ACCA Certified Accounting Technician (CAT) Paper 1 - Recording Financial
Lecturer: Tran Viet Thang
Part A Introduction to transaction accounting
1 Business transactions and documentation 2 Assets, liabilities and the accounting equation 3 Statement of financial position and income statement 4 Recording, summarising and posting transactions 5 Completing ledger accounts
Part B Recording and accounting for cash transactions
6 Receiving and checking money 7 Banking monies received 8 Recording monies received 9 Authorising and making payments 10 Recording payments 11 Maintaining petty cash records 12 Bank reconciliations
Part C Recording and accounting for credit transactions
13 Sales and sales returns day books 14 The receivables ledger 15 Purchase and purchase returns day books 16 The payables ledger 17 Control accounts 18 Recording payroll transactions
Part D Payroll
Business transactions and
Types of business transaction Documenting business transactions Invoices and credit notes Discounts, rebates and allowances Sales tax Contract law Storage of information Data protection
Types of business transaction
What is a business?
economic resources to create goods or services which customers will buy Provides jobs for people to work in Invests money in resources in order to make even more money for its owners
changes hands Two main types: sales and purchases
By cash or on credit
cash: goods or services given in exchange for immediate payment (in notes, coins, cheques) On credit: cash received later
cash: payment made immediately On credit: cash paid later
Other business transactions
Payment of wages Borrowing money Lending money Offering a discount Receiving a discount
Documenting business transactions
Binding point b/w seller and buyer?
Documentation to expect
1 3 You buy a CD from a shop, paying cash
(1) A receipt
You have air-conditioning system installed
(1) A letter of enquiry (2) A quotation (3) An order (4) An order acknowledgement (5) A delivery note (6) An invoice (7) A credit note
Inventory lists: check availability of all the parts Supplier lists: where to buy parts Staff schedules: plan for human resource Timesheet: record the actual hours staff spent Goods received notes Expense claims: Employees may incur expenses which need to be reimbursed Accounting system: records, summarizes and presents the information contained in
Pu rc h as e or S al es or d er
Purchase order vs. sales order
Invoice vs. credit note vs. debit note
demand for payment Settled immediately in cash: receipt Paid on receipt of goods: cash on delivery (COD) invoice Paid later: credit invoice Invoice illustration How many copies needed?
invoice: cancel part or all of previously issued invoice Amount payable: unpaid invoice’s value minus the credit note’s
to supplier requesting a credit note Supplier to customer to adjust upwards
H o w m u c h is th e p a y a bl
Discounts, rebates and allowances
$1 per unit, but 95p for 100 units or more Given on invoice Permanent
10% 0 days, 5% 7 days, net 30 days Financing matter
A reduction in the bills for the following year A cheque for the calculated rebate
Buy 1 get 1 free
Trent Marcus has three major suppliers. (a) Parker is in the same business as Trent and offers 5% trade discount (b) Scott offers a trade discount of 6% on amounts in excess of $200 (ie the trade discount does not apply to the first $200) (c) Alan offers a 10% cash discount for immediate payment or a 5% cash discount for all items paid for within 30 days of purchase Purchase transactions in Jan 20X8 worth the following amounts before discounts have been deducted. From Parker: $600 From Scott: $850 From Alan: $280 cash and $920 to be paid on 14.1.X8 for goods purchased on 3.1.X8 Calculate how much Trent has received as discounts in
Product A is quoted at $10 per each. A lower price of 95% per unit for buying 100 units or more at a time. One company purchased 150 units. What is accounting treatment?
Trade discount The value of those goods recorded in accounting book should be the net amount after discount i.e, $1,425 ($1,425 = 150*$10*95%)
Champer purchases goods with a list price of $30,000. The supplier offers a 10% trade discount, and a 2½% cash discount for payment within 10 days. Required Note. Ignore sales tax. (a) Calculate the amount Champer will have to pay if it delays longer than 10 days before paying. (b) Calculate the amount the company will pay if it pays within 10 days.
