Verification of accounting records (AS Level) flashcards

Topic 4: Verification of accounting records

The four verification techniques named in 9615

Trial balance, bank reconciliation statements, trade receivables ledger control accounts and trade payables ledger control accounts.

Which four errors does the trial balance reveal?

Addition, partial omission, transposition (on one side) and unequal posting.

A transposition is made in the book of prime entry. Is it revealed by the trial balance?

No. The wrong figure is used for both sides, so it becomes an error of original entry. Nor is it revealed by a control account.

$5,420 was posted to one account as $5,240, with the other side correct. Difference and clue?

Difference $180. It divides by 9 (180 ÷ 9 = 20), the sign of a transposition.

Trial balance credits exceed debits by $360. Which side does the suspense account open on?

Debit, $360: the side that makes the trial balance agree. Errors not revealed never touch suspense.

A payment of $450 to P Okwuosa was debited to bank and credited to his account. Correction?

Complete reversal: Dr P Okwuosa $900, Cr Bank $900.

Classify: an invoice for T Amadi posted to T Amado; a delivery van debited to purchases

T Amadi / T Amado: error of commission. Van to purchases: error of principle. Neither is revealed by the trial balance.

Payables control: b/d credit $17,300, debit $150; credit purchases $28,460; payments $25,910; discounts $540; returns $1,280; contra $900; closing debits $210

Debit side 150 + 25,910 + 540 + 1,280 + 900 + c/d; credit side 17,300 + 28,460 + 210 = 45,970. Closing credit balance $17,190.

Updated cash book overdraft $640; unpresented cheques $1,150; outstanding lodgement $380. Bank statement balance?

Work in signed numbers: −640 + 1,150 − 380 = $130 favourable.

Effects: closing inventory overstated by $1,200; electricity owing of $340 omitted

Inventory: profit overstated $1,200; current assets overstated $1,200. Electricity: profit overstated $340; current liabilities understated $340.

Contra between the receivables and payables ledgers: control account entries

Debit the trade payables ledger control account; credit the trade receivables ledger control account.

Unpresented cheque vs dishonoured cheque in a bank reconciliation

An unpresented cheque is a timing item in the reconciliation statement. A dishonoured cheque is a real event, so the cash book is updated.