Transcript ACCA and CIMA courses - ISDC Accounting College

CAT 1 – Recording financial transactions
Course slides
For computer-based and
paper-based exams
Syllabus
Slide 2
1
Business transactions and documentation
2
Double entry bookkeeping
3
Banking and petty cash
4
Sales and sales records
5
Purchases and purchase records
6
Payroll
7
Control accounts and the initial trial balance
Examiner and exam format
Can be taken as a paper-based or computer-based exam
50 multiple-choice questions – 100 marks
Time allowed: 2 hours
Pass mark: 55%
Slide 3
The BPP Learning Media classroom slides
What do these slides cover?
– A selection of key areas of the syllabus
Using the slides
– Use the slides as a point of reference
– Add detail by talking around the slides (eg using material
from the corresponding Study Text chapter)
– Consider adding slides yourself to suit your course
– Recommend students attempt appropriate questions
from the Practice & Revision Kit and from i-Pass
Slide 4
Chapter 1
Study Text Chapter 1
Business transactions
and documentation
Sales
SALES
Goods paid
for immediately
CASH SALES
Slide 6
Goods delivered
before payment
made
CREDIT SALES
Purchases
PURCHASES
Goods delivered
Goods paid
before payment
for immediately
made
CASH PURCHASES CREDIT PURCHASES
Slide 7
Invoice
‘G O GET EM AT GOTHAM!!’
W.E. GOTHAM USED CARS
Old Iron Gate Street, Wraillings Industrial Estate, Melchett
SALES INVOICE
No. A576
Date: 10 March 20X8
Item
List Price
£
p
Total
£
p
Vauxhall Itel
2,500.00
Registration A977 TMF
TOTAL
2,500.00
2,500.00
DISCOUNTS
DUE PAID BY
To:
CHEQUE
M Rose Videos
10 The Yard
Ilford
Esse
x
Reg Office: Old Iron Gate Street, Wraillings Industrial Estate, Melchett
Reg No: 82912
VAT Reg No: 5 439832
Slide 8
Inclusive of
VAT
2,500.00
Discounts
Trade discounts
• Given at time of sale/ purchase
• Bulk buying
Settlement discounts
• Offered as incentive for early payment
• For example 5% if settled within 14 days
• May or may not be taken
Slide 9
Sales tax
INDIRECT TAX
Charge sales tax
on sales
Suffer sales tax
on purchases
OUTPUT TAX
INPUT TAX
Slide 10
Sales tax and Discounts
Sales tax is calculated on the amount
after all discounts regardless of
whether the discount is taken or not
Slide 11
Contract law
• What is a contract?
– Legally binding agreement (offer and
acceptance)
– Consideration
• Breach of contract
Slide 12
Implied terms
• Goods must
– Exist
– Match description
– Be of satisfactory quality
• Seller must have the right to sell
Slide 13
Storage of information
• Information stored must be:
– Accessible
– Secure
• What information may be needed by a
business?
• Who may be entitled to information from a
business?
Slide 14
Retention periods
• If you think you may need it, keep it
• Legal limits for different records
– Simple contracts – 6 years
– Income and sales tax) records – 6 years
– Purchase orders, sales invoices – 6 years
– Bank statements – 6 years
– Cheque counterfoils – 1 year
Slide 15
Data protection
• To protect individuals (data subjects)
• Data subjects have rights
– Gain access to personal data held
– Know why data is held and who has
access
– Have inaccurate data corrected or deleted
– Seek compensation
Slide 16
Question practice – end of Chapter 1
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
Business transactions and
documentation
The material in this chapter is covered in the following BPP
Learning Media i-Pass tests.
