Books, cash book and bank reconciliations Flashcards
(22 cards)
What does the sales day book record?
All credit sales
This book is specifically for tracking sales made on credit.
What is recorded in the purchases day book?
All credit purchases
This book tracks purchases made on credit.
What does the returns inwards day book track?
Goods returned by customers
This book is used for recording returns from customers.
What is the purpose of the returns outwards day book?
Records goods returned to suppliers
This book tracks returns made to suppliers.
What transactions does the cash book record?
All cash receipts and payments
This book is used for recording cash transactions.
What types of transactions does the journal record?
Unique or infrequent transactions
It serves as a catch-all for transactions not fitting into specialized books.
Give an example of transactions recorded in the journal.
Purchases and sales on credit of non-current assets
Other examples include adjustments like depreciation and bad debts.
What are personal accounts used for?
Individuals or organizations
Examples include trade receivables or trade payables.
What do impersonal accounts include?
Real accounts and nominal accounts
Real accounts track assets, while nominal accounts track income, expenses, and capital.
What are control accounts?
Summary accounts in the impersonal ledger
They consolidate entries from individual ledgers for a total balance.
What is the primary purpose of control accounts?
Check ledger accuracy
They help in identifying errors and preventing fraud.
How do control accounts facilitate financial reporting?
By providing a quick overview of total receivables or payables
This eliminates the need to review each individual account.
True or False: Control accounts are typically updated periodically.
True
This periodic updating helps maintain accuracy.
What are the benefits of using control accounts?
Identify errors quickly, prevent fraud, facilitate financial reporting
These benefits enhance the integrity of financial records.
What is a two column cash book?
A cash book that records cash received and paid in one money column on each side and cheques received and paid in the other column on each side.
This format allows for tracking both cash and cheque transactions simultaneously.
What does the second type of two column cash book record?
It records cheques received and paid in one money column on each side, and cash discount allowed and received in the other column on each side.
This type focuses on cheque transactions and cash discounts.
What is a three column cash book?
A cash book that records (a) cash received and paid in one column on each side, (b) cheques received and paid in one column on each side, and (c) cash discount allowed and received in the remaining column on each side.
This format combines cash, cheque, and discount tracking.
What is the purpose of a petty cash book?
To record the receipt and payment of small amounts of cash (loose cash).
Petty cash books are essential for managing minor expenses.
What is the imprest system?
A method for managing petty cash where a fixed amount is set aside for small, everyday expenses.
This system helps in maintaining control over petty cash spending.
What is bank reconciliation?
A process that matches the balance of cash in the bank with the balance of cash in the company’s own records.
This ensures accuracy in financial reporting and cash management.
What are timing differences in cash?
Timing differences occur when the company records transactions before or after the bank records the same transactions.
This can lead to discrepancies in cash balances.
List the reasons for differences between the cash book and bank statement.
- Unrecorded items
- Unpresented items
- Other adjustments
These factors contribute to variances in reported cash balances.
