1. Control Accounts Lesson 2

2. Revision Bal b/d Fill in all possible entries and name the account.
Bal c/d

3. SLCA SLCA Bal b/d Bank Sales Discounts Allowed Returned cheques
Sales Returns
Irrecoverable debts
Contra
Bal c/d

4. VAT Control Account
Fill in all possible entries
VAT
Details

5. VAT Control Account VAT Details £ Purchases Sales Sales Returns
Purchase returns
Cash purchases
Cash sales
Other expenses
Other cash income
Bank
Other income

6. The Accounting Equation?

7. The Accounting Equation
Assets – Liabilities = Capital

8. The Accounting Equation Exercises

9. Aims of the Session The journal and maintaining it.
Offsets or contras.
Irrecoverable debts.

10. The Journal Records non-standard transactions, such as:
Opening entries
Irrecoverable debts written off
Payroll
Correction of errors

11. The Journal
Is a book of prime entry – NOT part of the double entry system.
Eliminates the need to remember why non-regular entries were made.
Reduces the risk of fraud.
Reduced the risk of errors as it lists the transactions to be entered into the double entry system.
Ensures entries can be traced back to an authorised document.

12. Capital Account (in General Ledger)
Journal Extract
Date
Details
Reference
Debit
Credit
20 Jun
20X6
Bank
Capital
Opening capital introduced to business
CB (cash book)
GL (general ledger)
20,000
This is simply a note-book style entry and now needs to be put into the double entry system.
General Ledger Extract Dr
Cash Book (CB) Cr
2xx6
Details
Cash
Bank
20x6
20 Jun
Capital
20,000 Dr
Capital Account (in General Ledger) Cr
2xx6
Details
Cash
Bank
20x6
20 Jun
20,000

13. Exercises
Prepare the journal entry for the following opening entries. Started the business on 1 Feb 20X6 with £100 cash, bank £5000, inventory £1000, machinery £2,500, trade payables £850. Prepare the journal entry for the following irrecoverable debt. J Smith £345 - irrecoverable debt 1 Feb 20x6

14. Solution Assets – liabilities = capital
Date
Details
Reference
Debit
Credit
20 Feb
20X6
Cash
Bank
Inventory
Machinery
PLCA
Capital *
Opening entries to business CB GL
100
5,000
1,000
2,500
850
7,750
Assets – liabilities = capital
( – 850 = 7750)
The capital is the balancing figure

15. Solution Date Details Reference Debit Credit 20 Feb 20X6 SLCA
Irrecoverable debts GL
345

16. Now record these as entries in the General Ledger

17. Offsets/Contras When a business buys and sells from another business.
Saves making two payments.

18. Patel Ltd has the following accounts in the purchases ledger and sales ledger.
A Smith
Balance b/d £200
Purchases Ledger
A Smith
Balance b/d £300
A Smith owes Patel Ltd £200 (sales), and Patel Ltd owes A Smith £300 (purchases).
Rather than making 2 entries and 2 bank payments the payments can be offset in Patel Ltd’s books:
Debit the purchase ledger of A Smith £200
Credit the sales ledger A Smith £200

19. Contra/set-off entries need to be properly documented and authorised.
Patel Ltd’s accounts now appear like so:
Sales Ledger
A Smith
Balance b/d £200
Purchases Ledger
A Smith
Balance b/d £300
Contra
Sales £200
Contra
Purchases £200
Balance c/d £100
£300
£300
Balance b/d £100
Entries now need to be made in the control accounts as the double entry.
Contra/set-off entries need to be properly documented and authorised.

20. Exercises
Mrs Moggins owes Mrs Miggins £400, Mrs Miggins owes Mrs Moggins £350.
Bagstock Ltd owes Kenwigs £50, Kenwigs owes Bagstock Ltd £60.
Mr Bond owes £780 to Chiffre Enterprises, Chiffre Enterprises owes Mr Bond £700.
Krook & Co owes £678 to Marley Ltd, Marley Ltd owes £300 to Krook & Co.
Draw up the entries in the subsidiary and control accounts, the first name is the business whose account you are working on.
Answers in course folder.

21. Irrecoverable Debts
Using your previous knowledge how are irrecoverable dealt with?
Debit: Irrecoverable debts (expense) & VAT
Credit: SLCA
Requires journal entries and proper authorisation.

22. Irrecoverable Debt Exercises
Write up the journal entries for the following irrecoverable debts:
Malvolio Ltd goes bankrupt owing £420 incl VAT.
Caius Coriolanus goes into liquidation owing £840 ex VAT.
The Prince of Morocco dies owing £2,592 incl VAT.
Dr Irrecoverable debt & VAT: 350 & 70 Cr: SLCA £420
Dr Irrecoverable debt & VAT: 840 & 168 Cr: SLCA £1008
Dr Irrecoverable debt & VAT: 2160 & 432 Cr: SLCA £2,592

23. Questions?