Topic 14: Incomplete records (Single Entry) Flashcards
Evaluate keeping double entry records
ADVANTAGES
1. Structured record system that provides detail. Therefore; it is easier to check for errors and omissions. Easy to validate figures because documents provide proof. Easy to check on employees work e.g., via control accounts. As a result, we can avoid errors & possible fraud.
- Availability of up-to-date information e.g., trade receivables’ and trade payables’ balances.
- Enables systematic analysis of data, financial analysis, comparisons over time, comparisons with other firms. Therefore; helps short-term decision making and long-term planning. E.g., did we achieve the budgeted sales? Should we advertise? Should we expand? etc.
- Enables the operation of a credit control system.
- Easy to produce final accounts and eventually save on Accountancy fees.
- Tax Authorities require a full set of Financial Statements
DISADVANTAGES
1. Time and cost of setting up and operating the double entry system.
- Need accounting knowledge or hire an accountant incurring an additional cost.
What can you figure out when you do a cash account?
The cash closing balance (or other missing items)
What can you figure out when you do a bank account?
The bank closing balance (or other missing items)
What can you figure out when you do a trade receivables control account?
The TRADE RECEIVABLES closing balance or CREDIT SALES
What can you figure out when you do a trade payables control account?
The TRADE PAYABLES closing balance or CREDIT PURCHASES
How do refunds become necessary in trade payable control accounts?
- Goods returned to trade payables
- Discount received not given
- Over payment to trader payables
How do refunds become necessary in trade receivables control accounts?
- Goods returned by trade receivable
- Discount allowed not given
- Over payment by trader receivables
