Fís Foghlaim Forbairt  www. pdst. i e Fís Foghlaim Forbairt  www. pdst. i e

pdst 2014  www. pdst. i e Correction of Errors one approach

pdst 2014  www. pdst. i e Double Entry including accruals/prepayments to simple P&L and Balance Sheet Incomplete Records Control Accounts – Subsidiary Books Depreciation and Disposal Clubs, Service, Farm Manufacturing Correction of Errors Bank Reconciliations Sequence of Topics

pdst 2014  www. pdst. i e Departmental CVP Cash Flow Product Costing Ratio Analysis Budgeting Published Tabulars Sequence of Topics

pdst 2014  www. pdst. i e Two aspects to all transactions Matching of Debits and Credits Double Entry

pdst 2014  www. pdst. i e Double Entry Accounts Purpose Asset Record what the firm owns and what is owed to the firm. e.g. Vans A / C, Premises A / C, Cash A / C, Debtors A / C Liability Record what the firm owes. e.g. Loan A / C, Bank Overdraft A / C, Creditors A / C Expense Record the firm’s day to day running expenses. e.g. Wages A / C,, Insurance A / C, Purchases A / C Revenue Record day to day income earned by the firm e.g. Sales A / C, Rent Received A / C, Commission A / C

pdst 2014  www. pdst. i e Summary of possible entries DebitCredit  Asset  Asset  Liability  Liability  Expense  Expense  Revenue  Revenue

pdst 2014  www. pdst. i e Thus with every transaction you come across you need to decide: 1.What are the two accounts involved? 2.Which type of account is each one? 3.Does the transaction cause an increase or decrease in each account? 4.Therefore is it a Dr or Cr? Finally make the entry in the relevant accounts (Handout) 4 Questions

pdst 2014  www. pdst. i e Stage 1Stage 2Stage 3Stage 4 Source DocumentsSubsidiary BooksLedger Double Entry Final Accounts Balance Sheet Invoices [credit purchases and sales] Sales Book Purchases Book Post these transactions using Double Entry Rules Transfer from the Ledger to ascertain Profit for the Year and the Net Worth of the Company at a point in time Credit Notes Sales Returns Book Purchases Returns Book Cheque Payments Cheque Payments Book Receipts Cash Receipts Book Anything ElseGeneral Journal Recording Transactions

pdst 2014  www. pdst. i e Source documents List Reduce entries in accounts in nominal ledger Subsidiary Books

pdst 2014  www. pdst. i e Arithmetical check on double entry before preparation of Final Accounts and Balance Sheet Obvious there are errors Hidden errors Material amounts Minor discrepancies Trial Balance

pdst 2014  www. pdst. i e Trial Balance doesn’t work – make it work temporarily by putting in Suspense A / C Prepare final accounts including errors while somebody searches for errors Correct the errors through double entry NOT by crossing out (illegal!) Suspense

pdst 2014  www. pdst. i e Errors Don’t show up Original Entry Omission Compensating Commission Principle Reversal Do show up Half double entry Twice on same side Figures different Totting errors New information

pdst 2014  www. pdst. i e Read and Explain Pairs Read a little -- Talk a little Types of Errors

pdst 2014  www. pdst. i e 1.What Happened 1.What should have happened 2.Correction = JOURNAL ENTRY Approaching the Question

pdst 2014  www. pdst. i e Transfer Suspense Items Highlight Profit & Loss items Highlight Balance Sheet items Journal Entries

pdst 2014  www. pdst. i e As per Journal Entries Transfer balance to what buried in – follow double entry rules Suspense Account

pdst 2014  www. pdst. i e Adjusting the Profit Debits in Journal => Increasing expenses or Reducing Revenue Credits in Journal => Increasing Revenue or Reducing Expenses Profits

pdst 2014  www. pdst. i e Profit as per draft accounts Add Less Corrected Net Profit Adjusting the Profit

pdst 2014  www. pdst. i e Balance Sheet Items ItemOriginal Figure ChangesNew Figure Premises Debtors Bank(xxxxx) Creditors Capital Loan

pdst 2014  www. pdst. i e Nature of business Unseen items Switching figures English! Watch for