Day 4 - Chapter 10 Flashcards
Sales cycle
sales order received from customer detailing goods required
goods sent to customer together with a goods delivery note
sales invoice - sent to customer as request for payment
credit note sent - if customer is overcharged or goods returned
Purchase Cycle
purchase order sent to supplier as a request for goods
goods received note completed
purchase invoice received from supplier and matched to goods received note
debit note - request credit note fro, supplier
What is a source document?
eg. sales invoices - credit sales
purchase invoices
Credit Sales Invoice
Sales Day Book (SDB)
- totals all SI for each day
totals posted daily to computerised general/nominal ledger
eg.
DR trade receivable - control
CR sales
Credit Purchases Invoice
Purchase Day Book (PDB)
- totals all PI for each day
totals all PI for each day - totals posted daily to computerised GL/NL
eg.
DR purchases
CR trade payables - controls
What is a payables/receivables memorandum a/c?
Reminders of how much our credit customers owe us at any given point in time
+
how much we owe credit suppliers at any given point in time
What is the journal entry for when you send a sales invoice?
DR trade rec
CR sales
Purchase Invoice Journal Entry
DR purchases
CR trade payable
What is the cash book?
book of prime entry
record of business banks transactions
its both a prime entry and the bank nominal ledger account - its a day book and forms part of the double entry
What do you record in the cash book?
record cash receipts and cash payments
to analyse cash receipts and payments into relevant catagories
Possible exam approach fro question one
- list all balances from initial TB
add extra blank lines at the bottom
make sure Drs + Crs are the right way round
write in the DR and CR for each line - adjustments
- final TB
initial TB bals +/- adjustment = final TB balances
What are the two types of VAT?
output and input VAT
What is Output VAT?
charged on sales
What is Input VAT?
paid on purchases and may be reclaimed
What happens if output tax exceeds input tax?
net HMRC liability - business periodically pays excess to HMRC
What happens if Input Tax exceeds Output Tax?
net HMRC rec - business periodically reclaims the excess from HMRC
What is VAT?
no expense to income
How do you calculate VAT?
net selling price (VAT exclusive price) - 100%
VAT - 20%
Gross selling price (VAT inclusive price) = 120%
What is the gross selling price?
net selling price + VAT
What does VAT equal to?
20% x net selling price
What do we do when we are provided with the gross (VAT inclusive) figure?
we take 20/120 or 1/6 to arrive to the VAT amount
VAT = 1/6 x Gross Selling Price
What do we do when we are provided with the net (VAT exclusive) figure?
we take 20% to arrive to the VAT amount
What are the double entries for VAT on sales?
DR receivables account - Gross
CR Sales - Net
CR Vat account - Output VAT
What are the double entries for VAT purchases/expenses?
DR purchases/expenses - Net
DR VAT account - Input VAT
CR Payables account - Gross
What can you not claim input VAT on?
purchase of motor cars
client entertaining expenses
