Process Customer Transactions

Introduction

This unit describes the performance outcomes, skills and knowledge required to process basic
financial transactions for customers in a retail financial organization.

Accounting is a technical business function responsible for recording, reporting and analyzing
financial information. Small business owners use accounting to determine the profitability of
their company operations. As small businesses continue to grow and expand, accounting
processes and procedures may be needed to maintain the company financial information.
Accounting processes and procedures are usually based on the basic accounting cycle. The
accounting process outlines how financial information flows through a company and which
individuals are responsible the information.

Therefore, this course is designed to support you to have a good grasp of the above stated ideas
and to develop your skills so as to cope with different challenges you might face in your
workplace

Objectives:
Dear learner after completing this competency you will be able to:
 Greet and serve customer with respect and professionalism in accordance with the
company service standards and expectations
 Provide Customer with information as required in a timely, accurate and effective
manner
 Process basic financial transactions
 analyze Error records and exception reports according to standard procedures and within
required timeframes

Learning outcome #1
1. Provide customer service
1.1. Customer is greeted and served with respect and professionalism in accordance with the
company service standards and expectations
All employees should do the following tasks/activities while providing service to customers:
a. Customer is greeted and served with respect and professionalism in accordance with the
company service standards and expectations.
b. Customer is provided with information as required in a timely, accurate and effective
manner with any queries about transactions answered fully and clearly to ensure customer
is appropriately informed.
c. Transactions outside the knowledge or delegated authority of the employees are referred to
other appropriate personnel for resolution as required.

1
Tips for Providing Great Customer Service to Your Clients
The way your customers feel towards you is important. The more you show you care about them,
the more they’ll likely want to continue working with you. With that in mind, providing good
customer service to your clients should naturally be a major priority in your day-to-day schedule.
Here are ten tips for you to provide great service to your clients.
A. Respond to Clients as Soon as Possible
Speed is everything, especially when a client is requesting something that’s time-sensitive. Try to reIf
you can’t find the time to perform the task, it will be considerate of you to let them know as soon as
possible so that they can make alternative arrangements.

a. other appropriate personnel for resolution as required.

Tips for Providing Great Customer Service to Your Clients
peed is everything, especially when a client is requesting something that’s time-sensitive. Try

ply to your clients as soon as you can. Delaying/postponing on a response to a client’s email,
phone call or voicemail doesn’t help anyone; you’re going to have to reply sooner or later, so
why not do it as soon as possible? Avoid that "mark as unread" button in your email client. Even
if you can’t work on the task they’re requesting you to accomplish right away, at least let them
know you got their request and then supply them with a timeline of when you’re able to get the
task completed. If you can’t find the time to perform the task, it will be considerate of you to let
them know as soon as possible so that they can make alternative arrangements.
B. Keep Clients Updated
Feelings like you’re lost and that you don’t know what’s going on is one of the worst situations
you can be in when you hire someone. Even if you don’t have anything major to report, you can
still let your employer know what you’re working on and how things are progressing. Are you on
track on milestones/innovative? Did you find something that might become an issue later on?
Status updates give clients backups that they are involved in the project. If you are experiencing
trouble with something, let them know right away. It shows that you are keeping them in the eye
and that you have things under control. If it is something major, communicating your concern
right away allows clients to plan for possible delays in the project’s completion.
C. Go the Extra Mile
If a client asks for you to do something that truly will not cost you a lot in time and income, you
have the option of going the extra mile and doing it for them. Not only will these results in an
owing a favor and happy client, it can also go a long way in terms of keeping yourself in their
radar for future projects.
D. Fix Your Mistakes
If you did something that didn’t end up working, you should repair it. A quick way to lose a
client forever is not admitting that you are at fault and not fixing your own mistakes. You should
always do your best for a high-quality output; it shows that you have a high level of standards in
your craftsmanship/skill/ability. Not taking responsibility of your own mistakes is a sure-fire

2
way of gaining a bad business reputation/name. Transparency is important in any business;
service work is no different.
E. Listen to Your Clients
It is important to listen to what your clients are communicating to you. Like, really listen.
Understand what they are saying and ask for clarifications on things that might be ambiguous.
Clients might be unfamiliar with certain terminologies in our profession, and what you think they
mean might be different to what they actually mean. For example, they might be saying "pop-up
window," which we know to be annoying, but what they really want is a modal window. Listen
to what their needs are, and then offer your suggestion on the best way to go about fulfilling their
needs.

F. Keep Your Promises

If you say you are going to do something, make sure you do it. It is part of being a professional.
If you need more time on something, you should let them know as soon as possible, not after you
have already missed the deadline. Honoring your commitments is very important.
G. Don’t Confuse Clients with Jargon
Try to explain whatever the problem is as best as you can without making the client feels
senseless. When proposing a solution, make sure you state it in terms they understand. You could
use comparisons that are relevant to them.
H. Be Patient
I have lost count of how many times I have exhausted my patience on my clients. But I have
never actually showed them my worry. If you feel like the client is overstepping their
boundaries, let them know in a pleasant and professional manner. You just don’t want to start
shouting and troubling at the people you make a living off of. Maintain professionalism at all
times.
I. Know Everything You Need to Know
You are a paid expert. Someone is giving you their hard-earned money to do something they
believe you have a high level of mastery of. You need to keep yourself up-to-date with the
profession and always be ready to answer questions your client needs to know.
J. Put Yourself in Their Shoes
If you were in their shoes and were being treated the way you are treating them, would you enjoy
that experience? If so, you are doing a good job. If not, you probably want to get a little better. It
is important to constantly evaluate the way you communicate with others.
1.2. Customer is provided with information as required in a timely, accurate and effective manner
with any queries about transactions answered fully and clearly to ensure customer is appropriately
informed
Information may be related to:
 account services, including:
 savings
 retirement
 superannuation

3
  investment services
 processes for completing transactions including:
 cash or non-cash transactions
 cheques
 debit/credit cards
 The interests of customer include knowledge of the changing circumstances of the
customer and how these contexts influence customer needs in relation to financial,
retirement, investment and other services.
Good information often good service
Employees need to be empowered to satisfy customers. Employees will give bad service to
customers if they themselves receive bad service and little feedback from their managers and
supervisors. Remember: external customer service starts with internal customer service.

 Simple action, huge return

 Customers will spend up to 10% more for the same product with better service.
 When customers receive good service they tell 10-12 people on average.
 When customers receive poor service they tell upwards of 20 people.
 There is an 82% chance customers will repurchase from a company where they were
satisfied.
 There is a 91% chance that poor service will dissuade a customer from ever going
back to a company.

It is often not what you articulate but how it is presented. What you wear and how you
express yourself has a lot to do with how what you say is received.
Have you ever noticed how a person who is dressed-up, even in older or out-of-styl clothing, always
commands more authority and respect? The impression they make and what they have to say is
enhanced by their personal presentation, facial and hand gestures, as well as the substance of what
they have to say. As it turns out, substance is only part of the equation of being persuasive and
influencing perception.
On one level this seems unfair and superficial because what a person says and how they behave
should be more important than if they are well groomed, smiling and dressed-up. Yet visual
perception plays a vital role in human impressions and reactions. For reasons psychologists do not
always understand, nature and learned behavior have taught humans to perceive neat, smiling, well-
presented individuals in a more commanding manner.
It is clear that just looking good will not produce the desired level of customer satisfaction.
 Smiling – there is nothing like a smile and pleasant face to greet a customer, especially if
he/she has a complaint. A smile and polite conversation can immediately disarm a
disgruntled customer. Facial expression sets a positive tone before you even begin
speaking. A relaxed or pleasant facial expression is the ideal most of the time.
 Eye contact – always look into your customer’s eyes. Directly address customers.

