Control Accounts

Question 1

What are control accounts?

Answer 1

Control accounts are prepared to check the accuracy of recordings in the financial statements.

Question 2

Most common control accounts?

Answer 2

• Receivable control accounts
• Payable control accounts
• Bank reconciliation statement

Question 3

What is the use of the sales ledger control account?

Answer 3

to cross check balances in the receivables accounts.

Question 4

What necessitates reconciliation of control accounts?

Answer 4

When the accounts don’t balance.

It points to errors in acconting entries

Question 5

What is the purpose of bank reconciliation

Answer 5

To bring into alignment the balances of the bank statement and the cashbook.

Question 6

Items that may cause a difference between the balances

Bank Charges

Answer 6

Bank charges for services rendered

Question 7

Items that may cause a difference between the balances

Standing Orders

Answer 7

Instructions that an account holder will give to the bank to make fixed regular payments at stated dates to specific persons or companies.

Question 8

Items that may cause a difference between the balances

Direct Debits

Answer 8

Instructions given by a business to its creditors to directly obtain money from the business’ bank account.

Question 9

Items that may cause a difference between the balances

Credit Transfers

Answer 9

Amounts directly transfered into a business’ bank account by several people such as; customers.

Question 10

Items that may cause a difference between the balances

Unpresented Cheques

Answer 10

These are cheques issued by a business to its payables but have not been presented to the bank.

Henceforth, they are recorded in the cashbook but do not appear on the bank statement.

Question 11

Items that may cause a difference between the balances

Uncredited cheques/Outstanding bank lodgements

Answer 11

These are cheques or amounts deposited to the bank but the bank is yet to clear them.

They will be recorded in the cashbook but do not appear on the bank statement.

Question 12

Items that may cause a difference between the balances

NSF/Dishonored cheques

Answer 12

These are cheques that the bank has denied to clear for various reasons.

They will be recorded in the cashbook but because the bank denied them they do not appear on the bank statement.

Question 13

Items that may cause a difference between the balances

Errors

Answer 13

Errors committed by the accountant in the cashbook should be corrected in the adjusted cashbook

Errors committed by the bank should be corrected in the bank reconcilitation statement.

Question 14

Items that may cause a difference between the balances

Wrong Debit and Wrong Credit

Answer 14

Wrong debit is when the bank wrongly debits your account
wrong debits go with uncredited cheques

Wrong credit is then the bank wrongly credits your account
wrong credits go with unpresented cheques

Question 15

What are the factors that will influence the frequency of the preparation of the bank reconciliation statement?

Answer 15

• Frequency and volume of transactions - where there are more transactions the likelihood of error is greater.
• Number of bank accounts - the greater the number of bank accounts operated the more difficult it is to perform regular reconciliations
• Cashflows - reconciliation should be performed as often as information is required on the cash balance
• Other Controls - if there are few other checks the greater the need for bank reconciliation.

F.O.N.C

Question 16

What purpose does bank reconciliation serve?

Answer 16

• Recognising and identifying appropriate expenditures or receipts made directly by the bank
• Ensuring that Banks’ claims for reimbursement are not duplicated
• Detecting possible misappropriation of funds
• Analysing the difference between the cashbook and the bank statement
• Detecting and correcting errors committed by the bank or cash office.

R.E.D - A.D.