Batch Monetary Items

Batch monetary items

Contents

Introduction

Preparation of money for banking

Non-cash financial transactions

Sorting and batching documents

Feedback to activities

Introduction

Sales and services result in collection of monies commonly in the form of:

• cash
• cheques
• credit card payments.

These items are usually banked daily, especially cashbecause it is so vulnerable to fraud and embezzlement. Daily banking minimises the risk of theft of cash and other negotiable instruments.

A negotiable instrument is an item such as a cheque that can be transferred from one person or institution to another with or without endorsement.

Regardless of whether an organisation is large or small, a complete record must be made of all monies received. Each transaction must be acknowledged by:

• a receipt
• a cash register docket
• a credit card sales voucher.

Business banking usually involves large sums of money. Therefore, accuracy and security are very important because the people dealing with funds in an organisation are accountable for their mistakes.

Banking processes are currently undergoing rapid changes due to the rapid progress in technology. Although the basic processes will remain the same, many of the manual tasks you will learn in accounting are continually being replaced by more technologically advanced systems.

You will learn about the most common types of payment received by business and how these funds are prepared for banking. You will explore a variety of banking documents and you’ll learn how to complete these documents and record the information.

You will also look at the importance of accuracy in calculations and security when dealing with money.

Preparation of money for banking

One of the basic requirements of banking cash or money is knowledge of how to prepare cash and coins for the banking process.

Cash

As you are no doubt aware, cash (or money) consists of notes and coins.

Notes

Australian notes are made of polymer in denominations of $100, $50, $20, $10 and $5.

If you were banking lots of notes you would batch them—that is:

• sort the notes into the same denomination with the transparent window in the bottom right-hand corner
• bundle each denomination into groups of ten and secure the bundle with an elastic band.

/ Activity 1
See if you can calculate the value of a bundle of ten notes in each denomination.
Denomination / Value of bundle of ten
$100 / $
$50 / $
$20 / $
$10 / $
$5 / $

Check your answers with thosegiven at the end of this document/section.

It’s easy, isn’t it! You just add a zero!

Coins

There are six current Australian coins. They are:

$2 / two dollar
$1 / one dollar
50c / fifty cent
20c / twenty cent
10c / ten cent
5c / five cent.

When banking a lot of coins, you would separate them into the same denomination and place them into plastic bags—in the quantity marked on the bag.

Have you seen rolls of coins wrapped in brown paper at a bank? This is another method.However, there is quite a skill involved in rolling coins and most people opt for the recyclable plastic bag method.

The bank will check the amount of coins in each of the bags or rolls by weighing them.

/ Activity 2

Tim Woodley, the accounts receivable clerk at Fountain Art, has received the following cash in payments today and he has asked you to count the cash. Calculate the value of the notes and coins and enter this on the form below.

Denomination / Quantity
Notes / $100 / 0
$50 / 2
$20 / 11
$10 / 21
$5 / 23
Coins / $2 / 40
$1 / 25
50c / 15
20c / 35
10c / 30
5c / 20
Calculation form
Quantity / Value
Notes / $100
$50
$20
$10
$5
Coins / $2
$1
50c
20c
10c
5c
Total

Compare your calculations with the answer to Activity 2 at the end of this document.

How did you go? Did you need to use a calculator? If you did, that is okay. Most businesses use some type of calculator to help speed up work and reduce errors.

In large organisations where many staff accept payments from customers, modern cash registers are used which produce a cash summary slip. The cash summary slip gives a total of the cash register’s takings for the day. After totalling the notes and coins from the till, the staff member checks to see that this total reconciles with the total on the cash summary slip. If it does not reconcile, staff members must follow company policy in reporting the error and taking steps to find and fix the problem.

Non-cash financial transactions

Cheques

A cheque is a form with pre-printed details of your bank account, on which you write a person’s or organisation’s name and an amount of money that you want to pay them. You must also date and sign the cheque. When the cheque is presented to the bank, the money is deducted from your bank account and paid to the person or organisation named on the cheque.

You may be surprised to know that cheques are not legal tender in the way that cash is. This means that you can refuse to accept payment by cheque and insist on cash if you wish.

Businesses can also decide whether or not they will accept cheques from their customers. If you have ever tried to use a personal cheque in a shop you will know that many retailers do not accept them, preferring cash or credit cards where payment is guaranteed.

There are three ‘parties’ to a cheque:

• drawer—the person who writes the cheque
• drawee—the bank holding the drawer’s bank account
• payee—the person (or organisation) the cheque is written out to.

