Basic Bookkeeping

Assessment 1. Written Assessment

1. Give an example of daily financial records that you could have to maintain?

Update your accounts receivable and accounts payable daily on your accounting computer using the software provided or modifies to suit the organisational particular needs.

2. What are the requirements regarding identifying and rectifying errors in documentation?

- Using the right accounting method: cash and accrual
- Using professional bookkeeping method: hiring specialist, qualified accountant or bookkeeper.
- Separate personal and business finances
- Ensuring employee and other categories are recorded accurately
 - Perform basic account reconciliation.

- Implement adequate internal controls
- Save receipts for small purchases
- Know the difference between profit and cash flow
- Rely also on a paper environment
- Honour your cheques and GST

3. How can you ensure that credit and debit transactions are accurately recorded, in accordance with organisational requirements?

The use of computer software. The system will automatically record entries behind the scenes. Consider each transaction as amount that will either increase or decrease specific accounts, i.

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e. your bank, revenue as the Chart of Accounts.

4. What are the requirements regarding the maintenance of transactions in a general ledger?

The process is to record each journal entry into the general ledger. A general ledger holds four types of accounts: assets, liabilities, income, expenses and references equity.

Income and expenses are actually types of asset and liability accounts. There are only two types of accounts managed by a General Ledger:

- Accounts that tell you how much you are owed
- Accounts that tell you how much you owe

5. What are the requirements regarding the posting of transactions into the general ledger?

- Commencing business entries
- Correction of posting errors
- Interest expense
- Interest receivable; non-cash transactions
- Purchase of a fixed asset on credit
- Sale of a fixed asset on credit

- Withdrawal of stock/assets by owner
- Write-off a bad debt

6. What is the process for reconciling systems for accounts payable and receivable in the general ledger?

- Checking accuracy or creditor account balances (e.g. cash payments journal, purchases journal, purchases returns journal, general journal)
 - Checking accuracy of debtor account balances (e.g. cash receipts journal, sales return journal, general journal)

- Checking cash payments and receipt journals against bank statement

- Checking the total of the creditors schedule equals the balance of the creditors control account.

- Checking the total of the debtors schedule equals the balance of the debtors control account

7. Financial Reporting has two methods of accounting. What are they?


 - Cash
- Accrual

8. Explain the two methods and give examples of which reporting method can be used by what size organisation?

Cash Accounting:
This is the simpler method because it is based on the actual flow of cash in and out of a business. The cash method is used primarily by sole proprieties and business with no inventory.

Accrual Accounting:
This records income and expenses as they occur, whether cash has actually changed hands or not. Most small business should switch to accrual accounting, because this makes it easier to accurately match revenue to expenses.