Lecture Seven Flashcards
What are t accounts usually recorded in
one nominal / general ledger
Problems with the nominal ledger
real businesses have a few diff ledgers
-if the business was any real size with loads of transactions would’ve been massive.
-loads of ppl needed to look after the book, gain accesses to bookkeep one book
-everyone would need to know the rules - lots of training
what was put into place to solve nominal ledger problems
books of original entry
what is books of oringal entry
separate book for different types =
solves the problem of b. different jobs allocated
-totals can be posted to the nominal ledger = solving the problems
6 main books of the books of oringial entry
- sales daybook
- purchase daybook
- returns inward daybook
- returns outward daybook
- cash books (x2)
- the journal
sales daybook
lists all sales made on CREDIT terms
what info is kept in example on sales daybook
date, name, invoice, £
what entered on the double entry for the sales daybook
DR Recieveables
cr sales
where are total sales on credit terms
debited to the recieveables control account
what is receivables control acc also known as
sales ledger control a/c, debtors ledger control ac
what do we need to reord in the sales daybook
what is due from each individual customer
where is the information ab what is due from individual customers recorded, what is it known as
in seperate set of individual customer acc- known as recievables ledger
what happens when invoice listed in sales daybook
single sided debit entry made in the individual customers account in the recievables ledger
What must be equal when the sales book is recorded
the balance on recievables control acc (made up of the nominal ledger acc) = to the total list of balances (which is the balanced customer acc and list balances)
What are the alternatives to this ystem about the sales daybook
the control acc is part of double entry
Purhcases Daybook?
Lists all the goods & services bought on the credit (not just purchases)
What is recorded in purhcases daybook
date, details, ref, total, purchases, gases, water
the double entry system for the purchases daybook
DR pUrchases
DR Gas
DR WATER
CR Payables control a/c
where is the totalm purchase daybook credited
to payables comtrol acc
paybales comntrol ac also known as
purchase ledger control ac
what must we record for the purchase daybook as well
what is owed to each indidual supplier
where would the invidual suplier owed amount be recorded?
sperate set of indivual supplier accounts known as payables ledger acc
what happens everytime invoice for purchase daybook listed
single sided CREDIT entrt made in the indidual suppliers acc, in the payables ledger
what must equal in the purchase credit daybook
balance on payables control account = total of list of balances
cash book?
purpose of two cash books
what are the two cash books
1- cash book,
2- petty cash book
what is cash book (1 of the books)
-contains bank transactions
what does the petty cash book contain
records payments made with notes and coins
what are the two sides of the cash books
recepits and payments
how many formats used for the cash books
various formats e.g. two collumn or three
what format used mainly for small businesses - cash book
columnar (or analysis)
data stored in cash book in recepits side
date, details, total, recepits from credit customer, cash sales, interest
whats the total posed to double entry in the cash book reciept side
DR cash at bank
CR recievables controll
CR sales
CR interest income
data stored in cash book in payments
date, details, total, payments to credit suppliets, rent, cleaning
whats the total posed to double entry in the cash book payment side
DR pyables control,
DR Rent
DR cleaning
CR Cash at bank
The journal
used for any transaction & adjustments that arent recorded in any other book of orignal entry e.g depreicatiomn and stuff that arent sales
example of double entry for tje journal of depreication
DR depreication expense
CR accumulated depreation
What are the two control accounts
1- recieveables control account
2- payables control account
what are the reasons for the two control accounts
1- keep no of accounts in the nominal ledger in a manageable size
2-provides a total balance for recievables/payables quickly rather then adding up hundred of customer/suplplier balances
3- provides a check on accuracy of enteies - reconsilliations can be perfomed regularly - can double check everything
4- can segregae duties between staff and can focus on different accounts
what does reconciliation mean
checking to make sure the total and receivables is equal to the total amount
Don’t want mistakes / errors
where could there be a difference that could arise an error
balance on receivables cotrol ac & total of list in the ledger
what may the differecnes between the control and ledger account arise due to
a- errors in recievale control acc
b- errors in personal acc in receliables ledger
c- errors in both control acc and recieavle ledger
control acc reconcilliations typical approach, what must they do to sort out the errors to make sure they equal
a- correct control acc
b- correct total list of balances
c-agree the corrected balance on the control acc w the corrected total list of balances
2- errors cud include transpostion errors, omissons or errors in additions
3- if total is added p wrong say: miss cast, over or undercast
debit entries for the payable control account
-returns outward
-payment to credit supplier
-discount recieved
-contras with recievables control
-balance c/d (end )
credit entries for payables control account
-balance b/d (start)
-good/services bought on credit
-refund of debit balance
–balance b/d
debit entries for recievables control account
-balance b/d
-sales on credit
-refund of credit balance
-interest charged on overdue debt
-dishonered cheque
credit entries for recieveables control account
-return inward
-bad debt written off
-cash recieved from credit customer
-discount allowed
-contras with payables control acc
-balance c/d(end)
what would irredemable preference shares be treated as
equity
what would redemable preference shares be treated as
liability
