Accounting systems and controls

Question 1

Where does the BOPE come in

Answer 1

After transactions the BOPE is periodically totalled and entered by double entry into the nominal ledger

Question 2

What is the purpose of BOPE (2)

Answer 2

• Because it is not practical to record transactions directly into the nominal/general ledger
• Allows transactions to be categorised and recorded in BOPE then transferred periodically into the general/NL

Question 3

The 5 main BOPE and what do they record?

Answer 3

Sales Day Book (SDB)

Record credit sales and returned sales

Purchase Day Book (PDB)

Record credit purchases and returns

Cash Book (CB)

Recording bank receipts and payments

Petty Cash Book (PCB)

Record petty cash transactions (small cash holdings)

Journal Book (JB)

Record unusual and period end adjustments

Question 4

Which BOPE do these transactions go to?

• Buy goods on credit
• Pay creditor
• Buy goods by cheque
• Sell goods for cash
• Receive cash from debtor
• Sell goods on credit

Answer 4

PDB:

• Buy goods on credit

  Dr Debtors 5405
     Cr Sales 4600
             Cr VAT 805 CB:

• Pay creditor
• Buy goods by cheque
• Sell goods for cash
• Receive cash from debtor

SDB:

• Sell goods on credit

  Dr VAT 961.10
  Dr Sales 3932
        Dr Rent 1200
        Dr Fuel 1560
            Cr Creditors 7653.10

Question 5

Uses of the Journal

The Journal is a book of prime entry used for the following: (4)

Answer 5

• Recording entries to open a new set of ledger accounts
• Recording purchase and sale of non-current assets on credit (if not entered in SDB or PDB)
• Recording year end adjustments
• Correcting errors

Question 6

Potential Bookkeeping errors

Answer 6

Error of omission

Transaction not recorded (both or one side missing)

Errors of commision

- Correct theory but error by bookkeeper
- Post repairs to rent, addition or transposition error

Errors of principle

- Dr or Cr to completely wrong account
- Drawings to wages, repairs to non-current asset additions

Compensating errors

 Two unrelated errors which balance each other out

Question 7

The need for control accounts

What is the problem without them?
What is the solution it brings?

Answer 7

• Individual transactions are categorised and entered into the respective BOPE (PDB, CB etc)
• The BOPE are totalled SDB and entered via double entry into the nominal ledger
• Problem – not clear how much is owed to individual creditors/payables or from individual debtors/receivables
• Solution – keep additional ledgers, one for all credit sales, one for all credit purchases