Accounts

• Control accounts


  Also known as total accounts, used to represent numerous individual accounts in certain ledgers
• Whatever is done in the individual accounts must also be done in the control accounts representing those accounts, on the same side, but in total
• Main uses of Control Accounts

  • To help prevent and/or detect errors in the books
  • To assist with the speedy preparation of the trial balance
  • To assist with the preparation of final accounts from incomplete records
  • To help prevent fraud by book-keepers
  • To help prove that the entries in the individual accounts and their final balances are correct
• Main types of Control Accounts

  • The Sales Ledger Control Accounts or Total Debtor Account
  • The Purchase Ledger Control Account or Total Creditor Account
• Sales Ledger Control Account

  Represents an overall picture of all the individual debtors' accounts in the sales ledger
• The sales ledger control account can have a credit balance in certain instances
• Instances where the sales ledger control account can have a credit balance


  • Where a customer returns goods after paying for them in full
  • Where a customer makes advance payment(s) on his account
  • Where a customer is overcharged
  • Where a customer overpays his account in error
• Purchases Ledger Control Account


  Used to represent an overall picture of the individual creditors' accounts in the purchases ledger
• The purchase ledger control account can also carry a debit balance in certain instances
• Instances where the purchase ledger control account can have a debit balance


  • Where the firm returns goods after paying for them in full
  • Where the firm makes advanced payment(s) on its accounts
  • Where the firm has been overcharged
  • Where the firm overpays its account in error
• Items that should not be entered in the control accounts

  • Trade discounts
  • Cash sales and/or cash purchases
  • Returns from cash sales and/or cash purchases
  • Provision for bad(or doubtful) debts
  • Provision for discount on debtors
  • Provision for discount on creditors
• Items relating to the Sales Ledger Control Account

  • Opening balances
  • Total credit sales for the period
  • Total returns by credit customers (sales returns and allowances)
  • Cash and cheques received from customer (debtors)
  • Cash discounts allowed to credit customers
  • Customers' cheques dishonoured (cheques marked refer to drawer)
  • Cash refunded to customers
  • Interest charged on overdue sales ledger (debtors) accounts
  • Bad debts written off
  • Bad debts recovered
  • Set-off (contra-settlement) between debtors and creditors
  • Bills receivables received
  • Bills receivable dishonoured
  • Interest charged on bills receivables dishonoured
• The Sales ledger Control Account/Total Debtors Account has both debit and credit balances
• Items relating to the Purchases Ledger Control Account

  • Opening balances
  • Total credit purchases for the period
  • Total returns to credit suppliers (purchases returns and allowances)
  • Cash and cheques paid to supplier (creditors)
  • Cash discounts received from credit supplier
  • Cheques paid to supplier but later cancelled
  • Pretty cash paid to suppliers
  • Cash refunded by supplier
  • Interest charged by suppliers (creditors) on overdue accounts
  • Set-off (contra-Settlement) between debtors and creditors
  • Bills payable issued
  • Bills payable dishonoured
  • Interest charged on bills payable dishonoured
• Transactions NOT to be included in the Sales Ledger Control Account

  • provision for bad/doubtful debts
  • receipts from cash sales
  • refunds made to cash customers
  • discounts allowed to cash customers
  • goods returned by cash customers
• Sales Ledger Control Account DEBIT Entries

  • debit balance b/d from the previous period
  • sales
  • bad debts recovered now reinstated
  • returned cheques from credit customers
  • refunds to credit customers
  • interest revenue on overdue accounts
  • credit balance c/d to next period
• Sales Ledger Control Account CREDIT Entries

  • credit balance b/d from the previous period
  • cash and cheque receipts from credit customers
  • discounts allowed
  • bad debts written off
  • good returned from credit customers
  • purchases ledger set-off
  • credit balance c/d to next period
• Transactions NOT to be included in the Purchases Ledger Control Account

  • payments for cash purchases
  • refunds received from cash suppliers
  • discounts received from cash suppliers
  • goods returned to cash suppliers
• Purchases Ledger Control Account CREDIT Entries

  • opening credit balance b/d from the previous period
  • total credit purchases
  • refunds by trade creditors
  • interest expense charged by trade creditors for overdue balances
  • closing debit balance c/d to next period
• Purchases Ledger Control Account DEBIT Entries

  • opening debit balance b/d from the previous period
  • cash and cheque payments to creditors
  • discounts received from creditors
  • sales ledger set-off
  • good returned to creditors/credit suppliers
  • credit notes received from creditors
  • closing credit balance c/d to next period
• A co-operative society’s statement of financial position (balance sheet) records assets and liabilities in the same way as all other business organizations.

  The assets could include investments owned by the co-operative.

  Investment should be shown under the heading non-current assets (or under the heading current assets if they are likely to be cashed in during the next financial period)

  The capital and reserves section will show share capital, the statutory reserve, other reserves (such as the education reserve) and any undistributed surplus income.
• Limited liability company


  A business whose owner's liability for the business's debt is limited to the amount of money that they invested in shares in the business
• Limited liability company


  • Capital is raised by the issue of shares
  • Unlimited ownership
  • Shareholders receive dividends
  • Separate legal entity from its owners
  • Run by directors
  • Must have audits and publish accounts
  • Risk is limited to the amount invested in the shares
• Limited liability


  The liability of any shareholder is limited to the amount of their fully paid up shares
• Shareholders


  The owners of the share capital of a limited company
• Directors

  Officials appointed by the shareholders to manage the company
• Shares


  The capital of a limited company is split into parts called shares
• Nominal value


  The price description of an issued share under the company's constitution
• Dividend


  The amount given to shareholders as their share of the profits of the company
• Debenture

  A form of loan to a company with a fixed rate of interest over a period of time
• Authorized share capital


  The maximum amount of share capital that a limited company is allowed to issue under its constitution
• Issued share capital


  The amount of share capital that the company has actually issued, which cannot exceed the authorized amount
• Share premium


  The difference between the nominal value of shares and the price at which they are issued
• Ordinary shares


  Shares entitled to dividends after the preference shareholders have been paid, normally carry voting rights
• Preference shares


  Shares entitled to a fixed rate of dividend, normally seen as low risk and do not carry voting rights, can be cumulative or non-cumulative
• Education reserve is an amount of money which can only be used for educational purposes. For example, it might be used to fund training courses for employees.
• Statutory reserve is an amount of money which must be kept aside by law. This is usually 20% of the total value of the shares issued. If this figure falls below 20%, then the society has to make good the shortfall within two years.
• Share capital is the amount paid up or issued by members when joining the co-operative. It may also include amounts that have been transferred into the society from retained profits. The shares themselves do not earn interest but some societies pay dividends based on the number of shares held.
• Bank Reconciliation Statement


  A statement showing a comparison between the cashbook balance and the balance as per the bank statement
• Reconcile


  (as used in bank reconciliation statement) to make two apparently conflicting things (in this case, the cash book balance and the bank statement balance) consistent with each other