Second 1 -6

Question 1

What is the typical information on a receipt issued to a customer?

Answer 1

The name of the trader;
The trader's VAT number (if applicable);
The date of the transaction;
The value of each item sold;
The total value of the transaction.

Question 2

What is a debit card transaction?

Answer 2

Money is transferred from the customer’s bank account to the supplier’s bank account.

Question 3

What is a Credit card transaction?

Answer 3

Electronic transfer directly to the supplier’s account but the customer owes the money to the bank supplying credit.
A minimum amount payment must always be made by the customer to the bank.

Question 4

What is a charge card transaction?

Answer 4

The cardholder charges Goods and services against the card held. The charge card company then pays the trader.
On receipt of a statement, the cardholder must pay the outstanding balance in full.
Some companies issue charge cards to staff to be used by staff against work-related expenses.

Question 5

What is EFTPOS?

Answer 5

Electronic Funds Transfer at the Point Of Sale.

It’s one of the two methods if processing and documenting card transactions. Four digit pin is required.

Question 6

What is the manual system of processing and documenting card transactions?

Answer 6

Four-part carbon paper form will be filled in conjunction with a Zip Zap Machine or Imprinter.

Question 7

What information is needed in telephone Payment?

Answer 7

Name on the card;
Card Number;
Expiry date;
Card issue number (if applicable);
Card security code (the last three digits of the number on the back of the card).

Question 8

What is BACS?

Answer 8

Banker’s Automated Clearing System.
Used mainly for wages and salaries. The bank must have the details of the payee’s bank account. It has a three-day cycle.

Question 9

What is a CHAPS transaction?

Answer 9

Clearing House Automated Payment System.

Used for high-value, same day transfers. Mainly used by solicitors.

Question 10

What is a Sanding order and direct debit transactions ?

Answer 10

Method for making payments on an ongoing basis.
Standing orders are for fixed amounts on an ongoing basis;
Direct debits are for a determined amount that is split into smaller amounts and paid for a defined period of time.

Question 11

When posting from the Day Book, to which accounts go each total?

Answer 11

The invoice total goes to the control accounts;
The VAT total goes to the VAT account;
And the net goods total goes to the Sales/Purchase account.

In the analysis accounts, the invoice Totals are posted.

Question 12

How is a reconciliation carried out?

Answer 12

First, balance the control accounts on the GL and all the subsidiary/analysis accounts.
Total all the balances on each subsidiary Ledger.
Compare these totals to their corresponding control account.

Question 13

Where can errors arise when reconciling accounts?

Answer 13

There are three places where an error may occur:
Control Accounts;
Individual Accounts;
Preparing (extracting) the list of balances.

Question 14

What type of errors may have occurred when a reconciliation shows discrepancies?

Answer 14

Addition errors;
Posting errors of amounts;
Category errors;
Extraction errors;
Error of complete omission;
Compensating error.

Question 15

What is the Journal?

Answer 15

A book of prime entry which does not form part of the double-entry system but serves as a tool to record adjustments.
Entries are made in double-entry terms: the Debit entry is traditionally posted first.
A short description of the entry is made and is often referred to as the narrative. The narrative often starts with the word “being”.

Question 16

How is a cash reconciliation prepared?

Answer 16

The total amount of money held is counted and this number is compared to the total shown in the cash Book.

Question 17

What is the bank reconciliation?

Answer 17

It’s a comparison of the bank balance shown in the cash Book (CB) with the balance shown in the Bank Statement (BS)

Question 18

State some reasons why the balances on the CB and BS statement may differ.

Answer 18

Not all payments are made by cheque.

Not all receipts are made of cash or cheque.

Question 19

Name a few reasons for timing differences regarding bank reconciliations.

Answer 19

Unpresented cheques;

Outstanding Lodgements.

Question 20

What is the purpose of the bank reconciliation?

Answer 20

To bring the cash Book and the Bank statement into agreement.

Question 21

List the steps to be taken during the bank reconciliation.

Answer 21

Balance the cash Book at the date at which the BS is made up;

Enter the closing CB and BS balances on the Bank Reconciliation Statement (BRS);

Check if the opening CB and BS balances agree. (Highly unlikely)

Tick the receipts and then payments in the CB against the corresponding receipts and payments on the BS. Remember that the CB and BS are mirror images.

