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Contents
Definitions............................ ........................................................................... Pg 1
...... ...................
Reasons.............................. ........................................................................... Pg 2
............................
Stakeholders........................ ........................................................................... Pg 2
....... ...................
Accounting ........................................................................... Pg 3
Process..................... ...................
Trial........................................................................... Pg 4
Balance................................ ...................
Control ........................................................................... Pg 5
Accounts......................... ...................
Bank Reconciliation Statements...... ........................................................................... Pg 6
...................
Dealing with Bad ........................................................................... Pg 7
Debt................ ...................…read more

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Definitions
Accrued Expenses
A liability for services that have already been `used but have not yet been paid' (1) by
the business at the end of the accounting period (1) will increase expenses in the
income statement (1) and increase current liabilities in the balance sheet (1)
Current Asset
Resources (assets) that are intended to be turned into cash (1) within the next
twelve months (1).
Depreciation
The apportionment of the cost (1) of a noncurrent asset over its useful economic
life (1).…read more

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To record what has happened in the past (1) to enable the owner to produce an
income statement (1) and balance sheet (1).
Based on what has happened in the past, it will enable the owner to forecast for the
future (1) and produce forecast income statements and balance sheets (1) together
with cash budgets (1).…read more

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The Accounting Process
Stage 1 Sales invoices Purchases invoices Purchases credit no
Source Documents
Stage 2 Sales day book Purchases day book Purchases returns
Subsidiary books book
Stage 3 Dr customer account Dr Purchases account ­ Dr Supplier acco
Ledger Account ­ (trade receivable) ­ General ledger Purchases ledger
Double Entry Sales ledger
Cr Supplier account ­ Cr Purchases re
Cr Sales account ­ Purchases ledger account ­ General
General ledger
Pg 5…read more

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The Trial Balance
The trial balance only proves the arithmetical accuracy of the records (1) it does not
prove that amounts have been posted to the correct accounts (1).
Errors Revealed by the Trial Balance
Error of Omission (1) ­ where both sides of the transaction have been omitted from
the records (1).
Compensating Error (1) ­ where debit and credit errors cancel each other out (1).…read more

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Control Accounts
Benefits of Using Control Accounts
Verifies the balances in the ledger (1). The balance on the control account should
agree with the totals of the individual accounts in the sales ledger (1). If these do
not agree it indicates an error in either the sales ledger (1) or the control account
(1) or both (1).…read more

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Bank Reconciliation Statements
Key Definitions
Outstanding Lodgement
Funds (that have been debited) in the cash book (1) that have not yet been
processed by the bank (1) and therefore not shown on the bank statement (1).
Unpresented Cheque
A cheque drawn (and credited) in the cash book (1) that has not yet been processed
by the bank (1) and therefore not shown on the bank statement (1).…read more

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Dealing with Bad Debt
In the Ledger Accounts
The full amount should be treated as a bad debt (1) and be debited to bad debts
account
(1) and transferred to the profit and loss account (1) and credited to the debtors
control account (1).
The profit will reduce (1) by [mention figure for mark] (1) and debtors will be reduced
by [mention figure for mark] (1), thus reducing the net assets of the business (1).…read more

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