The Role of Accountancy Flashcards Preview

ACCA: F1: C: Accounting & Reporting Systems, Controls & Compliance > The Role of Accountancy > Flashcards

Flashcards in The Role of Accountancy Deck (53):
1

Accounting is...

...a way of recording, analysing and summarising transactions of a business

2

An organisation's accounting systems are affected by: (3)

1. Size2. Type of organisation3. Organisation structure

3

Users of financial statements and accounting information: (9)

1. Managers2. Shareholders3. Trade contacts4. Providers of finance5. HMRC6. Employees7. Analysts and advisers (Stockbrokers; credit agencies)8. Government & agencies9. Public

4

Statements are also prepared and perhaps published for the benefit of other groups: (5)

1. Law - Registrar of companies2. HMRC3. Bank - overdraft4. Professional accountancy bodies - issuing standards5. Employee reports

5

Qualities of good accounting information: (7)

1. Relevance2. Comprehensibility3. Reliability4. Completeness5. Objectivity6. Timeliness7. Comparability

6

Financial accounting is...

...mainly a method of reporting the results and financial position of a business...to satisfy the information needs of persons not involved in the day-to-day running of the business

7

Management (Cost) accounting is...

...a management information system which analyses data to provide information as a basis for managerial action...to present accounting information in the form most helpful to management

8

Factors which have shaped financial accounting: (6)

1. Company law2. Accounting concepts & judgement3. Accounting standardsa. FRC replaced ASCb. ASB is its subsidiaryc. UITF if an offshoot of ASB (practicable)d. FRRP (dep by large companies)4. EU (EUSE requires IFRS)5. International influences (IASB)6. GAAP

9

True and fair view (not defined) is...

...accurate and not misleading

10

Office organisation cover the following areas: (5)

1. Purchasing2. Human resources3. Finance4. Sales & marketing5. General administration

11

Transactions common to most business include: (5)

1. Making sales2. Making purchases3. Paying expenses4. Paying employees5. Purchasing non-current assets

12

The flow of funds, documents and information: (Sales)

1. Customer --> Order --> Sales2. Sales --> Sales order --> Receivables ledger3. Ledger --> invoice --> customer4. Customer --> payment --> ledger5. Ledger --> general ledger6. General ledger --> management information system

13

The flow of funds, documents and information: (Purchasing)

1. Purchasing --> PO --> supplier2. Purchasing --> PO --> payables ledger3. Supplier --> invoice --> ledger4. Ledger --> payment --> supplier5. Ledger --> general ledger6. General ledger --> management information system

14

Weaknesses in procedures may be signaled by:

1. Arguments over job functions2. Missing paperwork3. Disputes with customer / suppliers4. Goods not delievered

15

Management cannot personally be involved in every transaction. Management MUST have control over: (3)

1. Sales on credit to new customers2. Purchases of goods or non-current asset and payments for expenses3. Payroll

16

Examples of financial control procedures: (5)

1. Large cheques need 2 signatories2. Authorisation limits for PO3. Authorisation for petty cash & expense claims4. Effective credit control procedures5. Computer security procedures and access levels

17

Weaknesses in financial control procedures may be signaled by: (6)

1. Cash / cheques gone missing2. Excessive / bad debts3. Customers not paying withing terms4. Suppliers not paid on time5. Unauthorised purchases6. Failure to produce accounts (on time)

18

Key controls over payroll systems: (4)

1. Documentation and authorisation of staff changes2. Calculation of wages and salaries3. Payment of wages and salaries4. Authorisation of deductions

19

Important aims of the Wages and Salaries control system: Setting of wages and salaries:

1. Employees are only paid for work done2. Gross pay calculated correctly and authorised

20

Important aims of the Wages and Salaries control system: Recording of wages and salaries:

1. Gross, net pay and deductions are accurately recorded2. Wages and salaries paid are recorded in the bank and cash records3. Wages and salaries are correctly recorded in the GL

21

Important aims of the Wages and Salaries control system: Payment of wages and salaries:

1. Correct employees are paid

22

Important aims of the Wages and Salaries control system: Deductions:

1. Deductions have been calculated correctly and authorised2. Correct amounts paid to tax authorities

23

Wages and Salaries Controls: Setting of wages and salaries:

1. Staffing & segregation of duties2. Maintenance of personnel records3. Authorisation (Engagement & discharge, changes in pay rates, overtime, deductions, advances)4. Recording of changes in personnel and pay rates5. Recording of hours by time sheets; clocking in and out arrangements6. Review of hours worked7. Recording of advances8. Holiday pay arrangements9. Answering queries10. Review of wages against budget

24

Wages and Salaries Controls: Recording of wages and salaries:

1. Basis for compilation2. Preparation, checking and approval3. Dealing with non-routine matters

25

Wages and Salaries Controls: Payment of cash wages:

1. Segregation of duties (Cash sheets, pay packets, distribution)2. Authorisation of cheque3.Custody of cash (Encashment, pay packets, transit, banking of unclaimed wages)4. Verification of ID5. Recording of distribution

