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108 Cards in this Set
- Front
- Back
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what is the acronym to remember if a balance is a Debit? (DEAD)
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•Debit •Expense-is cost that occurs due to the company working. •Assets-what a business owns and money owned to the business •Drawing-is money taken out from the business by the owners for personal use. |
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what is the acronym to remember if a balance is a Credit? (CLIC)
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•Credit •Liability-is when a business owes money to people. •Income- is the amount of money a business gains or loses= drawing •Capital-amount of money that is placed towards the business. |
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how to you calculate the capital?
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you minus the total assets of the business by the liability.
equation: ASSETS - LIABILITIES = CAPITAL (Capital + Liabilities = Assets) (Assets - Capital = liabilities) |
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what are the types of discounts?
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•Trade discount-given reasons= regular customer or same trade •Bulk discount-given when a large order has been placed •Settlement discount-a discount given that can be accepted or not( usually given to encourage the consumer to pay back the money quicker) note when using discounts it goes 1st trade discount 2nd bulk discount. |
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if a kit kat cost £2.40 including VAT what will be the: Net Amount= VAT= Gross= |
as the Kit Kat has already has VAT added on you will need to remove it to find the Net. it is done by using this formala: amount * 20 = ANS / 120 = VAT amount - VAT = Net 2.40*20 = 48/120=0.4- 2.40=2 Net=£2------VAT=£0.4--------Gross=£2.40 |
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what is the DEBITS AND CREDITS rule?
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is when a balance is a decrease the whole concept of DEAD CLIC is reversed for example if it is a increase in asset then it will be Debit because of DEAD CLIC. but however if its a DECREASE in ASSET then it will be reversed meaning it will be a Credit. |
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Account Type To increase this account To decrease this account Expense-----------Debit-----------------Credit Asset---------------Debit-----------------Credit Drawing-----------Debit----------------Credit Liability----------Credit---------------Debit Income-----------Credit--------------Debit capital-----------Credit---------------Debit |
<-------example of the rule explained!
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how do you balance off a cash book>ledger account? can you name the steps? |
1.Add up the debit side and the credit side separately. 2.Put the largest of the two totals as the column total for both the debit and the credit columns 3.Calculate the balancing figure on the side with the lower total and describe this as the balance carried down (balance c/d) 4.Show the balancing figure on the opposite side below the total lines and annotate it as the balance brought down (balance b/d) |
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using the rule DEAD CLIC apply it to this task state if these balances are CREDIT OR DEBIT and the reason why. balances inventory bank overdraft bank, cash, petty cash VAT to HMRC Vat from HMRC loan bank interest received |
Inventory = Debit + Asset Bank overdraft = Credit + Liability Bank, cash, petty cash = Debit + Asset VAT to HMRC as a product is sold the VAT is given to HMRC= Credit + Liability VAT from HMRC = Debit + Asset Loan = Credit + Liability bank interest received = Credit + Income |
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using the rule DEAD CLIC apply it to this task state if these balances are CREDIT OR DEBITand the reason why. continued task balances motor vehicle electricity, telephone, bank charges sales ledger control Purchase ledger control discounts allowed discount recieved |
motor vehicle = Debit + Asset electricity, telephone = Debit + Expense bank charges = Debit + Expense sales ledger control =Debit + Asset purchase ledger control= Credit + Liability discounts allowed = Debit + Expense discount received = Credit + income |
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using the rule DEAD CLIC apply it to this task state if these balances are CREDIT OR DEBIT and the reason why. continued task balances sales purchases wages subscription, advertising rent and rates |
sales= Credit + income purchases= Debit + drawing wages= Debit + expense subscription, advertising= Debit + Expense rent and rates = Debit + Expense |
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what are the documents that can be used to update a cash book? (Receipts)
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business use primary records such as Receipts •Cash receipt-a receipt that list down your purchased goods with total sum. •paying in slips •remittance advice-a letter that is sent by the customer to the supplier to inform that a invoice is paid off •receipt listing |
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what are the documents that can be used to update a cash book? (Payments)
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business use primary records such as Payments •cheque book stub-is a cheque •direct debit(automated payment)-used to directly pay the business. •standing order(automated payment)-used to pay regular fixed payments •remittance advice •payment listing |
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what is meant by cash sale and credit sale what is the difference of a cash sale and a credit sale? |
Cash sale = is a quick and easy way of selling items.where cash is received immediately when a item is brought Credit sale = is when a purchase made by a consumer does not need to pay in full at the time of the purchase DIFFRENCES: cash sale - full amount is paid instantly credit sale-pays within 14 days. |
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what document is sent to the user to inform them on offers?
