topic4 control accounts and the bank reconciliation

Question 1

if the total of the individual customer or supplier accounts is different to the balance on the control accounts there must be an error

Answer 1

-transactions entered correctly in the customer/supplier account but incorrect in the control account
-transactions totalled incorrectly when posting in the control accounts
-transactions omitted from either side

Question 2

VAT(sales tax) control account

Answer 2

-used to record the amount of VAT due to tax authority
-created by DR output tax account and CR input tax account when a VAT return is submitted
-will clear to 0 when VAT is paid to tax authority

Question 3

control accounts

Answer 3

-usually used as checking accounts
-should clear to 0 once all entries for financial period have been complete
-e.g. the PAYE(pay as you earn) control account is used to record all entries to do with the payroll
such as tax, national insurance, pensions, student loan

Question 4

bank reconciliation

Answer 4

-to match the bank ledger account to the bank statement and identify the differences

Question 5

reasons for bank reconciliation

Answer 5

-bank ledger account is our record of all transactions affecting our bank account
-bank statement is the banks record of all transactions affecting our bank account
-use the bank statement as a check on our records to make sure everything is right
-key bookkeeping procedure

Question 6

differences in bank reconciliation

Answer 6

-the banks records will be the opposite way round to our accounts because they are recording transactions from their perspective, not ours
3 key types of differences:
-unrecorded items
such as interest, charges, standing orders, direct debits
-timing differences
such as cheques not cleared, bankings not yet processed
-errors
either in our records or in the banks records

Question 7

bank reconciliation process

Answer 7

-tick off each item on the bank statement against the transactions in the bank ledger account
-identify any items on the bank statement not recorded in the bank ledger account and enter adjustments for them
-calculate a revised ledger bank balance after the adjustments
-identify any items recorded in the bank ledger account that have not yet appeared on the bank statement
-prepare the bank reconciliation statement