Adjust the cash Book for any un-ticked posting. This should make both sides equal.

Question 22

What is Credit control?

Answer 22

A system set up to maintain the cash flow of the business by ensuring that debts owed for goods supplied are converted into cash asap.

Question 23

What is the purpose of credit control?

Answer 23

To ensure Credit is extended only as much as customer is able to pay;

Ensure that payment is received within the agreed timescale.

Question 24

List the stages in a self-managed Credit control system.

Answer 24

Setting credit terms (normally 30 days from the invoice date).

Setting credit limits (i.e. The maximum amount a supplier will allow a customer to owe for goods on credit)

Question 25

List the three methods companies could use to determine the credit limit for a prospective customer.

Answer 25

Fixed (cases in previous trading);

Credit references (requested from other companies with which the prospective customer has previously traded and received credit)

Credit agencies.

Question 26

What should be done if the Credit worthiness of a customer is in doubt?

Answer 26

Stop further orders;

Check if the company is still trading;

Advise the company that they are close to their credit limit and that further order will have to be on a cash bases only;

Check if there has been a dispute on an outstanding payment, particularly if there has been a gap in trading.

Question 27

List the features of a good credit control system.

Answer 27

Invoices prepared correctly and dispatched promptly

The regular issue of statements to customers

Maintaining a progressive procedure for the collection of all outstanding debts.

Question 28

Define a good progressive procedure for the collection of all outstanding debts.

Answer 28

Stage 1- Sending out a monthly statement of account

Stage 2- Telephone call followed up, if necessary, with a letter advising that payment is overdue

Stage3- letter threatening legal action if payment is not received

Stage 4- take legal action if payment is not received within time specified.

Question 29

What will a statement of account include?

Answer 29

Name of supplier

Name of customer

Date of the statement

Account reference number, if used

Dates of invoices/credit notes issued

Balance brought forward from any previous statements

Amounts which increase the debt owed to the supplier i.e. invoices in a Debit column

Amounts which decrease the debt, i.e. payments received, discounts allowed, or credit notes issued in a credit column

The amount due at the end of the month, repeated at the bottom of the balance column.

Question 30

What is a aged debt analysis?

Answer 30

A Statement, or report, showing the period for which trade debts have been outstanding it is often used for the purpose of identifying slow payer or bad debt.

Question 31

What is the typical layout of the Aged Debtor Analysis?

Answer 31

Customer name

Credit limit

Total owed

A breakdown, on a monthly basis, of outstanding debts (which may be used as a basis to decide what, if any, action should be taken)

Question 32

What are the warning signs indicating possible difficulty in collecting debts?

Answer 32

Payments on account (a general payment which does not relate to any specific invoices)

Late payments, particularly if the customer is wont to pay on time

A sudden decrease in the value of purchases by a customer, particularly if there is old debt outstanding

Other info e.g. adverse press reports or information from other traders

Question 33

What should be done when a supplier statement and the Postings on the purchases Ledger show differences?

Answer 33

A statement reconciling the two balances, and explaining the differences, should be prepared.

Question 34

What is the major reason for different records, in supplier statements?

Answer 34

Timing differences

Question 35

In supplier statement reconciliation, what wording should be used if an invoice is missing in the Ledger?

Answer 35

Add Invoice 1234 not received.

Question 36

In supplier statement reconciliation, what wording should be used if a payment is shown with different values in the documents?

Answer 36

Add query re invoice 1234

Question 37

Why should a business pay its credit suppliers on time?

Answer 37

To avoid a loss of credit worthiness.

To avoid missing the opportunity for a PPD.

Question 38

What points should be considered when identifying invoices falling due for payment?

Answer 38

Taking advantage of the maximum period of credit (in view of good cash flow)

Taking any PPD on offer

Keeping with supplier’s terms of trade

Making payments within the framework of a cheque run system e.g. Every week or two weeks

Making payments using the most appropriate method.

Question 39

What should always accompany the payment of invoices?

Answer 39

A remittance advise

Question 40

How long does the cycle of BACS payments last?

Answer 40

Three days:

Day 1 - A list of payees is submitted with bank account details (account number and sort code) and the amount to be paid;

Day 2 - Payment instructions are processed overnight for distribution billy the banks

Day -3 The payer’s account is debited with a single entry covering the value of all the payments. At the same time, the different accounts paid into are credited.