AAT Bookkeeping Controls BKCL
- Created by: M_gan
- Created on: 31-12-19 09:21
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- Bookkeeping Controls
- Correction of Errors
- Types of Errors:
- Error of Principle: wrong type of account.
- Reversal of Entries: credit and debit have been put on the wrong side on both accounts.
- Error of Commission: wrong person/ business account
- Error of Omission: completely omitted (not put on)
- Compensating Error: two errors cancel each other out.
- Error of Original Entry: wrong amountsUntitled
- Suspense Accounts
- opened when the trial balance doesn't match
- cleared by using journals
- Correcting Errors
- Omission: do double entry in accounts it needs to go in
- Commission: remove from account its in and put it in account it should be in
- Principle: remove from account its in and put where it should be.
- Complete reversal: take out of wrong sides put on correct side (4 entries)
- Original Entry: take out wrong amount put in correct amount (4 entries)
- Types of Errors:
- Reconciling Control Accounts:
- ensures that the entries in the sales & purchase ledgers match entries in the control accounts
- SLCA is a asset accounts that show the amount owed to the company
- Debit Side: balance of recieveables, sales and unpresented cheques.
- Credit Side: sales retuens, payments recieved, discount allowed, contra and irrecoverable debts.
- PLCA is a liability account that shows the amount owed by the company.
- Debit Side: payments, discount recieved, returns and bal c/d.
- Credit Side: balance of payables and purchases.
- VAT Control Account
- Credit: Sales Day Book, Purchase Returns Day Book, Discount Allowed Day Book.
- Debit Side: Purchases Day Book, Sales Returns Day Book, Cash Book, Petty Cash Book, Discounts Received Day Book
- Writing off Irrecoverable Debts
- If a company stops traiding and they owe money to another business than the other business would have to write off the debt as they wont recieve the money
- How to Write it off:
- Irrecoverable Debts = Debit
- VAT Control = Debit
- SLCA = Credit
- Payroll Transactions
- the accounting entries that record wages and salaries paid to employees.
- Definitions
- Gross Pay: pay before deductions
- Net Pay: pay after all deductions
- Income Tax: collected by employer paid to HMRC
- Employers NI contribution: paid to HMRC
- Employees NI Contribution: collected by employer paid to HMRC
- Pension Contributions: provided by employer paid to pension funds.
- Employees Pension Contributions: deducted from pay paid to pension funds
- Voluntary Deductions: eg trade union fees, deducted from pay & paid to organisation
- Accounts Used
- Bank: net pay of employees, pensions, HMRC and payment to outside agencies
- Wages Control Account: all go through, forms one half of double entry
- Wages Expense: employers expense account, records gross pay, employers NI Contributions, pensions and trade unions
- HMRC: amounts payable in NI and Income Tax to HMRC
- Pension Fund: payable to external pension funds, employers and employees contributions
- Journal and Ledger Entries:
- payroll transactions must be recorded by journal entries to trace the entries from payroll records through book of prime entry to the general ledger accounts
- 1. Record wages as an expense (cost to employer)
- D = wage expense
- C = wages control account
- 2. Record Net Pay (paid to employees)
- C = bank
- D = wages control account
- 3. Record liability to HMRC (income tax and NI)
- D = wages control account
- C = HMRC
- 4. Record liability to pension fund (employer & employee contributions)
- D = wage control account
- C = pension
- 5. Record liability to voluntary deductions eg TU fees
- Banking Procedures
- Banks
- Owened by shareholders eg HSBC, Lloyds
- Bank Accounts
- Current Account: used to pay money out of the account
- Loan Account: money is lent in these accounts with interest
- Savings Account: money is saved. Person borrowing the money to the bank so the bank pays interest
- Building Societies
- Owned by its customers eg Nationwide, the Coventry
- Deposits for current and savings accounts
- Lons: mortgages for house purchase
- Insurance
- Bank Lending
- Overdrafts: allows more money to be taken out the account than there is in there. Short periods of time, high interest.
- Business Loan: given to businesses to cover large expenses such as new machinary
- Commercial Mortgage: up tp 25 years to cover purchase of property with interest either fixed or variable rates.
- Other Bank Services:
- Debit Card: used for purchases and cash withdrawals money that is in the bank account
- Credit Card: "buy now pay later" money is not in the account, interest paid
- BACS: Bankers Automated Clearing Services, 3 day computer-based direct payment system
- Standing Order: regular BACS payments set up with bank by customer
- Direct Debit: regular & variable BACS payments set up by organisation recieving payments
- CHAPS: Clearing House Automated Payment System, high value same day payments
- Statement & Reconcilliation
- The cash book and the bank statement might be different:
- Unpresented cheques: on bank statement but not in cash book
- Outstanding Lodgements: in cash book but not on bank statement
- Bank Statements
- on bank statement credit means money in the account and debit means overdrawn
- not the same on cash book opposite way debit is money in and credit is money out
- on bank statement credit means money in the account and debit means overdrawn
- Reconcilliation
- Balance as per cash book + unpresented cheques - outstanding lodgements = balance as per bank statement
- Balance as per bank statement - unpresented cheques + outstanding lodgements = balance as per cash book
- The cash book and the bank statement might be different:
- Banks
- Correction of Errors
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