Tests 1 and 2: Business
transactions and documentation
Slide 17
Chapter 2
Study Text Chapter 2
Assets, liabilities and the
accounting equation
Profit
• Income
• Expenses
Slide 19
Assets
$
ASSETS
Non-current assets
Land and buildings
Plant and machinery
Motor vehicles
Fixtures and fittings
$
$
100,000
50,000
30,000
20,000
200,000
Current assets
Inventories
Trade receivables
Cash in hand and at bank
Total assets
Slide 20
55,000
28,000
7,000
90,000
290,000
Liabilities
$
$
Non-current liabilities
Bank loans
Current liabilities
Bank overdraft
Trade payables
Accruals
Total liabilities
Slide 21
$
40,000
16,000
40,000
4,000
60,000
100,000
The concept of business entity
• A business is a separate entity from its
owner
• Exclude personal transactions
Slide 22
The accounting equation
ASSETS
ASSETS
=
- LIABILITIES
=
+
LIABILITIES
Investment
CAPITAL
CAPITAL
+
Profit
Drawings
Slide 23
Accounts receivable
SALE to customer creates
ACCOUNT RECEIVABLE (customer owes $)
ASSET of the business
CASH RECEIPT settles
Slide 24
Accounts payable
PURCHASE from supplier creates
ACCOUNT PAYABLE (we owe $)
LIABILITY of the business
CASH PAYMENT settles
Slide 25
General rules
D ebits
C redits
E xpenses
L iabilities
A ssets
I ncome
D rawings
C apital invested
Slide 26
Question practice – end of Chapter 2
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
Assets, liabilities and the
accounting equation
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 5: The accounting equation
Slide 27
Chapter 3
Study Text Chapter 3
Statement of financial
position and income
statement
Statement of Financial Position & Income Statement
Statement of financial position –
worth of business at a point in time
Income Statement for y/e 31.12.X7
31.12.X6
Income statement –
trading activities over period
Slide 29
31.12.X7
Non-current Assets
• Land and buildings
• Plant and machinery
• Fixtures and fittings
• Vehicles
Slide 30
Current Assets
• Inventory
• Receivables
• Prepayments
• Bank and Cash
Slide 31
Current Liabilities
• Bank overdraft
• Trade payables
• Accruals
Slide 32
Non-current Liabilities
• Bank loans
Slide 33
Capital
• Share capital
• Reserves
Slide 34
Income Statement
• Income
• Expenses
Slide 35
Capital v Revenue expenditure
Capital expenditure
Expenditure on the acquisition of noncurrent assets or improvement in their
earning capacity
Slide 36
Capital v Revenue expenditure
Revenue expenditure
Trading expenses or the repair/
maintenance of non-current assets
Slide 37
Question practice – end of Chapter 3
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
Balance sheet and profit and loss
account
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 4: Classification of expenditure `
Slide 38
Chapter 4
Study Text Chapter 4
Recording, summarising
and posting transactions
Source documents
Invoice
Delivery note
Bank
statement
Payslip
Slide 40
Supplier account
Source document
Customer
account
Remittance advice
Books of prime entry
Sales day book
credit sales
Purchase day book
credit purchases
Cash book
movements in bank account
Petty cash book
physical cash movements
Journal book
other information
e.g. period end adjustments
correction of errors
large/unusual transactions
Slide 41
Sales Day Book
Lists all sales made on credit
Date
Customer
$
3.1.X7
J. Spalding
200
5.1.X7
G. McGregor
400
8.1.X7
J. Spalding
400
14.1.X7
G. McGregor
300
1,300
Slide 42
Purchase Day Book
Lists all purchases made on credit
Slide 43
Date
Supplier
$
1.1.X7
Tewson Co.
400
4.1.X7
Manley & Co.
350
16.1.X7
Manley & Co.
200
950
Cash Book
• Records receipts and
payments into and out of the
bank
• Often assumed to be two
books
Slide 44
Cash Book (receipts)
Date
Narrative
Total
Capital
Sales
Receivables
$
$
$
$
4,000
2.1.X7
F. Bloggs
4,000
5.1.X7
J.
Spalding
200
6.1.X7
200
500
500
J. Smith
4,700
Slide 45
4,000
500
200
Cash Book (payments)
Date
Narrative
Total
Purchases
Van
Rent
Payables
Petty
Drawings
Cash
$
6.1.X7
Manley & Co.
6.1.X7
Petty Cash
8.1.X7
Digby Co
Slide 46
$
350
$
$
$
$
350
50
50
1,000
1,000
1,400
1,000
350
50
$
General Ledger
Example
Advertising account
Date
Details
Ref
$ Date
20X8
15/4
Slide 47
JFK
PL8 2,500
Details
Ref
$
Ledger Accounts
Dr
Cr
$
DEBIT
TOTAL DEBITS
Slide 48
$
CREDIT
=
TOTAL CREDITS
Cash Sales double entry
Dr Cash
Cr Sales
Slide 49
Cash Purchases double entry
Dr Purchases
Cr Cash
Slide 50
Credit Sales double entry
Dr Accounts receivable
Cr Sales
When goods are sold
Dr Cash
Cr Accounts receivable
When cash is received
Slide 51
Credit Purchases double entry
Dr Purchases
Cr Accounts payable
When goods are purchased
Dr Accounts payable
Cr Cash
When cash is paid
Slide 52
Memorandum Ledgers
Can you identify how much J. Spalding
owes you from the following invoices?