4
  How you look – personal grooming has a big impact on your customers. Dirty hands,
messy hair and poor dress can mean the loss of an otherwise happy customer. When
interacting with customers, dress neatly and in a professional manner so as to command
respect and to let customers know you take seriously your position.
 Shaking hands – when shaking hands with a customer a firm and professional handshake is
expected. This part of the greeting is now common among both men and women in a
professional environment.
 Be attentive - when listening to a customer, slightly lean towards your customer and nod
your head ever so slightly to indicate you are listening.
 Tone of voice – always convey friendliness and amicability. Do not raise your voice in
frustration or anger no matter how difficult or tiresome a customer may behave.
 Hand gestures - use hand movements to emphasize what you say (even on the phone) and
to emphasize your feelings.
 Personal space – this is the distance that feels comfortable between you and another person.
If another person approaches you and invades your personal space, you automatically move
back without thought. You are uncomfortable. Leave adequate distance between you and
your customer. Adequate space is important to making customers feel secure and
unthreatened.
 Posture – slumping in a chair or leaning against a wall while interacting with a customer
are sure signs you are not interested in the customer. Your pose or posture should express
attention, friendliness, and openness. Lean forward, face the customer and nod to let them
know you are interested.
 Observation - notice how your customer behaves and what he/she reacts positively to while
you are providing service.
Remember, the little, interpersonal actions noted above mean a great deal in the area
of customer relations. They can change customer perceptions and ultimately affect the
success of your customer relations efforts.

Ten Major Do’s and Don’ts of Customer Service

Every day customer service representatives face situations when what they say makes or breaks
a service interaction.
Most customer service is defined by how a company or organization treats “external customers,”

No: Everyone hates the word “no”. It is de -motivating, discouraging, and disinteresting. You
will hear this word throughout your life as a customer and as a service provider. “No” is
tantamount to “bad service.” “No” is easy, cheap, unproductive and negative – it means failure.
Unfortunately, “no” is the word we most often hear when a new idea, request or concept is
introduced. Admittedly, there are times when you will have to say “no,” but focus on what you
can do for the customer (accentuate the positive) and not the negatives of the situation. Better to
say “What I can do is…” and demonstrate that you care and want to provide quality service
despite your current limitations.
5
I don’t know: Good service means never saying, “I don’t know.” When a customer hears “I
don’t know,” they hear, “I don’t feel like finding the information you need.” Better to say, “I’ll
find out” or “Let me look into this and get back to you ASAP.”
That’s not my job./That’s not my department: When a customer asks you to do something
that you do not know how to do or do not have the authority to do, become a catalyst by leading
the customer to the person or department who can help him/her solve the problem. Better to say,
“Let me transfer to the person who ca n immediately help you will this problem.”
You’re right – that is bad: Many inexperienced customer service representatives think by
sympathizing with the customer’s plight, he/she will win over the customer rather than actually
doing something to solve the customer’s problem. If a customer expresses annoyance or
frustration, do not make it worse by commiserating with him/her. Empathize with the customer
but seek to solve the problem.
Likewise, it does not do your company or organization any good to criticize co-workers or other
departments within the company or to the customers. All interested parties end up looking
unprofessional and inept. Rather try your best to accommodate the customer. Do not promise
anything you cannot deliver but do try to serve the customer well. Better to say, “I understand
your frustration, let’s see how we can solve this problem.”
Calm down: When customers are upset or angry let them vent (within reason) and they will
eventually calm down. Telling them to “calm down” is belittling, and often serves only to
infuriate them further. Better to say, “I’m sorry.” This is one of the ideal phrases for customer
service – it helps to placate the angriest of customers and allows you to begin the process of
solving a customer complaint or request and “meet him/her half way.”
Apologizing does not mean you agree with the customer but it is a means to empathize and
move beyond the emotion of the moment and negative impact.
I’m busy right now: It is not easy to juggle customers. You are often helping one customer when
another calls or visits your service area. Asking a customer to be patient or politely asking them to
wait is very different than putting them off and saying you are too busy to help. Leaving them
standing there or on hold are two of the mortal sins of customer service.
Call me back: This expression conveys little interest on the part of the customer relation’s
employee for the needs and wants of the customer. You should always call the customer back
because you want their business and are responsive to their requests. Being proactive is part of
good customer service.
That’s not my fault: If an angry customer accuses you of creating a problem, rightly or wrongly,
the natural reaction is to defend oneself. However, this is not the best course of action. The
customer has a problem that needs to be solved. By resisting the need to defend yourself, and
focusing on the needs of the customer, you can resolve the problem faster and with less stress and
confrontation. Better to say, “Let’s see what we can do about this problem.”
You Need to Talk to My Supervisor: This cliché of bad customer service has angered and
frustrated customers decades. Customers often ask for things outside the scope of your work or
authority – maybe even outside the services/products provided by your company. While passing
off these requests to your manager is a tempting option, it is better if you attempt to solve the
6
 problem yourself or directly go to the supervisor yourself and get a solution. You become a
service hero for the customer and the supervisor. Better to say, “Let me find that out for you.”
You Want it by When?: Customers often make unrealistic demands, especially when it comes to
time. Your first reaction may be annoyance and you may want to make a snide or sarcastic
comment. However, the best approach is to hold off on displaying a negative attitude and making
a poor impression. Better to say, “I will call you right back after I find out if that is feasible.”

Below are ten phrases that should never be used because they frustrate and anger customers.
 “No.”
 “I don’t know.”
 “That’s not my job./That’s not my department.”
 “You are right – that is bad”
 “Calm down.”
 “I’m busy right now.”
 “That’s not my fault.”
 “You need to talk to my supervisor.”
 “You want it by when?”
 “Call me back”

Helpful Reminders for Polite and Polite and Friendly Alternative

Friendly Responses Wrong Approach
“I don’t know.” “I’ll find out.”
“No.” “What I can do is…”
“That’s not my job.” “Let me find the right person who can help you with …”
“You’re right – this is bad.” “I understand your frustrations.”
“That’s not my fault.” “Let’s see what we can do about this.”
“You want it by when?” “I’ll try my best.”
“Calm down.” “I’m sorry.”
“I’m busy right now.” “I’ll be with you in just a moment.”
“Call me back.” “I will call you back, what is your telephone number.”

1.3. Transactions outside the knowledge or delegated authority of the officer are referred to other
personnel for resolution as required
Authorized personnel may include:
o dispute resolution officer
o employees
o supervisors and managers

7
Learning outcome #2
2. Process basic financial transactions
2.1. Process Customer transactions in an accurate and timely manner using standard policies,
procedures and systems

Transactions may be processed:

 using manual or electronic systems
 using the standard procedures and systems of the financial services institution and
may include:
 bank cheques
 credit card transactions
 debits such as from:
 savings accounts
 cheque accounts
 inward credits/outward payments
 payroll deductions
 Periodic payments.

 The relevant financial services organization’s policies, procedures and

systems may relate or be influenced by:
o administrative and clerical systems
o database and IT systems
o product and account and service range
o range of responsibility
o size, type and location of branch
o Types of equipment used.

Accounting Processes & Procedures

Accounting is a technical business function responsible for recording, reporting and analyzing
financial information. Small business owners use accounting to determine the profitability of
their company operations. As small businesses continue to grow and expand, accounting
processes and procedures may be needed to maintain the company’s financial information.
Accounting processes and procedures are usually based on the basic accounting cycle. The
accounting process outlines how financial information flows through a company and which
individuals are responsible the information.