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Quotations: is a document that offers to sell good or services at a stated price.
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general ledger-contains all the ledger accounts for recording transactions sales ledger control account-contains the total value of all the invoices, credit notes and cash receipts that reflect how much a customer owes the business in a given period. purchase ledger control account-shows how much a business owes to there suppliers. The amount is shown on invoices, credit notes and cash payments in a given period. subsidiary ledger-provides the detail of the general ledger such as individual receivables and payables |
sales ledger-is a record that contains ledger accounts for every credit customer. Helps with queries over invoices credit notes and receipts. purchase ledger-is a record that contains ledger accounts for every credit supplier it owns to Credit purchases- goods/purchases brought but not paid yet. |
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for a sales daybook: the total(gross) is placed in the debit side of the sales ledger control account and the Vat and Net will be posted on the Credit side of Vat and sales sales return- it is the same principal as above but as it is a credit note and not a invoice it will be reversed therefore sales ledger is credited and VAT and sales is debited |
for Purchases daybook: the total(gross)/purchase ledger control is Credited and the VAT and Net/sales is Debited Purchase returns: same principle but as it is a credit note it means that the purchase ledger control is Debited and the VAT and sales is Credited.
note the debit entries must = the credit entries. |
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What are the two action should be taken if the customer takes the discount?
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•record the received in the cashbook/ ledger account •issue a new credit not for the discount taken |
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what are the 3 different types of coding system that are used?
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•Numeric-all documents are given a sequential /document number ex 29 august 20xx is 1204 used for dates. •Alphabetical-alphabetical order such as names of customers •Alpha-Numeric-used for customer acc codes such as for wellington- it will be WEL001 and if there's another company that start with a W then it will be W__002. |
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for any business documents you should make sure there's nothing missing by checking through these questions
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for a invoice it should have: •address from and to •date •customer account code •invoice number •table=quantity, product code, Net, VAT, gross |
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further questions
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what are the 5 business documents ?
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•invoice-is a list of goods sent to a customer of supplier that shows the charge / bill they owe. •credit note-is a document sent from a customer to a supplier that repays a portion of the invoice.it can also be used to return items. •quotation and list price •customer order •delivery note |
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as a invoice and credit note is very similar what are the differences between them?
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•the name •it has a unique sequential credit note number to a invoice number •on the bottom of the credit not is states a reason. |
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for a Sales day book what are the entries? and for a Sales return daybook what are the entries? boi (note: SRD is the reverse of SD) |
Sales day book Debit- sales ledger control Credit- VAT Credit- sales Sales return daybook Credit-sales ledger control Debit- VAT Debit- sales return |
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for a Purchase daybook what are the entries? and for a purchase return daybook what are the entries? (note:PRD is the reverse of PD) (must progress through this dude!) |
Purchase daybook U Credit = purchase ledger control U Debit = VAT U Debit = purchases Purchase return daybook U Debit = purchase ledger control (reduces Liability) U Credit = VAT (vat is not paid) U Credit = purchases return(as the expense is reduced) |
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Chapter 9 -double entry for sales and trade receivables
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for a general ledger what are the entries for a purchase day book? what are the entries for a purchase return? what are the entries for a discount received? |
Purchase daybook Debit-purchase Debit-VAT Credit-purchase ledger control Purchase return Credit-purchase return Credit-VAT Debit-purchase ledger control Discount recieved Credit-discount recieved Credit-VAT Debit-purchase ledger control |
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sales ledger Debit-sales ledger control Credit-VAT Debit-sales account(net amount) cash receive double entry Debit-Bank account Credit-sales ledger control |
sales return double entry Debit- sales return account (enter: Net amount) Debit- VAT from HMRC Credit- sales control account Discount allowed Debit- discount allowed (enter: Net amount) Debit- VAT from HMRC Credit- sales ledger control (gross amount) General ledger Debit- sales ledger control Credit- VAT Credit- sales account |
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for a general ledger what are the entries for a Sales ledger? what are the entries for a Sales Return? what are the entries for a (sales) Discount allowed? |
Sales ledger Debit-sales ledger control Credit-VAT to HMRC Debit-sales account(net amount) sales return Debit- sales return account (enter: Net amount) Debit- VAT from HMRC Credit- sales control account Discount allowed(sales) Debit- discount allowed (enter: Net amount) Debit- VAT from HMRC Credit- sales ledger control (gross amount)
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which of the following is prime entry? sales day book sales return daybook sales ledger control purchase daybook sales ledger |
ANSWEARS sales day book sales return daybook purchase daybook |
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when entering the details for Aldo and co in a sales ledger ,would it be a Debit or Credit? when entering the details for Aldo and co in a Purchase ledger ,would it be a Debit or Credit? |
for the sales ledger it would be the Credit side For a Purchase ledger it would be on the Debit side. |
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what is the process of a Cash Book?
