9706 · 1.4.1
Reconciliation and verification flashcards
Revision flashcards for Cambridge 9706 Reconciliation and verification (syllabus 1.4.1). Flip, recall, then mark a real past-paper question.
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Error of omission?
Transaction completely left out — TB may still balance.
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Error of commission?
Correct amount, wrong personal account.
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Error of principle?
Wrong class of account — e.g. capital item expensed.
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Error of reversal?
Debits and credits swapped — TB still balances.
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Compensating errors?
Two errors cancel — TB balances incorrectly.
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Internal control example?
Different staff authorise payments and record them.
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What is an unpresented cheque?
A cheque issued by the business and recorded in its cash book, but which has not yet been presented to or paid by the bank. It is deducted from the bank statement balance in a bank reconciliation.
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What is the purpose of a suspense account?
A temporary account used to record the difference on a trial balance, allowing it to balance while the underlying error(s) are located and corrected through journal entries.
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Define 'Error of Principle'.
An error where a transaction is recorded in the correct amount and on the correct side, but in the wrong class of account. For example, treating the purchase of a non-current asset (e.g., a vehicle) as a revenue expense (e.g., motor expenses). This error does not affect trial balance agreement.
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What is a 'Schedule of Trade Receivables'?
A list of all the individual balances owed by customers (trade receivables) at a specific date, extracted from the sales ledger. The total of this schedule is reconciled with the Sales Ledger Control Account balance.
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What is the double entry to record a dishonoured cheque from a customer?
Debit: Sales Ledger Control Account / Customer's Account (to reinstate the debt). Credit: Bank/Cash Book (to reduce the bank balance). This reverses the original entry for the receipt of the cheque.
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What is a supplier statement reconciliation?
The process of comparing the account balance for a supplier in the business's purchases ledger with the statement of account provided by that supplier to identify and correct any discrepancies.
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What is the mandatory first step when preparing a bank reconciliation?
To update the cash book with all items that appear on the bank statement but have not yet been recorded by the business (e.g., bank charges, direct debits, credit transfers).
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What is an outstanding lodgement / deposit in transit?
A deposit (cash or cheques) recorded in the business's cash book but not yet processed and credited by the bank. It is added to the bank statement balance in a bank reconciliation.
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What is debtor circularisation?
A verification procedure where a business writes to its customers (debtors) asking them to confirm the balance they owe. It provides external evidence for the existence and valuation of trade receivables.