Basic Accounting II (BAII) Level 2 Certificate in Accounting AAT

Basic accounting I recap

Terminology UK International Fixed Assets Non-current Assets A summary of the equivalent international version to the UK terms which are used within this assessment. UK International Fixed Assets Non-current Assets Stock Inventory Debtor Receivable Creditor Payable It is also important for you to be able to use the terms “main ledger” and “general ledger” interchangeably. Progressing through the AAT qualification and other accounting qualifications requires a knowledge of both UK GAAP terms and International Accounting Terms

Ledger accounts Run through terms eg Assets, Liabilities, Expenses, Income Stress difference between Purchases and Expenses

Ledger accounts

Ledger accounts

Every DEBIT must have an equal CREDIT Debits and credits Every DEBIT must have an equal CREDIT

Balancing a ledger account

Balancing a ledger account

The trial balance List of all the ledger balances in the main (general) ledger Debit balances and credit balances listed in difference columns Total debit balance must equal total credit balance

The trial balance

Debit balances Credit balances The trial balance Debit balances Credit balances Assets Liabilities Expenses Income Drawings Capital

Journal adjustments

Journal adjustments A written instruction by a bookkeeper to write a double entry into the general ledger accounts Generally for adjustments therefore a narrative usually accompanies the double entry as explanation for the purpose

Journal adjustments E.g. £170 has been debited to insurance instead of motor tax Journal: Dr Motor tax Cr Insurance Being motor tax posted to insurance in error

Journal adjustments Other adjustments: Bad debts Contra entries

Journal adjustments Bad debts Arise when a debtor fails to pay and the debt is written off DR Bad debt expense CR Sales Ledger Control Account Being the write off of a bad debt

Journal adjustments Contra entries A business is both a debtor and creditor of another business if it buys and sells with it. Both parties have to agree to “net” balances off i.e. Reduce both the creditor and debtor balances DR Purchases Ledger Control Account CR Sales Ledger Control Account Being the adjustment for a contra entry with ABC Ltd

Contra entry - example

Contra entry - solution

Suspense account

Suspense accounts Used as a temporary holding account when Destination of a posting is uncertain The Trial Balance does not balance and an error has to be investigated Review producing a trial balance

The trial balance

Errors identified by trial balance

Errors not identified by trial balance

Journals Used to record unusual items such as error corrections or to clear a suspense account Dr Cr Account to be debited £XXX Account to be credited £XXX

Journal entry

control accounts

Sales ledger control account

Purchases ledger control account

Control Account Balances Reasons for differences Casting errors Posting errors Bad debts Contra entries Talk around casting/posting errors Next slides cover bad debts and contra entries

Petty cash

Imprest system

Petty cash voucher

Petty cash book

vat

VAT VAT is charged on the taxable supply of goods and services in the United Kingdom by a taxable person in the course of a business carried on by them.

VAT Control Account VAT INPUT VAT (on purchases) OUTPUT VAT (on sales) OUTPUT VAT > INPUT VAT = LIABILITY OWED TO HMRC INPUT VAT > OUTPUT VAT = REFUND DUE BACK FROM HMRC

Calculating VAT Net 100% VAT 17.5% Gross 117.5% Explain and work examples on calculating VAT

Calculating VAT

payroll

Gross pay and deductions

Employee payslip

Entering payroll in the ledger - 1

Entering payroll in the ledger - 2

Entering payroll in the ledger - 3

Banking procedures

Bank accounts

Cheques

Cheque crossings

Standing orders and direct debits

BACS and CHAPS

Credit and debit cards

BANK Reconciliations

Bank reconciliation - 1

Bank reconciliation - 2

Bank reconciliation - method