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1.in a cash book it is split into a Debit side(money out) and a Credit side(money in) on the Debit side it will include columns such as Cash (gross amount) , bank (gross of cheques paid in), VAT, Analysis columns = Trade recievables(money owned to the business by the customer) and finally Cash Sales (is the Net amount of the cash) for the credit side they have the same simalarty of also having cash,VAT,bank but however have Analyse columns =Trade Payables(is the amount paid to the supplier/business) and Cash Purchases (is the cash without VAT) 2.both sides must add up in total to the same total on each side so that a balance between them is achieved/paid off |
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in a petty cash book if it ask you how much is required to restore the imprest level of £... where on the table would u find it?
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when you get asked this it is asking how much is spent on the credit side. this is the total for example of fuel office and postage. 38.4+24+72+10 = 144.4 |
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for the petty cash book the items on the credit side will be debited and therefore for the Debit side it will be credited. |
tip if it only shows the credit coloumn then the last slot is petty cash and if it shows both Debit and Credit then the last slot will be bank |
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what details do you transfer from a ledger account to a statement account? on the statement of account they have a column for balance what is entered in this column ? |
you would transfer the invoices onto the statement of account. the balance column you add the invoices going down. |
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why are product code used?
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a product code helps with identifying goods and transactions.-which helps reduce errors being made in the sale.
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what is the purpose of a : •statement of account •petty cash voucher •invoice •remittance advice •credit note |
statement of account- give details of to the credit customer in a given period advising amount to be paid petty cash voucher-can be used to pay employees and expenses incurred invoice-gives details on quantity and cost supplied to credit customers. invoice-is a list of goods sent to a customer of supplier that shows the charge / bill they owe. credit note-is a document sent from a customer to a supplier that repays a portion of the invoice.it can also be used to return items. |
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are these financial transactions a Capital expenditure, Revenue expenditure, capital income, or Revenue income? •purchase of computer equipment •receipt from credit sale •receipt sale of a motor vehicle •payment of rent •purchase of goods for resale •sale of goods to a credit customer |
purchase of computer equipment = capital expenditure receipt from credit sales = Capital income receipt sale of a motor vehicle = Capital income payment of rent = Revenue expenditure purchase of goods for resale = Revenue expenditure sale of goods to a credit customer = Revenue income |
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Wages control account |
note: wages control will be a debit, but only in this instance. |
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gross pay = wages expense, wages control Net pay = wages control, bank HMRC= wages control, HMRC Pension= wages control, pension |
note: control will always be a Debit but for wages expense it will be a credit. |
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Accounting for payroll How do you calculate Wages Expense? how would you calculate the Gross pay? |
Wages Expense = Gross pay + employers NIC +employer pension contribution Accounts placed wages expense: Wages Expense, Wages control Gross pay = net pay+income tax+employees NIC+employee deductions. |
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How would you calculate Net Wages/pay to employees? |
Net Wages: gross pay-employee NIC-income tax-employee deductions
Accounts placed Net Wages: wagescontrol, Bank |
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How would you calculate HMRC? |
HMRC = BOTH NIC + Income tax Accounts placed HMRC= wages control, HMRC |
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how do you calculate the pension? |
Pension = is employees deductions /+ or employers pension contributions Accounts placed Pension= wages control, pension |
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work out the Net pay, wages expense, HMRC, and trade union on the table shown below. 5 employees have agreed to pay 20 for food. item gross wages = 10000 Employer NIC = 200 Employee NIC = 100 Income tax = 1000 employer pension contribution = 50 Trade union liability= 50 |
