FABM 2 Financial Statement Analysis PDF

FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE Financial Statement Analysis A1 Purpose of Analysis TOPIC OVERVIEW to evaluate the performance of the business...

FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE Financial Statement Analysis A1 Purpose of Analysis TOPIC OVERVIEW to evaluate the performance of the business in the past as BASIS for future operations. A. Analysis and Interpretation of Financial Statements a. Purpose of Analysis B TWO PHASES OF FINANCIAL STATEMENT B. Two Phases of Financial Statement ANALYSIS Analysis a. Computation Phase COMPUTATION PHASE b. Interpretation Phase INTERPRETATION PHASE C. Three Ways of Financial Statement Analysis a. Horizontal Analysis B1 COMPUTATION PHASE b. Verticay Analysis c. Financial Ratios compute for differences, percentages, or D. Horizontal Analysis ratios. a. Computation Phase involves looking for differences, percentages, b. Interpretation Phase or ratios. E. Vertical Analysis a. Computation Phase B2 INTERPRETATION PHASE b. Interpretation Phase F. Financial Ratios interpret the results of the figures from the a. Categories of Financial Ratios first phase. i. Liquidity a crucial part of the analysis as it provides ii. Solvency meaningful and relevant decisions based on iii. Profitability the results of the computation. iv. Market value or valuation To do the interpretation, there are certain b. Liquidity Ratios financial tools or methods used to give c. Solvency Ratios financial figures for analysis. d. Profitability Ratios C THREE WAYS OF FINANCIAL STATEMENT A REMINDER FROM JEONGHAN ANALYSIS ○ Horizontal Analysis ○ Verticay Analysis ○ Financial Ratios D Horizontal Analysis A Analysis and Interpretation of Financial compares the same account in the financial Statements statement of two periods (current and past year), determining the amount of changes, INTRODUCTION and computing its percentage change using Financial statements a base year as a comparison ○ sources of important financial useful only to businesses that have 2 or information for a business. more years of operation. ○ This information, however, is not yet method of comparing and analyzing to achieve its purpose until it is financial results of different accounting interpreted and used in the decision periods in each financial statement account making of the stakeholders. and element. ○ give clear figures in which managers also called comparative analysis analyze rather than mere guesses on helps management analyze the statement of crucial financial decisions or plans. financial position and statement of comprehensive income’s increase and decrease in accounts. PAGE 1 ALYSSA FLORES – 12 DIGNITY  FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE As the name implies, accounts are There is a lot more to see in the computations, and compared horizontally between two the following are some examples: periods. Statement of Financial Position ○ Total assets increased by 42% due to the purchase of PPE, which reflects a D1 Computation Phase 66% increase. ○ However, current assets have only 2% Steps in performing horizontal analysis: growth compared to noncurrent 1. Prepare financial statements for 2 assets, which may indicate that consecutive periods. liquidity is very small. 2. Get the amount of increase/decrease in the ○ Total liabilities increased by 38% due third column. to a 50% increase in non-current a. Select a base year. It is usually the liabilities. It reflects that PPE could initial or the previous year. have been financed by a loan. b. Deduct the current year from the ○ The owner’s equity, on the other base year. hand, increased 58% from the 3. Compute the percentage of increase or previous year. This may be due to decrease by using the formula: additional investments made by the owner in the business. 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑒𝑎𝑟 − 𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 Statement of Comprehensive Income % 𝑜𝑓 𝑐ℎ𝑎𝑛𝑔𝑒 = 𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 × 100 ○ Almost all accounts in the SCI increased. It could be because of increased PPE from the SFP that D2 Interpretation Phase could have boosted the selling process. In this phase, the users of financial ○ It is understood that with greater information may have a different sales, COGS are parallel, as are perspective on the figures. operating expenses and taxes. By interpreting, they will be able to decide ○ It is noticeable that interest objectively based on the results of the decreased by 8%, which could mean computation. that loans acquired by the business The interpretations vary for every user of may have longer period payments. financial information, depending on which way the horizontal analysis would be of use to E Vertical Analysis shows a relationship among the elements of a financial statement where each item is represented in a percentage. SFP Vertical Analysis (also called common-size analysis) helps the management analyze the components of the total assets, total liabilities, and owner’s equity. It analyzes the financial statements in a vertical manner, as its name implies. Questions to help you understand how SFP vertical analysis goes. a. Of the total assets, how much percentage is classified as current? Noncurrent? b. Of the total assets, how big/small is merchandise inventory? Accounts receivable? Or other accounts? c. Of the total liabilities, how much