Double entry book keepin Flashcards
Debit
left, gain
credit
right, loss
what to put in details
description of matter and cross reference the other account
how to record balance
DR balance if DR entries exceed CR and vice versa
how to record a bill issued
CR entry on income account (often called profit costs)
DR entry on client account (debt owed by client)
how to record payment of bill
receipt of cash
loss of debt
no entry on profit costs account (profit costs account only record bill issued. it does not show if the client has paid the bill)
what does the cash account record
payments in and out of the bank account
other names for the cash account
cash sheet or cash book
what entries can be seen in the petty cash account
record periodic receipts of cash from bank and payments made from petty cash
which accounts are not included in the ledger account
cash book and sometimes petty cash account
how many client ledgers will there be
Two - a client ledger for client account and a client ledger for firm account. these are often combined
how many cash accounts will there be
there must be one for client money and there is often one for firm money too. these are often combined.
how to record receipts of money
identify if it is client money or firm money
DR cash account (client side if client money and firm side if firm money)
CR client ledger (client side if client money and firm side if firm money)
how to record payment of money
CR cash account (client side if client money being used and firm side if firm money used)
DR client ledger (client side if client money and firm side if firm money)
how to record the firms professional charges / issue of bill
issue of bill:
DR client ledger professional charges (business section- because business pays until client meets costs)
DR client ledger VAT (business section- because business pays until client meets costs)
CR income ledger / profit costs
CR HMRC
other names for income ledger
profit costs, professional charges, professional fees
how to record disbursements
record as and when they are paid. don’t record the issue of a bill for disbursements.
is it client money or firm money when money is received in payment of professional charges for which a bill has been issued and for paid or unpaid disbursements for which a bill has been issued
firm money - pay into firm bank account
how to record cash transfer when money is withdrawn from client bank account and paid into business bank account
CR cash account (client section)
DR client ledger (client section)
DR cash account (business section)
CR client ledger (business section)
how to record inter-client transfers (aka paper transfers)
DR client ledger of client who money was originally held for (client section)
CR client ledger of client who money is now held for (client section)
how to record mixed receipts - split cheque
DR business portion to cash account business section
DR client portion to cash account client section
CR business portion to client ledger business section
CR client portion to client ledger client section
how to record mixed receipts - pay whole amount into client account then transfer business portion to business account
DR whole amount to cash account client section
CR whole amount to client ledger client section
CR firm portion from cash account client section
DR form portion from client ledger client section
DR firm portion cash account business section
CR firm portion client ledger business section
what special account entries use ‘different rules’ (use the original basic rules of CR loss and DR gain)
bad debts petty cash (cash into PC, payment for item out of PC and payment for client out of PC) agents professional charges
how to record a payment from bank account into petty cash
CR cash account business section
DR petty cash account
how to record a payment for items out of petty cash
CR petty cash account
DR appropriate ledger eg sundries
how to record payment for client out of petty cash
CR entry petty cash
DR client ledger business section
how to record payment to agent
Agents professional charges: CR cash account business section DR agency expenses account business section Agent VAT: CR cash account business section DR HMRC account business section Agent disbursements: CR Cash account business section DR client ledger account business section
how many elements are to be recorded when recording payment to agent
agents professional charges
agents VAT
agents disbursements
how to record commission from insurance companies
commission received account and a ledger account in the name of the insurance company
how to record a client who is a law firm
when a law firm uses another law firm as their agent there is a client ledger in the name of the instructing law firm and they are recorded like any other client.
if a law firm uses another law firm as their agent is the cost of the agent law firm recorded as a disbursement
no - it is an expense of the instructing firm who charge more to cover this expense.
when a law firm uses another law firm as their agent are disbursements recorded as normal? does it matter if the instructing law firm or agent law firm pays the disbursement
record disbursements as normal as and when they are paid. it doesn’t matter if the instructing law firm or agency law firm pays it.
how to record bad debts
CR client ledger account business section DR bad debt account record refund from HMRC: CR bad debt account with amount of VAT DR HMRC Account with amount of VAT
when is VAT relief available on a bad debt
when it has been outstanding for at least 6 months since payment was due.
if a firm receives a cheque made out to the client or a third party should it be paid into the firm bank account
no send it straight to client or third party
can you draw against a cheque that hasn’t cleared yet
yes but if it bounces you have breached the rules for drawing more than you hold and will have to make good the shortfall
what is abatement
when firm reduces costs following complaint from client
how to record abatement
reverse entries on profit costs, HMRC and client ledger accounts to the extent of the abatement.
Send a VAT credit note to the client.
