Answer: B