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aat level 2 > principles of bookkeeping > Flashcards

principles of bookkeeping Flashcards

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1
Q

developments in technology have caused a increase in the use of what

A

plastic cards( debit and credit)
BACS

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2
Q

developments in technology have caused a decline in the use of what

A

cash , cheques

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3
Q

when writing a check u must make sure these details are correct

A
  • the date
  • the name of the person or business receiving the money
  • the amount in words
  • the amount in figures
  • authorized signature
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4
Q

BACS Stands for

A

Bankers, Automated, Clearing, Services

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5
Q

standing orders are used for

A

making regular payments of the same amount

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6
Q

CHAPS stands for

A

Clearing House Automated Payments System

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7
Q

a cheque

A

is an instruction in writing, signed by the bank’s customer (who is the paying money), telling the bank to pay an amount to a named person or business

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8
Q

a debit card is

A

a card which can be used for purchases and cash withdrawals; payment is normally taken from the bank account on the next working day

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9
Q

a electronic bank transfer is

A

a term used to describe the electronic transfer of funds through the banks computer system

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10
Q

a direct debit is

A

variable date and amount BACS payments set up by a business receiving the payments through their bank

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11
Q

a current account is

A

an account with a bank into which money can be paid from which payments can be made

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12
Q

payments into the bank are know as

A

credits

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13
Q

payments out of the bank are know as

A

debits

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14
Q

features of an overdraft

A
  • a arrangement that allows you to go overdrawn
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15
Q

normal cost of having a business bank account

A
  • bank service charges for operating the account
  • interest payable on overdrawn balances
  • fees for setting up and renewing an overdraft
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16
Q

how cash works with the bank

A

notes and coins are withdrawn, it immediately leaves the bank

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17
Q

how bank draft works with the bank

A

‘as good as cash” cheque’s issued by the bank, it immediately leaves the bank

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18
Q

how CHAPS payments work with the bank

A

large amount electronic transfer, it immediately leaves the bank

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19
Q

how faster payments work with the bank

A

electronic transfer processed by banks, it immediately leaves the bank

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20
Q

how BACS payments work with the bank

A

electronic transfer processed by BACS set up on BACS system 3 days before the actual money transfer, reduction in bank balance on the same day as the transfer reaches the account receiving payment

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21
Q

how debit cards work with the bank

A

card used for businesses expenses, normally taken from the account on the next working day

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22
Q

how cheque’s work with the bank

A

payment relies on an issued cheque, one working day after the cheque is cashed

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23
Q

how credit cards work with the bank

A

card used for businesses expenses, monthly payments of the previous month’s expenses made on the card

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24
Q

an overdraft is

A

an arrangement with a bank to allow short-term borrowing on a current account

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25
Q

an overdraft limit is

A

the amount which a bank will allow a customer to borrow on an overdraft

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26
Q

a same-day deduction is

A

where a payment made by a business is deducted from the bank account on the same day

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27
Q

the difference that need to be found between the bank statement and cash book are

A

timing differences
updating items for the cash book

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28
Q

the two main timing differences between the bank columns of the cash book and bank statements are

A

unpresented cheques and outstanding lodgments

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29
Q

unrepresented cheques are

A

cheques issued, not yet recorded on the bank statements

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30
Q

outstanding lodgments are

A

amounts paid into the bank not yet record on the bank statement

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31
Q

receipts (money in) are

A
  • electronic receipts, including BACS direct debits, faster payments and CHAPS payments
  • bank interest received
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32
Q

payments (money out) are

A
  • electronic payments made by the bank
  • bank charges and interest paid
  • unpaid cheques deducted by the bank
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33
Q

bank reconciliation is carried out by

A
  1. tick of item that are in both cash book and bank statements
  2. the unticked items on the bank statement are entered into the cash book
  3. the bank columns are now balanced
  4. the remaining unticked will be timing difference
34
Q

common control accounts are

A
  • recivables ledger control account
  • payables ledger control account
  • value added tax control account
35
Q

an irrecoverable debt written of is

A

is a debt owing to a business which it considers will never be paid

36
Q

set off/ contra entries are

A

occur when the same person or business has a subsidiary account in both the receivables ledger and the payables ledger

37
Q

the totals for the receivable ledger control account comes from

A
  • total credit sales (include vat) from total column of sales day book
  • total sales return (include vat) from total column of sales return day book
  • total payments received by customer - from total column of the analysed cash book
  • total discounts allowed - from total column of discounts allowed day book
  • irrecoverable debts - from the journal
38
Q

the first thing to do when dealing with discrepancy’s is to establish

A
  • is the balance of receivables ledger control account greater than the total of the balance of the subsidiary accounts in receivable ledger
  • is the total balances of the subsidiary accounts in receivables ledger greater then the receivables ledger control account
39
Q

