FA 1 Section - Banking | Receiving and making payments

17 important questions on FA 1 Section - Banking | Receiving and making payments

What is a retail bank?

Retail banks are usually the largest type of banking institutions. Having services for individuals and for businesses. Can be regional, national or international.

What is an investment bank?

An institution which conducts strategic financial operations on behalf of clients.
  • Stock market flotations
  • Mergers
  • Acquisitions
  • Bonds
  • shares 

What is a central bank?

An institution that exists within a country or currency to manage the money supply and ensure financial stability. Acts as the bankers bank. Closely linked to government policies.
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Considering a business
  • What is a current account
  • Overdraft
  • Surplus funds

Current account
Bank account that enables a business to make transactions. Usually pays low interest.

Overdraft
If you need to spend more for a short period of time you can ask the bank for an overdraft which allows you to continue spending when you have no money with the bank.

Surplus funds
Saving account where the business can keep extra money.

What is the central bank for
  • The UK
  • Europe
  • USA

Bank of England, European Central Bank, Federal Reserve

What is paying in slip?

A document where cheques and cash are recorded to show the amount of money you pay into you bank account.

What is a cheque requisition form?

It is part of the business systems of control and used to request that a cheque is written for a particular amount to a particular payee, it needs to be authorized by a senior member of the accounts department.

What kind of payments need a cheque requisition form? [3]

  • Donations;
  • Deposits for hiring a venue or renting a piece of equipment;
  • Advances to employees who are travelling;

Cheque
  • What is a cheque?
  • Who is the drawer or payer?
  • Who is the payee
  • What is the cheque stub?
  • What is an important rule?

Cheque is a writtten instruction from one person (drawer or payer) to their bank to pay a specific person (payee) an amount of money.

Cheque stub is where you write the name of the payee

Never sign a cheque before completely filled out so there will be no misuse.   

  • What is a clearing system?
  • What is dishonoured or bounced?

When the payee goes and deposits the check the cheque will go through the clearing system which is the last check.

The check returns unpaid.

How do you cancel or stop a check?

You need to put a line through the check and write cancelled, additionally make a not in the cheque book stub.

What is a bankers draft?

A check from the bank to pay for high value items.

Where should a business store cash?

In a fireproof safe, placed in a room where only certain employees have access until it can deposit cash in the bank.

What is direct credit?

A way to transfer money directly from a bank account to another bank account for one-off payments.

What is a reconcilation?

A check that two sets of records match each other.

What is an aged payables analysis?

Shows all the outstanding amounts of money owed to each supplier and how overdue they are.

What is a remittance advice?

Shows how much the customer is paying and which invoices and credit notes it relates to.

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