Making payments

Question 1

what are the certain checks that need to be made before making any payments from the company’s bank account? (4)

Answer 1

• check all the relevant documents. the purchase should match the deliver note and the good received note which should match the invoice
• if goods are retuned then a credit not must have been received before payment
• payments must be adjusted for any discounts, the invoice will show the discount but you must calculate the amount
• all payments must receive the necessary authorisation

Question 2

what is a cheque requisition form?

Answer 2

when there are less regular payments being made so payments may be requested through a cheque requisition form, for items like equipment or reimbursement

also remember a cheque should be accompanied by a remittance advice

Question 3

what is bank giro credit?

Answer 3

this allows money to be paid at one bank or branch and processed through a clearing system, like a cheque clearing system. bank giro credit is digital so removes the risk associated with cheques

Question 4

when can BACS autopay be used?

Answer 4

to pay multiple accounts or standing orders, this can be used for wages or paying suppliers and the money is automatically transferred to the bank and account name supplied

Question 5

how to record payments in the cash book?

Answer 5

receipts go on the left (debited) and payments on the right (credited) chapter five focused on receipts this chapter is for payments

payments layout is very similar to receipts as it also has an analysed cash book for payments and has the following columns: ‘bank’ ‘VAT’ ‘cash purchases’ ‘payables ledger control’ and ‘other expenses’

Question 6

how to complete the double entry for making payments (payments side)? (receipts side found in chapter five )

Answer 6

exactly like sales but all the entries will be made in the opposite side (debited) entries in the purchases account, VAT account, payables ledger control account and other expenses account as well as updating the payables ledger and the customer accounts and then balance the individual accounts

Question 7

what is a contra

Answer 7

a supplier could also be a customer so we could set off our outstanding amount with their outstanding amount if both we and they agree, so if we owe a customer £800 and they owe us £600 then we can contra meaning we have £200 left to pay however it will be entered as £600 in both the receivables and payables ledger in the customer account with the detailing of the opposite ledger so in the customer account in the payables ledger the details will be ‘contra (rl)’ with the amount of £600 (debited and then credited in the receivables ledger)so then we will calculate that we have £200 left to be paid but it wont be stated
these account may be subsidiary accounts so we should also update the control accounts as this is where we get the figures to post to the general ledger.

its also good to remember that which side the contra goes on, in the receivables ledger and the receivables ledger control account the contra will always be on the credit, and then on the debit side on the payables ledger and payables ledger control account.