Vat returns show

A
  • the money amount due to be paid by the business when VAT collected from sales is greater then the VAT paid on purchases
  • the money amount due as a refund from HM Revenue & Customs to the business VAT collected from sales is less then the VAT paid on purchases
40
Q

control accounts are

A

a ‘masters’ account which controls a number of subsidiary accounts

41
Q

receivables ledger control account are

A

the general ledger account which controls the receivable ledger

42
Q

payables ledger control account are

A

the general ledger account which controls payables ledger

43
Q

value added tax control accounts are

A

the general ledger account which brings together totals of VAT from the books of prime entry

44
Q

set off / contra entries are

A

where balances in the receivables ledger and the payables ledger are set of against one another

45
Q

What is aged trade receivables/payables analysis

A

A summary of each customer/supplier balance analysed into columns showing how long the amounts have been outstanding

46
Q

the purpose of the journal are

A
  • to provide a book of rpime entry for non-regular transactions
  • to reduce the risk of fraud
  • the esnure entries can be traced back to an authorised financial document
47
Q

an irrecoverable debit is

A

a debt owing to a business which it conciders will never be paid

48
Q

for the inrecoverable debts account u

A

debit the ammount

49
Q

for the value added tax account you

A

debit the ammount

50
Q

for recievable ledger controll account

A

credit the ammount

51
Q

payroll transactions are

A

the accounting entries which record wages and salaries piad to employees

52
Q

payroll tranasations require journal and and accouting entries for

A
  • gross pay
    -net pay
  • income tax
  • employers and employee NIC
  • employers and employee pension contrubutions
53
Q

accounts used in payroll transaction

A
  • bank
  • wage control accounts
  • wages expense
  • hm revenue and customs
  • pension fund
54
Q

the wages control account contains

A

all payroll transactions

55
Q

the wages expense account contains

A

gross pay, employer’s National insurnce pnsion controbution, volentary donations

56
Q

hm revnue and custom account contains

A

income tax (PAYE) and employee and employers NIC

57
Q

pension fund account contains

A

pension contrubution from employee and employer

58
Q

voluntary deductions conains

A

voluntary deductions from employees

59
Q

the journal entries are as follows

A
  1. record the wages expense
  2. record the net pay
  3. record the liability to HM revenue and customs
  4. record the liability to the pension fund
  5. record the liabiity for voluntary deductions
60
Q

the journal is a book of

A

prime entry

61
Q

an initial trial balance is extracted for the purpose of

A

checking the accuracy of the double entry bookkeeping

62
Q

a trial balance is

A

a list of the balances of every account from general ledger, distinguishing between those accounts which have debit balances and credit balances, theses are totaled to show that debits equal credits

63
Q

certain accounts always have debit balances, debit balances are assets and expenses, and include

A
  • purchases account
  • sales return account
  • non-current assets accounts
  • inventory account
  • expenses accounts
  • drawings account
  • receivables ledger control account
  • petty cash accounts
  • cash account
64
Q

the non-current assets account contains

A

premises
motor vehicles
machinery
office equipment

65
Q

the inventory account contains

A

the inventory valuation

66
Q

expenses account contains

A

wages
telephone
rent paid
discount allowed

67
Q

certain accounts always have credit balances, credit balances are liabilities, income and capital, and include

A
  • sales account
  • purchases returns account
  • income accounts
  • capital accounts
  • loan accounts
  • payables ledger control account
68
Q

the income accounts contain

A
  • rent received
  • commissions
  • fees received
  • discount received
69
Q

value added tax will be a debit when

A

vat is due to the business

70
Q

value added tax will be a credit when

A

the business owes VAT to HM revenue and customs

71
Q

the procedure to finding error’s is

A
  • check the addition of the trial balance
  • check balances have been entered correctly
  • check all accounts have been included
  • calculate the amount is out by and they to find that amount
72
Q

error of omission is

A

when a financial transaction has been completely left out from the accounting records

73
Q

error of commission is

A

a transaction is entered into the wrong account

74
Q

wage expense

A

is when it comes from the employer

75
Q

error of principle is

A

when a transaction has been entered in the wrong type of account

76
Q

error of original entry is

A

when the wrong amount is entered

77
Q

reversal of entries is

A

when the debit and credit have been put on the wrong side of the accouns

78
Q

compensating error is

A

when 2 errors cancel each other out

79
Q

Money goin into an account for assets or expenses is a

A

debit

80
Q

Money going out an account for assets or expenses is a

A

credit

81
Q

money going into a account for liabilities or income is a

A

credit

82
Q

money going out a account for liabilities or income is a

A

debit

aat level 2 (3 decks)

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