Incomplete Records

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Information Available to Accountant
Cash book, banking details, invoices, expenses, records of assets and liabilities
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Information to Calculate
Capital at beginning of financial year, purchases and sales for year, cash book summary, profit for the year
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Tools of Accounting
Use of opening trial balance, construction of cash account, use of control accounts, accounting equation, gross profit mark-up and margin, format of income statement and balance sheet
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Opening Capital: Statement of Affairs
Assets at beginning of the year - Liabilities at the beginning of the year = Capital at the beginning of the year
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Opening Capital: Changes in Capital Over Time
Capital at end of year - Capital at beginning of year = Retained profit for the year after drawings
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Cash Book Summary
Dr: balance c/d, receipts from TR, Cr: payments to TP, drawings, expenses, balance c/d
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Purchases
payments to TP in year - TP at beginning of year + TP at end of year OR control accounts (Dr: payment to TP, balance c/d, Cr: balance b/d, purchases missing figure)
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Sales
receipts from TR in year - TR at beginning of year + TR at end of year OR control accounts (Dr: balance b/d, sales missing figure, Cr: receipts from TR, balance c/d)
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Income Statement: Expenses
Bank and cash payments - accruals/+ prepayments at beginning of year +accruals/-prepayments at end of year OR control accounts (Dr: cash/bank, balance c/d, Cr: balance b/d, income statement missing figure)
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Gross Profit Mark-up
Gross Profit/Cost Price x 100
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Gross Profit Margin
Gross Profit/Selling Price x 100 Selling Price = Cost Price + Gross Profit
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Cash Losses: Cash Book Summary
Dr: balance b/d, cash sales, Cr: bank, expenses, balance c/d, amount of cash stolen
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Cash Losses: Margins and Mark-ups
Calculate cost of sales, gross profit and sales, use a sales ledger control account (Dr: balance b/d, sales, Cr: bank missing figure, balance c/d), bank missing figure - cash actually banked = cash losses
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Measures to Prevent Cash Losses: Maintain Accurate Records
Keep a detailed cash book, keep a copy of cash receipts, use a numbering system for receipts and invoices, preparation of bank reconciliation statement when a bank statement is received, using margin/mark-up to compare expected and actual sales
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Measures to Prevent Cash Losses: Office Procedures
Record cash transactions, collect cash from tills regularly and placing it in a safe in the office, bank cash regularly, pay bills by cheque or bank transfer, divide duties in the business, carry out cash checks, security, authorisation limits
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Inventory Losses: Part 1 (Cost of Inventory Available for Sale)
Opening Inventory + Purchases
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Inventory Losses: Part 2 (Cost of Sales)
Sales - Gross Profit
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Inventory Losses: Part 3 (Value of Inventory Lost)
Cost of Inventory Available for Sale (Part 1) - Cost of Sales (Part 2) = Estimated Closing Inventory - Value of Inventory Remaining
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Measures to Prevent Inventory Losses: Maintain Accurate Records
Using store ledger records, keep a copy of all inventory receipts and issue documents, keep records for the disposal of damaged inventory, carry out inventory counts
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Measures to Prevent Inventory Losses: Office Procedures
Improve security, carry out inventory reconciliations to compare information from inventory count with records, ensure that discrepancies in inventory reconciliation are referred to managers, set authorisation limits for disposal of inventory
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Drawbacks of Incomplete Records
Cost, lack of up-to-date management, statements of account sent to TR may not be accurate, dangers of loss or theft of cash and inventory, lack of accuracy, additional costs may be incurred, reliability of figures may be questioned
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Comments on Year-end Financial Statements
Profitability, liquidity and capital structure
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Other cards in this set

Card 2

Front

Capital at beginning of financial year, purchases and sales for year, cash book summary, profit for the year

Back

Information to Calculate

Card 3

Front

Use of opening trial balance, construction of cash account, use of control accounts, accounting equation, gross profit mark-up and margin, format of income statement and balance sheet

Back

Preview of the back of card 3

Card 4

Front

Assets at beginning of the year - Liabilities at the beginning of the year = Capital at the beginning of the year

Back

Preview of the back of card 4

Card 5

Front

Capital at end of year - Capital at beginning of year = Retained profit for the year after drawings

Back

Preview of the back of card 5
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