8
Identify Transactions

Identifying transactions or other financial events is the beginning of the accounting cycle.
Business owners use written documents to track specific information relating to financial
transactions. These documents classify transactions and usually include specific information
regarding economic events. Business owners also use this information to have a historical record
of business transactions. Once each transaction is identified and classified, the information is
recorded in the company’s general ledger.

Record Transactions

Recording transactions is the physical process of entering financial data into the company’s
general ledger. Small businesses may use manual or automated accounting ledgers in their
business operations. Manual accounting requires business owners to maintain several paper
ledgers for recording financial transactions. Accounting software provides business owners with
an electronic process for recording transactions and maintaining financial information.
Recording transactions may require business owners to prepare journal entries based on financial
transaction documents.

Prepare Reports and Statements

The final output of the accounting cycle is the preparation of financial reports and statements.
These reports and statements provide business owners with information regarding the efficiency
and profitability of business operations. Business owners often use information to make
decisions on improving operational performance. Business owners can also use this information
to secure external financing for growing and expanding their company.

Handling Procedures

Accounting procedures usually dictate which individuals are responsible for financial or
accounting information. Smaller or home-based businesses do not usually require these
procedures. Larger business organizations may employ several individuals to handle financial
information and move it through the accounting cycle. Handling procedures outline who is
responsible for gathering financial data and how the information will be entered into the general
ledger.

9
Reconciliation Procedures

Reconciliation procedures ensure all financial information is properly recorded in a company’s

accounting ledger. Business owners may also require reconciliations when reviewing internal
financial information against vendor invoices, bank statements or other external documents.
Reconciliation procedures ensure all business or financial information is correct and financial
reports include accurate and valid information.

Review Procedures

Review procedures are an important part of the accounting process. Business owners implement
these procedures to ensure financial information prepared by employees is correct. Larger
organizations with accounting departments commonly use a controller or accounting supervisor
to review an employee’s work. This review process may discover errors and require changes
prior to releasing financial information to business owners.

Customer service policies and procedures

What customer service policies and procedures are used in your workplace? Some
of these policies may not be written. They could include:

? Policy on the return of damaged goods

? Procedures for direct checking
? Quality checking procedures
? Procedures for handling telephone complaints
? Procedures for obtaining information about a lost consignment.
Examples of customer service policies can be seen in other workplaces. Next time
you have your car serviced, stay in a hotel or visit another warehouse, look out for
examples of customer service policies. Many workplaces now have them displayed
for customers.
What do quality and customer service mean?

Quality is a term that is increasingly used in our society. As business and industry
become more competitive, so ‘Quality’ and ‘Standards’ are being improved.
Some definitions of 'quality' are:

? Fitness for purpose

10
 ? Quality is meeting customer needs (W.E. Deming)
? Quality consists of freedom from deficiencies (Joseph Juran Quality
Control Handbook)

There are four steps to quality customer service that you can apply in your
workplace.

Step 1: Send a positive attitude.

? An attitude is a state of mind influenced by feelings, thought and
actions.
? The attitude you show is usually the attitude you receive.

Step 2: Identify the needs of your customers.

Step 3: Provide for the needs of your customers.
Step 4: Make sure your customers return.

Financial transaction

A financial transaction is an agreement, communication, or movement carried out between a

buyer and a seller to exchange an asset for payment. It involves a change in the status of the
finances of two or more businesses or individuals. The buyer and seller are separate entities or
objects, often involving the exchange of items of value, such as information, goods, services, and
money. It is still a transaction if the goods are exchanged at one time, and the money at another.
This is known as a two-part transaction: part one is giving the money; part two is receiving the
goods.

Systems of credit are evident throughout recorded history and from archeology. By contrast little
evidence has been found of widespread use of pure barter, where traders meet face to face and
transactions are completed in a single swap.
As cities, states, and empires were established, coins and other compact forms of specie were
minted or printed as fiat money with set values, permitting the accumulation of assets that would
not deteriorate over time as goods might and that had the relatively secure backing of a
government which could adjust value by producing more or less of the currency. As fixed
currencies were gradually replaced by floating currencies during the 20th century, and as the
recent development of computer networks made electronic money possible, financial
transactions have rapidly increased in speed and complexity.

Information Processing

11
It is imperative that a business develop a reliable accounting system to capture and summarize its
voluminous transaction data. The system must be sufficient to fuel the preparation of the
financial statements, and be capable of maintaining retrievable documentation for each and every
transaction. In other words, some transaction logging process must be in place.

In general terms, an accounting system is a system where transactions and events are reliably
processed and summarized into useful financial statements and reports. Whether this system is
manual or automated, the heart of the system will contain the basic processing tools: accounts,
debits and credits, journals, and the general ledger. This chapter will provide insight into these
tools and the general structure of a typical accounting system.

Accounts

The records that are kept for the individual asset, liability, equity, revenue, expense, and
dividend components are known as accounts. In other words, a business would maintain an
account for cash, another account for inventory, and so forth for every other financial statement
element. All accounts, collectively, are said to comprise a firm's general ledger. In a manual
processing system, imagine the general ledger as nothing more than a notebook, with a separate
page for every account. Thus, one could thumb through the notebook to see the "ins" and "outs"
of every account, as well as existing balances.

The following example reveals that cash has a balance of $63,000 as of January 12. By
examining the account, one can see the various transactions that caused increases and decreases
to the $50,000 beginning- of-month cash balance.

In many respects, this Cash account resembles the "register" one might keep for a wallet-style
checkbook. A balance sheet on January 12 would include cash for the indicated amount (and, so
forth for each of the other accounts comprising the entire financial statements). Notice that

12
column headings for this illustrative Cash account included "increase" and "decrease" labels. In
actuality, these labels would instead be "debit" and "credit." The reason for this distinction will
become apparent in the following discussion.

Debits and Credits

References to debits and credits are quite common. A business may indicate it is “crediting” an
account. “Debit” cards may be used to buy goods. Debits and credits (abbreviated “dr” and “cr”)
are unique accounting tools to describe the change in a particular account that is necessitated by
a transaction. In other words, instead of saying that cash is "increased" or "decreased," it is said
that cash is "debited" or "credited."

As one can tell by reviewing the illustration, the "+/-" system lacks internal consistency.
Therefore, it is easy to get something wrong and be completely unaware that something has gone
amiss. On the other hand, the debit/credit system has internal consistency. If one attempts to
describe the effects of a transaction in debit/credit form, it will be readily apparent that
something is wrong when debits do not equal credits. Even modern computerized systems will
challenge or preclude any attempt to enter an "unbalanced" transaction that does not satisfy the
condition of debits = credits.

The debit/credit rules are built upon an inherently logical structure. Nevertheless, many students
will initially find them confusing, and somewhat frustrating. This is a bit similar to learning a
new language. As such, memorization usually precedes comprehension. Take time now to
memorize the "debit/credit" rules that are reflected in the following diagrams. Going forward,
one needs to have instant recall of these rules, and memorization will allow the study of
accounting to continue on a much smoother pathway. Full comprehension will follow in short
order.

Assets/Expenses/Dividends

As shown at left, asset, expense and dividend accounts each follow the same set of debit/credit
rules. Debits increase these accounts and credits decrease these accounts. These accounts
normally carry a debit balance. To aid recall, rely on this mnemonic: D-E-A-D = debits increase
expenses, assets, and dividends.

13
  

Liabilities/Revenues/Equity

Liability, revenue, and equity accounts each follow rules that are the
opposite of those just described. Credits increase liabilities,
revenues, and equity, while debits result in decreases. These accounts
normally carry a credit balance.

