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2 b o o k k e e p i n g c o n t r o l s t u t o r z o n e

Payment methods1

1.1 (a) A standing order is set up by the person making the payments

1.2 (b) A high value same day payment set up by a bank for its customer

1.3 (b) A credit card using details including the card number, security code and expiry date

(c) A debit card using details including the card number, security code and expiry date

1.4 (a), (b), (e) and (g) Electronic; (c), (d) and (f) Not electronic

1.5 (a), (c), (d), (e), (g) and (j)

1.6Monthly rent payments for business premises Standing order

Monthly settlement of a business credit card bill Direct debit

Payment of a credit supplier’s account Faster payment

Purchase of computer equipment at a retailer in person Business credit card

Donation of £10 to local charity who collect door to door Cash

Same-day payment for a new storage facility costing £45,000 via CHAPS payment a solicitor

a n s w e r s t o c h a p t e r a c t i v i t i e s 3

Payment methods and the bankaccount balance2

2.1 (b) Limit set, interest charged on amount borrowed, arranged for a set time period

2.2 (b) A cheque written out by a bank, as good as cash, deducted on the day issued

2.3 (a) Two hours

2.5 A bank will charge interest on an overdrawn current account. It may also charge fees for settingup overdraft arrangements. An overdraft is a form of short-term borrowing for a business. Anoverdrawn account will show as a debit on the bank statement and a credit in the business cashbook. It is normal for a bank to debit bank charges for running an account.

2.6 (a) £99 (b) Debit (c) No

2.4Credit card One day

Cheque paid in at a different bank to the cheque issuer Monthly

CHAPS 3 working days

BACS payment Same day

Cash withdrawn Next working day

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3.1 (a) 1 bank charges; 3 direct debit payments

3.2 (d) £650 credit (calculated as £850 – £2,250 + £750)

3.3 (a)20-4 Receipts £ 20-4 Payments £1 May Balance b/d 755.50 3 May Curtis Ltd 002476 200.0010 May Hawkins Ltd 530.90 12 May T Daniels 002477 327.4028 May B Morgan 386.45 15 May Smith & Co 002478 289.6015 May AJ Traders BACS 396.20 16 May Arnold & Sons 002479 327.20 22 May P Singh 002480 154.30 24 May Arley Finance DD 184.65 31 May Balance c/d 585.90 2,069.05 2,069.05

1 Jun Balance b/d 585.90

(b) CHRIS HART

BANK RECONCILIATION STATEMENT AS AT 31 MAY 20-4 £ £ Balance at bank as per bank statement 680.95 Less: unpresented cheques: Arnold & Sons (002479) 327.20 P Singh (002480) 154.30 481.50 199.45 Add: outstanding lodgement: B Morgan 386.45 Balance at bank as per cash book 585.90

Bank reconciliation statements3

a n s w e r s t o c h a p t e r a c t i v i t i e s 5

3.4 (a) to (c)CASH BOOK

Date Details Bank Date Cheque Details Bank 20-2 £ 20-2 number £

01 Nov Balance b/f 1,736 02 Nov 594883 Mercia Supplies 352

02 Nov R Phillips 1,364 02 Nov 594884 Perran Ltd 1,700

10 Nov Begley & Co 1,517 03 Nov 594885 Wilson Ltd 922

22 Nov Egan Ltd 2,235 11 Nov 594886 Durning Stores 1,062

23 Nov Dholiwar Ltd 1,076 11 Nov 594887 Bromfields 796

18 Nov Walters & Co 2,392 19 Nov 594888 Scott Ltd 426

19 Nov Wyvern Council 245

22 Nov 594889 HTP Ltd 968 24 Nov Bank charges 50

24 Nov Balance c/d 3,799

10,320 10,320

25 Nov Balance b/d 3,799

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(d) Bank reconciliation statement as at 24 November 20-2

Balance as per bank statement £1,882

Add

Name: Egan & Co £2,235

Name: Dholiwar Ltd £1,076

Total to add £3,311

Less

Name: Scott Ltd £426

Name: HTP Ltd £968

Total to subtract £1,394

Balance as per cash book £3,799

a n s w e r s t o c h a p t e r a c t i v i t i e s 7

4.1 (c) £36,780

4.2 (a) £20,703

4.3 (d) £2,788 credit

4.4 (a) Details Amount Debit Credit

£ Balance of credit suppliers at 1 August 29,338 4 Purchases from credit suppliers 18,174 4 Payments made to credit suppliers 19,351 4 Discounts received 176 4 Goods returned to credit suppliers 847 4

(b) (f) Cr £27,138

(c) £ Balance on purchases ledger control account at 1 September 27,138 Total of the purchases ledger balances at 1 September 27,483 Difference 345

(d) (b) A purchases invoice was entered twice in the purchases ledger

(e) (b) Reconciliation of the purchases ledger control account assures managers that the amount showing as outstanding to trade payables is correct

Using control accounts4

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4.5 (a)

