Chapter 3

Question 1

What is a control account

Answer 1

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

Question 2

What does a control account show

Answer 2

Summarised totals of all trans affecting their ledger… same info as receivables and payables only they show totals rather than trans

Question 3

What are control accounts mainly used for

Answer 3

Trade receivables (credit cuts) and trade payables (credit suppliers) and VAT

Question 4

How is the accuracy of the general ledger and subsidiary accounts checked?

Answer 4

Be reconciling the balance on the control accounts in the former to the total of the balances on the latter

Question 5

Receivable ledger control: b/d explain

Answer 5

Normally on left side as credit customer owe business money, therefore balance b/d is an asset

Question 6

Receivable ledger control: c/d explain

Answer 6

Balancing figure which enables the totals on both sides of the T account to equal. Usually right hand side

Question 7

Receivable ledger control: credit sales explain

Answer 7

Increase amount owed by credit customers, therefore debit entry posted to control account reflecting increase in asset

Question 8

Receivable ledger control: bank explain

Answer 8

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

Question 9

Receivable ledger control: sales return explain

Answer 9

Decrease asset as they no longer owe money to business. Entry on right hand side

Question 10

Receivable ledger control: discounts allowed explain

Answer 10

If amount owed by credit customers are partially settled through discounts allowed, the reduces rlca asset. Entry right side

Question 11

Payable ledger control: b/d explain

Answer 11

Right hand side as business owes money and therefore the balance is a liability

Question 12

Payable ledger control: c/d explain

Answer 12

Totals both sides of T account usually on left

Question 13

Payable ledger control: credit purchases explain

Answer 13

Increases liability as business owes, credit side of account

Question 14

Payable ledger control: banks explain

Answer 14

When credit suppliers r paid what’s owed, there is a decrease in pcla liability. Left side of account

Question 15

Payable ledger control: purchase returns explain

Answer 15

Purchase returns decrease liability as the business has returned the item therefore entry on left

Question 16

Payable ledger control: discounts recieved explain

Answer 16

Amount owed to credit suppliers is partially settled through a discounts, this reduces the plca liability. Left hand side entry.

Question 17

Why is a subsidiary ledger prepared

Answer 17

So that the business can see the amount owed from credit customers or suppliers at a point in time

Question 18

What happens if the double entry in the ledger and the subsidiary have all been entered correctly ?

Answer 18

The total of the list of balances in the ledger will always equal the balance on the respective control accounts

Question 19

What is a vat control accounts

Answer 19

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

Question 20

How is the vat control accounts used to establish what vat is owed or due

Answer 20

The input is deducted from the output

Question 21

Vat control: b/d explain

Answer 21

Right hand side as liability as vat is usually owed to hmrc

Question 22

Vat control: c/d explain

Answer 22

Total on both sides of T account

Question 23

Vat control: sales explain

Answer 23

When business makes a sale it must collect VAT… therefore a sale increases liability

Question 24

Vat control: cash sales explain

Answer 24

Increase in liability when a cash sale is made

Question 25

Vat control: purchases explain

Answer 25

Reclaim vat on purchase so decrease in liability

Question 26

Vat control: sales return explain

Answer 26

Vat liability goes down as sale is return so decreasing liability

Question 27

Vat control: purchase return explain

Answer 27

Increase in liability as vat cannot be reclaimed if returning a purchase

Question 28

Vat control: discounts allowed explain

Answer 28

If credit cuts takes PPD they owe less money so they owe they vat to hmrc ..debit on vat control

Question 29

Vat control: discounts recieved explain

Answer 29

If a business has PPD, it will pay less so the vat reclaimable with decrease…credit

Question 30

Vat control: bank explain

Answer 30

Payment relating to HMRC