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
The banker/customer
relationship
Banker Customer
 Put money and  Bank opens an
cheques received on account for him in
a customer's behalf
into his account. his name.
 Take out all cheques  Bank accepts his
and orders paid instructions and
from the account by
the customer. undertakes to
 Keep accounts on provide a service
the customer's
behalf.
Contractual relationship
Procedures for banking cash
Procedures for preparing a paying-in slip
Step 1 Count the cash
Step 2 Add up, on a separate piece of paper
Step 3 Compare: calculated total vs. cash register
Step 4 Calculate any discrepancy
Step 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.

 Complete the paying-in slip and

counterfoil below for presentation to the
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
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 Sale 26.41 Sale 12.95
Sale 32.99 Sale 14.48
end of a working
Sale 32.99 Sale 136.48
day. You receive all Sale 100.4 Sale 12.95
the card vouchers Sale 22 Sale 112.95
for the day and you Sale 46.99 Sale 11.8
obtain a summary Sale 37.8 Sale 56.71
voucher. The Sale 12.95 Refund 22
transaction
vouchers are as
follows
Solution – back of
processing copy
Solution – front of
processing copy
Queries arising from card
transactions
Banking other receipts
 Direct debits Banking and EFTPOS
 Standing orders  Credit, charge or

 Automated payments debit card receipts via

EFTPOS are credited
 Telegraphic transfers directly to the
 Banker's drafts retailer's bank
 same manner as account. He can
cheques agree the amounts
 Bank giro credits received to the 'End
 paid into a bank of day' reconciliation
account by the produced by the
customer of the terminal
business, in which
case the amounts will
appear automatically
on the business's bank
1 What is 'clearing' in 1 Clearing is the
banking terms? mechanism for
2 How long does a obtaining payment for
cheque take to clear? cheques.
2 Cheques take three
3 What are the four

types of relationship working days to clear.

which may exist 3 The relationships are:

between a banker and receivable/payable,

customer? bailor/bailee,
4 What is a 'fiduciary principal/agent,
relationship'? mortgagor/mortgagee.
4 A fiduciary
5 How should coins be

banked? relationship is one in

which the superior
QB 15
A fiduciary relationship is
A A contractual relationship
B 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
contractual
D Between principal and agent

Answer: B