Net pay wages control(D)=8750 bank(C)=8750 Wages expense wages control(C)= 11250 wages Expense(D)= 11250 HMRC Wages control(D)=1300 HMRC(C)=1300 Trade union wages control(D)=50 trade union(C)=50 |
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sales and purchases control accounts |
:) |
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For a purchase control account the opening balance (bd) will be on the credit side as it is a liability account. Purchases will also go on the credit side as it increases this balance/ liability. and usually the rest will be on the debit side. |
and if you would of guess :) the sales control account is pretty much the opposite of the PLCA. The balance and sales will be on the debit side while the rest will be on the credit side. |
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what are the reasons for maintaining control accounts for sale/purchase accounts? |
reasons •to show that there is a balance •to double check for any errors. |
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trade payable-credit trade receivables -debit credit customer= credit (sale) credit supplier = debit (purchase) |
when it says it includes/including VAT = already has VAT added on and when it states plus vat add VAT onto amount |
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How would you identify the cause of the difference ? (control accounts) |
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for accounts (sale/purchase) when posting them into a subsidiary ledger accounts, you enter in relevant accounts to the title of the subsidiary for ex VAT = may include vat for purchases vat for purchase returns. a picture is available on the next page :) |
<--example for (PRDB) |
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Correcting Errors and suspense accounts |
C |
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when correcting Errors this is the method -> |
step one: analyse what has been done in the double entry, the error step 2:identify what should have been done in a double entry step 3: then you carry out the corrections using a journal.this is done by removing the incorrect entry and entering the correct one |
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what are suspense account used for? |
suspense accounts are used when a trial balance doesn't agree where it is used as a temporary ledger account to balance the debit to the total credit. it is also used to show an error as it shows an imbalance. |
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For this error the purchase has been recorded as a cash rather then a credit purchase what should be done? |
1.see what has been done 2.write what should be done which as to debit purchases and credit PLC 3.which is to correct the error by removing the bank by crediting and adding the credit purchase/PLC by crediting 4.then its posted on the journal. |
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what is the purpose for a wages control account? |
Wages control account •help organise and post entries in payroll •makes sure no errors has been made •helps with payroll deductions and ensure employer cost are accounted for.
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fix these errors 1)Rent of £750 was entered into the rent account as £570 2)An advertising bill was overstated in the advertising account by £100 |
Answers 1) debit - rent account - £180 credit - suspense - £180 2) Debit - suspense account - £100 Credit - advertising account - £100 |
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what are the most appropriate method for Paying wages andsalaries? |
check (payroll procedures) BACs Method is most commonly used |
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g |
Salesreturns – opposite to sales (income) therefore debit balance
Purchasereturns – opposite to purchases (expense) therefore a credit balance |
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For these errors remove the incorrect entry and enter the correct one Error 1 = a repair bill of£200 has been added as the cost of a van account (no VAT) Error 2 = a purchase of £1500 has been has been recorded as a cash purchase but it was a credit purchase because it was paid by the bank.( credit= no VAT) |
Error 1 (Have been done van acc= 200 (c) bank = 200 (d) should be done Repair bill (D) = 200 Bank (C) = 200 How to correct it Van acc (C) = 200 Reoair bill (D) = 200 Error 2 should be done Purchase (D) = 1500 Purchase Ledger control(C) = 1500 How to correct it Bank (D) = 1500 purchase ledger control(C) = 1500 |
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For these errors remove the incorrect entry and enter the correct one
Error 3 = rent+rates of £750 has been recorded as £150 in the rent + rates account Error 4 = a additional of £1800 (capital) has been paid into the business bank account. |
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Discountsallowed(debit) of £150 have been entered as a credit entry in the discounts allowedaccount
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What has been done?
