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14 Cards in this Set
- Front
- Back
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Memorandum account |
Record financial information but not part of double entry system |
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How are memorandum accounts created? |
Any entry in any sales or purchases ledger is duplicated in memorandum account |
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Where are memorandum accounts used? |
To send out monthly statements For credit control purposes eg identifying bad debt |
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What are two types of ledger control accounts? |
Sales ledger control account and purchases ledger control account |
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How do we obtain totals for memorandum accounts? |
Using books of prime entry |
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Schedule of trade receivables |
List of debtor's balances extracted from each sales ledger |
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Show double entry of contra entry of control account |
When showing contra entry ALWAYS cr sales ledger control account Dr purchases ledger control account In the personal ledgers it is the smaller balance that is transferred |
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Schedule of Trade payables |
List of creditors balances extracted from each of the purchases ledgers |
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When asked to prepare both a purchase and sales ledger in an exam question : |
Prepare purchases ledger control account first then extract information and prepare a sales ledger control account |
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Individuals whose accounts are written off as bad debt : |
Credit the debtor's account this closing it and balancing the account off |
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Are provisions for doubtful debt included in sales ledger control account |
No unlike debt that is written off provisions for debt are not written in any individual's debt account. |
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How is control accounts reconciled with ledger ? |
Comparison of trade receivables / trade payables balance are made if they are not equal there are errors |
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Advantages of control account |
1 check accuracy of all postings 2 enable errors to be located quickly 3 may indicate which ledger contains the error 4 total amounts owed by trade receivables and owing to trade payables can be quickly ascertained 5 used for division of labor between staff responsible for different parts of ledger 6 check of honesty |
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Limitations |
Not all errors will be revealed during preparation of control account cropoc errors could still be present |