2.2. Documentation or systems entry to support transactions is checked for accuracy and
completeness and customer account and transaction details maintained and verified using correct
procedures
Financial transaction process stages
 A specific financial process may be composed of some or all of the following activities,
or stages:

Transaction
Description Examples
Process Stage

Setup of basic vendor,

customer, or employee
1.Entity set-up Customer, vendor, or employee account set-up,
information in a
review and which includes account number assignment,
financial system and
approval contact, and other information
verification (review) of
the data’s accuracy.

2.Transaction Review and approval Purchase requisition approval; cash receipt form
review and of a transaction. This approval; time report approval; transfer of
approval may occur at more than expense approval
one stage of a financial
process.

14
 Verification of
3.Transaction payment being made or Goods receipt confirmation; manual signature
verification of goods or services on check payments
being received.

Verification of
transactions appearing
4. Post- General ledger transaction review; distribution
in a ledger, sub-ledger,
transaction report of payroll expense review; transaction exception
and other report, such
review report review
as an edit or exception
report.

Balance comparison
Bank account reconciliation; stock
between ledger and an
5.Reconciliation reconciliation; accounts receivable
independent data
reconciliation
source.
Transaction Process Risks

At each stage of a financial process, there are one or more risks that could prevent the process
from completing successfully.

Risk Examples

1. Error in accounting Incorrect account code assigned to a transaction; critical

classification accounting coding data omitted

Input of incorrect amount; arithmetic or numerical

2. Number or arithmetic error
transposition error

Good sent to wrong place because of the input of an

3. Unintentional asset
incorrect address; excess financial aid check sent to wrong
misdirection error
address because of incorrect student account data

Pocketing cash receipt; purchase of equipment or other

4. Misappropriation
goods or services for personal use

Falsifying accounting records or data; entering into

5. Fraud
unauthorized agreements in the name of the University

6. Regulatory, contractual, or Failing to comply with a policy requirement; failing to

15
policy non-compliance fulfill the terms of a contract.

Types of financial controls

What is a financial control?
A financial transaction control is a procedure that is intended to detect and/or prevent errors,
misappropriations, or policy non-compliance in a financial transaction process. A control
procedure help an organization achieve its mission and strategic objectives by ensuring resources
are effectively collected and used, and accurately recorded.
A control procedure may be performed by either an individual or as part of an automated
process within a financial system. A control procedure is effective only if there is adequate
separation of duties between individuals performing the different control responsibilities in the
process. This is usually done by indicating approval through a signature on a form or an on-line
approval captured in an automated financial system.
To manage the risk of a financial transaction processing failure, manual and/or automated
control procedures are implemented at key stages of the process.
1. Manual Transaction Controls

Control Procedure Type Examples

 Review and approval of expense reimbursement

request.
1. Transaction initiation
 Review and approval of a purchase requisition.
review and approval
 Review and approval of a transfer of expenditure.
 Review and approval of Payroll Personnel records.

2. Asset receipt
 Review and approval of a receiving report
verification

 Review and certification of transactions appearing in

the general ledger.
 Review and certification of monthly Purchasing
3. Post-transaction review
Card transaction reports.
 Review and certification of Distribution of Payroll
Expense reports.

4. Balance reconciliation  Monthly reconciliation and certification of

summarized accounts receivable ledger balance to
detailed debtor accounts balances listing.
 Monthly or quarterly petty cash and bank account

16
 reconciliation and certification.

 Review and approval of entertainment expenses for

unusual fluctuations in the balance over the course of a
5. Balance analysis year.
 Analysis and certification of material budget to actual
expense differences.

2. Automated Transaction Controls

Control Procedure Type Examples

Financial Information System password access

1. System access functions
requirement.

2. Data input Date or telephone number format checking

3. Data validation Account code validation

Automatic summarization and posting of invoice payment

4. Data processing
data to the general ledger.

Transaction Analysis

It is now apparent that transactions and events can be expressed in "debit/credit" terminology. In
essence, accountants have their own unique shorthand to portray the financial statement
consequence for every recordable event. This means that as transactions occur, it is necessary to
perform an analysis to determine (a) what accounts are impacted and (b) how they are impacted
(increased or decreased). Then, debits and credits are applied to the accounts, utilizing the rules
set forth in the preceding paragraphs.

Source documents

Usually, a recordable transaction will be evidenced by a source document. A disbursement will

be supported by the issuance of a check. A sale might be supported by an invoice issued to a
customer. A time report may support payroll costs. A tax statement may document the amount
paid for taxes. A cash register tape may show cash sales. A bank deposit slip may show
collections of customer receivables. Suffice it to say, there are many potential source documents,

17
and this is just a small sample. Source documents usually serve as the trigger for initiating the
recording of a transaction. The source documents are analyzed to determine the nature of a
transaction and what accounts are impacted. Source documents should be retained (perhaps in
electronic form) as an important part of the records supporting the various debits and credits that
are entered into the accounting records.

A properly designed accounting system will have controls to make sure that all transactions are
fully captured. It would not do for transactions to slip through the cracks and go unrecorded.
There are many such safeguards that can be put in place, including use of renumbered documents
and regular reconciliations. For example, an individual might maintain a checkbook for
recording cash disbursements. A monthly reconciliation should be performed to make sure that
the checkbook accounting system has correctly reflected all disbursements. A business must
engage in similar activities to make sure that all transactions and events are recorded correctly.
Good controls are essential to business success. Much of the work performed by a professional
accountant relates to the design, implementation, and evaluation of properly functioning control
systems.

An Account's Balance

The balance of a specific account can be determined by considering its beginning (of period)
balance, and then netting or offsetting all of the additional debits and credits to that account
during the period. Earlier, an illustration for a Cash account was presented. That illustration was
developed before the introduction of debits and credits. However, accounts are maintained by
using the debit/ credit system. The Cash account is repeated below, except that the
increase/decrease columns have been replaced with the more traditional debit/credit column
headings. A typical Cash account would look similar to this illustration:

18
Bear in mind that each of the debits and credits to Cash shown in the preceding illustration will
have some offsetting effect on another account. For instance, the $10,000 debit on January 2
would be offset by a $10,000 credit to Accounts Receivable.

The Journal

What is already known about a journal (not an accounting journal, just any journal)? It's just a
log book, right? A place where one can record a history of transactions and events, usually in
date (chronological) order. Likewise, an accounting journal is just a log book that contains a
chronological listing of a company's transactions and events. The accounting journal serves to
document business activity as it occurs. However, rather than including a detailed narrative
description of a company's transactions and events, the journal lists the items by a form of
shorthand notation. Specifically, the notation indicates the accounts involved, and whether each
is debited or credited.

The general journal is sometimes called the book of original entry. This means that source
documents are reviewed and interpreted as to the accounts involved. Then, they are documented
in the journal via their debit/credit format. As such the general journal becomes a log book of the
recordable transactions and events. The journal is not sufficient, by itself, to prepare financial
statements. That objective is fulfilled by subsequent steps. But, maintaining the journal is the
point of beginning toward that end objective.

Journal example

The following illustration draws upon the facts for the Xao Corporation. Specifically it shows the
journalizing process for Xao’s transactions. Review it carefully, specifically noting that it is in
chronological order with each transaction of the business being reduced to the short-hand
description of its debit/credit effects. For instance, the first transaction increases both cash and
equity. Cash, an asset account, is increased via a debit. Capital Stock, an equity account, is
increased via a credit. The next transaction increases Advertising Expense "with a debit" and
decreases Cash "with a credit."

Note that each transaction is followed by a brief narrative description; this is a good practice to
provide further documentation. For each transaction, it is customary to list "debits" first (flush
left), then the credits (indented right). Finally, notice that a transaction may involve more than
two accounts (as in the January 28 transaction); the corresponding journal entry for these
complex transactions is called a "compound" entry.