Or how much you owe to Tewson Co.?
Slide 53
Memorandum Ledgers
• Receivables ledger
– Shows the total owed by each
individual customer
• Payables ledger
– Shows the total owed to each individual
supplier
Slide 54
Control Accounts
Receivables and payables recorded in two places
1. Sales and purchase ledgers giving information
on individual customers and suppliers
2. The general ledger
• Receivables account or Sales Ledger
Control Account
• Payables account or Purchase Ledger
Control Account
giving information on receivables and
payables in total.
Slide 55
Output Sales Tax
Dr Accounts receivable
Cr Sales
Cr Sales tax account
Slide 56
Input Sales Tax recoverable
Dr Purchases
Cr Accounts payable
Cr Sales tax account
Slide 57
Input Sales Tax not recoverable
Dr Purchases
Cr Accounts payable
Slide 58
Question practice – end of Chapter 4
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
Recording, summarising and posting
transactions
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 3: Double entry transactions
Slide 59
Chapter 5
Study Text Chapter 5
Completing
ledger accounts
Journal
Period end adjustments
Correction of errors
Slide 61
Journal entry example
$
$
DEBIT Accountancy fees 10,000
CREDIT Legal costs
10,000
With payments to accountants incorrectly
posted to legal fees
Slide 62
Balancing off ledger accounts
1
Separately add debit and credit sides
2
Fill in higher of two totals on both sides
3
Balance the account – balance c/d
4
Bring down balance b/d on opposite side
Slide 63
The Trial Balance
Lists the balances brought down on each
ledger account
Debits = Credits
Slide 64
Example – Miss Smith
Account
Cash
Capital
Debit
Credit
$
$
720
500
Sales
Purchases
2,200
1,100
Furniture
Electricity
500
120
Telephone
Drawings
60
200
Total
Slide 65
2,700
2,700
Suspense accounts
Never appear in the final accounts
Slide 66
Dealing with items in Suspense account
1
Determine what original entry was
made
2
Determine what original entry should
have been
3
Make required adjustment
Slide 67
Computer terms
Input
Processing
Entering data from original
documents
Sorting data
Output
Producing data in useful form
Slide 68
Accounting packages
Dedicated
accounting
packages
Slide 69
General
software
Accounting modules
A program which deals with one part of a
business’ accounting system
May or may not be integrated
Slide 70
Question practice – end of Chapter 5
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
Completing ledger accounts
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 11: The trial balance
Slide 71
Chapter 6
Study Text Chapter 6
Receiving and
checking money
Remittance advice
Slide 73
Comparing Receipts and Remittance advice
1
Check remittance advice adds up
2
Compare total with receipt
3
Calculate and record any difference
4
Bank cheque and record receipts
5
Send remittance advice to receivables dept
Slide 74
Till receipts
Slide 75
Methods of payment other than cash
• Credit card
• Debit card
• Cheque
• Banker’s draft
Slide 76
Security over cash receipts
• Security guards and collections
• Safe
• Protective glass
• Strong box
• Cash register
• Night safes
• Banking
Slide 77
Cheque guarantee cards
Slide 78
Receipt of cheques
1
Examine cheques to ensure details correct
2
Make sure cheque is signed
3
Compare signatures on cheque and card
4
Check details on cheque guarantee card
5
Copy cheque guarantee card details to
back of cheque
Slide 79
Plastic cards
Slide 80
Accepting credit card receipts
1
3
Rub thumb over signature panel to check
not raised
Compare signatures on card and
vouchers
Check warning lists of stolen cards
4
Check card date is still valid
5
Check transaction does not exceed
business floor limit
2
Slide 81
EFTPOS
Slide 82
Question practice – end of Chapter 6
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