List price 30,000 Less 10% trade discount 3,000 27,000 Less 2½ cash discount 27,000 x 2½% 675 26,325
Note: Trade discount first, cash discount second
Credit period allow: 60 days Invoice price of the goods: $10,000 3% discount for immediate payment Questions:
1. Should the customer take this option when he has no money and has to ask money from bank with interest rate 2% per month? 2. Should the supplier offer this option if he can deposit the early payment in bank with interest rate 1.8% per month?
The discount worth = $10,000*3% = $300 The interest paid to bank = 2%*2*$10,000*97% = $388 Customer should refuse this option The interest income received from bank = 1.8%*2*$10,000*97% = $349.2 Supplier should refuse this option
Net price = $120 Sales tax rate = 17½% Sales tax = 17½% * $120 = $21 Gross price = $141 Note:
pays gross price 141 Government takes the sales tax (21) Seller keeps net price 120
Input tax vs. output tax? Sales tax return?
The gross price of product A is $705 and the net price of product B is $480. What is the sales tax charged on each product if the sales tax rate is 17½%? Solution (a) Sales tax for product A = 17.5/117.5 × $705 = $105. (So net price was $705 – $105 = $600.) (b) Sales tax for product B = 0.175 × $480
A company sells goods for $127,350 including sales tax at 17 ½% in a quarter. It buys goods for $101,290 including sales tax. What amount will it pay to or receive from the tax authorities for the quarter (round to the nearest $)?
Example: Discounts and sales tax
A company buys goods for sale costing $6,000. A cash discount of 5% is offered for payment within 10 days. If the sales tax rate is 17½%, what is the sales tax due? Is your answer different if the company pays after 10 days?
Sales tax is calculated on the discounted price regardless of whether the discount is actually taken.
Contract law - Discussion Contract law - Discussion
You pick up something in a department store which is priced at $24. When the assistant scans it, the price appears as $26. You tell her that, as it was marked at $24, the store is legally obliged to sell it to you at that price. Are you correct? No, you are not correct. The price label in the store is an 'invitation to treat' (invitation to make an offer). Your proposal to pay $24 is the offer. There is no acceptance from the store, so no contract has been made.
R bought a car from D, which D had unknowingly bought from a thief. When this was discovered, the car was returned to the true owner. R sued D for the return of the full purchase price (as damages). The court decided that, although R had used the car for several months, he had not had ownership of it, which is what he had paid for. D therefore had to repay the full amount.
A sells goods to B, who sells them on to C. B then fails to pay A for the goods and disappears without trace. Then how A and C should go on? If A can demonstrate that he was genuinely mistaken as to the identity of B and would not have dealt with him had he known who B really was, then A can recover the goods which were subject to the original contract from C. This is because the law takes the view in such a situation that the original contract between A and B was no contract at all. Therefore C, who was an innocent third party acting in good faith, has to return the goods to A and either bear the
A seller advertised a second-hand reaping machine, describing it as new the previous year. The buyer bought it without seeing it. When it arrived he found that it was much more than a year old and rejected it. The seller sued for the price. It was held that this was a sale by description, the goods had not corresponded to the description, and the buyer was therefore entitled to reject the
Peter buys an electronic keyboard from his local catalogue store. He pays $199 for it. He returns to the store the next day complaining that, although the main keys work, none of the pre-set rhythm buttons seem to function. He demands an immediate refund. The sales assistant refuses to given him a refund or take back the goods, and instead gives him a card with the name and address of the manufacturer, suggesting that Peter contacts them to obtain a refund or a replacement. Questions: (a) Was the sales assistant legally justified in refusing to give a refund? NO (b) Give briefly a reason for your answer. Contracts of sale are between the buyer and the seller
Information and data Information and data
Sets down how long different kinds of information are retained
files and reference files: charter agreement, legal documents Temporary or transitory files Active files: invoices, GRNs files Non-active file: purchase invoices of previous years
No long needed info and data
Will you throw it away??? Ways to deal:
or microfiched Stored elsewhere (archiving) Securely destroyed