percentage is classified as current? Noncurrent? d. Of the total liabilities and owner’s equity, how much percentage are liabilities? Owner’s equity? them. PAGE 2 ALYSSA FLORES – 12 DIGNITY  FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE Answering these questions will lead to Statement of Financial Position disclosing the percentages of the ○ The current asset of 2019 is 27% of the components that occupy the total assets, total assets. liabilities, and owner’s equity. ○ However, compared to 2018, current It may lay some problems that needed to be assets are more liquid at 37%. addressed, and you can recommend Statement of Comprehensive Income solutions. ○ Net income is 27% from net sales. Of all the expenses deducted after gross Example: The current assets, which consist mostly of profit, income tax comprises the account receivable, may indicate that most sales are biggest percentage at 12%. collectible until the end of the accounting period. The ○ The company should spread the problem found is that the company has a impact of incurring expenses by below-average collection policy and may need getting better sales performance improvement on it. The management may suggest better sales discount terms to make customers settle their accounts earlier than possible. F Financial Ratios can be used to compare a company’s Questions to help you understand how SCI current financial position and performance vertical analysis goes. to be able to identify their strengths and weaknesses. SCI Vertical Analysis, on the other hand, helps the Ratios can be used to compare your status, management analyze the components of the not only within your operations but also with overall sales. other companies. Financial ratios have four a. Of the net sales, how much percentage does categories, namely, liquidity, solvency, the cost of sales occupy? Gross profit? profitability, and valuation. Operating expenses? b. Of the operating expenses, how big/small is the percentage of administrative expenses? F1 Categories of Financial Ratios Selling expenses? 1. Liquidity c. Compare the percentages of net income to 2. Solvency net sales. 3. Profitability 4. Market value or valuation E1 Computation Phase Liquidity Steps in performing vertical analysis: ability of the company to settle current 1. Prepare the financial statements of two liabilities as they fall due. consecutive periods. 2. Add a column on each year of comparison. Solvency 3. Express each component account as a percentage of the total assets, liabilities and ability of the company to settle its owners (for SFP) or to the Net sales (for SCI) non-current liabilities and interest related to these liabilities 𝑚𝑎𝑦 𝑣𝑎𝑟𝑦 (𝑒𝑥. 𝑐𝑎𝑠ℎ 𝑡ℎ𝑒𝑛 𝑎/𝑟) indicates financial stability by measuring the % 𝑜𝑓 𝑐𝑎𝑠ℎ = 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡/𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦 × 100 company’s ability to borrow funds using its assets and equity. E2 Interpretation Phase Profitability In comparing vertically and horizontally, this measures the operating performance as a phase can be done to fully analyze the return on its investment. position of the company and its results of It measures the company’s efficiency in operation. using its resources to generate revenue. Doing both analyses entails a holistic approach to addressing the possible Market value or valuation problems and planning the necessary actions. measures the company’s potential for future As always, interpretations may vary earnings, dividend earnings, and stock depending on the purpose of the user's price growth. financial information. PAGE 3 ALYSSA FLORES – 12 DIGNITY  FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE 3. Receivable turnover measures efficiency to collect amounts due from receivables. Analysis: The company was able to collect receivables 1.58 times in 2019. This means that the company has a very slow collection. To be favorable for the company, it should maintain higher receivable turnover. 4. Ave. collection period is also called day’s sales outstanding. It is the approximate number of days to be taken to collect receivables. Analysis: There are 227.8 or 228 days to collect all F2 Liquidity Ratios receivables in a year. To be favorable, the shorter days of average collection, the better for the company. 1. Current ratio measures the ability of the 5. Inventory turnover measures the number of business to pay its short-term liabilities as times the company’s inventory is sold and they fall due. replaced during the year. Analysis: Current ratio shows that there is P1.53 current asset for every P1 of current liability. To maintain good current ratio standing, it should be maintained greater than 1.0. 2. Quick ratio, also known as acid test ratio, measures immediate liquidity by its ability to Analysis: The turnover of inventory is 3.72 times. It pay current liabilities by the most liquid means that the company is very slow in converting assets. inventory to sales. To be favorable, the company should maintain a higher inventory turnover. 