(b) Yes 4 No

VAT control

Details Amount £Purchases 5,256Sales returns 344

Details Amount £

Sales 10,992Purchases returns 168Cash sales 1,136Discounts received 104

a n s w e r s t o c h a p t e r a c t i v i t i e s 9

5.1 (d) Writing off an irrecoverable debt

5.2 Date Details Reference Dr Cr

20-8 £ £ 1 Jan Office equipment GL 10,500 Inventory GL 3,300 Cash CB 200 Bank CB 1,400 Purchases ledger control (trade payables) GL 1,700 Bank loan GL 2,500 Capital GL 11,200 15,400 15,400 Assets and liabilities at the start of business

The journal5

1 0 b o o k k e e p i n g c o n t r o l s t u t o r z o n e

5.3 (a)

Account name Amount Debit Credit £ Irrecoverable debts 440 4

Value Added Tax 88 4

Sales ledger control 528 4

(b) Account name Amount Debit Credit £ Inventory 3,412 4 Office equipment 15,200 4 Cash at bank 1,874 4 Sales ledger control 11,391 4 Purchases ledger control 6,987 4 Rent 5,310 4 Heating and lighting 846 4 Wages 4,105 4 Bank loan 10,600 4 Capital 24,551 4

Journal to record the opening entries of the new business

5.4 (a) £57,350

5.5 (c) £137,850

5.6 (b) £71,450

a n s w e r s t o c h a p t e r a c t i v i t i e s 1 1

5.7 (a) Account name Amount Debit Credit £ Wages expense 48,831 4

Wages control 48,831 4

(b) Account name Amount Debit Credit £ Wages control 10,854 4

HM Revenue & Customs 10,854 4

(c) Account name Amount Debit Credit £ Wages control 36,071 4 Bank 36,071 4

(d) Account name Amount Debit Credit £ Wages control 1,906 4

Pension fund 1,906 4

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6.2 Debit Credit

(c) Bank £430 Advertising expenses £430 Advertising expenses £340 Bank £340

The trial balance and correction of errors6

6.1 Type of errorA sales credit note has not been entered into the accountsBank interest received has been debited to Interest received andcredited to BankThe cost of computer repairs has been debited to Computer equipment(original cost)Purchases has been undercast by £80. The balance of the discountsallowed account is £80 less than it should beA purchase invoice from K Burns Ltd has been credited to the accountof K Burning LtdA cash sale of £204 including VAT has been entered in the cash bookas £240 including VAT

Error of omissionReversal ofentriesError of principle

CompensatingerrorError ofcommission

Error of originalentry

a n s w e r s t o c h a p t e r a c t i v i t i e s 1 3

6.3

(a) Account name Amount Debit Credit £ Suspense 1,147 4

(b) Error in the general ledger Error causes Error does NOT an imbalance cause an imbalance

The cost of stationery has been debited to office equipment account and 4 debited to bank account

A cash sale has been recorded in the cash book only 4

A bank payment for heating and lighting has been debited to bank account and credited to heating and lighting 4 account

Rent paid of £540 has been recorded as £450 in the cash book and rent paid 4 account

A bank payment for office equipment has not been entered in the accounts 4

The balance of sales ledger control account has been calculated incorrectly 4

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6.4 (a) (1) Account name Amount £ Debit Credit Sales ledger control 2,982 4

(2) Account name Amount £ Debit Credit

Sales ledger control 2,928 4

(3) Account name Amount £ Debit Credit

Suspense 54 4

(b) (1) Account name Amount £ Debit Credit

Bank 350 4

Rent received 350 4

(2) Account name Amount £ Debit Credit

Bank 350 4

Rent received 350 4

a n s w e r s t o c h a p t e r a c t i v i t i e s 1 5

6.5 Sales Details Amount £ Details Amount £

Suspense 425

Suspense Details Amount £ Details Amount £ Sales 425 Balance b/f 230 Wages 195

Vehicle expenses Details Amount £ Details Amount £ Vehicles 80

Vehicles Details Amount £ Details Amount £ Vehicle expenses 80

Wages Details Amount £ Details Amount £ Suspense 195

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6.6 Account name Balances Balances at extracted on 1 January 20-3 31 December 20-2 £ Debit £ Credit £ Inventory 5,640 5,640 Sales ledger control 11,453 11,453 Purchases ledger control 6,726 6,726 Petty cash control 122 122 Capital 22,611 22,611 VAT owing to HM Revenue & Customs 1,594 1,594 Bank (overdraft) 3,827 3,827 Cash 496 496 Sales 74,012 74,362 Sales returns 1,475 1,475 Purchases 36,823 36,823 Purchases returns 308 308 Discounts allowed 1,480 1,480 Discounts received 736 736 Wages 19,414 19,414 Advertising 3,727 3,727 Insurance 1,496 1,496 Heating and lighting 2,023 2,023 Rent and rates 5,671 5,761 Miscellaneous expenses 854 854 Office equipment 18,800 19,400 Suspense account (debit balance) 340 – – Totals 110,164 110,164