Chapter 18&19

Question 1

What are different ways for doing bank reconciliation?

Answer 1

1.Adjusting the cash book before performing the bank reconciliation statement
a. Starting with the adjusted cash book closing balance
b. Starting with the bank statement closing balance
2.Not adjusting the cash book before performing the bank reconciliation
statement
a. Starting with the unadjusted cash book closing balance
b. Starting with the bank statement closing balance

Question 2

Structure of Starting with the adjusted
cash book closing balance?

Answer 2

Bal per adjusted cash book
+Payment not yet presented
-Amount not yet credited
Bal per bank statement

Question 3

Structure of Starting with the bank
statement closing balance?

Answer 3

Bal per bank statement
+Amount not yet credited
- Payment not yet presented
Bal per adjusted cash book

Question 4

Structure of Starting with the unadjusted cash book closing balance

Answer 4

Bal per unadjusted cash book
+ Receipts not entered in the cash book
+Payments not yet presented
- Payment not yet entered in cash book
-Amount not yet credit
Bal per bank statement

Question 5

Structure of Starting with the bank statement closing balance

Answer 5

Bal per bank statement
+Payment not yet entered in cash book
+Amount not yet credit
- Receipts not entered in cash book
- Payments not yet presented
Bal per unadjusted cash book

Question 6

What is a sales ledger?

Answer 6

which contains all the personal accounts of credit customers. The personal accounts are also referred to as ‘debtors’ in the UK. The total of the credit customer balances is known as the ‘trade receivables’ of an entry

Question 7

What is a purchases ledger?

Answer 7

Which contains all the personal accounts of credit suppliers. The personal accounts are also referred to as creditors in the UK. The total of the credit suppliers balances is known as the ‘trade payables’ of an entity

Question 8

What is a general ledger

Answer 8

which contains all other accounts (also called the impersonal ledger). These comprise the nominal (i.e sales, purchases, wages and expense) accounts, capital and assets and liabilities other than trade receivables and trade payables.

Question 9

What is a control account?

Answer 9

• A control account is an account in the impersonal ledger which represents in total the entries in some other ledger (e.g. sales ledger control, purchases ledger control).
• Control accounts are written up periodically (usually monthly) from the totals of the relevant books of prime entry.
• The balances on the control accounts are entered in the trial balance for the impersonal ledger.

Question 10

Structure of Proforma Sales Ledger Control

Answer 10

Layed out as a T account

On the left:
- Balances b/d
- Credit sales
- Returned payments/cheques
- Interest charged
- Balance b/d

On the right:
- Monies received
- Cash discount allowed
- Sales returns
- Irrecoverable Debts written off
- Set-off/contra entries
-Balance c/d

Question 11

Structure of Proforma Purchase Ledger Control

Answer 11

Layed as a T structure

On the left:
- Payments made
- Cash discount received
- Purchases returns
- Set-off/contra entries
- Balance c/d

On the right:
-Balance b/d
- Credit purchases
- Interest Charged
- Balance b/d

Question 12

What is the Purposes of control accounts ?

Answer 12

• To provide a check on the accuracy of the ledger it represents.
• The balance on the control account should equal the total of the balances of the accounts in the personal ledger.
• If so, this proves the arithmetic accuracy of the ledger, and that all the entries are on the correct side.
• To facilitate the location of errors highlighted in the trial balance by pinpointing which personal ledger (or control account) is likely to contain the error(s).

Question 13

What is the location and correction of errors using control accounts

Answer 13

• An error in a book of prime entry will result in an error in the relevant control account and the nominal
  account containing the double entry (e.g. under or overcast total of a day book).
• It may also result in an error in the relevant personal ledger (e.g. the amount of an invoice entered
  incorrectly in a day book).
• An error in a personal account will not affect the
  control account.

Question 14

What is the Purposes of control accounts ? (Part 2)

Answer 14

• To deter fraud and the misappropriation of cash.
• To facilitate the preparation of
  monthly/quarterly/annual final financial statements since the total values of the trade receivables and trade payables are immediately available in the control
  accounts.