Receiving and checking money
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 6: Banking and petty cash
Slide 83
Chapter 7
Study Text Chapter 7
Banking monies
received
Banker-customer relationship
• Comply with customer’s instructions
• Honour cheques
• Receive funds
• Repayment on demand
• Provide statement
• Confidentiality
Slide 85
Paying-in slip
Slide 86
Preparing a paying-in slip
1
Count the cash
2
Add up how much cash is being banked
3
4
Compare total calculated with cash
register record
Calculate and investigate if discrepancy big
5
Enter total for each denomination of note
6
Add up numbers again and enter in total
cash box
Slide 87
Paying in cheques
Slide 88
Returned cheques
• Insufficient funds
• Stolen cheques
• Wrongly completed cheques
• Out-of-date cheques
X
Slide 89
Banking credit card transactions
q
Retailer
1
4
Bank
2
3
Credit Card Company
Slide 90
Question practice – end of Chapter 7
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
Banking monies received
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 6: Banking and petty cash
Slide 91
Chapter 8
Study Text Chapter 8
Recording monies
received
Security over cash register
• Access keys kept in secure place
• Staff training
• Programming of preset information
• Analysis of periodic information
Slide 93
Posting cash to General Ledger
Book of
prime entry
p
O
Ledger
account
Cash book
S
Cash account
T
Records cash
receipts
Summarises
cash receipts
I
N
G
Slide 94
Question practice – end of Chapter 8
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
Recording monies received
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 6: Banking and petty cash
Slide 95
Chapter 9
Study Text Chapter 9
Authorising and
making payments
Controls over payments
Controls
Evidence - for
reason of
payment
Slide 97
Authorisation by appropriate
person
Cheque Requisition form
Slide 98
Expenses claims
EXPENSES CLAIM
$
Business travel
X
Newspapers or magazines
X
Telephone
X
Petrol
X
Car service and repair
X
Total
X
Receipts must be attached for all amounts claimed
Authorised by
Slide 99
Cash payments
• Small payments out of petty cash
• Cash wages
Slide 100
Preparing cheques
1
Prepare list of payments
2
Authorise payments
3
Check invoices to be paid
4
Prepare cheques
5
Sign cheques
6
Mark invoices as paid
7
Send cheques plus remittance advices
Slide 101
Stopping cheques
Slide 102
Bank Giro Credit
Slide 103
Standing Orders
Examples: Hire purchase/Rental/Insurance
Business making payment specifies:
• Desire to make regular payment
• Amount
• Frequency
• Banking details of supplier
Slide 104
Standing Order Mandate
Slide 105
Direct Debits
Differ from standing orders:
• Recipient initiates payment
• Payments can be for variable amounts
• Payments can be at irregular intervals
Slide 106
Direct Debit instruction
Slide 107
Remittance Advice
Slide 108
Question practice – end of Chapter 9
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
Authorising and making payments
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 6: Banking and petty cask
Slide 109
Chapter 10
Study Text Chapter 10
Recording
payments
Analysis of Cash Book
• Number of categories of purchases
• Frequency of purchases
• Split of business
• How complicated cash book may become
Slide 111
Posting to the General Ledger
Sales
Receipt Purchase
invoice Payment invoice
S/L
SDB
CB
PDB
General ledger
Slide 112
P/L
Use of automated credit systems
• Standing orders
• Direct debits
• Monthly salaries
• Weekly wages
Slide 113
Question practice – end of Chapter 10
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
Recording payments
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 6: Banking and petty cash
Slide 114
Chapter 11
Study Text Chapter 11
Maintaining petty
cash records
What is Petty Cash?
• Cash held in the form of coins and notes.
