Please enable JavaScript.
Coggle requires JavaScript to display documents.
The internal controls (Trial balance (A list of account balances in a…
The internal controls
Trial balance
-
-
-
Every transaction generates a debit and credit entry, a trial balance by definition will result in the total debits and credits being equal
-
-
An arithmetical check of the ledger balances, drawn up in two columns: debits and credits
-
-
-
Customary to produce a trial balance at the end of the accounting period, forming a link between the ledger recording and the accounts production. May be regarded as the bridge between the end of the bookkeeping process (recording business transactions) and the beginning of the accounting process (reporting of financial information to users in order that they can make economic decisions)
Despite the usual practice of producing a trial balance at the end of the accounting period, a trial balance can be produced more frequently to provide an internal check that a business has recorded its business transactions correctly and all its debits are equal to its credits
-
Bank reconciliation
At periodic intervals, usually monthly, a business will receive a bank statement
The bank statement shows all the transactions processed through the banking system at the end of the reporting period
-
It is uncommon to find agreement between the bank statement and the cash book maintained by the business. The differences can occur for a variety of valid or justifiable reasons. The disagreements may arise from timing differences or actual mistakes
-
Should be prepared at the end of each month in order to provide an explanation for the differences between the bank statement and the cash book
The bank account balance on the bank statement is recorded in the opposite way to the cash book, i.e a debit balance is a negative balance
A positive balance in the bank account will be a creditor (a liability) of the bank and is therefore shown as a credit balance
-
Whichever method is used to prepare a bank reconciliation, the terms and content are the same and require further explanation as they contribute to explain the differences between the cash book and bank statement
Unpresented cheques: Cheques that have been issued to a payee but have not yet been presented to the bank or processed by the banking system
Bank transfer (credit transfer): A direct payment into a bank account such as a direct debit or standing order by a customer; the transfer does not appear in the cash book
Bank lodgement not yet banked: A payment received and entered into the cash book, but it may not have been deposited into the bank or it has not been processed through the bank system at the bank statement date
Control accounts
-
-
The transactions in each debtor account and each creditor account are totalled and entered in the sales ledger control account or purchase ledger control account
The sales ledger control account is also known as the 'debtors control account'. Similarly the purchase ledger control account is also known as the 'creditors control account'
The extensive use of computerised accounting systems in business may result in a separate control account no longer being generated, because the accounting systems can readily produce the individual debtor and creditor accounts plus the total balances for the debtor and creditor accounts
An account that checks the arithmetic accuracy of a ledger, primarily the debtors and creditors, resulting in the terms 'sales ledger control account' and 'purchase ledger control account'
-
-
-