6. Average sales period is the average days to convert inventory to sales. Analysis: It takes 96.77 or 97 days to convert inventory to sales. To be favorable, the company should monitor the selling process and maintain it in as short a period Analysis: This indicate that there is P1.35 liquid assets as possible. for every P1 liability in 2019. For good standing, the company should maintain above 1.0. PAGE 4 ALYSSA FLORES – 12 DIGNITY  FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE 7. Working capital measures the short-term 3. Debt-to-equity ratio is also called a financial liquidity of a company. leverage ratio. It measures the ratio between financing from creditors and investments of the owner. Analysis: The company has 134.8M working capital in 2019, lower than 155.6M of the previous year. However, Analysis: In 2018, the ratio of financing from creditors the company can’t conclude that it has better to those invested by the owner was P3.65 to P1. That working capital by looking into the increase in for every P1 investment by the owner, P3.65 is amount. The working capital should be used to financed by the creditor. The ratio went slightly lower improve the operations of the business. On the other at P3.18 is to P1. To be favorable, the company should hand, to be favorable, the company should at least maintain it at a lower ratio. This may result in higher maintain a positive working capital. interest payments instead of income generation. F3 Solvency Ratios F4 Profitability Ratios 1. Debt Ratio is also known as debt-to-assets 1. Gross profit ratio is also called the gross ratio. It measures the business liabilities as margin ratio. It measures the percentage of a part of total assets. peso sales earned after deducting the cost of goods sold. This is the percentage of markup that the company adds to the cost of its inventory. Analysis: In 2018, 78.5% of the asset was financed by liabilities; however, it went slightly lower in 2019. To be favorable, the company should utilize and maximize the use of its resources in order to generate income Analysis: The percentage of the markup is 47.9% for and pay liabilities. It is still not a good sign that 76.1% 2019, higher than 37.5% of 2018. This markup is the of the company’s assets are owned by creditors. company’s use to absorb its operating expenses. Thus, a higher gross profit ratio is more favorable for the 2. Equity ratio measures how much of the company. total assets are invested by the owners themselves. 2. Operating profit margin measures the percentage of income after deducting the cost of sales and operating expenses. It simply shows the operating income for every net sale. Analysis: In 2018, 21.5% of the assets are from the owner’s investment while a slight increase to 23.9% in 2019. To be favorable, the company should maintain a higher equity ratio. Analysis: The result shows for 2019 that 41.4% is the operating income despite the selling and administrative expenses. Compared to last year’s 33.8%, this means the increase trend is favorable and should be maintained. PAGE 5 ALYSSA FLORES – 12 DIGNITY  FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE 3. Net profit margin is also known as return on sales. It measures the percentage of net income earned from net sales after deducting all expenses, including taxes. It shows the net income for every net sale. Analysis: There is a 25.5% net income for the net income during the 2019 operation, higher than 22.5% of 2018. The result shows that the operations of 2019 are favorable for the company. To maintain good standing, a higher percentage should be kept track. 4. Return on assets, otherwise known as return on investment. It measures the company’s efficiency in using its level of investment to generate income. Analysis: For 2019, the return on asset shows 6.1%, which indicates that the assets are not fully utilized to generate income. However, it takes time for a company to tell and to reflect an effective return on assets. To be favorable, it should be maintained at an increasing rate throughout the years of operation. Note: Results may have discrepancies depending on the use of decimal place values and round-off numbers. 5. Operating profit margin measures the percentage of income after deducting the cost of sales and operating expenses. It simply shows the operating income for every net sale. Analysis: In 2018, 21.5% of the assets are from the owner’s investment, with a slight increase to 23.9% in 2019. To be favorable, the company should maintain a higher equity ratio. PAGE 6 ALYSSA FLORES – 12 DIGNITY  FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE Basic documents and transactions A Savings Account related to Bank deposits account at a bank or credit union that is designed to hold your money. TOPIC OVERVIEW Savings accounts typically pay a modest A. Savings Account interest rate, but they are considered safe for B. Current Account parking cash that you want available for C. Time Deposit short-term needs. a. Key Takeaways The services intended for savings account b. Advantages provide incentive for account holders to c. Disadvantages save and earn minimal interest for keeping a D. Deposit Slip minimum balance a. Types of Deposit Slip b. Purposes Purpose of opening a To save money c. Steps in preparing bank account d. How deposit slip works E. Withdrawal Slip Ideal use Employees/Personal Use a. Steps in preparing F. Checks Interest rate offered by Low a. Steps in preparing the bank b. The Philippine Clearing House Corporation Daily Maintaining Low c. Acceptable and Not Acceptable Balance required by the Date Formats bank d. Acceptable and Not Acceptable Payee Formats Overdraft (bank service Not Allowed e. Acceptable and Not Acceptable that allows an account Amounts Formats holder to withdraw a f. Formats for Signature/s little more beyond G. Notes