I think I am more and more nervous and desperate lately since I have synoptic exam in a couple of days. I have this exercise and have troubles to answer question why amount of 31 is included in the list of summary of entries into the general ledger ? amount of 31 doesn't reflect any transaction. On the same summary we have entries that reflect transactions: receiving bank interest, paying for insurance. Why amount of 31 ( which is difference between opening balance and closing balance on cash account ) should be included in the summary of entries into the general ledger ?
Sit down, have a nice, relaxing cup of tea... and breathe!
Now think it through in a more calm state of mind.
The question is asking for a "summary of entries" that will correct the figures for the transactions that aren't already included. Think of the answer as a single journal to correct for three missing transactions.
The three items are:
1) the insurance standing order of £35 - which needs to be debited to insurance, and credited to the "cash" account.
2) the interest (received) on the bank deposit account of £18 - which needs to be credited to interest received, and debited to the "cash" account.
3) the bank charges of £14 - which needs to be debited to bank charges and credited to the "cash" account.
If you just show the single debit or credit as necessary - a debit to insurance, a credit to interest and a debit to bank charges, the single entry needed on the "cash" account to balance things is the net value of those debits and credits. £35 - £18 + £14 = £31.
__________________
Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
I think the part that might be confusing you here Rafal is the answer in part (b) and probably to do with the fact that they usually ask you to show the adjustments to the actual cash account alone and do a bank rec report thingy. Whereas this one is, as Vince says, wants you to also show ALL the actual (general ledger) accounts that will be affected - where all the adjustments would be keyed to.
Maybe - think analysed cashbook as that might help.
At least this one isnt a typo in the book this time - makes a change!!!!!
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Sit down, have a nice, relaxing cup of tea... and breathe!
Now think it through in a more calm state of mind.
The question is asking for a "summary of entries" that will correct the figures for the transactions that aren't already included. Think of the answer as a single journal to correct for three missing transactions.
The three items are:
1) the insurance standing order of £35 - which needs to be debited to insurance, and credited to the "cash" account. 2) the interest (received) on the bank deposit account of £18 - which needs to be credited to interest received, and debited to the "cash" account. 3) the bank charges of £14 - which needs to be debited to bank charges and credited to the "cash" account.
If you just show the single debit or credit as necessary - a debit to insurance, a credit to interest and a debit to bank charges, the single entry needed on the "cash" account to balance things is the net value of those debits and credits. £35 - £18 + £14 = £31.
thanks for reply, I think I undestand everything now.
-- Edited by rafapak on Thursday 2nd of March 2017 12:23:54 PM
-- Edited by rafapak on Thursday 2nd of March 2017 12:50:11 PM
It is the net total of the three individual items needed to adjust the account - the insurance, bank charges, and deposit interest.
As you know, the basic rule is that for every debit there is a credit. The crucial point is that those debits and credits don't have to match one for one; it's the total that must match - and this question is an example of that.
Look again at the list of transactions that need to be posted:
An insurance standing order of £35 (needs to be debited to insurance, credited to the 'cash' account)
Interest received on the bank deposit account of £18 (to be credited to interest received, debited to the 'cash' account)
Bank charges of £14 (to be debited to bank charges, credited to the 'cash' account)
Now consider the individual transactions that would achieve this:
Ledger account
Debit £
Credit £
Insurance
35
'Cash' account
35
Interest received
18
'Cash' account
18
Bank charges
14
'Cash account
14
Total
67
67
What you are seeing here are THREE entries on the 'cash' account - one for each of the three items that need posting: A single debit for each credit, and vice versa.
The £31 is a way to shortcut this: It is the sum total of the three items - so instead of individually crediting the cash account with £35 and £14, and debiting it with £18, those three are being totalled, and the net amount is credited.
£35 credit plus £14 credit minus £18 debit equals a £31 credit.
__________________
Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
It is the net total of the three individual items needed to adjust the account - the insurance, bank charges, and deposit interest.
As you know, the basic rule is that for every debit there is a credit. The crucial point is that those debits and credits don't have to match one for one; it's the total that must match - and this question is an example of that.
Look again at the list of transactions that need to be posted:
An insurance standing order of £35 (needs to be debited to insurance, credited to the 'cash' account)
Interest received on the bank deposit account of £18 (to be credited to interest received, debited to the 'cash' account)
Bank charges of £14 (to be debited to bank charges, credited to the 'cash' account)
Now consider the individual transactions that would achieve this:
Ledger account
Debit £
Credit £
Insurance
35
'Cash' account
35
Interest received
18
'Cash' account
18
Bank charges
14
'Cash account
14
Total
67
67
What you are seeing here are THREE entries on the 'cash' account - one for each of the three items that need posting: A single debit for each credit, and vice versa.
The £31 is a way to shortcut this: It is the sum total of the three items - so instead of individually crediting the cash account with £35 and £14, and debiting it with £18, those three are being totalled, and the net amount is credited.
£35 credit plus £14 credit minus £18 debit equals a £31 credit.
thanks vince for reply. Now I understand even better.
