6. Errors And Corrections To Accounting Records And Financial Statements Flashcards
What do trade receivables and trade payables record
Total amounts owed to/by customers & suppliers
How often is a bank reconciliation conducted?
Likely to be a daily basis
What is the purpose of a bank reconciliation
To spot differences between the bank statement balance and the cash at bank balance
Are errors and omissions possible in computerised systems?
Yes
What are the most common reconciliation checks
- Supplier statement reconciliations
- Bank reconciliations
What are supplier statement reconciliations
Reconciliations involving statements sent by suppliers detailing the transactions in the period and the balance at the end
How/when are bank reconciliations recorded
Computerised accounting systems allow bank reconciliations to be performed at any time, usually daily
What is a bank reconciliation in simple terms
A comparison of a bank statement with the cash at bank account
Why are bank reconciliations important
It’s an important financial control which spots accounting errors
What are possible differences that can be found on bank reconciliations
Errors, omissions, timing differences
What are the various types of errors
Errors of transposition
Errors of omission
Errors of principle
Errors of commission
Compensating errors
What are errors of transposition
For example, writing 381 instead of 318
What are errors of omission
For example, receiving an invoice of £500 and not recording it at all (completely missing it)
What are errors of principle
For example, treating a capital expenditure as a revenue expenditure
What are errors of commission
For example, putting telephone expenses in the electricity expense account