in Handling Checks his/her balance) a. Stale Checks b. Post-Dated Check Evidence of Passbook, deposit and c. Crossed Check transactions withdrawal slips i. Types of Crossed Check ii. Advantages iii. Disadvantages Documents Required ID, Proof of Address, iv. Can a Crossed Check be for opening an account Picture, Reference of transferred? existing account holder d. Bouncnig Check i. Consequences on the issuer B Current Account ii. How to Avoid Bounced Checks? allows the convenience of having multiple H. Bank Statement transactions, withdrawals, and payments a. Notes to understanding a Bank through checks suitable for businesses. Statement Because of its fast cash turnover, current accounts rarely earn interest except for hybrid (combination of savings and current) A REMINDER FROM JEONGHAN accounts for premium deposits. Purpose of opening a bank Facilitate financial account transactions Ideal use Employer/Business Interest rate offered by the None/lower than bank savings, if any PAGE 7 ALYSSA FLORES – 12 DIGNITY  FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE Daily Maintaining Balance High C1 Key Takeaways required by the bank Philippine Deposit Insurance Corporation Overdraft (bank service that Allowed (PDIC) allows an account holder to Interest rate withdraw a little more Holding period beyond his/her balance) Deposit amount Principal amount Evidence of transactions Deposit slips, Maturity date Checks and Bank statements C2 Advantages Documents Required for ID, Proof of opening an account Address, Picture, Higher Returns: The major advantage is the Proof of Business higher interest rates compared to regular savings accounts. Safety and Security: They are generally C Time Deposit considered low-risk investments. Disciplined Savings: The fixed term A crucial type of account that offers a secure encourages disciplined savings. way to grow your money also known as a Certificate of Deposit (CD) C3 Disadvantages is a savings account with fixed term (TD term: 30, 60, 90, 180, 360 days). Limited Liquidity: You cannot access your ○ you agree to keep your money in the money easily before the maturity date. account for a specific period (the Penalties for Early Withdrawal: Early term), and you cannot withdraw it withdrawals result in financial penalties. before the maturity date without penalty. D Deposit Slip The agreed-upon period can range from a few months to several years, depending on Used by the deppositor to put money in the book and the specific deposit terms. bank Can be predetermined. Uniquely designed for the specific needs of Time deposits have a minimum placement each bank. amount, which depends on the bank. However, the essential information required Fixed Higher interest than the savings to make a deposit are the same account often used in the United States and can be had a holding period and a maturity date more general, encompassing all types of There is a penalty for premature deposits. withdrawals Although savings accounts are linked with a passbook (record of deposit, withdrawal, and earnings), a popularly used savings account nowadays is a debit card or an ATM (Automated Teller Machine) account wherein withdrawals can be made through designated machines. ○ allows the account holder to use the card to make cashless payments in various establishments. ○ ATMs carry the convenience of withdrawing anytime, anywhere, using a teller machine, even if banks are already closed or during holidays. The owner of a business can avail of both savings and current accounts in the same bank or in different banks. Each account is covered by the Philippine Deposit Insurance Corporation for up to P500,000 PAGE 8 ALYSSA FLORES – 12 DIGNITY  FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE D1 Types of Deposit Slips D3 Steps in preparing deposit slips 1. Business Deposit Slip 1. Date 2. Sales Deposit Slip 2. Account Holder (complete name) 3. Savings Deposit Slip 3. Account Number a. To make sure that the deposits are credited to the correct account. This is Business Deposit Slip usually found in the first page of the Purpose: Tailored for businesses depositing account holder’s passbook funds into corporate accounts. 4. Type of account Details: Often pre-printed with the company’s a. Savings or Current information, making it easier for businesses to 5. Currency manage their deposits and maintain accurate a. It is a generally accepted form of records. money, issued by a government , and it serves as a standard for transactions. Sales Deposit Slip 6. Amount in words and in figures Purpose: Used by businesses to record 7. Details/Breakdown customer payments for goods or services. a. Deposits can be in the form of cash or Details: Helps businesses track daily sales and check. reconcile cash flow effectively. b. FOR CASH DEPOSITS i. The breakdown of cash is Savings Deposit Slip listed c. FOR CHECK DEPOSITS Purpose: Used when depositing money into a i. The issuing bank, address of savings account. the issuing bank, date of the Details: Similar to a cash deposit slip but may check, and the amount of the have specific sections to indicate that the check are listed. funds are for a savings account, which may earn interest. D4 How deposit slip works D2 Purposes The completed deposit slip, along with the cash and/or checks, is given to a bank teller 1. Record-Keeping or inserted into an ATM. 2. Verification The teller verifies the information on the slip 3. Audit trail against