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Books of original entry(1.7)- to keep record, to trace back errors, to balance Receipt and payments account(1.

9)- check all the invoices if they are entered appropriately in the ledgers, to check the balance of cash and bank accounts Three-column cashbook(1.14)- to show the detail and breakdown of cash actually received, discounts received/allowed, etc. Two-column cashbook(1.15)- to show separately the cash discounts and the portfolio Reconciliation statement(1.21)- to verify the cash book in order to agree with the bank statement Ledger balances(2.2)- balance can be brought down for the ongoing operation of the company in the following year Debit/credit balances(2.8)- understand the items with debit(asset)/credit(liability/capital) Ledger subdivision(2.13)- grouping purpose, easy analysis and clear breakdown, etc. Trial balance(2.14)- to verify credit entry equals to debit entry, easier to prepare balance sheet and income statement Shortcoming of an agreed trial balance(2.18)- some errors cannot be depicted by the trial balance Types of errors that do not cause disagreement in trial balance(2.19)- omission>forget to make a complete entry; principle>entries recorded in the opposite sides Net sales/net purchases(3.1)- net sales= sales-returns inwards; net purchases= purchases-returns outwards-carriage inwards Fixed/current asset(3.9)- fixed asset=longer term(eg. Building, car); Current asset=portable, shorter term(eg. Inventory) Orders of permanent and liquidity(3.10)- permanent-rank first(fixed assets); liquid-rank first(current assets) Difference between long term and current liabilities(3.11)- current liabilities <1 year debt ; Long-term liabilities >1 year debt Working capital(3.15)- current asset-current liabilities Adjustments in preparation of final accounts(4.1)- to avoid error, and for contingency items Methods of depreciation(4.2)- straight-line>fixed depreciation value per year; Reducing balance>calculates net book value every year as basis of depreciation; revaluation>when the value of asset is revalued, the difference is depreciation Accrued/prepaid(4.5)- accrued>owing money-we have some expense outstanding; prepaid>asset, advanced payment Provision for bad debts(4.11)- to prepare for the loss of bad debt, adjustment for recovery, for decision-making, for customer analysis

Difference between bad debts and provision for bad debts(4.12)- provision>estimated Bad debts>actual Introduction of partners(5.1)- more capital, risk sharing Partnership(5.2)- >2people, unlimited liabilities Partnership agreement(5.3)- less problems/arguments between partners Partners current accounts(5.8)- for regular payment and other items Debit/credit balances in current accounts(5.9)- debit>positive balance brought down to next year; Credit>not enough capital(need to inject) Incomplete record(6.1)- lack of accounting knowledge for small company owners; Single entry for transactions that forgot to fulfill double entry principle Capital(6.2)- capital=assets-liabilities, capital can be verified by statement of affairs Increase/decrease in capital(6.4)- when a company makes profit, it will be shared between the partners, thus capital increases whereas the capital will be reduced when the company incurs a loss Effects of drawing and introduction of new capital to profit(6.5)- drawing reduces capital that has to be reflected by reducing net profit; new capital invested refers to more funds in the company>affects ratios and net profits Cash purchases and sales must be separated from credit sales and purchases(6.8)cash purchases and sales are dealing with cash accounts, which is real account under impersonal account category>put in general ledger; Credit purchases and sales are dealing with accounts payable/receivable under personal accounts category>put in sales/purchases ledger Receipts and payments account(7.1)- a summary of the cash book for a financial period. The account prepared are for non-profit-oriented organization to show what has happened during a period Balance in a R&P account(7.2)- to compute income and expenditure account. The difference refers to whether payments exceed receipts in the period or vise versa Income & expenditure account(7.3)- to depict whether there is net profit or net loss

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