19
In reviewing the general journal for Xao, note that it is only two pages long. An actual journal
for a business might consume hundreds and thousands of pages to document its many
transactions. As a result, some businesses may maintain the journal in electronic form only.

20
Special Journals

The illustrated journal was referred to as a "general" journal. Most businesses will maintain a
general journal. All transactions can be recorded in the general journal. However, a business may
sometimes find it beneficial to employ optional "special journals." Special journals are deployed
for highly redundant transactions.

For example, a business may have huge volumes of redundant transactions that involve cash
receipts. Thus, the company might have a special cash receipts journal. Any transaction entailing
a cash receipt would be recorded therein. Indeed, the summary total of all transactions in this
journal could correspond to the debits to the Cash account, further simplifying the accounting
process. Other special journals might be used for cash payments, sales, purchases, payroll, and so
forth.

The special journals do not replace the general journal. Instead, they just strip out recurring type
transactions and place them in their own separate journal. The transaction descriptions associated
with each transaction found in the general journal are not normally needed in a special journal,
given that each transaction is redundant in nature. Without special journals, a general journal can
become quite voluminous.
Page Numbering
Second, notice that the illustrated journal consisted of two pages (labeled Page 1 and Page 2).
Although the journal is chronological, it is helpful to have the page number indexing for
transaction cross-referencing and working backward from financial statement amounts to
individual transactions. The benefits of this type of indexing will become apparent in the general
ledger exhibits within the following section of the chapter. As an alternative, some companies
will assign a unique index number to each transaction, further facilitating the ability to trace
transactions throughout the entire accounting system.
Recap
The general journal does nothing to tell a company about the balance in each specific account.
For instance, how much cash does Xao Corporation have at the end of January? One could go
through the journal and net the debits and credits to Cash ($25,000 - $2,000 + $4,000 - $500 +
$4,800 - $5,000 = $26,300). But, this is tedious and highly susceptible to error. It would become
virtually impossible if the journal were hundreds of pages long. A better way is needed. This is
where the general ledger comes into play.
The General Ledger

As illustrated, the general journal is, in essence, a notebook that contains page after page of
detailed accounting transactions. In contrast, the general ledger is, in essence, another notebook
that contains a page for each and every account in use by a company. As examples, the ledger
accounts for Xao would include the Cash and Accounts Receivable pages illustrated below:

21
Xao’s transactions utilized all of the following accounts:

 Cash
 Accounts Payable
 Service Revenue
 Accounts Receivable
 Notes Payable
 Advertising Expense
 Land
 Capital Stock
 Utilities Expense
Therefore, Xao’s general ledger will include a separate page for each of these nine accounts.
Posting
Next, consider how the details of each specific account can be determined through a process
known as posting. To "post" means to copy the entries listed in the journal into their respective
ledger accounts. In other words, the debits and credits in the journal will be accumulated
("transferred"/"sorted") into the appropriate debit and credit columns of each ledger page. The
following illustration shows the posting process. Arrows are drawn for the first journal entry
posting. A similar process would occur for each of the other transactions to produce the resulting
ledger pages.
In reviewing the ledger accounts below, notice that the "description" column includes a cross-
reference back to the journal page in which the transaction was initially recorded. This reduces
the amount of detailed information that must be recorded in the ledger, and provides an audit
trail back to the original transaction in the journal. The check marks in the journal indicate that a

22
particular transaction has been posted to the ledger. Without these marks (in a manual system), it
would be very easy to fail to post a transaction, or even post the same transaction twice.

23
To Review
Thus far the following accounting “steps” should have been grasped:
 STEP 1: Each transaction is analyzed to determine the accounts involved
 STEP 2: A journal entry is entered into the general journal for each transaction
 STEP 3: Periodically, the journal entries are posted to the appropriate general ledger
pages

The Trial Balance

After all transactions have been posted from the journal to the ledger, it is a good practice to
prepare a trial balance. A trial balance is simply a listing of the ledger accounts along with their
respective debit or credit balances. The trial balance is not a formal financial statement, but
rather a self-check to determine that debits equal credits. Following is the trial balance prepared
for Xao Corporation.

24
Debits Equal Credits
Since each transaction was journalized in a way that insured that debits equaled credits, one
would expect that this equality would be maintained throughout the ledger and trial balance. If
the trial balance fails to balance, an error has occurred and must be located. It is much better to
be careful as one proceeds, rather than having to go back and locate an error after the fact. Be
aware that a "balanced" trial balance is no guarantee of correctness. For example, failing to
record a transaction, recording the same transaction twice, or posting an amount to the wrong
account would produce a balanced (but incorrect) trial balance.
Financial Statements from the Trial Balance
The next chapter reveals additional adjustments that may be needed to prepare a truly correct and
up-to-date set of financial statements. But, for now, a tentative set of financial statements could
be prepared based on the trial balance. The basic process is to transfer amounts from the general
ledger to the trial balance, then into the financial statements:

In reviewing the following financial statements for Xao, notice that italics are used to draw
attention to the items taken directly from the previously shown trial balance. The other line items
and amounts simply relate to totals and derived amounts within the statements.

25
Chart of Accounts

A listing of all accounts in use by a particular company is called the chart of accounts. Individual
accounts are often given a specific reference number. The numbering scheme helps keep up with
the accounts in use and the classification of accounts. For example, all assets may begin with "1"
(e.g., 101 for Cash, 102 for Accounts Receivable, etc.), liabilities with "2," and so forth. The
assignment of a numerical value to each account assists in data management, in much the same
way as zip codes help move mail more efficiently. Many computerized systems allow rapid entry
of accounts by reference number rather than by entering a full account description. A simple
chart of accounts for Xao Corporation might appear as follows:

 No. 101: Cash

 No. 102: Accounts Receivable
 No. 103: Land
 No. 201: Accounts Payable
 No. 202: Notes Payable
 No. 301: Capital Stock
 No. 401: Service Revenue
 No. 501: Advertising Expense
 No. 502: Utilities Expense

Another benefit is that each account can be further subdivided in subsets. For instance, if
Accounts Receivable bears the account number 102, one would expect to find that individual
customers might be numbered as 102.001, 102.002, 102.003, etc. This facilitates the
maintenance of "subsidiary" account records which are the subject of the next section of this
chapter.

Control and Subsidiary Accounts

Some general ledger accounts are made of many sub-components. For instance, a company may
have total accounts receivable of $19,000, consisting of amounts due from Compton, Fisher, and
Moore. The accounting system must be sufficient to reveal the total receivables, as well as
amounts due from each customer. Therefore, sub-accounts are used. For instance, in addition to
the regular general ledger account, separate auxiliary receivable accounts would be maintained
for each customer, as shown in the following illustration:

26
The total receivables are the sum of all the individual receivable amounts. Thus, the Accounts
Receivable general ledger account total is said to be the control account or control ledger, as it
represents the total of all individual subsidiary account balances. It is simply imperative that a
company be able to reconcile subsidiary accounts to the broader control account that is found in
the general ledger. Here, computers can be particularly helpful in maintaining the detailed and
aggregated data in perfect harmony.

T-Accounts

A useful tool for demonstrating certain transactions and events is the T-account. Importantly, one
would not use T-accounts for actually maintaining the accounts of a business. Instead, they are
just a quick and simple way to figure out how a small number of transactions and events will
impact a company. T-accounts would quickly become unwieldy in an enlarged business setting.
In essence, T-accounts are just a "scratch pad" for account analysis. They are useful
communication devices to discuss, illustrate, and think about the impact of transactions. The
physical shape of a T-account is a "T," and debits are on the left and credits on the right. The
"balance" is the amount by which debits exceed credits (or vice versa).

