Study tips: applying the Foundation Certificate in Accounting to a business scenario (part 2)

This is the 2nd in a series of articles

where we are exploring a few of the trickiest areas at Foundation level.

We are overcoming a business situation to illustrate how the AAT Foundation Certificate in Accounting can be used, in practice, to the common day-to-day jobs of an accounts assistant.

Let’s re-join Zairah at the end of November when she is making the last entries to the sales journal control account (SLCA) so that she can reconcile it as part of JDB Materials’ month end procedures.

As the SLCA is a property account, Zairah knows it needs to have a debit balance. She likewise understands that transactions that increase the stability must be entered upon the debit side and transactions that decrease the balance needs to be opened on the credit side.

The very first entry she needs to make is from the sales daybook (SDB):.

She needs to ask herself:.

Q Which is the ideal figure to utilize from the SDB extract?
A The total since it consists of the BARREL which’s the figure customers will pay.
Q Will the transaction increase or decrease the SLCA?
An Increase as the SDB lists credit sales billings and the SLCA records just how much the credit customers owe JDB Materials.
For that reason, ₤ 47,603 need to be debited to the SLCA.

Zairah has made the entry from the SDB and now requires to make another from the sales returns daybook (SRDB).

The same concerns use:.

Q Which is the best figure to use from the SRDB extract?
A The overall since it consists of the BARREL. Consumers will have been invoiced for a BARREL inclusive figure so any credit notes must refund the BARREL.
Q Will the transaction boost or reduce the SLCA?
A Decrease as the SRDB lists the credit keeps in mind that has been provided to credit consumers when they return items, and this decreases the quantity that is owed to JDB Supplies.
Therefore ₤ 918 need to be credited to the SLCA.

Having actually posted both daybooks, Zairah now requires to upgrade the SLCA for the bank invoices. Bank receipts are entered in the debit side of the money book as they increase the cash book balance.

Zairah knows that a typical mistake when publishing entries to control accounts is to enter them on the wrong side. However, she knows that double entry accounting is based on the essential concept that amounts to debits equal total credits. For that reason, as ₤ 60,357 has actually been debited to the money book, then the exact same quantity must be entered in the credit side of the SLCA.

She can double check

her thought process by analyzing the function of the transactions– the cash was gotten from credit customers to pay the invoices that were initially noted in the SDB and published to the debit side of the SLCA. Customers no longer owe that cash so the entry in the SLCA needs to decrease its balance and that implies distributing it to the credit side.

Zairah is now in a position to balance the SLCA:.

Her next job is to reconcile the sales ledger with the SCLA. As the SCLA has a debit balance, Zairah expects the specific client accounts in the sales journal will have debit balances also, although she understands that credit balances are possible.

Zairah totals the debit balances and then subtracts the credit balances to compute the appropriate ledger figure. The total of the sales journal balance is ₤ 44,280 which is ₤ 501 lower than the balance on the SLCA. Zairah knows they should be the same.

JDB Products has a policy that all control account disparities must be examined and after that reported to the finance group manager. Zairah understands they could be some possible reasons that the amounts do not match so she tries to work out what might lead to the SLCA balance being more than the sales ledger total. Some possible description is:.

Omissions.
An omission of publishing from the credit side of the SLCA.
An omission of publishing from the debit side of the sales journal.
Duplication.
If a transaction had actually been posted two times to the debit side of the SLCA.
If a deal had been published two times to the credit side of the sales journal.
Entered upon the wrong side.
Correctly going into a deal on the debit side of the SLCA however then incorrectly publishing it to the credit side of the sales ledger.
Zairah discovered the reason for the distinction eventually and emailed Ian her supervisor:.

Hi Ian,.

I discovered a ₤ 501 disparity when I reconciled the SLCA with the sales ledger today. The control account balance is more than the sales ledger overall so I believed there might be an omission, duplication or transaction entered upon the wrong side somewhere.

I began searching for these sort of deals and noticed that a ₤ 501 sales billing had correctly been posted to the debit side of the SLCA however that it has actually not been participated in JU Weavers’ account in the sales ledger. When this omission is corrected, and the specific client account has actually been updated, the SLCA and sales ledger will concur.

If you require any more information, then please do not hesitate to call me.

Zairah proof-read her e-mail before she sent it, correcting spelling mistakes and changing a few of her phrasing to ensure the information was accurate, technically proper and devoid of spelling and grammatical errors.

Zairah has actually dealt with a few of the locations many struggles with at Foundation level. More in-depth articles are offered on how the SLCA and sales journal work, in addition to PLCA and purchase

journal, various

methods to balance T accounts and how to compose expertly.

In the next post of this series, we’ll see how Zairah uses double-entry strategies and journals to remedy the mistake she found.

Gill Myers is a self-employed accounts specialist. She has actually taught AAT qualifications because of 2005 and composed numerous articles and e-learning resources.

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