An example of a cheque is shown below in Figure 1.

Figure 1

/ Activity 3

Russell Briggs needs a cheque from the Accounts Department to pay a driver, John Lee, who has just delivered a load of sand to the factory area at Fountain Art. The cost of the sand is $145.00.

1Complete the cheque below, ready for signature.

Figure 2

2Let’s do a quick revision exercise to see if you understand cheques before you read further. On the cheque you completed above, who is the drawer, the drawee and the payee? Write your answers below.

Drawer ______

Drawee ______

Payee ______

Compare your answers with the answers to Activity 3 at the end of this section.

Safeguarding cheques

Once you have written a cheque you should look after it carefully until you pass it on to the payee. If a cheque is lost or stolen, it is possible someone else may be able to use it. One way of avoiding this is to ‘cross’ the cheque by writing two lines across it with the words ‘Not Negotiable’ between the lines. This is illustrated in Figure 2. This means the cheque cannot be cashed but must be deposited into a bank account, and, except in special circumstances, the bank account must belong to the payee.

The exception to crossing a cheque is when you write a cheque to ‘Cash’. That is, you write the word ‘Cash’ on the line where you would normally write the payee’s name. Procedures for cashing cheques vary between banks but they all have one rule:

The bank will not exchange a cheque for cash unless they are sure that the cheque is valid and that the holder is authorised to cash it.

An example of the use of a cash cheque is when you reimburse petty cash. With a petty cash fund, imprest cheques and reimbursement cheques are cash cheques.

If your work involves handling petty cash, you will write cheques to be cashed. An example cash cheque is shown below.

Figure 3

Validity checking

All cheques received by your organisation should be checked prior to banking to ensure they are accurate and valid. You should check that:

• the date is current—check this with your bank. Depending on the bank, a cheque can be considered stale and not valid if it were written and dated more than 15 months ago. Likewise, a cheque may not be accepted at your bank if it is post-dated (a date in the future).
• the payee’s name is correct
• the words and figures agree
• the cheque is signed.

The validity checking process is most important, as cheques that are inaccurate or invalid can prove costly to the business, in terms of bank charges.

Recording cheque details

Cheques are numbered consecutively and are usually issued by the bank in a cheque book. There are two methods for recording cheque details. These are either on the cheque butt or on the cash record pages that are in the cheque book. Some organisations may also record their cheque details in a cash book or journal.

Deposit slips are also issued by the bank and can be included in the cheque book or can be a separate deposit book.

In the activities that follow, you can sign the cheques for practice, but company cheques can usually only be signed by a member of staff who is authorised to spend the company’s money. It is often company policy that the signatures of two members of staff are required on a cheque to ensure that one person cannot write cheques to take money out of the company account without the knowledge of other staff.

The cheque butt, on the left side of the cheque, is your record of your purchase and your account balance. You should keep these cheque butt records up to date, so that you can check them against the bank statement when received.

The cheque butt shows:

• the date you write the cheque
• the payee’s name
• a brief description of the payment
• the balance after the last cheque was written
• any money deposited in the account since the last cheque was written
• the amount of the cheque you are writing
• the balance after the amount of the cheque is deducted.

/ Activity 4

Complete the following cheques according to the instructions. You should carry the cheque book balance forward from the Activity 3 exercise.

1Using today’s date, write the first cheque to Telstra for the telephone bill of $578. No money has been deposited since the last cheque was written, so bring the final balance up to date by deducting the amount of this cheque.

Figure 4

2The second cheque is for Energy Australia to pay an electricity bill for $291.00. You have deposited $360 since writing the last cheque.

Figure 5

3Write the third cheque to cash to reimburse the petty cash fund for $96.50. Bring the balance forward from the previous cheque butt. $360 has been deposited since the last cheque was written.

Figure 6

Compare your answers with the answer to Activity 4 at the end of the document.

Credit card transactions

Credit card sales can be made in two ways:

• manually using a hand held machine or
• electronically, using EFTPOS (electronic funds transfer at point of sale).

Let’s look at each of these.

Manual credit card transactions

Some businesses do not have on-line credit card facilities so manual credit card transactions are made. These transactions are also made manually in cases where the on-line network is not operating.

The credit card is placed on a portable machine and a triplicate voucher (with three copies) is inserted into the machine. Part of the machine is then ‘swiped’ from left to right across the voucher so an imprint of the credit card details is made on the voucher. Details of the sale are hand-written on the voucher and the buyer signs in the signature block.

