7/30/2019 Final Xref 5kjljljl
1/49
Chapter 17
Correction of errors
7/30/2019 Final Xref 5kjljljl
2/49
Slide 2 notes reference - page 187
2 main uses:
Suspense accounts
Never appear in the final accounts
To account for a Dr or Cr
when the accountant is
unsure where it should go
To make a preliminary
trial balance balance
7/30/2019 Final Xref 5kjljljl
3/49
Slide 3 notes reference - page 187
Lecture example 1
The double entry would be: Dr Suspense account 400
Cr Cash at bank 400
Bank 400Suspense
Suspense 400Bank
7/30/2019 Final Xref 5kjljljl
4/49
Slide 4 notes reference - page 187
Lecture example 1 (cont)
The double entry is: Dr Rent expense 400
Cr Suspense account 400
Bank 400Suspense
Suspense 400Rent
Rent 400
7/30/2019 Final Xref 5kjljljl
5/49
Slide 5 notes reference - page 188
Lecture example 2
(W1) Should Dr SLCA 8,132 Cr Sales 8,132
Have Dr SLCA 8,132 Cr Sales 1,832Now Dr Suspense 6,300 Cr Sales 6,300
Dr Suspense 6,300
Cr Sales 6,300(ii) Dr Electricity expense (615-516) 99
Cr Suspense 99
(W2) Should Dr Telephone 70 Cr Accruals 70Have Dr - Cr Accruals 70Now Dr Telephone 70 Cr Suspense 70
Dr Telephone 70
Cr Suspense 70(iv) Dr Purchases (77,356 76,182) 1,174
Cr 1,174Suspense
(i) (W1)
(iii) (W2)
7/30/2019 Final Xref 5kjljljl
6/49
Slide 6 notes reference - page 189
Lecture example 2 (cont)
Suspense account(i) Sales 6,300
(ii) Electricity 99
(iii) Telephone 70
bal b/d 4,957
(iv) Purchases 1,174
6,3006,300
7/30/2019 Final Xref 5kjljljl
7/49
Slide 7 notes reference - page 189
Dr Cr
Motor van at cost 5,500
Inventories 6,230Receivables ledger control 19,167Cash at bank 218Petty cash 50Payables ledger control 13,166Prepayments 490Accruals 70Motor van - provision for depreciation 2,000Sales 100,170Purchases 77,356Rent expense 1,200Wages and salaries expense 12,500Electricity expense 615
Telephone expense 300Accountancy expense 500Van expenses 280Depreciation expense 1,000Capital 10,000
125,406 125,406
Lecture example 2 (cont)
7/30/2019 Final Xref 5kjljljl
8/49
Slide 8 notes reference - page 190
Ledger codes
Vital to record all transactions without error but also be
able to retrieve them Need to organise all these transactions by means of
individual flags
Format can be in a hierarchy e.g. Assets
Non current assets
Current assets Inventories
Receivables
Liabilities
Capital Expenses
Revenues
Audit trail of all items and transactions
Time
7/30/2019 Final Xref 5kjljljl
9/49
Slide 9 notes reference - page 191
Ledger codes
Accounting codes used should be: Unique
Useful
Compact
Meaningful
Self-checking & of standard size
Expandable
7/30/2019 Final Xref 5kjljljl
10/49
Slide 10 notes reference - page 191
Example of how a Ledger stores datafor retrieval
X
Cos
tcentre
Ledger code
All data must be unique to
be easily stored andlocated within the ledger
and represent one item inone place at one time
Literally, a cube of
data. How do you findone item out of all
transactions in the yearso far?
At one slice of time,
you can find anindividual transaction
e.g. Newcastle Wageson 16/4/05
e.g. 16/4/05
e.g.