Used to pay small incidental expenses
• Employees
– Travel, groceries, postage
• Suppliers
– Cleaners
Slide 116
Security of Petty Cash
• Staff responsibility
• Authority
• Container
• Limits
• Supporting documentation
Slide 117
The Imprest system
Pre set limit of £50. At the beginning of the
week:
£10 note
£10 note
£10 note
£10 note
£10 note
Slide 118
The Imprest system
• During the week:
Buy plants £10
Pay milkman £5
• Now:
£5 note
£10 note
£10 note
£10 note
£10
voucher
Slide 119
£5
voucher
The Imprest system
At the end of the week
Write up expenses in the petty cash book
Top up cash (£15) to the imprest amount
(£50)
£10 note
£10 note
£10 note
£10 note
Slide 120
£10 note
Petty Cash vouchers
• Sequentially numbered
• Dated
• Amount – Sales tax (VAT) should be
analysed
• Signature
• Authorisation
Slide 121
Petty Cash Book
Receipts
Date
Narrative
Payments
Total
Date
Narrative
$
6.1.X7
Cheque
50
7.1.X7
City
Stationers
8.1.X7
F. Bloggs
cashed
Metro fare
Total
Stationery
Travel
$
$
$
10
10
2
12
Slide 122
2
10
2
Question practice – end of Chapter 11
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
Maintaining petty cash records
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 6: Banking and petty cash
Slide 123
Chapter 12
Study Text Chapter 12
Bank
reconciliations
Bank statement
Slide 125
Bank Reconciliations
Cash transactions
posted to
Cash books
posted to
Cash account in N/L
reconciles to
Bank statement
Slide 126
Differences: Cash Book v Bank Statement
Three reasons:
•
Timing differences
•
Errors by the business
•
Errors by the bank
Slide 127
Bank Reconciliation
Cash account (cash book)
Bal b/d
Error in bal b/d
X
X
Dishonoured chq
X
Bank charges, direct debits
X
Bal c/d
Y
X
X
Balance per statement
X
Less: unpresented cheques
(X)
Add: uncleared lodgements
X
Bank errors
Adjusted balance
Slide 128
reconciles
X/(X)
Y
Question practice – end of Chapter 12
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
Bank reconciliations
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 12: Bank reconciliations
Slide 129
Chapter 13
Study Text Chapter 13
Sales and sales
returns day books
Sales Day Book
Lists all sales made on credit
Date
Customer
3.1.X7
J. Spalding
200
5.1.X7
G. McGregor
400
8.1.X7
J. Spalding
400
14.1.X7 G. McGregor
Slide 131
$
300
1,300
Coding
Accounting codes used should be:
– Unique
– Useful
– Compact
– Meaningful
– Self-checking & of standard size
– Expandable
Slide 132
Coding systems
Sequence
Block
Give next available
number
Different sequences
Significant digit
Incorporates description
Hierarchical
Interrelationship
Faceted
Different features
Slide 133
Coding sales
• Sales invoice number
• Product code numbers
Slide 134
Credit Sales postings
Sales invoice
Sales day book
Daily postings
Sales ledger
Slide 135
Weekly/monthly postings
General ledger
Question practice – end of Chapter 13
The material in this chapter is covered in the following question
set from the BPP Learning Media Practice and Revision Kit.
The receivables ledger
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 7: Sales and sales records
Slide 136
Chapter 14
Study Text Chapter 14
The receivables
ledger
Receivables Ledger
Ledger account
CUSTOMER S S Ltd
ADDRESS
11 The Drive
TEL
FOLIO
DATE
Alderney
550 6565
SS1
DETA ILS
CREDIT LIMIT
TERMS
DISCOUNT
DETAILS
ACCOUNT
INVOICES
£
Slide 138
£3,000
30 days from date of invoice
none
Mrs C Control
RECEIPTS
BALANCE
£
£
Discounts
Trade discounts
• Given at time of sale/ purchase
• Bulk buying
Settlement discounts:
• Offered as incentive for early payment
• For example 5% if settled within 14 days
• May or may not be taken
Slide 139
Discounts allowed
Offered to customers
Sales are recorded after trade
discounts but before settlement
discounts
Slide 140
Aged Receivables report
Aged receivables report
Customer Credit Balance Current <60 <90 >90
Limit
days days days
£
Slide 141
£
£
£
£
£
Irrecoverable debts
Bad debts and
irrecoverable
debts are the
same thing!
An irrecoverable debt is a debt which
will definitely not be recovered
Slide 142
Doubtful debts
A doubtful debt is a debt which is
possibly irrecoverable
Slide 143
Irrecoverable bad debts double entry
Dr Irrecoverable debts account
Cr Accounts receivable
Slide 144
Question practice – end of Chapter 14
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
The receivables ledger
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 7: Sales and sales records
Slide 145
Chapter 15
Study Text Chapter 15
Purchase and purchase
returns day book
Purchase Day Book
Lists all purchases made on credit
Slide 147
Date
Supplier
$
1.1.X7
Tewson Co.
400
4.1.X7
Manley & Co.
350
16.1.X7
Manley & Co.
200
950
Coding purchases
• Supplier account number
• Product or service number
• Purchase invoice sequence number
Slide 148
Posting credit purchases
Purchase order/use of utilities
Purchase invoice
Purchase day book
Daily postings
Purchase ledger
Slide 149
Weekly/monthly postings
General ledger
Posting cash purchases
Invoice
Cash payments book
Daily/weekly postings
General ledger
Slide 150
Question practice – end of Chapter 15
The material in this chapter is covered in the following question
set from the BPP Learning Media Practice and Revision Kit.
