Chapter 11 Flashcards
What are reconciliations?
A method for verifying particular balances in the accounts.
What is contra?
When a supplier is also a customer. Instead of owing each other money, it is agreed that the balances will be cancelled out. (Whoever owes more will pay the difference)
What is the double entry for contra?
Dr Payables
Cr Receivables
When would credit balances appear on the receivables account?
When we owe the customer money. I.e when the customer has overpaid. Credit notes being issued when the goods have been paid for. When payment is received in advance of raising invoices. The payables account may show a debit balance for similar reasons.
What are dishonoured cheques?
A customer pays by cheque but it bounces.
What is the double entry for dishonoured cheques?
Dr Receivables
Cr Cash
What is a bank reconciliation?
A statement agreeing the balance on the bank statement to the balance in the cash at bank ledger account.
What are the reasons for differences between the bank statement and balance on our cash ledger?
Unrecorded items in the cash ledger
Timing differences
Errors
What are some examples of unrecorded items in the cash ledger account?
Interest
Bank charges
Dishonoured cheques/receipts
Standing orders and direct debits
Unmatched items
What are timing differences (in terms of bank reconciliations)?
Items that have been recorded in the cash ledger but have not been recorded in the bank statement. These may be:
Unpresented cheques/Uncleared payments
Outstanding lodgements
What are unpresented cheques?
Cheques that have been sent to suppliers but not yet cleared by the bank. (Cash has been recorded as leaving the ledger but not in the bank as it has been presented)
What are outstanding lodgements?
Cheques received by the business but not yet cleared by the bank. (Cash has been recorded as entering the cash ledger but has not entered the bank)
