4% per annum, how much interest could you withdraw every three months? Would the withdrawing of this interest every three months reduce your $100. balance? Explain fully.

Exercise 74-Written.

1. Rule paper to represent a savings bank book, record the following transactions, and find the balance of the account:

Deposit April 6, $150.00;

Deposit May 14, $100.00;

Withdrawal June 9, $75.00.

2. If the bank in Question 1 pays interest at 3%

compounded semi-annually on Jan. 1st and July 1st, and all deposits made on or before the 5th of any month draw interest from the first of that month, what amount of interest will be credited on this account July 1st? Make the necessary entry on the account.

3. Rule paper, record the following transactions, and find the balance of the account:

Deposits: July 3, $1,400.00; Sep. 6, $200.00; Withdrawals: Aug. 1, $300.00; Nov. 1, $400.00. 4. If the bank in Question 3 pays interest at 4%

compounded semi-annually Jan. 1st and July 1st, and all deposits made on or before the 5th of any month draw interest from the first of that month, what amount of interest will be credited on this account Jan. 1st? Make the necessary entry on the account.

LESSON 35

Bank Accounts Which Are Subject to Check

Bank accounts on which checks can be issued, or checking accounts," as they are very often called, are used by individuals, firms, and companies to conduct their finances.

Money deposited in these accounts is entered in the depositor's bank book, but draws no interest (excepting in special cases).

To withdraw money, the depositor is not required to present his bank book as in the case of savings accounts; instead, he issues checks for the amounts he wishes to withdraw and makes them payable to the parties to whom he wishes to pay the money.

These checks, after being cashed by the bank, are charged to the depositor's account and are returned to him with a statement of his account on the first day of each month.

Total

Check payable

Wm

465.00

Chicago, June 30,

FIRST NATIONAL BANK

OF CHICAGO, ILLINOIS

1920

Pay to the order of William Collins $50000

to You Collins Fifty and see

Amount

50.00

Dollars

Thos. Hall.

The "payee" of a check is the party to whom it is

payable.

Since the bank does not know of the existence of any check until it is presented for payment, any checks not cashed on the last day of a month would naturally not be charged by the bank against the depositor's account; therefore, to make his account agree with the bank, the depositor must add all uncashed outstanding checks to his balance. Balancing in this manner is called a "reconcilement" of a bank account.

To ascertain what checks are outstanding uncashed at the end of the month, all cashed checks received from the bank must be sorted numerically and compared with the stubs.

Exercise 75-Oral.

1. In the check here illustrated, who is paying a sum of money? Who is receiving a sum of money? What sum of money is being paid?

2. What has the First National Bank to do with this transaction?

3. What will the First National Bank do with this

check after paying it?

4. Who is the payee of this check?

5. Supposing you had a bank account and issued a check on April 30th for $100.00 payable to a party in another city and mailed it to him, would your bank be able to cash this check during April? When would they be likely to cash it?

6. In the case mentioned in Question 5, how would you be able to reconcile your bank account on April 30th?

7. What is meant by reconciling a bank account? 8. How can you ascertain which checks are outstanding unpaid at the end of the month?

9. Explain each of the entries on the stub shown in the illustration.

10. Explain each of the entries in the reconcilement shown in the illustration.

Exercise 76-Written.

1. Find the balance as of September 30th on the

2. What balance would the bank show on the account

given in Question 1 Sep. 30, if checks #17,477

and #17,478 were sent to distant cities and therefore were not cashed until early in October? 3. Prepare a reconcilement of the bank account given in Question 1 and Question 2 as of Sep. 30th.

4. Find the balance as of Dec. 31st of the following

5. On Dec. 31st the bank returned the following checks with a monthly statement of the account given in Question 4:

#11,416;

17;

18;

20;

What balance appeared on this statement?

6. Construct a reconcilement of the bank account given in Question 4 and Question 5 as of Dec. 31st.