the actual deposit and processes it, crediting the funds to the specified account. The teller usually provides a receipt Record-Keeping confirming the deposit. A deposit slip provides a documented record of the funds being deposited (cash, checks, or E Withdrawal Slip both), ensuring accuracy for the bank and the depositor. is a bank document where the date, account number, and amount of money to be withdrawn from a bank are written. Verification is a written request to the bank to pay the It acts as a receipt for the depositor, account holder the specified sum. confirming the transaction and allowing them to verify that the bank accurately credited their account. Audit trail Deposit slips create a trail for auditing purposes, assisting banks in tracing transactions if any discrepancies arise. PAGE 9 ALYSSA FLORES – 12 DIGNITY  FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE F1 Steps in preparing checks 1. Write a date 2. Write the complete name of the payee. a. If the check is tended to be encashed by a person, write the person's full name. b. If it is intended to be encashed by any person, write "cash" instead of a name c. If the recipient is an organization, write the complete name of the E1 Steps in preparing withdrawal slips company. 3. Write the exact amount in figure right after the peso sign. 1. Date 4. Write the amount in words followed by the 2. Account Holder (complete name) word only, so that nothing can be written 3. Account Number after. 4. Type of account 5. Sign the check on the line at the bottom a. Savings or Current right corner. 5. Currency a. It is a generally accepted form of money, issued by a government , and F2 The Philippine Clearing House it serves as a standard for Corporation (PCHC) transactions. 6. Amount to be withdrawn helps process transactions and activities for a. in words and in figures the country’s banking industry. 7. Signature of Depositor Founded in 1977 a. Signature is an important part of the PCHC is supported by the Bankers withdrawal slip. Association of the Philippines (BAP) b. It is a proof authorizing the bank to works across 69 regions and 9,000 bank release cash to the bearer. branches nationwide. c. The signature is usually compared to Banks shall observe the clearing procedures the specimen signature provided in accordance with the PCHC Clearing House upon opening the account rules and regulations for the clearing of checks, including the banks’ responsibility to F Checks verify the accuracy of reports and directly communicate with the concerned party regarding any clearing discrepancy or error a written, dated, and signed draft that noted in the course of proving their directs a bank to pay a specific sum of money incoming/outgoing clearing items. to the bearer. With the recent Memo Circular No. 3738 Checks essentially provide a way to instruct published by the Philippine Clearing House the bank to transfer funds from the payor’s Corporation entitled “Clarification on the account to the payee or the payee’s account. Implementation of the New Check Design Standards and Specifications," it stated a The following are the parties involved in a transaction new format of all checks to be created by any that uses check as a medium of exchange: organization or individual starting May 01, Payor or Drawer 2024. ○ the person or entity who issues the In line with the new check design check implemented by the PCHC last May 01, 2024, Payee incorrect check writing check formats will ○ the recipient of the money whose no longer be acceptable starting January name is written on the check 2025. Drawee ○ the bank or other financial institution where the check can be presented PAGE 10 ALYSSA FLORES – 12 DIGNITY  FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE F3 Acceptable and Not Acceptable Date F5 Acceptable and Not Acceptable Formats Formats for Amount in Figures F4 Acceptable and Not Acceptable Payee F6 Acceptable and Not Acceptable Formats Formats for Amount in Words PAGE 11 ALYSSA FLORES – 12 DIGNITY  FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE F7 The Format for Signature/s presence of the drawer's signature validates the check issued as regular and negotiable. Two signatories may share one signature box Signature that exceed the box boundaries do not affect the check’s acceptability for deposit/clearing. G3 Crossed Check Any check that is crossed with two parallel lines, either across the whole check or through the top left-hand corner of the check This double-line notation signifies that the check may only be deposited directly into a G Notes in Handling Checks bank account. ○ Such checks cannot be immediately A. Stale Check cashed by a bank or by any other B. Post-Dated Check financial institution. C. Crossed Check The payee can't uncross it after a check has D. Bonucing Check been crossed. Crossed checks are also considered non-transferable. G1 Stale Check They can't be signed over to a third party. The only action permitted is for the payee to deposit the check in an account that the outdated check that the recipient hasn't payee holds in their name. cashed within a certain timeframe. Although the payee can't uncross a check, A check is typically considered stale six (6) the payer can do so by writing "Crossing months or 180 days from the date written on Canceled" across the front of the check. But the check. this activity is generally discouraged because it eliminates the protection the payer Ex. A check that is issued on January 1, 2020, may originally set in place. only be valid for transactions until June of the same year. G2 Post-Dated Check a check that has a future date written on it. funds should NOT be withdrawn from the account until the date written on the check. Often used for paying bills or for making payments on loans or other debts. Can be written for any amount and can be made payable to any person or organization. Types of Crossing Ex. A check released on January 1, 2020, was dated as 1. General Crossing March 30, 2020. This check may be transacted only as 2. Special Crossing soon as March 30, 2020 arrives. 