26

Wages and Salaries Controls: Payment of salaries:

1. Preparation & signing of cheques and bank transfer lists2. Comparison of cheques and transfer lists with payroll3. Maintenance and reconciliation of wages and salaries bank account

27

Wages and Salaries Controls: Deductions from pay:

1. Maintenance of separate employees' records2. Reconciliation of total pay and deductions3. Surprise cash count4. Comparison of actual totals with budget estimates5. Agreement of gross earnings and total tax deductions

28

Important aims of the Payables and Purchasing control system: Ordering:

1. All orders for goods and services authorised and are for goods and services actually received; and are for the company2. Orders made to authorised suppliers ONLY3. Orders made at competitive prices

29

Important aims of the Payables and Purchasing control system: Receipt and invoices:

1. Goods and services received are for organisation's purposes and not private purposes2. Goods and services only accepted if ordered and order was authorised3. Goods and services received are accurately recorded4. Liabilities recognised for all goods and services received5. All credits due are claimed6. Receipt is necessary to establish liability

30

Important aims of the Payables and Purchasing control system: Accounting:

1. Expenditure authorised for goods actually received2. Expenditure is recorded properly in General and Payables ledger3. All credit notes received are recorded in General and Payables ledger4. All entries are made to correct Payables ledger accounts5. Cut-off is correctly applied

31

Purchasing system controls: (3)

1. Buying (authorisation)2. Goods inwards (custody)3. Accounting (recording)

32

Purchasing System: Test of controls: Ordering:

1. Use certain suppliers only2. Obtain authorisation3. Use pre-numbered forms

33

Purchasing System: Test of controls: Goods received:

1. Compare goods received note with PO2. Check conditions of goods received3. Check supplier invoice is correct4. Record goods returned

34

Purchasing System: Test of controls: Accounting (Recording):

1. Segregate duties of accounting and checking2. Record purchases & returns promptly3. Compare supplier statements to payables ledger4. Check payment is properly authorised

35

Sales cycle controls: (3)

1. Selling (authorisation)2. Goods outwards (custody)3. Accounting (recording)

36

Important aims of the Receivables and Sales control system:

1. Ordering and granting of credit2. Dispatch and invoicing3. Recording, accounting and credit control

37

Important aims of the Receivables and Sales control system: Ordering and granting credit:

1. Goods and services only supplied to customers with good credit ratings2. Customers encouraged to pay promptly3. Orders recorded correctly4. Orders fulfilled!

38

Important aims of the Receivables and Sales control system: Dispatch and invoicing:

1. Dispatches are recorded2. Goods and services are correctly invoiced3. Invoices relate to goods and services supplied by the business4. Credit notes only given for valid reasons

39

Important aims of the Receivables and Sales control system: Recording, accounting and credit control:

1. All invoiced sales are recorded in the General and Receivables Ledger2. All credit notes issued are recorded in the GL and RL3. All entries in the RL are made to the correct RL account4. Cut-off is applied correctly to the RL5. Potential doubtful debts are identifed

40

Sales System: Test of controls: Selling:

1 Segregate duties of credit control, invoicing and dispatch2. Obtain authorisation for credit terms for customers3. Use pre-numbered forms

41

Sales system: Test of controls: Goods outwards:

1. Authorisation of dispatched goods2. Check conditions of goods returned3. Check signature of delivery notes4. Match sales invoices with dispatch and DN, and SO

42

Sales system: Test of controls: Accounting (Recording):

1. Segregate duties of accounting and checking2. Record sales sequentially3. Match cash receipts to invoices4. Prepare regular receivables statements5. Retain customer remittance advice6. Review and follow up overdue accounts

43

Controlling cash: Controls over cash receipts: (3)

1. Receipts must be banked properly2. Record of receipts must be complete3. Loss of receipts through theft or accident must be prevented

44

'Teeming and lading' refers to...

...receipts for customers are misappropriated and this is then covered up by mis-posting future receipts

45

3 main steps in applying controls over payments:

1. Documentary evidence of why and the amount2. Authorisation 3. Restricting authority to certain specified individuals

46

The most important controls designed to detect fraud and error which may have taken are...

...reconciliations!

47

Disadvantages of manual accounting systems:

1. Productivity2. Slower3. Risk of errors4. Less accessible5. Alterations6. Quality of output7. Bulk (paper!)

48

A module is...

...a program which deals with 1 particular part of a business accounting system

49

The name given to a set of several accounting modules is...

...a suite

50

A database may be described as...

...a pool of data which can be used by any number of applicants (not restricted to the accounts department)

51

Virtues of a database: (4)

1. Common data for all users to share2. Effort of duplicate files is avoided3. Conflict through use of inconsistent data is avoided

52

Databases have 4 major objectives:

1. Shared2. Integrity must be preserved3. Provide for the needs of different users / operational requirements of all users4. Capable of evolving

53

A spreadsheet is...

...an electronic piece of paper divided into rows and columns with a built in pencil, eraser and calculator; an easy way of performing numerical calculations