The payables ledger
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 8: Purchases and purchase
records
Slide 151
Chapter 16
Study Text Chapter 16
The payables
ledger
Payables Ledger
SUPPLIER ACCOUNT
Debit side
Payments made X
Purchase returns X
Discounts received X
Slide 153
Credit side
Invoices received X
Discounts
Trade discounts
• Given at time of sale/ purchase
• Bulk buying
Settlement discounts:
• Offered as incentive for early payment
• For example 5% if settled within 14 days
• May or may not be taken
Slide 154
Discounts received
Received from the business’ suppliers
Purchases are recorded after trade
discounts but before settlement
discounts
Slide 155
Supplier’s statement
Slide 156
Supplier’s statement reconciliation
1
Tick off items which appear in
statement and payables ledger
2
Agree opening balance on supplier’s
statement
3
Allocate payments to invoices after
allowing for credit notes
4
Identify differences
Slide 157
Checks over payments
• Authorisation of payments
• Signing by cheque signatory
• Attachment of supporting documents
Slide 158
Contras
P Co owes F Co $70 but F Co owes P Co $200
Slide 159
Question practice – end of Chapter 16
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
The payables ledger
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 8: Purchases and purchase
records
Slide 160
Chapter 17
Study Text Chapter 17
Control accounts
Control Accounts
Receivables and payables recorded in two places
1. Sales and purchase ledgers giving information
on individual customers and suppliers
2. The general ledger
• Receivables account or Sales Ledger
Control Account
• Payables account or Purchase Ledger
Control Account
giving information on receivables and
payables in total.
Slide 162
Reasons for control accounts
• Check on accuracy of ledger balances
• Aid location of errors
• Reinforce segregation of duties
• Assist preparation of trial balance
Slide 163
Control account reconciliations
Theory:
Balance per RLCA
=
Balance per list of balances
in receivables ledger
and similarly for the PLCA and payables ledger
Slide 164
Question practice – end of Chapter 17
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
Control accounts and the trial
balance
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 10: Control accounts
Slide 165
Chapter 18
Study Text Chapter 18
Recording payroll
transactions
Payroll systems
• Basic hourly rate
• Piecework systems
– Wages = units produced x rate of pay per
unit
• Overtime
• Bonus schemes
• Commission
Slide 167
Employer’s legal responsibilities
• Operate income tax system
• Maintain and retain records
• Pay income tax and benefit contributions
• Allow tax office to access records
• Submit year-end returns
• Give employees payslips
Slide 168
Gross and net pay in the UK
GROSS WAGE
Net wage
paid to employee
Pension
Employee’s
NI
paid to
pension fund
Income
tax
paid to tax authorities
Total cost to employer is full gross wage plus employers NI:
GROSS WAGE
Net wage
Pension
Employee’s
NI
TOTAL EXPENSE
Slide 169
Income
tax
Employers
NI
Personnel records
A COMPANY PERSONNEL SYSTEM
Name: A Chappel
Main Menu
1 Personal details
2 Job and salary
3 Training
4 Exit
Slide 170
Payroll function
• Calculation of gross pay
• Calculation of tax and other deductions
• Preparing and distributing payslips
• Making returns to external agencies
• Arranging for payment of wages and
salaries
• Preparing payroll statistics
Slide 171
Timesheet
Example
Timesheet No
Name
Date
Job
Slide 172
Start
Finish
Dept
Week
Qty
Check
Hour
Rate
Ext
Income Tax
Tax deducted at source covering all
employees of an organisation
Slide 173
Benefit Contributions
• Unemployment benefit
• Income support
• Healthcare contributions
• State pension scheme contributions
Slide 174
Payslip
Slide 175
Remittance advice
Slide 176
Updating payroll records
• Updating normally only done weekly or
monthly
• Same type of entry takes place every month
• Use of wages control account as half of
double entry
Slide 177
Payroll accounting entries
DR
CR
Wages control
X
X
Staff costs (gross wages)
X
Staff costs (employer
contributions)
Cash (net wages paid)
X
PAYE liability
Slide 178
X
X
Question practice – end of Chapter 18
You should now be able to attempt the following question set
from the BPP Learning Media Practice and Revision Kit.
Recording payroll transactions
The material in this chapter is covered in the following BPP
Learning Media i-Pass test.
Test 9: Payroll
Slide 179