workshop stuff and layouts of all statements Flashcards
What is the point of the bank reconciliation statement?
reconcile balance of cash book with bank statement balance
what are unpresented cheques?
cheques drawn but not yet presented for payment through the bank
what are outstanding lodgements?
cash or cheques paid into the bank that have not yet been recorded on the bank statement
what side of the cashbook will outstanding lodgments be on?
Debit
what side of the cashbook will unpresented cheques be found on?
credit
What is the first step of the bank reconciliation statement?
tick all items that appear on both the bank statement and cashbook
what is step 2 of the bank reconciliation statement? (After ticking)
enter into cashbook any items that appear on bank statement but not the cashbook
Also put in previous balance b/d
what is step 3 of the bank reconciliation statement?
balance the cash book and carry down closing balance (use this balance on reconciliation statement)
what is step 4 of the bank reconciliation statement? (Using calculated balance)
start the reconciliation statement by entering balance as per cash book or bank statement
what is step 5 of the bank reconciliation statement? (Unpresented cheque)
unticked credit in the cashbook are unpresented cheques put in reconciliation statement and take them off
what is step 6 of the bank reconciliation statement? (Outstanding lodgements)
unticked receipts (debits) in the cash book are outstanding lodgements enter in the reconsiliation statement and add them
what is step 7 of the bank reconciliation statement? (Final stage of reconciliation statement)
calculate the closing balance on reconciliation statement
should agree with balance on bank statement
What is the calculaiton for the final balances on bank reconciliation statement?
Bank
+ outstanding lodgements
- unpresented cheques
Cash
Or the reverse
What is a direct debit?
where authority is granted by the business for a third party for fixed or variable payments to be made at the request of that third party
What is a standing order?
where a fixed payment is made at regular intervals by the bank on the instructions of the business
How does the bank reconciliation check the accuracy of the cashbook?
will help find errors in the cashbook
What is an example of an error in the cashbook that the bank reconciliation will correct?
where a cheque has been entered incorrectly or missed out all together
How can the bank reconciliation statement check the accuracy of the bank statement?
makes sure all the entries on the bank statement belong to our business
How does the bank reconciliation statement prevent fraud?
uses independent evidence (bank statement to check cash book)
usually done by two or more people to provide a further check
What will a credit in the bank statement be in the cashbook?
a debit
If the cash book has a credit b/d balance what does this mean on the reconciliation statement?
it will be a negative
how can you avoid errors in the accounts?
More then one person does them
Check all statements received
Send regular reminders to trade receivables
Compare cash balances with cash actually held
Use control accounts
Regularly do trial balances
Use computer based accounting
What can any errors found in the accounts be corrected with?
the general journal
What errors will not be shown with a trial balance?
CROPOC
What would be used to correct CROPOC errors?
the general journal not a suspense account
How will the suspense account be treated if it isn’t resolved when the SFP is created?
Debit= current asset
Credit= current liability
What would the suspense account entry for stationary expenses £48 has been debited to both the stationary account and the bank account?
2x debit suspense account for £48
2x credit bank £48
what is the general journal?
subsidiary book that contains any items that will not go in other subsidiary books
Lists transactions that will later go into the T accounts
What is the important bit that people always forget to put in the suspense account?
the difference that is given from trial balance or the difference that is calculated
what is a suspense account?
temporary account which enables the trail balance and financial statements to be prepared if errors cannot be found
What is an invoice?
document detailing the goods or services supplied and the price paid
What is a credit note?
document detailing sales or purchase returns or overcharge with reasons
What is a cheque counterfoil?
contains details of cheques drawn
What is a paying in slip counterfoil?
contains details on funds paid into the bank (date, source, amount)
What are cash receipts and till roll?
contains details of cash received
What is a bank statement?
printout issued by the bank detailing all receipts into the account, payments out of the account and running balance
What is a petty cash voucher?
contains details of small cash payments made
What is a delivery note?
document detailing the goods that have been delivered by a supplier
What is a purchase order?
document used to place an order with a supplier
What is remittance advice?
document sent with a payment advising the recipient which invoices are being paid
what is a statement of account?
document sent to customer detailing all recent transactions and informing them of total amount owing
What is the accounting process?
Source documents
Books of prime entry
Ledgers
Trial balance
Final accounts
What is the trial balance?
a list of all the ledger balances on a given date
if the T accounts are accurate the debit and credit should be equal
what are ledgers?
essential part of the double entry system containing all the information grouped together from a specific customer, supplier or general account.
What is the sales/receivables ledger?
ledger containing individual personal accounts for each credit customer and recording all transactions with that customer
What is the payables/ purchases ledger?
contains individual personal accounts for each credit supplier and recording all transactions with that supplier
what goes on the debit side of a T acocunt?
Expenses
Assets
Drawings
what goes on the credit side of the T account?
liabilities
revenue
capital
what is the cash book?
records all cash and bank transactions together with details of discount allowed and received
Do you bring down the discount columns in the cash book?
No they are directly posted to the general ledger
what is the sales journal?
a list of all credit transactions on, depending on the volume of the transactions the sales day book will be totaled daily, weekly or monthly
What is the sales returns journal?
list of all credit notes issued to customers
layout identical of sales day book
Just the entries will be reversed (sale return debit, customer credit)
What is the purchases ledger?
list of all supplier invoices received in respect of credit transactions
Will be totaled based on volume (day, week, month)
What is the purchase returns journal?
list of all credit notes received form suppliers
layout identical to purchase day book
the transaction will be posted to the debit of the purchase returns account and credit of the supplier account
What is a trade discount?
offered to business in a similar line of business distinct form general public often as incentive for buying in bulk quantities
What is a cash discount?
reduction in the amount owing to a supplier in return for settling their bills early
What is a discount received?
discount we receive from suppliers for settling bills early
What is discount allowed?
discounts given to customers who settle their bills early
What are the 2 types of reserve?
Revenue
Capital
What are revenue reserves?
a general reserve to which retained profits from trading activities can be transferred to.
What can the revenue reserve be used to pay?
Dividends
what isnt the revenue reserve?
not a sum of money(record of profit)
what are the 2 types of capital reserve?
Revaluation reserve
share premium account
where do capital reserve largely arise from?
changes to the balance sheet and not from trading profits
What cant you do with capital reserves?
distribute them as profits
When would you use a revaluation reserve?
when an asset has increased in value and you increase the NCA figure to make sure the balance sheet balances you must add a revaluation reserve for the same amount
When is a share premium account created?
when shares are sold they will usully be increased form nominal value the differnce between the sold value and nominal value will be put in the share premium reserve.
