Chapter 10 - Account System and VAT Flashcards
What are source documents?
Documents that feature in an accounting system
What are the two types of source documents
- Sales Cycle
- Purchase
What are the source documents in a sales cycle?
- Sales order: Received from customers, dealing with detailing goods required
- Goods delivery note: Goods sent to customer together
- Sales invoice: Sent to customer as request for payment
- Credit note: issued if customer is overcharged or if the goods returned
What are the source documents in a purchase cycle
- Goods received note completed: Goods received
- Purchase invoice: Received from supplier and matched to GRN
- Debit note: Issued in order to request credit note from supplier
What is a Nominal ledger?
Produce a trial balance and then a financial statement for a business
What does the nominal ledger contain?
Income
Expense
Asset
Liability
Capital balance
What is contained in a receivables ledger?
Each credit customer so the business can chase late payments
What does the payables ledger contain?
Separate ledger account for each credit supplier, allowing the business to ensure that they make payments to suppliers within agreed credit terms
What are examples of input for computerised accounting system
Source documents
Standing data
What are examples of Accounting system processes for computerised accounting system
- Calculations
- Ledgers
- Journal entries
- Record keeping
What are examples of outputs for computerised accounting system
- Trial balance
- Reports
What are inputs
- These documents trigger an accounting entry of an invoice to a customer
- Standing data (Master file data) reference data that does not regularly change such as the name and registered address of the business, credit limits, VAT registration number
What is real time processing?
Transactions are processed by the system as they are input
What are batch processing?
Processed later in one go
What is record keeping?
Records are maintained within T-Accounts. In electronic accounting system a ledger will be created and updated for each of these T accounts
What are journal entries?
Journal entry is simply a double entry entered into a system
What are the steps of electronic banking
- Data on transaction report uploaded on computerised accounting system
- Accounting system attempts to match transactions
- ‘Known’ transactions are automatically recorded
- ‘Unknown transactions’ are recorded in temporary account known as ‘suspense account’ will be reported on an exception report, to be investigated by the accountant
- Once identified suspense account is removed and transactions are recorded within the correct accounting period
What is petty cash?
Cash reserved for occasional odd items of expense. The cash is usually accounted for separately in a petty cash book
What is the imprest system?
- Business decides on the amount of cash to be held as ‘float’ and withdraws from the bank. THIS IS KNOWN AS PETTY CASH FLOAT
- Payments are made from the float, these are recorded in the petty cash book. All expenditure must be evidenced by an expense receipt which is attached to an expense voucher
- When the petty cash runs low, a cheque drawn to return the petty cash to the exact amount of the float. At this stage expense vouchers should be produced to the cheque signatory. The total of these will equal the cheque required.
Therefore, at any stage
Float = Cash in petty cash box + sum total of expense vouchers since last reimbursement
What is the petty cash book?
Amount paid into petty cash from the bank as well as analysing the nature of each item of expenditure
What are journal entries?
Way of presenting accounting double entry of transactions
What is value added tax?
- VAT is a form of indirect taxation
- A business registered VAT collects the tax on behalf of HMRC
- Output tax is charged on sales
- Input tax is paid on purchases and may be reclaimed
- If output tax exceeds input tax, the business periodically pays the excess to HMRC
- If input tax exceeds output tax, the business periodically reclaims the excess from HMRC
What are the double entries for VAT on sales?
Dr Receivable Amounts
Cr Sales
Cr VAT
What are the double entries for VAT on purchases/expenses?
Dr Purchases/expenses
Dr VAT account
Cr Payable account \
What are blocked items of VAT
- Purchase of motor cars
- Client entertaining expenses
How is VAT calculated on prompt payment discounts?
VAT initially calculated on the full sales prices.
If customer pays within discount period then VAT is adjusted
Can issue a credit note
