Chapter 16 Other Financial Systems

Elsevier items and derived items Copyright © 2016, 2011 by Mosby, Inc., an affiliate of Elsevier Inc. All rights reserved.
Other Financial Systems
Chapter 16
1

Other Financial Systems
1. Define the key terms in this chapter.
2. Discuss the advantages of using financial
management software.
3. Explain the function of a budget.
4. Discuss the use of electronic banking and the steps in
accessing an online bank account.
5. Discuss the process of establishing a checking
account and identify various types of checks.
Lesson 16.1
2

Other Financial Systems (Cont.)
6. Describe how to prepare checks for deposit with correct
endorsements and how to complete a deposit slip.
7. Discuss how to reconcile bank statements and how to record
business expenses.
8. Identify the purpose of payroll records and the importance of
having every employee complete an Employee’s Withholding
Allowance Certificate (Form W-4).
9. Discuss employee’s earnings records, including:
• Discuss calculating gross and net wages.
• Explain how withheld income tax and Social Security taxes are
deposited.
• Describe how federal unemployment taxes are deposited.
• Describe how to complete a Form W-2.
• Discuss the importance of retaining payroll records.
• Discuss the employer’s responsibility for tax information.
Lesson 16.1
3

Advantages of Using
Financial Software
4

Determining a Budget
 Purpose: To establish the dental practice’s
financial goals
 Expenditures: Money spent
 Revenue: Income received
5

Spreadsheet Software
6
Screenshot © Inuit, Inc. All rights reserved.

Bank Accounts
 Dental office banking responsibilities include:
 Writing checks
 Accepting checks as payment
 Endorsing and depositing checks
 Keeping bank balances
 Reconciling bank statements
7

Online Banking
 The account holder can:
 View balances
 Transfer money between accounts
 Pay bills electronically
 Access cash through an automated teller machine
 Direct deposit paychecks
8

Establishing a Checking Account
 Signature card
 Power of attorney
9

Checks
10

Types of Checks
 Certified check
 Cashier’s check
 Money order
 Traveler’s check
 Bank draft
 Voucher check
11

Accepting Checks
 Legibly written in ink or typewritten
 Currently dated
 Signed by the check writer
 Drawn on a U.S. bank
 Same amount shown in figures and in words
 Payable to a payee or bearer
12

Other Forms of Payment
 Credit cards
 Debit cards
13

Deposits
 Night depository
 ATM
14

Deposits
15

Bank Statement
 The bank statement shows:
 The balance of the account at the beginning of the
month
 Deposits made during the month
 Checks drawn against the account
 Corrections or charges against the account
• For example, the service charge or stop-payment
charges
 The bank balance at the end of the month
16

Procedures for Reconciling
the Bank Statement
1. Verify the amount of the canceled checks
with the amounts on the bank statement
2. Arrange the canceled checks numerically
3. Compare the amounts on the canceled
checks and the deposits with the amounts
written in the checkbook register
4. List and total outstanding checks
17

Procedures for Reconciling
the Bank Statement (Cont.)
5. Add any deposits made that do not appear
on the bank statement
6. Look for charges (for example, service
charges, debit memos, and overdrafts)
18

Petty Cash
 A small amount of cash kept in the office
 A voucher is completed each time money is
taken from the petty cash fund
19

Sample Petty Cash Voucher
20

Initial Payroll Procedures
 The dentist must:
 Apply for an employer identification number
 Have each employee complete an Employee’s
Withholding Allowance Certificate (Form W-4)
 Maintain employee’s earnings records
21

Determining Employee Wages
 After the gross wage is determined, net pay is
calculated by deducting:
 FICA (Federal Insurance Contributions Act), which
are Social Security and Medicare taxes
 Federal withholding taxes, which are determined
by the number of withholding allowances taken
 Local income taxes, which are state and city
taxes, if applicable
 Other deductions
22

Depositing Taxes
 Electronic depositing of withheld taxes
 Income tax
 Social Security taxes
 Medicare taxes
 Employment tax
 Electronic Federal Tax Payment System
(EFTPS)
23

Federal Unemployment Tax
 6% of wages paid
 Applies to the first $7,000 of wages paid
during the calendar year
24

Federal Unemployment Tax (Cont.)
 The first $7,000 of each employee’s annual
wages paid during the quarter is multiplied by
0.008
 If the amount subject to deposit (plus the
amount subject to deposit but not deposited
for any prior quarter) is more than $100, a
deposit should be made during the first month
after the quarter
25

Wage and Tax Statement
(Form W-2)
26
•From Internal Revenue Service, Department of the Treasury, Washington, D.C.

Transmittal of Wage and Tax
Statements (Form W-3)
27
From Internal Revenue Service, Department of the Treasury, Washington, D.C.

Retention of Payroll
and Tax Records
 Amounts and dates of all wages paid
 Names, addresses, occupations, Social
Security numbers of employees
 Periods of employees’ employment, including
sick days
 Employee’s income tax withholding allowance
certificates
 Employer’s identification number
 Duplicate copies of returns filed
 Dates and amounts of deposits made
28

Employer’s Responsibility
for Tax Information
 Employer’s Tax Guide – Circular E
29

Questions?
30

Chapter 16 Other Financial Systems

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