POBK Flashcards
(47 cards)
For bank statements from the bank’s point of view, why are balances deemed as credits and overdrafts assets (opposite to the business’)
-A balance is a liability for the bank (owed back to the customer)
-An overdraft is an asset for the bank
-Does cash withdrawn from the till/petty cash tin impact the bank?
-What does cash paid into the bank have to be accompanied with?
-Impact on bank balance?
-No
-Paying in slip that details number of notes and coins
-Immediate if you withdraw
-Who is the drawee, payee and drawer for a cheque?
-Affect on bank balance
-What’s a dishonoured cheque?
-Drawee is the bank
-Payee is the supplier that will cash in the cheque.
-Drawer is the customer who is withdrawing funds from their bank account.
-Due to clearing systems in banks, can take up to 3 days for funds to be sent/received (future).
-Dishonoured is rejected by the bank and is given back to the payee (supplier) for example the payer has insufficient funds on their bank account.
What’s a debit card and how does this affect the bank balance?
-Automatically purchase goods and services in person or online.
-Immediate impact on supplier account (credited due to a reduction in assets)
Credit card and impact on bank balance
-Purchase goods and services on credit (a deferred payment). Any outstanding payment (where only partial payment for the full amount has occurred) at the end of the month must be paid back with interest to the bank.
-Impact bank balance at a later date (when the amount being settled is paid)
What’s a bank draft and the impact of this on the bank balance?
-Non-cancellable cheque that is taken from the bank.
The business requests a bank draft specifying the amount and the payee.
Bank takes this amount plus a fee and provides it to the supplier.
Guaranteed funds and good for large payments.
-Immediate impact on the bank balance.
What’s a standing order and the impact on the bank balance?
-Making same regular payment directly from business bank account. Typically a fixed date, amount and recurrence frequency.
-Has an immediate effect on the bank balance.
What’s direct debit and the impact of this on the bank balance?
-Making payments from the bank to suppliers in varying amounts/times depending on when supplier requests to be paid and how much. Must sign a direct debit mandate.
-Immediate effect on the bank balance.
What’s BACS and the impact on the bank balance?
-Banker’s automated clearing services. Electronic payment. Good for direct debits and direct credits. Security.
-Impacts bank balance at a later date (typically takes 3 days for funds to be transferred).
What’s direct credit and the impact on the bank balance?
-Deposit of money by a payer directly into a payee’s bank account. Usually electronic. Submit details of amounts and customer accounts to the BACS clearing centre.
-Immediate.
What’s CHAPS and the effect on the bank balance?
-Clearing House Automated Payment System. Move large amount of money to recipients bank account. Fees apply.
-Immediate effect on the bank balance.
What are faster payments and their impact on the bank balance?
-Allows customers to make small or medium sized payments almost instantly online.
What’s a bank reconciliation statement?
-Reconciles bank balance on a given date to the cash book balance at a given date. Typically the closing balances.
Both must agree to one another.
Why does a bank statement need to be reconciled with the cash book?
- Detecting errors
- Identifying fraudulent transactions and theft
- Keeping track of trade receivables and trade payables
What are the causes of differences between the cash and bank balance?
-Opening balances (below. Errors and omissions or transactions that haven’t been recorded yet).
-Bank interest paid/received not recorded in the cash book.
-Bank charges not in the cash book.
-Automated payments or receipts not in the cash book.
-Timing differences:
1) Outstanding lodgements (cheques received and recorded in the cash book but not the bank balance yet).Eg not deposited yet.
2) Unpresented cheques
Cheque payments that appear in the credit side of the cash book but not in the bank balance yet. Eg not taken out of the account yet
Walk through the bank reconciliation process with the cash book in 4 main steps
1) Match transactions in the bank account to the cash book (transaction values and dates).
2) Enter the unticked values in the bank statement to the cash book and adjust the balance c/d. These are differences due to omissions (leaving them out).
3) Enter the unticked values from the cash book into the bank reconciliation. These are differences due to time eg unrepresented cheques (cheque values that have been credited in the cash book but not yet entered into the bank) and outstanding lodgements (cheques that have been debited in the cash book but not yet recorded in the bank).
4) Transfer the original bank closing balance to the top of the bank reconciliation. Add the outstanding lodgements values. Less the unrepresented cheques. The adjusted bank balance should now agree with the adjusted cash book balance which will be carried down and brought down as either a debit or credit balance.
How are the bank and cash columns of the cash book posted to the general ledger?
-Bank is either a debit or credit balance (debit if positive since its an asset or credit if negative because it means you have used an overdraft).
-Cash account is debited if the balance is positive. If the value is nil (cannot negative since you can’t spend more cash than you have) it is not included in the trial balance.
What are the two possible things to do with the cash book when reconciling?
-Account for duplicated transactions
-Account for unrecorded ones.
RLCA
-Receivables ledger control account. Values from the receivables subsidiary ledger are posted here.
-Left (debits) shows total value of receivables (assets) that haven’t been paid off yet.
-Right (credits) shows the total value of PPDs, credit notes and payments, reducing the amounts owed.
-Usually, the balance b/d is a debit balance (it is an asset account).
-The total of individual balances summed up in the receivables ledger should equal the balance b/d in the rlca.
PLCA
-Payables ledger control account. Values from the payables subsidiary ledger are posted here.
-Left (debit side) shows PPDs, credit notes received and payments to suppliers, reducing your liabilities.
-Right (credit side) shows the total value of unpaid credit purchases, increasing liabilities.
-The normal balance is a credit one b/d since it is a liability account.
-The total of the payables ledger accounts for each supplier summed up should equal the total balance b/d in the plca.
VAT control account
-VAT amounts are initially recorded in daybooks in their own columns.
-Left (debit side) reduces the liabilities to HMRC (input VAT, sales return, discounts allowed)
-Right side increases liabilities to HMRC such as ouput VAT, purchases returns, discounts received.
-Debit balance = asset (HMRC owes you the difference between your output and input vat).
-Credit balance (normal) = liability. You owe HMRC the difference between your output and input VAT.
VAT is paid in a VAT return. How is it paid to a business or to HMRC?
-Through bank
Why do the rlca and receivables ledger and plca and payables ledger accounts need to be reconciled?
-In order to ensure the trial balance postings from the control accounts are accurate, error free and are complete.
What does a credit controller do and what is an aged receivables analysis?
-Ensures payments are made at the correct times and chases up any debts.
-Aged receivables analysis schedule shows for each credit customer how long parts of their outstanding balances have been unpaid for.
