Chapter 3 Flashcards
What is a control account
A general ledger account that includes totals from the book of prime entry. This ensures the posting to the general ledger are complete and accurate
What does a control account show
Summarised totals of all trans affecting their ledger… same info as receivables and payables only they show totals rather than trans
What are control accounts mainly used for
Trade receivables (credit cuts) and trade payables (credit suppliers) and VAT
How is the accuracy of the general ledger and subsidiary accounts checked?
Be reconciling the balance on the control accounts in the former to the total of the balances on the latter
Receivable ledger control: b/d explain
Normally on left side as credit customer owe business money, therefore balance b/d is an asset
Receivable ledger control: c/d explain
Balancing figure which enables the totals on both sides of the T account to equal. Usually right hand side
Receivable ledger control: credit sales explain
Increase amount owed by credit customers, therefore debit entry posted to control account reflecting increase in asset
Receivable ledger control: bank explain
When credit customer pay the amount they owe, there is a decrease in the receivable ledger control account asset. Therefore entry on ride hand side
Payable ledger control: b/d explain
Right hand side as business owes money and therefore the balance is a liability
Payable ledger control: c/d explain
Totals both sides of T account usually on left
Payable ledger control: credit purchases explain
Increases liability as business owes, credit side of account
Payable ledger control: banks explain
When credit suppliers r paid what’s owed, there is a decrease in pcla liability. Left side of account
Payable ledger control: purchase returns explain
Purchase returns decrease liability as the business has returned the item therefore entry on left
Payable ledger control: discounts recieved explain
Amount owed to credit suppliers is partially settled through a discounts, this reduces the plca liability. Left hand side entry.
Why is a subsidiary ledger prepared
So that the business can see the amount owed from credit customers or suppliers at a point in time
What happens if the double entry in the ledger and the subsidiary have all been entered correctly ?
The total of the list of balances in the ledger will always equal the balance on the respective control accounts
What is a vat control accounts
Used for all transactions related to vat and allows the business to see how much is owed to hmrc or how much is due from them in a period of time
How is the vat control accounts used to establish what vat is owed or due
The input is deducted from the output
Vat control: b/d explain
Right hand side as liability as vat is usually owed to hmrc
Vat control: c/d explain
Total on both sides of T account
Vat control: sales explain
When business makes a sale it must collect VAT… therefore a sale increases liability
Vat control: cash sales explain
Increase in liability when a cash sale is made
Vat control: purchases explain
Reclaim vat on purchase so decrease in liability
Vat control: sales return explain
Vat liability goes down as sale is return so decreasing liability
Vat control: purchase return explain
Increase in liability as vat cannot be reclaimed if returning a purchase
Vat control: discounts allowed explain
If credit cuts takes PPD they owe less money so they owe they vat to hmrc ..debit on vat control
Vat control: discounts recieved explain
If a business has PPD, it will pay less so the vat reclaimable with decrease…credit
Vat control: bank explain
Payment relating to HMRC