Newcastle
e.g. Wages
7/30/2019 Final Xref 5kjljljl
11/49
Chapter 18
Sales tax, PAYE and NI
7/30/2019 Final Xref 5kjljljl
12/49
Slide 12 notes reference - page 197
Sales tax
An indirect tax
Charge sales tax on sales
OUTPUT TAX
Suffer sales tax on purchases
INPUT TAX
7/30/2019 Final Xref 5kjljljl
13/49
Slide 13 notes reference - page 197
Lecture example 1
(a) Grow raw materials &
Net Tax Gross
sell for $117.50 (W1)
100 17.50 117.50
(b) (1) Buy raw materials for $117.50(2) Sell to wholesaler for $293.75 (W2)
100 17.50 117.50250 43.75 293.75
17.50
26.25
(W1) 17.5
117.5x $117.50 = $17.50
17.5
117.5x $293.75 = $43.75
(W2)
7/30/2019 Final Xref 5kjljljl
14/49
7/30/2019 Final Xref 5kjljljl
15/49
Slide 15 notes reference - page 197
Lecture example 1 (cont)
(e) Customer bought goods for $470
Net Tax Gross
400 70.00 470
Tax paid directly to HMRC is:
(a)(b)
(c)
(d)
(e)
17.5026.25
8.75
17.50
0
70.00
Tax suffered by customer
7/30/2019 Final Xref 5kjljljl
16/49
7/30/2019 Final Xref 5kjljljl
17/49
Slide 17 notes reference - page 200
Lecture example 2
The double entry to record the sales is:
Trade Receivables 1,762.50
Sales 1,500.00
Dr Cr
Sales Tax 262.50
Sales
Tr Rec 1,500
Trade Receivables Sales Tax
b/d 175Sales 1,762.50
(incl ST)
Tr Rec 262.50
262.50262.50
c/d 87.50
b/d 87.50
7/30/2019 Final Xref 5kjljljl
18/49
Slide 18 notes reference - page 200
Lecture example 3
Sales Tax calculated after accounting forall discounts
Settlement discount (10% x 11,000) (1,100)
Trade discount (4,000)
11,000
Sales net of all discounts 9,900
Sales Tax = 9,900 x 17.5% = 1,732.50
Sales 15,000
$
7/30/2019 Final Xref 5kjljljl
19/49
Slide 19 notes reference - page 201
Lecture example 3 part (a)
The double entry to record the sale will be:
Sales 11,000
Receivables 12,732.50
Dr Cr
Sales Tax 1,732.50
7/30/2019 Final Xref 5kjljljl
20/49
Slide 20 notes reference - page 201
Lecture example 3 part (b)
Sales tax control account
Receivable 1,732.50
Receivables
Sales 12,732.50
Sales
Receivable 11,000
Cash 12,732.50
7/30/2019 Final Xref 5kjljljl
21/49
Slide 21 notes reference - page 201
Lecture example 3 part (c)
Sales
Receivables 11,000
Receivables
Sales 12,732.50
Sales Tax control account
Receivables 1,732.50
Cash 11,632.50
Discounts allowed
Receivables 1,100
Discount allowed 1,100
12,732.50 12,732.50
7/30/2019 Final Xref 5kjljljl
22/49
7/30/2019 Final Xref 5kjljljl
23/49
Slide 23 notes reference - page 203
National Insurance and PAYE
Employers
NI
paid to
employee
paid to
pension fund
paid to
HMRC
TOTAL EXPENSE
Net wage Pension PAYE
GROSS WAGE
Employees
NI
7/30/2019 Final Xref 5kjljljl
24/49
Slide 24 notes reference - page 203
Lecture example 4
(a) The total cost to the employer is $33,000
33,000
30,000
The double entry would be:
Wages & salaries expense
Wages control (gross pay)
Dr Cr
NIC (employers contribution) 3,000
(Gross pay 30,000 + Employers NI 3,000)
(b) The 3 items deducted from gross pay are
(i) Employees National Insurance contribution
(ii) PAYE
(iii) Trade Union deductions
7/30/2019 Final Xref 5kjljljl
25/49
7/30/2019 Final Xref 5kjljljl
26/49
Slide 26 notes reference - page 204
Lecture example 4 (cont)
(d) The total amount paid to the Inland Revenue is $8,900
3,900
8,900
The double entry would be:
NIC control
Bank
Dr Cr
PAYE control 5,000
600
600
(e) The double entry to reflect payments to the TU would be:
Trade union account
Bank
Dr Cr
7/30/2019 Final Xref 5kjljljl
27/49
Slide 27 notes reference - page 205
Lecture example 4 part (f)
NIC control
bal b/d 4,000Wages & salaries expense(employers NI)
3,000
Wages & salaries control(employees NI)
2,000
3,900Bank
5,100bal c/d
9,0009,000
Trade Unions
bal b/d 500
Wages & salaries control 100
600Bank
600600
7/30/2019 Final Xref 5kjljljl
28/49
Slide 28 notes reference - page 205
Lecture example 4 part (f)
Bank
Wages & salaries control 21,900NIC control 3,900
Trade Union 60031,400bal c/d
31,40031,400