Credit Discounts allowed account £150 Credit SLCA £150 Whatshould have been done? Debit Discounts allowed account £150 Credit SLCA £150 How dowe correct it? Debit Discounts allowed account £300 Credit Suspense account £300 |
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The errors that the Trial balance DO NOT DETECT are: •Error of principle •Error of original entry •Error of omission •Error of commission •Error (compensation) •Reversal= when debit or credit is switched around. |
Compensating Error- occurs when 2 or more errors cancel out there imbalance in the trial balance . ex PLCA is overcast by 200 and the rent account of £200 has been omitted (not entered).which causes it to cancel out. |
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what is meant by Error of Principle? what is meant by Error of Original entry? |
Error of principle-when entries are entered into the wrong classification account ex 200 for rent exp has been entered into electricity exp. Error of Original entry-is when it is entered into the correct account but with the wrong figures. |
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what is meant by Error of Omission?
what is meant by Error of Commission? |
Error of omission- are transactions that hasn't been recorded yet = need to be entered Error of Commission-are entries made in the wrong Personal account - 200 = to bob but is meant to be entered to bobby = 200 a mistake that consists of doing something wrong, such as including a wrong amount, or including an amount in the wrong place
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The errors that the Trial balance DO DETECT are: (causes imbalance)
•Single Entry- entry not entered fully(only side) •Casting error-when accounts are incorrectly balanced •Unequal amounts error-where credit and debit entries are made at different amounts which causes a imbalance
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•Transposition Error-when the figures are entered wrong but its within the difference of 9
•Extraction Error- account balance entered on trial balance as wrong figure. •calculation error •balance transfer error |
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What is BACS Direct Debit? what is CHAPS? WHAT IS Direct debit? |
BACS Direct Debit= is depositing money straight into a payees(person money is being given to) bank account
CHAPS= is when a business moves a LARGE SUM of MONEY to another business bank account through the bank and this is done quick. Direct debit= is a method for making payments direct from the bank, where the money is a variable amount /time. |
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what is Faster Payments? what is a Standing Order? |
Faster payments= is a method that allows small/medium payments to be made online instantly. Standing order= is a method for making the same regular payments from the bank.ex to suppliers |
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what are the 2 payment methods that reduce the bank balance at a later date? |
2 methods •Credit card •Cheque note: meaning the rest will be done on the day except for withdrawal they have no effect |
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debit remove (- output) credit add (+input) |
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Trial Balance |
•Atregular intervals, after all the transactions have been posted and the bank andcontrol account reconciliations have been carried out a business will produce atrial balance.
•Thetrial balance is another method of checking for any errors in the accountingrecords. •The debits should equal the credits,indicating that the ledger accounts have been correctly prepared. •If the trial balance does not balancethen the reason for this must be found and the error rectified. |
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what are the uses for journals? |
they are used to •write off bad debts •to post pay information •to correct errors |
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here is a page to show were the different VAT accounts should be entered ? :) |
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sales ledger control account •shows were accounts should be entered |
purchase ledger control account
•shows were accounts should be entered |
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when correcting a error ensure that the sides equal out |
keep it up :) |
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What is meant by a : •Drawee? •Payee? •Drawer? |
Drawee: the person that will be paying the bill/cheque usually a bank. Payee:is the person the cheque is being paid to. Drawer: the person writing the cheque |
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here is a labeled cheque of what should be present. |
details that should be included in a cheque •name of payee •date •amount •signature of authorized person. |
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Element of Costing |
d |
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How can cost be classified as? |
•Variable-varies as it is dependent on the No. of units. •Fixed-cost stays the same regardless of No. of units •Semi variable- is a mixture of both |
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Here is the order of the manufacturing accounts ----> :) |
1.Opening of INV of Raw Materials 2.Purchase of Raw Materials 3.Closing of INV of Raw Materials 4.Direct Material used = 5.Direct Labour 6.Direct Cost = 7.Manufacturing Overheads 8.Manufacturing Cost= 9.Opening/closing of INV Of WIP 10.Cost of Goods Manufactured = 11.Opening/Closing of Finished Goods 12.Cost Of Goods Sold = |
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what is FIFO? |
FIFO works from the First Receipt entered working down to achieve the Issued amount. values inventory at the most recent purchase. |
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What is LIFO? |
LIFO works from the Most Recent receipt entered (which is from the one above the issue) working up to achieve the issued number. LIFO is a method of valuing inventory issues and balances. issues the most recent purchase. |
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What is AVCO? |
AVCO is the units and cost added up and divided by each other to find the cost of one unit.where it is then times (*) by the issued number to calculate the total cost of issue |