Below is the T-account for Cash for the transactions and events of Xao Corporation. Carefully
compare this T-account to the actual running balance ledger account which is also shown (notice
that the debits in black total to $33,800, the credits in red total to $7,500, and the excess of debits
over credits is $26,300 -- which is the resulting account balance shown in blue).

27
Financial Transaction Control Procedures Guide

The information provided in this guide will assist a campus department or program in evaluating
and establishing effective financial transaction control procedures for a campus financial process.

This guide provides cursory information about financial accountability and separation of duties.
For detailed information on these topics refer to the Understanding Financial Accountability and
Understanding Separation of Duties guides. Click here to contact a Financial Management
specialist.

 What is a financial control

A financial transaction control is a procedure that is intended to detect and/or prevent

errors, misappropriations, or policy non-compliance in a financial transaction process.

o Control procedures help an organization achieve its mission and strategic

objectives by ensuring resources are effectively collected and used, and accurately
accounted for.
o A control procedure may be performed by either an individual or as part of an
automated process within a financial system.
o A control procedure is effective only if there is adequate separation of duties
between individuals performing the different control responsibilities in the
process.
 For more information about separation of duties, refer to the
“Understanding Separation of Duties Guide.”
o An individual usually receives a formal delegation of authority to perform a
transaction process control procedure and, upon successful completion of the
procedure, is expected to document his or her accountability.

28
  This is usually done by indicating approval through a signature on a form
or an on-line approval captured in an automated financial system. For
more information about financial accountability, refer to the
“Understanding Financial Accountability Guide."

2.3. Customer complaints and disputes are resolved or referred to other authorized personnel and
customer accounts are rectified where necessary

Unhappy customers are bad news for any company, and it only takes one of them to shatter a
perfectly good day at work for everyone. It only takes one of them to steer many more
prospective customers away from you.

Unhappy customers have their reasons. Some don’t feel well, some have unrealistic expectations,
and others may just have lousy dispositions. However, we must be honest; others may have a
legitimate gripe, for somehow, some way, we may have been the catalyst that tipped the scale to
take them from annoyed to cranky to downright unhappy.

Whatever the cause, unhappy customers are still our guests and our hope for future business, and
we want them happy again. Said another way, the customer may not always be right, but he or
she will always be the customer we want and we need. So we need to take control of customer
complaints and turn them to our advantage.

Here are 7 steps for resolving customer complaints which have proven to work well. Do not let
time lapse and make things worse with your avoidance. Approach the customer as soon as you
learn they are unhappy, and;
1. Listen Intently: Listen to the customer, and do not interrupt them. They need to tell their
story and feel that they have been heard.
2. Thank Them: Thank the customer for bringing the problem to your attention. You can’t
resolve something you aren’t completely aware of, or may be making faulty assumptions about.
3. Apologize: Sincerely convey to the customer your apology for the way the situation has made
them feel. This is not the time for preachy reasons, justifications or excuses; you must apologize.
4. Seek the Best Solution: Determine what the customer is seeking as a solution. Ask them;
often they’ll surprise you for asking for less than you initially thought you’d have to give—
especially when they perceive your apology and intention is genuinely sincere.
5. Reach Agreement: Seek to agree on the solution that will resolve the situation to their
satisfaction. Your best intentions can miss the mark completely if you still fail to deliver what
the customer wants.
6. Take Quick Action: Act on the solution with a sense of urgency. Customers will often
respond more positively to your focus on helping them immediately versus than on the solution
itself.
7. Follow-up: Follow-up to ensure the customer is completely satisfied, especially when you
have had to enlist the help of others for the solution delivery. Everything up to this point will be
for naught if the customer feels that “out of sight is out of mind.”

29
Problems happen. It’s how you honestly acknowledge and handle them which counts with
people. Customers will remember you, and happily give you another chance to delight them
when you choose to correct problems with the very best you can offer, proving you value them
and their business.

2.4. Accurate reconciliation of subsidiary ledgers to general ledger accounts is performed

and fees appropriate to the transaction are levied in accordance with standard procedures
How to prepare general ledger to sub-ledger reconciliation
General ledger to sub-ledger reconciliation type with step by step instructions.
The purposes of accounting reconciliation statements, identified two major types of
reconciliations (bank reconciliation and general ledger to sub-ledger reconciliation), provided
step-by-step instructions for the bank reconciliation process, and showed a real life example of
the bank reconciliation. In this article, we continue explaining the reconciliation process and
switch our gears to the general ledger to sub-ledger reconciliation.

1. Step by step instructions for general ledger to sub-ledger reconciliation

Reconciliation of the general ledger to sub-ledgers is another type we will review. The general
ledger (or simply "ledger" or "G/L") is a collection of all balance sheet and income statement
accounts. The general ledger also includes all journal entries posted to accounts. In nowadays'
computerized world, the ledger is maintained in an electronic form.

A sub-ledger is a detailed record of transactions for an individual account. Usually, a sub-ledger

contains detail of transactions for an account, which are summarized by day (or month) and the
total is then posted to the general ledger. Therefore, sub-ledgers serve as support for amounts
posted to the general ledger. Sub-ledgers are presented in an electronic form as well (e.g. Excel
file, detail of an account in QuickBooks, SAP or Oracle). For example, accounts receivable sub-
ledger may contain detail for all issued invoices and cash receipts. At the end of a day, an
accountant can summarize all invoices issued (sales) and cash receipts (cash collections) and
post them to the general ledger in two separate journal entries. The general ledger would not
contain detail for each individual transaction.

As there is always room for a human error, it is important to reconcile the general ledger
balances to the sub-ledger balances on a periodic basis to spot such errors. If there are no errors
in posting journal entries to the general ledger, then the two balances will match; however, if
there are differences, then there would be reconciling items, which need to be analyzed and
corrected, if necessary. Two important accounts that should be reconciled on a monthly basis are
accounts receivable and accounts payable.

30
Illustration 1: General ledger to sub-ledger reconciliation statement
Balance per general ledger:  

Add / (Subtract) Items in general ledger not in sub-  

ledger:

  Item a – short description  

  Item b – short description  

  …  

Add / (Subtract) Items in sub-ledger not in general  

ledger:

  Item c – short description  

  Item d – short description  

  …  

Adjusted balance per general ledger Y

Balance per sub-ledger X

   

Difference between general ledger and sub-ledger Z

   

Reconciling items (if any)  

Reconciling item I – short description  

Reconciling item II – short description  

…  

Total reconciling items (= Difference) Z

Sometimes items (amounts) are included into a sub-ledger, but not in the ledger. Vice versa,
items (amounts) may be posted to the ledger via a journal entry, but not recorded in the sub-

31
ledger. Such items should be identified on the reconciliation separately to ensure they are given
proper treatment.

Let's now take a look at a four step approach for an accounts receivable reconciliation and an
accounts payable reconciliation.

Step 1: Compare G/L balance to the sub-ledger balance

You should start by analyzing the G/L and sub-ledger balances to identify any differences. While
doing that, pay special attention to the transactions that are unusual in their nature. For instance,
non-recurring transactions may have a higher risk of an error than transactions completed on
recurring and regular basis. You should examine the sales journal (for receivables) and the
purchases journal (for payables); have a look at posted entries, which were posted to the wrong
account, transactions posted twice (duplication error), transposition errors, etc. Then you should
look at the cash receipts and cash payments journals (for receivables and payables, respectively).
Possibly, you will need to repeat with your examination of the invoice register for accounts
receivable and the purchase order journal for accounts payable.

