AC 9-11 Flashcards
What is an irrecoverable debt? Where does it go in financial statement?
A debt believed not to be paid. It goes in the statement of profit and loss.
What is the double entry for irrecoverable debt
Dr IDE (irrecoverable debt expense)
Cr trade receivables
What is a doubtful debt and how do you deal with it? What is the double entry?
A doubtful debt is when you are unlikely to receive the money. You do not to remove from receivables, but instead create an allowance for receivables.
Double entry for increase:
Dr IDE
Cr allowance for receivable
What is the formula for irrecoverable debt expense?
Irrecoverable debt expense= irrecoverable debt + doubtful debt
What type of expense is irrecoverable debt expense classed as
Admin expense
What is the general ledger, receivable ledger, payable ledger
General shows all journal entries (aka nominal)
Receivable ledger more detailed than general and shows what is owed to us
Payable ledger is what we owe and where
What are the three source documents?
Sales invoice, purchase invoice, and credit note (adj amount owed (refunds?))
What is the difference between real time and batch processing?
Real-time process it as it is imported
Batch processes in one go, usually at the end
Give the formula for the imprest system (float)
Float= cash in petty cash box + total expense
Money left + money used = float (fixed) amount
What is the net selling price and gross selling price in terms of VAT
Net selling price is the amount the business wants to keep and gross selling price is the amount they actually charge
When provided net, take 20% off to get VAT amount
When provided gross, take off 1/6th
What can’t you claim VAT on?
Entertaining clients and motor vehicles
What is the double entry for overcharging VAT?
Dr VAT (expense rise)
Cr receivable (asset rise)
What is the double entry for contra and dishonoured checks
Contra:
Dr payable Cr receivable
Dishonoured checks :
Dr receivable Cr cash
What are the three main reasons for bank reconciliation to be needed
1) unrecorded items in cash at bank Ledger- interest or dishonoured checks
2) timing difference- unpresented cheque (paid by us, but not cashed in) lodgements (paid by them, but not cashed in)
3) Error
In a pro forma, reconciliation and bank reconciliation statement what should be the same
We want the revised balance b/f in the pro forma to match the balance of cash at bank (revised) in bank reconciliation
How would you create a T table for VAT?
On the debit side purchases
on the credit side sales
Dr purchase
Cr sales
When looking at a financial statement, what is carried forward and brought forward?
For receivables brought forward is current year
For payables forward is prior year
When looking at the receivable or payable ledger, what is brought forward? (Double entry)
Receivables:
Dr Brought forward
Cr carried forward
Payables:
Dr carried forward
Cr brought forward
What is output tax and input tax
Output tax is charged on sales
Input tax is charged on purchases
How does a business account for discounts from the customer and from the supplier?
Discounts allowed reduce the amount receivable from the customer discount received reduce the amount payable to supplier
In a receivables account (ledger) what goes in the credit side?
Balance brought forward
Cash received
Irrecoverable debts
Discount allowed
Contra
Balance carried forward
Black CID Centre back
For a payable’s account (ledger) what goes in the credit side?
Balance brought forward
Credit purchases less returns
Refund of debit balances
Balance carried forward
Black CRB check
When approaching reconciliation, what does a difference in the supply statement mean? What does the difference in the payable ledger mean?
Supplier statement implies problem lies with them (no need to make change)
Payable ledger implies error in our account system (make change to payable ledger)