Two carbon copies have now been produced. One copy is for the cardholder (buyer), one is for the merchant (seller) and the original goes to the bank with a summary of all credit card sales for the day.

When accepting payment by credit card using the manual method, you should ensure that the transaction is valid by taking the following steps:

• Compare the customer’s signature on the voucher with the signature on the card.
• Check the expiry date on the card—is it current?
• Telephone the merchant authorisation centre for approval if the amount is above the authorised credit card limit for your organisation.
• Check the card number against the latest list of stolen and invalid cards issued through the banks.

If you suspect that the card is stolen or being used illegally, you should follow company policy in dealing with the situation.

Here is an example of a credit card sales voucher.

Figure 7: A credit card sales voucher

At the end of each day the credit card sales vouchers are recorded on a merchant summary. Figure 8 is an example of a merchant summary.

Figure 8: A merchant summary

Notice that the amount of each sales voucher is listed separately and then the total is entered. There is space for eight sales vouchers on this merchant summary. If the credit card sales exceed this amount, a cash register tape or some other itemised list can accompany the summary voucher.

Notice that there is also a space for credit vouchers to be entered and deducted from the sales amount. A credit voucher is issued when a customer returns goods. A credit voucher is processed at the bank and the amount is credited to the customer’s account.

/ Activity 5

Tim Woodley has processed four credit card sales vouchers today. He has asked you to complete the merchant summary voucher provided by entering the correct details and totals.

Four credit card sales vouchers

Figure 9: Credit card sales vouchers

Complete the merchant summary voucher below, and check it at the end of this section.

Figure 10: Merchant summary voucher

EFTPOS

Electronic Funds Transfer at Point of Sale (EFTPOS) is a service that is offered to customers who are paying for goods or services by credit. Transactions are made electronically through a system of EFTPOS terminals. The customer ‘swipes’ their credit card through the electronic machine and enters a PIN (personal identification number). Details of the sale are printed on a docket through the cash register and the customer is asked to sign the docket if a PIN is not used.

Two printed reports of the sale are made. One is given to the cardholder and the other is retained by the merchant. The bank’s record is generated by the electronic transaction.

The money is transferred from the customer’s bank account to the merchant’s bank account instantly.

The EFTPOS system checks that the:

• card has not been reported stolen
• card expiry date is not earlier than the current date
• merchant has authority to accept the amount of the transaction.

If the cardholder has reached their credit limit, or if there are insufficient funds in the customer’s account, the transaction will not be processed.

So far you have been introduced to manual credit card transactions and EFTPOS, including safety measures you might take. You have completed a merchant summary which lists the credit card transactions for each day.

You have also been introduced to a method for counting cash, bundling notes and putting coins into bags and the steps you should take when preparing cheques for banking.

Sorting and batching documents

Earlier, we sorted and ‘batched’ money according to the same denominations. Likewise, we can sort and batch documents. When large numbers of documents such as receipts, invoices and orders are prepared or received regularly, it is often more efficient to process the items together at one time rather than to deal with each individual document as it arrives. In other words the documents are accumulated and processed at one time, in a batch.

Sorting

If you are working as an accountspayable clerk, you will receive many invoices and statements for payment.

Depending on whether you have an account with your supplier the payment terms will differ. In addition, different suppliers have different terms. Therefore, it becomes necessary to sort invoices and statements by their payment due date so they can be easily identified for processing and payment.

Paying bills too early reduces the available cash for other expenses and purchases, especially in small companies where cash flow is critical.

Paying bills too late, on the other hand, may incur a late fee. This in turn reduces your profit margin. Constant late payments may also result in refusal to extend further credit to your company.

If you are working as an accountsreceivable clerk, you will be sending invoices and statements to customers for the money they owe your company. You will also be receiving the receipt source document once the customer has made a payment. As part of your monthly routine, you will update the debtor’s accounts in the organisation’s records and print statements.

Following the printing of the statements, they are usually checked for obvious anomalies (in accordance with the organisation’s policies and procedures) before being sent to the customer. Anomalies are not necessarily errors but may include instances where the customer’s account isoverdue.

Coding source documents

Before batched source document can be entered into the accounting system (ie recorded in the journal) the details of the general ledger account and customer or supplier record number will need to be recorded on the document. These details will be needed to record the journal entry for the transaction. Having this information recorded on the source document (oronan attachment to the document) will improve the batch processing.