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what is the Formula for Total cost? what is meant by direct cost? what is meant by Overheads / Indirect cost? |
Direct cost + Overheads = Total cost Direct cost- are cost that is related to the production of a product. examples are materials, labour and transportation of products. Overheads / Indirect cost-are cost that are not related to the production of a product but cost that are needed to operate the business. examples = Expenses, Renting and Equipment, |
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what is Financial Accounting? what is Cost Accounting? |
H |
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(Classifying cost as a Fixed, Variable or Semi-Variable) what are Material classified as for production? what are wages paid on a Piecework basis? what are salaries / wages classified as? |
Materials = Fixed PW wage = Variable Salaries = Fixed |
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<--Calculating Absorption rate |
<--Calculating Total unit cost |
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(Different levels of Output) |
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Work out the Total cost and Cost per unit? |
Total cost = fixed + variable Cost per unit = Total cost/ no. of units. |
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Overhead Absorption Rate calculation --> |
Fixed cost / Overhead = OAR |
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(Accounting Software) |
a |
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what are some initiatives a business can take to become more environment friendly? |
•avoid Vehicle usage when traveling to work
•invest in environment friendly machines •recycle •turn off machines when not in use •reduce the use of paper and printing •use recyclable materials within products •reduce amount of packaging •reducing waste •Design Initiatives |
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What does a synoptic assessment look like?
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These synoptic assessments are not trying to catch you out and therefore the style and the look of these questions will be similar to what you have already seen in the individual units assessments.
Each synoptic assessment is going to be examining new content, so the whole exam itself is not going to be based purely on the other units. |
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<-Here is the topics that will be included in the synoptic the first three topics you have already covered :) |
j |
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(Writing a Report) what are the key mistakes made in text? |
•Text speak = abbreviations such as TBH GTG •Poor Grammar •spelling mistakes •proof reading these are the key features that you should analyse when told to find the mistakes in the text. these are also points you should ensure not to do when writing a report. |
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how can a Business become more sustainable? |
•produce quality products that have a long product life •minimize use of materials •minimize the waste of resources •manage finances properly •how efficient the employees are in the supply chains - well trained/highly skilled and well supported |
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(Solvency)-is the ability of the business to pay debts/bills in order to keep running. this can be determined through the businesses cash flow (money going in and money going out)
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what are ways that a business can stay solvent? •ensure that credit customers pay early or before set date •doing regular bank reconciliations to monitor the cash balance of the business. •keeping money in the business by paying at the last moment. •obtain trade credit from suppliers •negotiate low interest rates. |
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(the finance Function) |
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what are the Fundamental Principle Ethics? |
•Integrity •Objectivity •Professional Competence •Confidentiality the confidentiality of information acquired as a result of professional and business relationships must be respected. This is an important part of the relationship of trust which must exist with colleagues and clients. You should not use or disclose confidential information unless you are properly authorised to do so or have a legal or professional right or duty to disclose •Professional Behavior-You must not disclose confidential professional or business information or use it to your personal advantage •Equality |
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what is a fixed cost? give a example |
A FIXED COST IS A COST THAT STAYS THE SAME REGARDLESS OF THE LEVEL OF OUTPUT. An example of a fixed cost is : raw materials or cost of rent. |
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what is a variable cost? give a example |
A variable cost is a cost that change in relation the the change of the level of output. an example of a variable cost is: |
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what is a semi-variable cost? give a example. |
Semi variable- is a mixture of both. it has a element of fixed to a set no. of units and if it is exceeded it becomes variable. example when paying staff overtime. |
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what is the difference between Piece rate and time rate pay? |
Piece rate pay is a method of payment when they are paid a set amount for every output/product they produce. while time rate pay is when they are paid a set amount for a set time they cover. |
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what is FIFO,LIFO,AVCO? |
l |
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all accounts ending with received is a credit. |
Raw materials are the parts used to produce a product. For example the pieces of wood used to make the cabinets. When the cabinets are partially completed this is known as work in progress because the cabinets are not ready to be sold Direct costs are the costs that can be directly identified with the units of output. This is made up of materials and labour. The manufacturing cost is made up of the direct costs plus any manufacturing overheads Direct materials is calculated as follows: opening inventory of raw materials, plus materials purchased, minus closing inventory of raw materials |
