Verification of accounting records

Topics

Choose a topic to revise

Sample objectives

What this unit covers

• The trial balance: Understand that a trial balance is a summary of account balances as of a specific date. Describe the purposes and drawbacks of a trial balance. Create a trial balance based on a provided list of balances and correct a trial balance that has mistakes. Recognize and clarify errors that do not impact the trial balance, including commission, compensating, complete reversal, omission, original entry, and principle errors.
• Correction of errors: Identify and rectify mistakes using journal entries, and describe how a suspense account can serve as a temporary solution to achieve balance in the trial balance. Make corrections through suspense accounts, and modify the profit or loss for an accounting period following error corrections. Comprehend how correcting errors impacts the statement of financial position.
• Bank reconciliation: Comprehend the function and significance of a bank statement. Adjust the cash book to reflect bank fees, interest received and paid, error corrections, credit transfers, direct debits, dividends, and standing orders. Grasp the aim of a bank reconciliation statement and create one that accounts for bank mistakes, deposits not yet credited, and cheques that have not been presented.
• Control accounts: Understand the functions of control accounts for both purchases and sales ledgers. Recognize the books of prime entry that provide information for entries in control accounts. Prepare control accounts for purchases and sales ledgers, incorporating elements such as credit purchases and sales, receipts and payments, cash discounts, returns, irrecoverable debts, dishonoured cheques, interest on overdue accounts, contra entries, refunds, and both opening and closing balances (debit and credit). Note that preparation of control accounts as part of the double entry system and reconciliation of control account balances with the sales and purchases ledger balances is not required.