3. ‘Not Negotiable’ Crossing PAGE 12 ALYSSA FLORES – 12 DIGNITY  FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE Advantage of a Crossed Check Consequences on the Issuer can safeguard against fraud if it falls into the Returned check fees wrong hands because it can't be immediately Financial institutions may charge a returned cashed. check fee to a bank account if there aren't can only be deposited directly into a bank enough funds to cover a check. account. Fees may vary depending on the financial Anyone who's stolen the check creates a institution. line of evidence pointing to their identity Bank fees when they deposit it into an account that Some institutions also charge a they have access to. non-sufficient funds fee or overdraft fee if a This can be particularly advantageous if the check bounces, though these types of fees check is written for a large amount of money. are becoming less common. Service provider fees Disadvantage of a Crossed Check If you send a check to pay for a monthly bill and it bounces, you also might have to pay a It can create problems for the payee if the late payment fee if the due date has passed. individual needs to access the cash quickly Legal implications for any reason. Some states consider a bounced check a A deposited check can take days to clear criminal offense if the payor was aware of depending on the country and the banking insufficient funds in their account to cover the institution, and crossed checks can only be deposit. deposited. How To Avoid Bounced Checks? Can a Crossed Check be transferred? Consumers can reduce the number of can't be transferred to a third party if the bounced checks they write by tracking their payer has written "not negotiable" or bank balances more carefully, by using an "account payee only" on the check in ironclad system of recording every single addition to drawing the two parallel lines. debit and deposit on a check register as soon as it occurs, or by keeping close tabs on their checking account by using online banking. G4 Bouncing Check H Bank Statement A bounced check is slang for a check that can't be processed because the account holder has non-sufficient funds (NSF) available for payment. Banks return, or “bounce,” these checks, also known as rubber checks, rather than honor them, and banks charge the check writers NSF fees. Here are a few of the most common reasons why checks bounce: The person may have written the check incorrectly by putting the wrong date or writing the wrong check amount. A bank statement contains relevant information, The account belonging to either the payee or including payor has been closed. A. Customer's information There aren't enough funds in the payor's a. identifies the name and location of bank account to cover the amount listed. the account holder. It is important to The payee holds onto the check for too long. make sure that this information is Checks have an expiration date, at which correctly stated. without misspellings. point they become void. B. Bank's information a. the name, phone number and address of the bank PAGE 13 ALYSSA FLORES – 12 DIGNITY  FABM 2 ABM04 1ST SEMESTER — 2ND QUARTER — MA’AM TINE C. Account information a. this help identify the account number and the type of account that is held by the account holder. D. Transactions a. deposits made during the statement period and withdrawals through cheques, bill payments, ATM withdrawals, bank fees, and debit purchases. The beginning balance is carried over from the previous month's ending balance. ○ This is added to the transactions that transpired within the current month, including deposits, withdrawals, interest earned, and other charges, to show how they have affected the account. H1 Notes to understanding a Bank Statement 1. Debit column represents all charges or deductions made by the bank to your account. 2. Credit column represents the deposits or additions to your account that were made by the bank. 3. Balance column is the running balance after considering the effect of the transaction to your account. 4. Transactions other than deposits, withdraws, and checks drawn come with codes beside them. a. Transaction codes are normally a bank code for the transactions. 5. The ending balance of Tala Dry Goods is P185,950 after all transactions have been entered. This balance will now be the beginning balance of the bank statement for the month of August. By understanding the bank statement, an account holder will be able to compare and check the transactions made and reflected in the company books and transactions that appeared in the records of the bank. It is important to review bank statements regularly to make sure that there are no errors. If there are errors, it is important to contact the bank immediately for corrections. PAGE 14 ALYSSA FLORES – 12 DIGNITY