PAYE control
bal b/d 5,000
Wages & salaries control 6,000
5,000Bank
PAYE control 5,000
bal c/d 6,000
11,00011,000
7/30/2019 Final Xref 5kjljljl
29/49
Slide 29 notes reference - page 205
Lecture example 4 part (f)
Wages & salaries control
NIC control(employees NI) 2,000
Trade Union 100
21,900Bank
30,00030,000
Wages & salaries expense
IS 33,000
PAYE control 6,000
33,000Wages control &NIC control
33,00033,000
Wages & salaries 30,000expense
Ch t 19
7/30/2019 Final Xref 5kjljljl
30/49
Chapter 19
Incomplete records
7/30/2019 Final Xref 5kjljljl
31/49
Slide 31 notes reference - page 211
Lecture example 1
The records that are likely to be kept would include:
Bank statements
Till rolls
Supplier invoices and statements Sales invoices and statements
7/30/2019 Final Xref 5kjljljl
32/49
7/30/2019 Final Xref 5kjljljl
33/49
7/30/2019 Final Xref 5kjljljl
34/49
Slide 34 notes reference - page 212
Lecture example 3
The cost of sales is $285,600
100%
60%
40%
Rule (margin): Set sales to 100%
Sales
COS
Gross Profit
476,000
285,600x 60%
7/30/2019 Final Xref 5kjljljl
35/49
Slide 35 notes reference - page 213
Lecture example 4
Credit sales for the year are 290,560
130%
100%
30%
Rule (mark-up): Set COS to 100%
Sales
COS
Gross Profit
257,000
334,100x 130%
Total salesCash sales
Credit sales
334,100(43,540)
290,560
7/30/2019 Final Xref 5kjljljl
36/49
Slide 36 notes reference - page 214
Lecture example 5
Purchases for the year are $174,500
130%
100%
30%
Rule (mark-up): Set COS to 100%
Sales
COS
Gross Profit
221,000
170,000x 100/130
170,000
43,000
174,500
Opening inventory
Purchases
Cost of sales
Less: closing inventory (47,500)
7/30/2019 Final Xref 5kjljljl
37/49
7/30/2019 Final Xref 5kjljljl
38/49
Slide 38 notes reference - page 215
Lecture example 7(a) Purchases for the year are $173,029
Cash 430
Bank 167,224
bal c/d 43,825
bal b/d 38,450
Purchases 173,029
211,479 211,479
Purchase Ledger Control Account
(b) The double entry for the purchases figure is:
Purchases 173,029
PLCA 173,029
7/30/2019 Final Xref 5kjljljl
39/49
7/30/2019 Final Xref 5kjljljl
40/49
9
7/30/2019 Final Xref 5kjljljl
41/49
Slide 41 notes reference - page 217
Lecture example 9
(a) Purchases for the year were $158,345
Bank 157,300
bal c/d 15,456
bal b/d 14,411
Purchases 158,345
172,756172,756
PLCA
The double entry for the purchases figure is:
Purchases 158,345PLCA 158,345
Dr Cr
7/30/2019 Final Xref 5kjljljl
42/49
L t l 9 ( t)
7/30/2019 Final Xref 5kjljljl
43/49
Slide 43notes reference - page 217
Lecture example 9 (cont)
(d) Sales for the year were $203,008
The double entry for the sales figure is:
Trade Receivables 203,008
Sales 203,008
Dr Cr
Sales
COS
Gross Profit
130%
100%
30%
156,160
203,008x 130%
L t l 9 ( t)
7/30/2019 Final Xref 5kjljljl
44/49
Slide 44notes reference - page 217
Lecture example 9 (cont)
(e) Cash received from trade receivables during the year was
$200,877
bal b/d 19,246
Sales 203,008Receipts from receivables 200,877
bal c/d 21,377
222,254222,254
SLCA
L t l 9 ( t)
7/30/2019 Final Xref 5kjljljl
45/49
Slide 45notes reference - page 217
Lecture example 9 (cont)
(f) The amount of cash stolen by the cashier was $36,824
bal b/d 100 Expenses 2,080($40 x 52)
200,977200,977
Cash
Receipts from 200,877
receivables Drawings 2,860($55 x 52)
Bankings 159,213
Stolen 36,824
bal c/d 0
Chapter 20
7/30/2019 Final Xref 5kjljljl
46/49
Chapter 20
Profit adjustments
P f d fit i fit
7/30/2019 Final Xref 5kjljljl
47/49
Slide 47notes reference - page 221
Proforma
Original profit
Adjustment
(a) over depreciation
(b) accrual
(c) unrecorded sale
Dr Cr
- +
X
X
(X)
X
(X) X X
XAdjusted profit
decrease profit increase profit
7/30/2019 Final Xref 5kjljljl
48/49
End of day 5 what to do now
7/30/2019 Final Xref 5kjljljl
49/49
End of day 5 - what to do now
1.Coursenotes review
Course Companion
2. Questionpractice
3. Study textreview
Reinforce todays learning
Develop question skills