Lecture Eigh Flashcards
what will there be between the balance on the businesses cashbook and the balance on the bank statement
a difference
Why would there be a difference between businesses cashbook and the balance on the bank statement:
1- errors in cashbook
2- ommissons from cash book e.g. bank charges, direct debits etc that havent been yet recoreded
3- errors made by bank
4- uncleared depost: money paid by bank not in bank statement yet
5- unpresented cheques = payments often cheques that havent appeared on statement
what is dishonoured cheque
are when customer hasn’t got the money so need to cancel check
how do u know if bank reconciliation is sucessfull
all differences have been identified
whats the process of bank reconciliation
1- Tick off items that appear in both cashbook & bank statement
2- Update the cashbook for any errors or omissions
3- inform the bank of the errors the bank made
4- any remaining differences are timing differences that will be shown on the reconciliation statement itself
i- uncleared deposits
ii- unpresented cheques
when would cashbook be higher then bank
if havent cleared deposits,
is there differences in the double entry for bank statements
-bank statement shows credit balance
-the bank is using the exact same account. e.g. it’s a liability to the bank, why it shows a credit
=debit and credit are reversed in the bank statement,
-when overdrawn will show debit (asset to bank)
what is the importance of regular bank reconcilliation? what does it do
it is essential to internal control that will:
1- indenfity errors in businesses cashbook
2- highlight errors made by the bank
give the business more confidence in the accuracy of many of its other accounts
how often must reconcilliation be perfomed
monthly weekly or even daily
Can correcting errors in ledger accounts be deleted
No they cant be crossed out or deleted
where should the ledger errors be corrected
in the journal entry
how should u work out how to correct ledger ac errors
a- what entries were made?
b-what enteries shud have been made?
c-examine a&b determine what correction needed
what are the two types of error?
errors affecting the balancing of TB/ others will
what categories are split of errors that WONT affect the balancing of the TB
a- errors of omisson
b- duplication errors
c-errors of commission of principle
d- errors of original entry
e- complete reversal of entry
what does errors of commission of principle
posting to the wrong account e.g. electricity
what does errors of commission of principle
completely wrong category
What ledger errors do affect the balancing of the tb
a- entering only 1 side of transcation ( debit no credit)
b-one figure for debit diff for credit
c-two debits no credit, two entries on one
d-make mistake balancing off,(addition)
e-list figures on trial balance wrong, extracting errors when preparing
suspense account?
when theres a mistake when affectin the balacing of tb (temp account - used when theres a problem forcing it to be okay until its sorted)
-nominal ledger acc, debit/credit is help temp until have sufficent info to correct account
one example of when suspense account needed
-go out of balance, post difference to suspense
-use it bc can take days to correct mistakes, gives a ballpark figure of total errors
another scenario of when to use the suspense account
transaction dk how to record it e.g. don’t know the credit = pit credit in suspense
e.g. received money but dk who from
do all errors affect profit
no some but not all
when would errors NOT affect profit
if correcting journal: only inolving assets, liabilities, capital , suspense
when WILL the error affecr profit
if correct journal including entry to income/expenses
