Verifying Accounting Records Flashcards
What does the bank balance in the cash book need to agree with?
The balance on the bank statement
What if the bank balance in the cash book isn’t equal to the bank statement balance?
If the two balances aren’t equal check for errors or reasons why
What is a big reason the bank balance in cash book would not be equal to the bank statement balance?
Timing
What needs to be done to check the cash book?
A bank reconciliation
What is the first step of a bank reconciliation?
Tick off all the items that appear on both the bank statement and cash book.
## Footnote
Tick on both
What is the second step of a bank reconciliation?
Add any items from bank statement that aren’t present on the cash book to the cash book.
##Footnote
Then tick them off when they appear on both
What is the third step of a bank reconciliation?
Circle items that aren’t ticked off on cash book
##Footnote
They’re needed for the reconciliation
What is the fourth step of a bank reconciliation?
Balance off the cash book now it’s been updated
What if the fifth step of a bank reconciliation?
Produce a reconciliation
What is the equation for the reconciliation?
Balance from updated balance
Add unpresented cheques
Subtract lodgements not yet credited
Equals balance for bank statement
Unpresented cheques
Items that aren’t ticked off in the cash book on the CREDIT SIDE
Why are unpresented cheques added to the updated balance?
They’re added as they haven’t come out of the bank yet.
Lodgements not yet credited
These are payments into the bank that aren’t on the bank statement due to timing.
What if there are errors made by the bank?
Any errors made from the bank should be taken off but don’t adjust the cash book as it’s correct.
What is the Trial Balance extracted from?
Detailed accounts in ledgers that are usually done at the end of the financial period.
Why is the Trial Balance important in the accounting process?
It acts as an accuracy check on the ledgers account balance.
What does the Trial Balance give?
Figures needed to prepare the financial statement.
What does the Trial Balance consist of?
Headings from general ledgers accounts
Credit and debit columns
Main Errors in Trial Balance
Addition errors
Partial Omnission
Partial Transposition
Unequal Posting
Partial Omnission
Where a ledger balance has been left out
Partial Transposition
Where the numbers have been transposed
e.g. 86 instead of 68 on one side of the account only
Unequal Posting
Where a debit and credit entry where entered incorrectly into the ledger accounts
e.g. Dr bank £300 Cr sales £200
What is the first step of identifying errors in the Trial Balance?
Add up the columns to ensure it isn’t just a simple addition error.
What is the second step in identifying errors within the Trial Balance?
If there is no addition errors then find the difference between the 2 columns.
Check for this number in the list of balances to ensure it’s not missed out.