Step 2: Investigate reasons for the difference

After you have compared the G/L and sub-ledger and found differences, you should investigate
reasons for them. Reasons for the difference can include the following:

 Items posted to G/L, but not in sub-ledger

 Items posted to sub-ledger, but not in G/L
 Errors

Some of these items require adjustments to the G/L while others require adjustments to the sub-
ledger. Illustration 2 shows where an adjustment is needed depending on the reasons for a
difference.

Reasons for Example Where to Adjust

Difference
Adding up The sales day book (or purchases day book) Adjust G/L

32
Reasons for Example Where to Adjust
Difference
error has been overstated / understated by wrong
summarizing of totals

Omission A debit / credit balance has been omitted Adjust sub-ledger

from the list of customer / supplier account
balances

Duplication A customer / supplier account balance of the Adjust sub-ledger

same transaction has been posted twice by
mistake

Transposition A sales / purchase invoice recorded in the Adjust sub-ledger

individual account as $XY instead of $YX

A total in the sale / purchase day book has Adjust G/L

been carried forward as $ACB instead of
$ABC

Set-offs in A credit balance on the suppliers ledger has Adjust G/L

individual been set off against a customer's ledger debit
accounts balance

Step 3: Adjust G/L and/or sub-ledger

The next step is to make necessary adjustments to the G/L or to sub-ledger(s) based on the
reconciliation to correct any errors, omissions, etc. To identify what needs to be adjusted, you
could use the template of the general ledger to sub-ledger reconciliation statement presented
above.

Step 4: Compare adjusted balances

Finally, compare G/L balance to sub-ledger balance again, after all necessary adjustments were
made. If reconciling items are resolved, the reconciliation process is completed. If there is a
difference, continue to examine the sub-ledger and journals that are a part of the revenue and
expenditure cycles to identify the problem and correct it.

Learning outcome #3
3. Administer the transaction process
33
3.1. Error records and exception reports are analyzed and responded to according to
standard procedures and within required timeframes
There will be times when you are checking or processing financial transactions in your
organisation and you identify an error or discrepancy which needs to be rectified (corrected.)
You may be able to do this yourself. If you are unable to do this because you don’t know how, or
you are not authorised to do so, you will need to refer the discrepancy to an authorised work
colleague.
Discrepancies may occur for a variety of reasons, including:
 miskeyed data; for example, making a mistake when entering information such as an item
code, price or quantity;
 arithmetic errors; for example, adding amounts together instead of subtractingƒ. counting
errors; for example, incorrectly counting cash in a till
 accounting errors; for example, entering debit amounts as credits.
When discrepancies occur on financial documents the consequences may vary depending on the
type of document, the extent of the discrepancy and the period of time which has elapsed before
the discrepancy is detected. For example, a discrepancy on a tax invoice may mean that a client
is overcharged or undercharged, and a discrepancy on a purchase order could result in an
incorrect quantity of goods being supplied.
3.2. Activity reports monitoring the nature and level of transaction activity are provided
and database records or customer files updated according to standard procedures and
within required timeframes
Financial transaction
Financial transaction involving money and agricultural goods at a farmers' market
A financial transaction is an agreement, communication, or movement carried out between a
buyer and a seller to exchange an asset for payment. It involves a change in the status of the
finances of two or more businesses or individuals. The buyer and seller are separate entities or
objects, often involving the exchange of items of value, such as information, goods, services, and
money. It is still a transaction if the goods are exchanged at one time, and the money at another.
This is known as a two-part transaction: part one is giving the money, part two is receiving the
goods.

In ancient times non-financial transactions were commonly conducted through systems of credit,
in which goods and services were exchanged for a promise of future recompense. Credit has
certain disadvantages, including the requirement that traders or their intermediaries trust one
another, or trust that authorities exist who can be relied on to enforce agreements. Debts must

34
eventually be settled either with goods or by payment of money, a substance of agreed value
such as gold and silver.

Systems of credit are evident throughout recorded history and from archeology. By contrast little
evidence has been found of widespread use of pure barter, where traders meet face to face and
transactions are completed in a single swap.

As cities, states, and empires were established, coins and other compact forms of specie were
minted or printed as fiat money with set values, permitting the accumulation of assets that would
not deteriorate over time as goods might and that had the relatively secure backing of a
government which could adjust value by producing more or less of the currency. As fixed
currencies were gradually replaced by floating currencies during the 20th century, and as the
recent development of computer networks made electronic money possible, financial
transactions have rapidly increased in speed and complexity.

Purchase

This is the most common type of financial transaction. An item or good is exchanged for money.
This transaction results in a decrease in the finances of the purchaser and an increase in the
benefits of the sellers. An example is a real estate transaction.

Loan

This is a slightly more complicated transaction in which the lender gives a single large amount of
money to the borrower now in return for many smaller repayments of the borrower to the lender
over time, usually on a fixed schedule. The smaller delayed repayments usually add up to more
than the first large amount. The difference in payments is called interest. Here, money is given
for not any specific reason.

Mortgage

This is a combined loan and purchase in which a lender gives a large amount of money to a
borrower for the specific purpose of purchasing a very expensive item (most often a house). As
part of the transaction, the borrower usually agrees to give the item (or some other high value
item) to the lender if the loan is not paid back on time. This guarantee of repayment is known as
collateral.

Bank account

35
A bank is a business that is based almost entirely on financial transactions. In addition to acting
as a lender for loans and mortgages, banks act as a borrower in a special type of loan called an
account. The lender is known as a customer and gives unspecified amounts of money to the bank
for unspecified amounts of time. The bank agrees to repay any amount in the account at any time
and will pay small amounts of interest on the amount of money that the customer leaves in the
account for a certain period of time. In addition, the bank guarantees that the money will not be
stolen while it is in the account and will reimburse the customer if it is. In return, the bank gets to
use the money for other financial transactions as long as they hold it.

Credit card

This is a special combination of a purchase and a loan. The seller gives the buyer the good or
item as normal, but the buyer pays the seller using a credit card. In this way, the buyer is paying
with a loan from the credit card company, usually a bank. The bank or other financial institution
issues credit cards to buyers that allow any number of loans up to a certain cumulative amount.
Repayment terms for credit card loans, or debts vary, but the interest is often extremely high. An
example of common repayment terms would be a minimum payment of the greater of $10 or 3%
every month and a 15-20% interest charge for any unpaid loan amount. In addition to interest,
buyers are sometimes charged a yearly fee to use the credit card.

In order to collect the money for their item, the seller must apply to the credit card company with
a signed receipt. Sellers usually apply for many payments at regular intervals. The seller is also
charged a fee of normally 1-3% of the purchase price by the credit card company for the
privilege of accepting that brand of credit card for purchases.

Thus, in a credit card purchase, the transfer of the item is immediate, but all payments are
delayed. The credit card holder receives a monthly account of all transactions. The billing delay
may be long enough to defer a purchase payment to the bill after the next one.

Debit card

This is a special type of purchase. The item or good is transferred as normal, but the purchaser
uses a debit card instead of money to pay. A debit card contains an electronic record of the
purchaser's account with a bank. Using this card, the seller is able to send an electronic signal to
the buyer's bank for the amount of the purchase, and that amount of money is simultaneously
debited from the customer's account and credited to the account of the seller. This is possible
even if the buyer or seller use different financial institutions. Currently, fees to both the buyer
and seller for the use of debit cards are fairly low because the banks want to encourage the use of
debit cards. The seller must have a card reader set up in order for such purchases to be made.
Debit cards allow a buyer to have access to all the funds in his account without having to carry

36
the money around. It is more difficult to steal such funds than cash, but it is still done. See also
skimming and shoulder surfing.

