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Category Archives: Accountant
The point of carrying out a bank reconciliation is to check that nothing has been missed from the business’s records and also to ensure that there have been no bank errors.
A business’s cash book will rarely agree to the bank statement and it can be easy to miss transactions, such as direct debit payments if a bank reconciliation is not done. Similarly, banks sometimes make errors too which may otherwise go unnoticed.
Bank reconciliation is a standard part of bookkeeping. If you have not done a bank reconciliation as part of your bookkeeping, your accountant’s fees will almost certainly be much higher. Many accountants will insist on a bank reconciliation having been done prior to their doing your statutory accounts.
In doing a journal, it is important that it is cross referenced properly so that later, if you or your accountant needs to, you can follow the original “logic” for having done the journal. Accountants refer to this as being able to follow the audit trail. This applies whether or not you actually have your accounts formally audited (the majority of small businesses are, in fact, well under the statutory audit threshold)
For example, you might keep a “hard copy” file of journals and supporting documentation, filed in some sort of order!
If a journal is being done to correct an error, you might also file a copy of the paperwork showing the original error.
It’s good practice to number each journal sequentially and use this unique number as a reference. When using a computerised accounting package, this number will be the cross reference to your “hard copy” file of journals and documentation.
A journal is usually used to correct errors that have been made. The errors must be able to be corrected by means of a double entry, to be able to put it right by journalling.
So, if £500 of sales of square widgets had been incorrectly posted to sales of round widgets, the correcting journal would be as follows:
DEBIT Sales of Round Widgets £500
CREDIT Sales of Square Widgets £500
Thus, the overall effect would be that the sales of square widgets ledger account would have a correct credit of £500 and sales of round widgets ledger account would have both a credit entry of £500 and a debit entry of £500 which would cancel eachother out.
T accounts are what ledger accounts might look like if they were kept on paper (as opposed to using computer software).
They are nothing mysterious, drawn on paper, a T account is quite literally a large T! The title of the ledger (for example, “motor expenses” is written across the top), debit entries against that account are written on the left hand side of the vertical line and credit entries are written on the right hand side.
At the end of an accounting period, a balance is calculated for each T account. All this means is that all the debit entries are added up and the total recorded at the bottom (on the left, as that’s where all the debit entries are) and all the credit entries are similarly totalled on the right hand side.
If the total debits exceed the total credits, then there is said to be a debit balance on that account.
T accounts are the building blocks of accounting and sometimes, it’s helpful to consider going back to basics and professional bookkeepers and accountants sometimes do go back to drawing up T Accounts if things don’t balance as they should.
However, if you use an accounting software package and/or an accountant, it’s perfectly possible that you will never come across a T account. Some accouting software does make reference to T accounts, particularly those aimed for use by accountants and specialised accounts departments.
I have been at the PUB (not that pub), the PowerUpBlog of Ingenuity Marketing (thanks to Michelle Golden at Golden Marketing for bringing this one to my attention) reading their what’s your story post and I’ve realised that I am guilty of giving off negative vibes about my profession.
I am apologetic at times, when I mention what I do and I’m not exactly sure why. May be it’s because there are so many of us about and the list is growing. CIMA, alone, celebrated its 70,000th member back in February 2007.
Anyway, also take a look at PUB’s Elevator Speeches, which would also be quite relevent for networking, particularly speed networking, where there isn’t that much time to make an impression.