3.3 store safely, securely and in accordance with standard customer records

Accounting Processes & Procedures

Accounting is a technical business function responsible for recording, reporting and analyzing
financial information. Small business owners use accounting to determine the profitability of
their company operations. As small businesses continue to grow and expand, accounting
processes and procedures may be needed to maintain the company’s financial information.
Accounting processes and procedures are usually based on the basic accounting cycle. The
accounting process outlines how financial information flows through a company and which
individuals are responsible the information.

Identify Transactions

Identifying transactions or other financial events is the beginning of the accounting cycle.
Business owners use written documents to track specific information relating to financial
transactions. These documents classify transactions and usually include specific information
regarding economic events. Business owners also use this information to have a historical record
of business transactions. Once each transaction is identified and classified, the information is
recorded in the company’s general ledger.

Record Transactions

Recording transactions is the physical process of entering financial data into the company’s
general ledger. Small businesses may use manual or automated accounting ledgers in their
business operations. Manual accounting requires business owners to maintain several paper
ledgers for recording financial transactions. Accounting software provides business owners with
an electronic process for recording transactions and maintaining financial information.
Recording transactions may require business owners to prepare journal entries based on financial
transaction documents.

Prepare Reports and Statements

The final output of the accounting cycle is the preparation of financial reports and statements.
These reports and statements provide business owners with information regarding the efficiency
and profitability of business operations. Business owners often use information to make
decisions on improving operational performance. Business owners can also use this information
to secure external financing for growing and expanding their company.

37
Handling Procedures

Accounting procedures usually dictate which individuals are responsible for financial or
accounting information. Smaller or home-based businesses do not usually require these
procedures. Larger business organizations may employ several individuals to handle financial
information and move it through the accounting cycle. Handling procedures outline who is
responsible for gathering financial data and how the information will be entered into the general
ledger.

Reconciliation Procedures

Reconciliation procedures ensure all financial information is properly recorded in a company’s

accounting ledger. Business owners may also require reconciliations when reviewing internal
financial information against vendor invoices, bank statements or other external documents.
Reconciliation procedures ensure all business or financial information is correct and financial
reports include accurate and valid information.

Review Procedures

Review procedures are an important part of the accounting process. Business owners implement
these procedures to ensure financial information prepared by employees is correct. Larger
organizations with accounting departments commonly use a controller or accounting supervisor
to review an employee’s work. This review process may discover errors and require changes
prior to releasing financial information to business owners.

Customer service policies and procedures

What customer service policies and procedures are used in your workplace? Some
of these policies may not be written. They could include:

? Policy on the return of damaged goods

? Procedures for direct checking
? Quality checking procedures
? Procedures for handling telephone complaints
? Procedures for obtaining information about a lost consignment.

Examples of customer service policies can be seen in other workplaces. Next time
you have your car serviced, stay in a hotel or visit another warehouse, look out for
examples of customer service policies. Many workplaces now have them displayed
for customers.

38
 What do quality and customer service mean?

Quality is a term that is increasingly used in our society. As business and industry
become more competitive, so ‘Quality’ and ‘Standards’ are being improved.
Some definitions of 'quality' are:

? Fitness for purpose

? Quality is meeting customer needs (W.E. Deming)
? Quality consists of freedom from deficiencies (Joseph Juran Quality
Control Handbook)

There are four steps to quality customer service that you can apply in your
workplace.

Step 1: Send a positive attitude.

? An attitude is a state of mind influenced by feelings, thought and
actions.
? The attitude you show is usually the attitude you receive.
Step 2: Identify the needs of your customers.
Step 3: Provide for the needs of your customers.
Step 4: Make sure your customers return.

 Activities
1. Name four of your external customers.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

2. Describe how you would handle a customer complaint?

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

3. Identify examples of good customer service.

39
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
4. Identify the times when the customer service was not up to your standards.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
5. Define customer transaction .
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
6 Explain why greeting is necessary when dealing with customers.
________________________________________________________________________
_______________________________________________________________________
________________________________________________________________________
________________________________________________________________________

7 When dealing with customers, explain how interpersonal skills facilitate accurate and
relevant exchange of information.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
8. How can receiving customer complaints be valuable to a business?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

9. Who are Your Customers?

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

10 Write Major Do’s and Don’ts of Customer Service

________________________________________________________________________
________________________________________________________________________
40
_______________________________________________________________________
________________________________________________________________________

11 What Is Customer Service Delivery?

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

12 Define Financial transactions

.________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

13 Why financial transaction control?

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

Summary

41
1, Provide customer service

 Customer is greeted and served with respect and professionalism in accordance with the
company service standards and expectations
 Customer is provided with information as required in a timely, accurate and effective
manner with any queries about transactions answered fully and clearly to ensure customer
is appropriately informed
Information may be related to:

 account services, including:

 savings
 retirement
 superannuation
 investment services
 processes for completing transactions including:
 cash or non-cash transactions
 cheques
 debit/credit cards

 Transactions outside the knowledge or delegated authority of the officer are

referred to other personnel for resolution as required
2, Process basic financial transactions

 Customer transactions are processed in an accurate and timely manner using standard
policies, procedures and systems
Transactions may be processed:

 using manual or electronic systems

 using the standard procedures and systems of the financial services institution and may
include:
 bank cheques
 credit card transactions
 debits such as from:
 savings accounts
 cheque accounts
 inward credits/outward payments
 payroll deductions
 Periodic payments.
The relevant financial services organisation's policies, procedures and systems may
relate or be influenced by:

42
  administrative and clerical systems
 database and IT systems
 product and account and service range
 range of responsibility
 size, type and location of branch
 Types of equipment used.

 Documentation or systems entry to support transactions is checked for accuracy and

completeness and customer account and transaction details maintained and verified using
correct procedures
 Customer complaints and disputes are resolved or referred to other authorized personnel
and customer accounts are rectified where necessary
 Accurate reconciliation of subsidiary ledgers to general ledger accounts is performed and
fees appropriate to the transaction are levied in accordance with standard procedures
3, Administer the transaction process

 Error records and exception reports are analyzed and responded to according to standard
procedures and within required timeframes
 Activity reports monitoring the nature and level of transaction activity are provided and
database records or customer files updated according to standard procedures and within
required timeframes
 Customer records are stored safely, securely and in accordance with standard processes
and recognizing the requirement to protect customer privacy and commercial
confidentiality

& Check list

43
You have now completed the competency of process customer transactions and you need to
check whether you have understood the basic content in this course. If you have a ‘no” answer
for any of the following, you have to go back and read the appropriate section again until you
grasp the important point

Yes No
 Greet and serve customer with respect and professionalism in accordance
with the company service standards and expectations
 Provide Customer with information as required in a timely, accurate and
effective manner
 Process basic financial transactions
 analyze Error records and exception reports according to standard
procedures and within required timeframes

References

Gray, Jim; Reuter, Andreas. "Transaction Processing - Concepts and Techniques (Powerpoint)".
Retrieved Nov 12, 2012.

44
Gerhard Weikum, Gottfried Vossen, Transactional information systems: theory, algorithms, and
the practice of concurrency control and recovery, Morgan Kaufmann, 2002, ISBN 1-5580-508-8

Jim Gray, Andreas Reuter, Transaction Processing — Concepts and Techniques, 1993, Morgan
Kaufmann, ISBN 1-55860-190-2

Philip A. Bernstein, Eric Newcomer, Principles of Transaction Processing, 1997, Morgan

Kaufmann, ISBN 1-55860-415-4

Ahmed K. Elmagarmid (Editor), Transaction Models for Advanced Database Applications,

Morgan-Kaufmann, 1992, ISBN 1-55860-214-3

45